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Basic Policy on Corporate Governance

Basic Policy on Corporate Governance

The Company has formulated the “Basic Policy on Corporate Governance” and specified its basic concepts, etc., to achieve sustainable growth and an increase in corporate value over the medium to long term.

Chapter 1 General Provisions

Purpose

Article 1
The purpose of this Basic Policy is to attain optimum corporate governance to make it possible for the Company to achieve sustainable growth and an increase in its corporate value over the long term, thereby allowing shareholders to hold the Company’s shares over the long term with peace of mind.
When this Basic Policy is revised in the future, such revisions shall be disclosed in a timely and appropriate manner.

Basic Concepts of Corporate Governance

Article 2
The Company pursues optimum corporate governance at all times and works to improve it on an ongoing basis.
2

The Company considers the strengthening of corporate governance to be a priority management issue in making a contribution to society as a good corporate citizen based on one of the objectives of “contributing to improvements in life and culture in local communities” set out in our Management Philosophy. The Company has introduced the independent officer system and became a company with an Audit and Supervisory Committee, and the execution of the duties by Directors are supervised and audited by the Board of Directors and the Audit and Supervisory Committee.

  • （1）Respect shareholders’ rights and ensure their equality
  • （2）Consider the interests of stakeholders including shareholders and appropriately work together with these stakeholders
  • （3）Disclose company information appropriately and ensure transparency
  • （4）Establish a system in which independent Outside Directors play a central role and work to strengthen functions to supervise business execution by the Board of Directors
  • （5）Hold constructive dialogue with shareholders who have investment policies that meet the interests of shareholders in the medium to long term

Chapter 2 Ensuring Shareholders’ Rights and Equality

General Meeting of Shareholders

Article 3
The Company sends out convocation notices of Annual General Meetings of Shareholders at an early stage to ensure that shareholders have sufficient time to examine the proposals to the relevant General Meeting of Shareholders and exercise their voting rights appropriately. The Company discloses the convocation notices on the Company’s website, etc., immediately after the sending them out.

Ensuring Shareholders’ Equality

Article 4
The Company works to establish an appropriate environment that is capable of substantially ensuring equality for all shareholders.

Basic Policy on Cross-Shareholdings and Exercise of Voting Rights Pertaining to Cross-Shareholdings

Article 5
The Company will not, as a general rule, acquire shares for the purpose of cross-shareholdings unless it deems the cross-shareholdings to contribute to an increase in the corporate value of the Company in the medium to long term.
2
The purposes of the acquisition and holding of shares in cases where the cross-shareholdings are deemed to contribute to an increase in corporate value shall be validated by the Board of Directors.
3
The exercise of voting rights pertaining to cross-shareholdings shall be determined from the perspective of an increase in the shareholder value of the issuer under the premise that it shall contribute to an increase in the corporate value of the Company, and be carried out appropriately.

Chapter 3 Consideration of Stakeholders’ Interests

Ethical Standards and Conflict of Interests

Article 6
The Company separately stipulates the Compliance Regulations at the Board of Directors meetings to ensure that Directors, Executive Officers, employees, etc., take ethically good actions at all times.
2
In cases where any issue of conflict of interest concerning themselves occurs (including latent ones), Directors shall report the matter promptly to the Board of Directors for approval.

Relationship with Stakeholders

Article 7
The Board of Directors takes into consideration the interests of not only shareholders, but also employees, customers, business partners, local communities and other various stakeholders of the Company, to increase the corporate value of the Company over the long term.
2
The Company will specify in relevant internal regulations that various stakeholders including employees may report their concerns about any illegal or unethical practice of the Company to the Board of Directors and that they will not be treated disadvantageously by the Company due to making such report.

Chapter 4 Appropriate Information Disclosure and Ensuring Transparency

Disclosure of the Company’ Policies on Risk Management, Internal Control System, etc.

Article 8
The Board of Directors shall determine the Company’s policies on risk management, internal control system, legal compliance, etc., of the Company and the corporate group including the Company based on the Companies Act and other applicable laws and regulations, and disclose them in a timely and appropriate manner.
2
The Board of Directors shall disclose matters concerning finance and operations in a fair, detailed and simple manner in accordance with the Companies Act, the Financial Instruments and Exchange Act and other applicable laws and regulations, as well as applicable financial instruments exchange rules.

Chapter 5 Responsibility of the Board of Directors, etc.

Section 1 Responsibility of the Board of Directors as a Supervising Body

Role of the Board of Directors
Article 9
The Board of Directors is entrusted by shareholders with the responsibility for realizing efficient and effective corporate governance and working to make it possible for the Company to achieve sustainable growth and maximize corporate value over the long term through such corporate governance for the benefit of all shareholders who intend to increase their interest through the maximization of corporate value over the long term.
2
In order to fulfil the responsibility in the preceding paragraph, the Board of Directors exercises supervisory functions on overall business management to ensure fairness and transparency of business management and make the best decisions for the Company through the appointment, evaluation and determination of the compensation of President and Director (Chief Executive Officer) and other executive management, the assessment of significant risks that the Company is exposed to, the formulation of countermeasures, the determination of the important business execution of the Company, etc.
Role of Independent Outside Directors
Article 10
One of the key roles played by the Company’s independent Outside Directors (excluding Directors who are Audit and Supervisory Committee Members) is to verify and evaluate the results of the Company’s management and the performance of executive management as and when necessary based on the management strategy or management plan determined by the Board of Directors, and judge and express their opinions on whether it is appropriate to entrust the Company’s management to the incumbent executive management from the perspective of the common interests of all shareholders.
2
The lead independent Outside Director shall be selected from among the independent Outside Directors (excluding Directors who are Audit and Supervisory Committee Members). The lead independent Outside Director works to establish and maintain a system for communication and coordination with executive management and collaboration with Audit and Supervisory Committee Members and the Audit and Supervisory Committee.
Chairperson of the Board of Directors
Article 11
The President and Director, Chief Executive Officer shall, as a general rule, serve as Chairperson of the Board of Directors of the Company.
2
The Chairperson of the Board of Directors works to enhance the quality of discussions of, and ensure the effective and efficient operation of, the Board of Directors. In order to fulfill this responsibility, the Chairperson of the Board of Directors shall give due consideration to ensuring that sufficient time is given for all proposals (particularly for those concerning strategic agenda items) and allowing each Director to obtain appropriate information in a timely manner.

Section 2 Effectiveness of the Board of Directors

Composition of the Board of Directors
Article 12
The Board of Directors of the Company is comprised of all Directors, multiple members of which shall be independent Outside Directors.
2
The Board of Directors separately stipulates criteria concerning the independence of Outside Directors (hereinafter referred to as the “Independence Criteria”) and discloses them in a timely and appropriate manner.
Qualification of and Appointment Procedures for Directors (excluding Directors who are Audit and Supervisory Committee Members)
Article 13
Directors of the Company (excluding Directors who are Audit and Supervisory Committee Members) shall be those who have excellent character, insight, capabilities and abundant experience, in addition to high ethical standards.
2
The Company sets forth its views on diversity in the composition of the Board of Directors in terms of gender, age, nationality, skill and other aspects, and pays attention to the diversity of Directors based on such views when selecting candidates for Director (excluding Directors who are Audit and Supervisory Committee Members). The Company discusses at the Board of Directors meetings the targets for the composition of the diversified Board of Directors as appropriate.
3
Directors of the Company (excluding Directors who are Audit and Supervisory Committee Members) shall be subject to re-appointment by a resolution to be passed at the conclusion of the General Meeting of Shareholders pertaining to the final fiscal year among the fiscal years that end within one year after their appointment.
4
Candidates for newly appointed Directors (excluding Directors who are Audit and Supervisory Committee Members) shall be selected at the Board of Directors meetings upon fair discussion by the Nomination and Compensation Committee based on this article.
Qualification of and Appointment Procedures for Directors who are Audit and Supervisory Committee Members
Article 14
Directors who are Audit and Supervisory Committee Members of the Company shall be those who have excellent character, insight, capabilities and abundant experience, in addition to high ethical standards. At least one of Directors who are Audit and Supervisory Committee Members of the Company shall have appropriate knowledge of finance and accounting.
2
The Company sets forth its views on the composition of the Audit and Supervisory Committee in terms of gender, age, nationality, skill and other aspects, and pays attention to the diversity of Audit and Supervisory Committee Members based on such views when selecting candidates for Director who is an Audit and Supervisory Committee Member. The Company discusses at the Board of Directors meetings, upon consultation with the Audit and Supervisory Committee, the targets for the composition of the diversified Audit and Supervisory Committee as appropriate.
3
Candidates for newly appointed Director who is an Audit and Supervisory Committee Member (including Directors who are substitute Audit and Supervisory Committee Members) shall be selected at the Board of Directors meetings upon fair discussion by the Nomination and Compensation Committee and consent from the Audit and Supervisory Committee based on this article.
Succession Plan for Chief Executive Officer
Article 15
Directors of the Company and executive management are working to improve their capabilities by understanding the Management Philosophy and the management strategies and fulfilling their roles, and each of them is positioned as a candidate for Chief Executive Officer.
2
The Board of Directors shall select a candidate for successor to the Chief Executive Officer upon his/her retirement based on the succession plan in the preceding paragraph.
Responsibility of Directors
Article 16
Directors shall collect sufficient information required to execute their duties, and proactively express their opinions and have thorough discussions.
2
Directors shall execute their duties by demonstrating their expected capabilities and spending sufficient time on the Company.
3
Upon the assumption of office, Directors of the Company shall understand relevant laws and regulations, the Company’s Articles of Incorporation, the Board of Directors Regulations and other internal regulations of the Company and fully understand their job responsibilities.
Learning and Training of Directors and Audit & Supervisory Board Members
Article 17
Newly appointed Directors of the Company (including independent Outside Directors) will receive explanations on the management strategies, financial position and other important matters of the Company from the Chief Executive Officer or Executive Director designated by the Chief Executive Officer after the assumption of office.
2
Directors and Audit & Supervisory Board Members of the Company shall always proactively collect information concerning the financial position, legal compliance, corporate governance and other matters of the Company and improve themselves to fulfill their roles.
3
The Company shall provide Directors and Audit & Supervisory Board Members with training in a planned manner.
Setting of Agenda Items, etc., of the Board of Directors
Article 18
The Chairperson of the Board of Directors of the Company shall set, in the Board of Directors meeting to be held at the end of each fiscal year, the main matters that should be included in the agenda items of the Board of Directors meetings in the following fiscal year based on the proposals and opinions of each Director.
2
The Chairperson of the Board of Directors of the Company shall set the agenda items for each of the Board of Directors meetings prior to holding such meetings.
3
Materials concerning agenda items and proposals for Board of Directors meetings of the Company shall be distributed to each Director including Outside Directors sufficiently prior to each meeting date so as to allow for substantial discussions in such meetings (provided, however, that this shall not apply to particularly highly-confidential items).
Collection of Internal Information by Independent Outside Directors and Directors who are Audit and Supervisory Committee Members
Article 19
Independent Outside Directors and Directors who are Audit and Supervisory Committee Members of the Company may, at any time where necessary or deemed appropriate, require Inside Directors, Executive Officers and employees to provide an explanation or report or submit internal materials.
Independent Officer Liaison Meeting
Article 20
The Company holds the Independent Officer Liaison Meetings comprised of independent Outside Directors twice a year to freely discuss matters concerning the business, corporate governance, etc., of the Company.
2
Discussions at the Independent Officer Liaison Meetings include matters to be considered concerning risks, etc., based on internal audit result reports created by the head of the Internal Audit Department.
3
The Independent Officer Liaison Meetings may, on their own accord, use legal, accounting, financial and other advisers independent of executive management and the advisers of the Company at the expense of the Company.
Self-Evaluation
Article 21
Directors other than the Chief Executive Officer and Outside Directors make self-evaluations on the effectiveness of the Board of Directors every year and submit the results to the Board of Directors. Outside Directors analyze and evaluate the overall effectiveness of the Board of Directors every year based on self-evaluations of each Director and report the overview of the results at Board of Directors meetings. The overview of self-evaluations on the effectiveness of the Board of Directors shall be disclosed in a timely and appropriate manner.

Section 3 Remuneration System

Remuneration, etc., for Directors, etc.
Article 22
Compensation, etc., for Executive Directors shall be divided into basic compensation and performance-linked compensation, and be appropriate, fair, well-balanced and linked with the long-term interests of shareholders. It shall further increase the motivation of the Executive Directors to maximize the corporate value of the Company.
2
Compensation, etc., for independent Outside Directors (excluding Directors who are Audit and Supervisory Committee Members) shall consist only of basic compensation.
3
The amount of compensation, etc., for individual Directors (excluding Directors who are Audit and Supervisory Committee Members) shall be decided by the Board of Directors upon fair discussion by the Nomination and Compensation Committee.
4
Compensation, etc., for Directors who are Audit and Supervisory Committee Members shall consist only of basic compensation, and the amount of compensation for each individual shall be determined by discussion among the Directors who are Audit and Supervisory Committee Members.
5
The Company shall disclose the policy on compensation, etc., for Directors determined by the Board of Directors and the total amount of compensation paid to Directors in a timely and appropriate manner.

Chapter 6 Dialogue with Shareholders

Dialogue with Shareholders
Article 23
The Chairperson of the Board of Directors shall strive to ensure that shareholders’ opinions are shared among the entire Board of Directors.
2
The Director in charge who has been appointed by the Representative Director shall serve as the Director responsible for engaging in constructive dialogue with shareholders and discuss corporate governance and important management policies from time to time with major shareholders who have investment policies that meet the interests of shareholders in the medium to long term. Independent Outside Directors shall be given opportunities to attend such dialogue sessions with major shareholders. Due consideration shall be given to preventing a substantial information gap between shareholders from occurring when holding such dialogue.
3
The Company shall establish and maintain a system to promote constructive dialogue with shareholders.

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