Corporate Governance Structure

Summary of the Corporate Governance System and the Reasons for Its Adoption

The Company has adopted a governance system based on a Board of Directors, comprising directors who are conversant with respective businesses and outside directors with diverse professional backgrounds, and an Audit & Supervisory Board, including outside Audit & Supervisory Board members. This governance system enables the holding company to effectively supervise and audit the execution of operations at Group companies and to realize and maintain high-quality business management.
Comprising eight directors, three of whom are outside directors and one of whom is a woman, the Board of Directors deliberates and makes decisions on such issues as important management policies and strategies and items stipulated by statutory laws and regulations or the Company’s articles of incorporation. To clarify management responsibility, directors are appointed for one year. Thus, we have built a business.

Corporate Governance Structure
* Both internal and outside Audit & Supervisory Board members attend meetings for the purpose of auditing the performance of duties by directors.

Overview and Composition of the Board of Directors, Advisory Committees, and Other Meetings

  Name Description
1 Board of Directors Based on its regulations, the Board of Directors convenes regular meetings every month and convenes extraordinary meetings as required. It makes decisions on management policy and strategy and other important business-related matters as well as on matters stipulated by statutory laws and regulations or the Company’s articles of incorporation.
2 Executive Nomination Advisory Committee An advisory body to the Board of Directors, the committee is chaired by an independent outside director and comprises three outside directors and three internal directors. In principle, the committee convenes annually on the day of the January meeting of the Board of Directors, considers the nomination or promotion of directors, and submits proposals to the Board of Directors for approval. The attendance and approval of all committee members is required to pass resolutions.

Status: Advisory body for the board of directors
Chairman: Tunehiko Iwai (outside director)
Membership: Outside directors, Representative Director and President, the director responsible for outside executives, Inside directors
Role: Discussion and provision of advice on selection/dismissal, promotion of directors
3 Executive Compensation Advisory Committee An advisory body to the Board of Directors, the committee is chaired by an independent outside director and comprises three outside directors and two internal directors. In principle, the committee convenes on the days of the April, July, and February meetings of the Board of Directors, considers the compensation of directors, and submits proposals to the Board of Directors for approval. The attendance and approval of all committee members is required to pass resolutions.

Status: Advisory body for the board of directors
Chairman: Tunehiko Iwai (outside director)
Membership: Outside Directors, the director responsible for outside executives, Inside directors
Role: Discussion and provision of advice on evaluation and compensation of directors
4 Independent Outside Officers Meeting Comprising outside directors, outside Audit & Supervisory Board members, and the director of the Administrative Department, the meeting evaluates the Board of Directors and discusses how to improve its administration and strengthens collaboration among outside directors and outside Audit & Supervisory Board members.

Status : Independent Meeting
Membership : Outside directors, outside audit & supervisory board members, the director responsible for outside executives
Role : Appraise the board of directors and discuss ways of improving its operational effectiveness, and strengthen coordination among outside directors and outside audit & supervisory board members
5 Group Management Meeting Comprising directors and key members of the management team, the meeting considers items related to the Group’s management strategy and other important management issues and conducts prior examinations of agenda items to be discussed by the Board of Directors.
6 Group Strategy Committee / Quarterly Business Results Review Committee Convening three times a year, these committees check business results and the progress of measures. Also, if targets are not achieved, the committees consider improvement measures and revise targets as required.
7 Corporate Ethics and Risk Management Committee With the president and representative director acting as supervisor, the committee comprises the director of the Administrative Department, internal directors, the directors of operating companies, corporate officers, and other members. The committee strengthens and ensures the rigorous enforcement of systems for compliance with corporate ethics, identifies risks related to the overall business management of the Group, and strengthens systems for managing such risks.

Outside Directors and Outside Audit & Supervisory Board Members

The Company has three outside directors and three outside Audit & Supervisory Board members. The Company appoints outside directors who have made wide-ranging contributions to the fields of art and culture in Japan and overseas or who have extensive experience and knowledge of corporate management. By providing objective, neutral advice based on their extensive business experience and specialized knowledge in a range of fields, outside directors enhance the appropriateness of directors’ decision-making. Further, the Group appoints as outside Audit & Supervisory Board members certified public accountants who have a high level of expertise with regard to finance and accounting, attorneys who are independent from the Company, and individuals who have many years of experience of working at financial institutions and extensive knowledge of corporate management. While retaining a high degree of independence, outside Audit & Supervisory Board members draw on their expertise to undertake strict auditing of the legality of directors’ decision-making and operational execution.

Reasons for Election of Outside Directors and Outside Audit & Supervisory Board Members

Outside directors Reason for election Expected Expected field of expertise and knowledge Attendance at Board of Directors’meetings
Madoka Mayuzumi As a haiku poet, Madoka Mayuzumi has made wide-ranging contributions to the fields of art and culture in Japan and overseas. Her expertise and experience is expected to contribute to our efforts to realize business management that emphasizes diversity, making her an appropriate outside director for the Group. Art, culture, and social insight 14/14
Shigeru Saito It is anticipated Shigeru Saito will enhance management supervisory functions by providing input from various perspectives based on his extensive knowledge and experience as a representative director of another company. Corporate management, operational management, and international insight 13/14
Tsunehiko Iwai In addition to his extensive knowledge and experience as a business manager, Tsunehiko Iwai can also be expected to contribute to management using his specialist knowledge relating to research, production, and various fields of technology. Corporate management, operational management, law and compliance, and international insight 10/10

Outside Audit & Supervisory Board members Reason for election Attendance at Board of Directors’ meetings and Audit & Supervisory Board meetings
Board of Directors’ meetings Audit & Supervisory Board meetings
Hiroshi Shirai Specialized knowledge of accounting and finance as a certified public accountant make Hiroshi Shirai an appropriate outside Audit & Supervisory Board member for the Group. 14/14 15/15
Mitsuhiro Hamamoto Mitsuhiro Hamamoto’s experience and specialized knowledge as an attorney make him an appropriate outside Audit & Supervisory Board member. 14/14 15/15
Minoru Shimada Minoru Shimada can be expected to contribute to our audit and supervisory structure by using his long experience in the financial sector and his knowledge as a business manager, as well as his overseas experience. 9/10 9/10

Strengthening of the Functions of the Audit & Supervisory Board and Its Members

The Audit & Supervisory Board comprises two internal full-time Audit & Supervisory Board members and three outside Audit & Supervisory Board members. Convening monthly to coincide with the meetings of the Board of Directors, the Audit & Supervisory Board also holds extraordinary meetings as required. Pursuant to auditing standards that are stipulated by the Audit & Supervisory Board, Audit & Supervisory Board members audit the status of duty execution and property, receive reports and explanations from the independent auditor, and verify the appropriateness of financial statements and the relevance of the auditing of accounts. The Audit & Supervisory
Board members also monitor and verify the establishment of internal control systems and their operational status. In addition, the Company provides an independent, dedicated secretariat to assist the Audit & Supervisory Board and assigns one employee to operate the secretariat.
At meetings of the Audit & Supervisory Board, outside Audit & Supervisory Board members communicate and coordinate extensively with full-time Audit & Supervisory Board members. For example, the latter provide the former with reports on the status of audits of operations and the details of discussions at important meetings. Outside Audit & Supervisory Board members also receive various types of reports from the independent auditor and departments engaged in internal control and audit internal control systems, including the appropriateness of
financial reporting. With a view to heightening the effectiveness of audits, outside Audit & Supervisory Board members engage in a range of other activities. For example, they attend important meetings other than those of the Board of Directors in light of discussions of the Audit & Supervisory Board and visit subsidiaries to conduct audits and investigative interviews.

Internal Control

The Office of Corporate Auditors reports directly to the president and representative director and conducts internal audits pursuant to internal audit regulations. The office audits the compliance and appropriateness of the execution of duties in the Company and subsidiaries in Japan and overseas, evaluates the effectiveness of internal control, and periodically reports results of these activities to the president and representative director.
Further, the Office of Corporate Auditors comprises seven personnel and holds monthly report verification meetings with Audit & Supervisory Board members. These meetings primarily verify reports on the main points of meetings that Audit & Supervisory Board members attend and report on the activities of the Office of Corporate Auditors. The Company has established a system for sharing documents and other information required for audits. To facilitate efficient, effective audits both parties coordinate through such measures as mutual exchanges and the verification of audit working papers.

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