Corporate Governance

The Group is working to strengthen our governance structure in order to have a firm grasp on rapidly changing business environments, to accelerate decision-making and business execution, and to achieve fair and highly transparent management.

The Board of Directors was established to discuss matters spec-ified by laws, regulations, and the Articles of Incorporation, as well as other important management issues. As of the end of June 2024, the Company's Board of Directors consists of 11 members: 6 non-Audit & Supervisory Committee members (5 male and 1 female) and 5 Audit & Supervisory Committee members (4 male and 1 female). The Chairman of the Board serves as the chairperson of the meetings. In accordance with laws, regulations, and the rules of the Board of Directors, transactions involving conflicts of interest between directors and the Company are subject to approval by the Board of Directors.

The Audit & Supervisory Committee has the authority prescribed by law, the Articles of Incorporation, etc., to audit the execution of duties by directors and to prepare audit reports. In addition, auditors endeavor to understand the state of business execution by individual executives of the Company and Group companies through interviews and the inspection of documents. Furthermore, auditors receive periodic reports on audit plans, progress, and results from the Internal Auditing Department and the accounting auditor while enhancing cooperation through the exchange of information and opinions.

In order to strengthen the objectivity and transparency of procedures related to the nomination and compensation of directors and to enhance corporate governance, we have established the Nomination and Compensation Advisory Committee as an advisory body to the Board of Directors. This committee is comprised of a majority of outside directors, with one of them serving as chair. The Nomination and Compensation Advisory Committee shall, in consultation with the Board of Directors, deliberate and report to the Board of Directors on matters such as personnel proposals for the Company's directors (including election and dismissal), policies for determining the compensation of the Company's directors and executive officers, the compensation system, and succession plans for the Company's president.

As an advisory organ to the president, the Executive Council, consisting of the president and executive officers appointed by the president, was established to discuss important matters regarding company management and to report the state of business execution.

With the recent growing calls from society to strengthen governance and internal controls, we appoint outside directors to incorporate new perspectives in judgment and new stimuli, as well as provide an external oversight function. As of the end of June 2024, 5 of the 11 directors (2 directors who are not Audit & Supervisory Committee members and 3 Audit & Supervisory Committee members) are outside directors.

Each Group company is placed under the jurisdiction of the appropriate operating or corporate department of the Company based on its business line, and the execution of its operations is managed and supervised by that department. Important matters regarding the business management of individual Group companies are reported to the Company through the relevant supervising departments. If necessary, they are also reported or discussed at the Executive Council and other important meetings.

Directors who are not Audit & Supervisory Committee members are selected from among persons having high professional ethics, excellent strategic thinking and judgment, adaptability to change, and the ability to make decisions and supervise management from the perspective of overall Group optimization.
Directors who are Audit & Supervisory Committee members are selected from among persons who have high professional ethics and a certain level of expertise in law, finance, accounting, etc., and who are capable of auditing the execution of duties by directors and supervising the execution of business operations appropriately.
The Nomination and Compensation Advisory Committee ensures objectivity and fairness by deliberating on the selection of director candidates before making a report to the Board of Directors.

We established a compensation system for directors respon-sible for business execution (directors who are not Audit and Supervisory Committee members and executive officers excluding outside directors) to ensure the sustainable growth of our group, enhance our corporate value over the medium to long term, and fulfill our responsibilities to our shareholders and other stakeholders. This system consists of fixed compensation and short-term performance-linked compensation to increase incentives for achieving our management plans. Short-term performance-linked compensation is compensation linked to the consolidated performance of the Company for a single fiscal year. On the other hand, compensation for directors who do not engage in business execution (outside directors and directors who are members of the Audit & Supervisory Committee) consists only of fixed compensation. This structure is designed to enable them to fully fulfill their responsibilities in overseeing and auditing business operations.
Compensation for directors who are not members of the Audit & Supervisory Committee is determined by resolution of the Board of Directors, taking into account the report of the Nomination and Compensation Advisory Committee, which is chaired by one of the outside directors who make up a majority of the committee and are expected to be reported as independent directors. The compensation of directors who are members of the Audit & Supervisory Committee is determined through discussions among directors who are members of the Audit & Supervisory Committee.
The Company does not have an executive officer retirement benefit program.

The Group has established the Basic Policy for Establishment and Operation of Internal Control Systems. Based on this policy, the Group has established internal control systems to ensure the efficiency and appropriateness of our operations. In addition to receiving reports on the status of internal control activities from each division of the Company, we conduct surveys of the status of development and operation of internal control systems at major Group companies. The status of the development and operation of internal control systems is, in principle, monitored once a year by the Executive Council. While taking into consideration the business characteristics of each company, we are continuously improving internal control systems for the Group as a whole. In addition, as of April 1 of this year, we have established an Internal Control Department and are working to more firmly establish the Group's internal control activities.

We conduct internal audits across the entire Group to investigate, discuss, and assess the state of business administration, operations, and asset preservation from the standpoints of legality, efficiency, and effectiveness. The Internal Auditing Department is in charge of these functions.
The Internal Auditing Department establishes a medium-term policy at three-year intervals and drafts auditing plans for each fiscal year to ensure systematic internal audits. Internal audits of Group companies are conducted in collaboration and cooperation with auditors dispatched from the Company. Based on the results of these audits, proposals for necessary improvements are made, with progress tracked for corresponding actions. Audit results and findings are reported to our president, to the relevant Group company, and, as necessary, to the Executive Council.