フルキャストホールディングス（4848） – [Delayed]Corporate Governance Report

This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation. Corporate Governance Report Last Update: December 20, 2021 Fullcast Holdings Co., Ltd. President, Representative Director and CEO Kazuki Sakamaki TEL: +81-3-4530-4830 Securities Code: 4848 （https://www.fullcastholdings.co.jp/en/en_ir.html） The corporate governance of Fullcast Holdings Co., Ltd. is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views Our Group considers the basic principles and aims of corporate governance to ensure transparent management for all concerned interested parties including shareholders as well as to improve the efficiency of management in order to realize the “sustained improvement of corporate value.” As of December 17, 2021, Fullcast Holdings Co., Ltd. is a company with a Board of Directors, which is comprised of 7 Directors, including 4 Directors (excluding those who are Audit & Supervisory Committee Members) and 3 Directors who are Audit & Supervisory Committee Members, and also a company with an Audit & Supervisory Committee, which is comprised of 3 Directors who are Audit & Supervisory Committee Members. To achieve the aforementioned basic principles and goals of corporate governance, it is our policy for the composition of the Board of Directors to consist of at least one-third Outside Directors and to report all Outside Directors as Independent Directors as stipulated by the Tokyo Stock Exchange. We have chosen Outside Directors to serve as 3 of our 7 Directors, and in so doing we aim to strengthen the supervisory function of overall enforcement from an external perspective. Regarding Directors who are Audit & Supervisory Committee Members, by appointing all 3 as Outside Auditors (one of them being a fulltime Audit & Supervisory Committee Member), we perform effective and appropriate oversight of business execution by Directors, and have put in place a system that ensures objectivity and neutrality. We believe that these systems allow our corporate governance to function properly. 1 [Reason for Non-Compliance with the Principles of the Corporate Governance Code] This information is provided based on the Corporate Governance Code after its revision in June 2021 (including the principles for the Prime Market which will apply from April 4, 2022.) Supplementary Principle 1-2-2 [Early Sending of Convocation Notices and Publication on Website before The Company recognizes that shareholders must be given sufficient time to review the proposals for the General Meeting of Shareholders, but at the present the Company is unable to send the convocation notice at an earlier date. The Company will review a schedule that makes it possible to send out the convocation notice earlier in the future, including completing the settlement of accounts and audits at an earlier point in time. Starting from the 24th General Meeting of Shareholders (for the fiscal year ended December 31, 2016), the Company has begun disclosing the convocation notice on its website and the website of the Tokyo Stock Exchange 7 days prior to Sending] sending it. [Disclosures Based on the Principle of the Corporate Governance Code] Principle 1-4 [Cross-Shareholdings] The Group acquires and holds cross-shareholdings of publicly listed stocks when it is determined to contribute to the improved medium to long-term corporate value of the Group from the perspective of maintaining and strengthening cooperative business relations and maintaining and strengthening stable, long-term transactional relationships between the Group and its business partners, restricted to alliance relationships, transactional relationships or other business relationships. The Company plans to sell and reduce its holdings of affiliated company stocks and investment securities for which these business synergies are not expected to materialize. In addition, every year the Company has examined the medium- to long-term economic rationality and future outlook of main cross-shareholdings taking into account risks and returns, and reported the findings to the Board of Directors as necessary. However, beginning from the fiscal year ended December 2018, the Board of Directors has examined whether these holdings are needed or not. For the fiscal year ended December 2020, the Board of Directors scrutinized in detail whether it is appropriate for the Group to retain cross-shareholdings (4 stocks) and examined whether these holdings are needed or not. As a result of this examination, it was determined that continuing to hold these cross-shareholdings is appropriate at the current point in time. With regard to exercising the voting rights of cross-shareholdings, the Group determines whether it approves or disapproves of a proposal and exercises its voting rights after comprehensively determining, based on individual scrutiny, whether the proposal contributes to the enhancement of the corporate value of the company and the Group and whether there is a possibility the proposal will damage shareholder value, for each individual proposal, taking into account the purpose of each individual holdings and referencing the criteria for exercising voting rights of the voting advisory company. Principles 1-7 [Related Party Transactions] Matters stipulated in laws and regulations, and the scope of major shareholders and subsidiaries considered as stakeholders, the Company’s Regulations on the Board of Directors stipulate that competitive transactions with the subsidiary of a Director and transactions involving a conflict of interest between a Director or major shareholder and 2 subsidiary must be approved by the Board of Directors, and the Board of Directors must be reported to with regard to when an approved transaction is executed and on a semiannual basis for transactions with blanket approval are executed. In addition, the results of a survey on the existence of related party transactions is reported to the Board of Directors every year and disclosed appropriately pursuant to laws and regulations. The development of these procedures and supervision of the Board of Directors ensures system is in place that does not damage the interests of the Company or its shareholders and that prevents such concerns from arising. Supplementary Principle 2-4-1 [Ensuring Diversity in Promotion to Core Human Resources] The Group will promote diversity not tied to attributes such as gender, nationality, age, and work history, not only in core human resources, but also among its regular employees, temporary employees, and jobseekers via dispatching or placement through the Group. As of December 31, 2020, the ratio of female employees, including regular and temporary employees working for the Group, was 59.1%, and we will maintain a minimum ratio of 50.0%. The ratio of female managers at the Group was 11.7% as of December 31, 2020. We have set a goal of raising the ratio to 15.0% by December 31, 2025, and will strive to enhance recruitment, personnel systems, and training programs. As we do not anticipate any differences in the promotion of foreign nationals and midcareer hires to management positions in terms of nationality or recruitment period, we have not set or disclosed goals for promotion to management positions at the current time. For the Group to achieve sustained enhancement of corporate value, it is essential for new graduates and midcareer hires to become competitive quickly after joining, and we have a full menu of training programs with a focus on practical training for employees up to their third year. In addition to increasing the precision and opportunities offered under our menu of training programs, we will consider gradually expanding the menu for each level of upper management and establishing training programs aimed at increasing awareness of sustainability among officers and employees. Principle 2-6 [Roles of Corporate Pension Funds as Asset Owners] The Company does not have a corporate pension fund as of the date this report was updated. Principle 3-1 [Full Disclosure] issues. 1. The Company’s future vision (management philosophy, etc.), management strategy and management plan Our Group considers the “sustained improvement of corporate value” to be one of its most important management Therefore, our Group will endeavor to maximize corporate value by striking a balance between profitability and growth. At the same time, our management will endeavor maintain a solid financial standing and implement strategies that focus upon capital efficiency. Also, we maintain a goal of realizing a debt-to-equity ratio target of no more than 1.0 time to maintain appropriate debt levels that will enable us to make investments necessary to secure growth, while at the same time maintaining financial soundness. The Fullcast Group also seeks to achieve an ROE of over 20% as a target indicator to reflect “improvement of corporate value.” In addition, we maintain a policy of enhancing returns of profits 3 to shareholders with a target of achieving total return ratio of 50%. time. Indicators used to realize our vision of “enhancing sustained corporate value”: Maintain ROE above 20% Indicator for shareholder returns: Indicator underpinning our “Basic Policy on Capital”: Total return ratio of 50% D/E ratio of less than 1.0x We seek to achieve the above target indicators to realize our vision of “sustained enhancement of corporate value” The Fullcast Group achieved its operating profit target of 5.0 billion yen for the final fiscal year of the Medium-Term Management Plan (FY16–FY20), which was formulated as a five-year plan beginning in the fiscal year ended December 2016, two years ahead of schedule in the fiscal year ended December 2018, the third year of the plan. As a result, the Group revised the Medium-Term Management Plan with changes to targets for the fiscal years ended December 2019 and 2020, and continued to work toward achieving these revised targets. During the current fiscal year, the final year of the revised Medium-Term Management Plan, we experienced a downturn in profits due to the impacts of COVID-19. However, we were able to achieved our initial target of “surpass our previous record high profit in the final year” in the fiscal year ended December 2018, the third year of the plan. And for the fiscal year ended December 2019, we made upward revisions to the initial Medium-Term Management Plan and our results exceeded the revised targets, establishing yet another record high level of profit. Operating profit Ordinary profit Initial MTMP FY16–FY20 targets Revised MTMP FY16–FY20 targets Results for FY12/20 5.0 billion yen 7.9 billion yen 6.1 billion yen ― 8.0 billion yen 6.2 billion yen Number of operating workers Gross profit per 1 yen of personnel costs 257,400 2.8 yen 320,000 2.6 yen 210,943 2.5 yen The Fullcast Group has been moving ahead with preparations for the publication of the Medium-Term Management Plan (FY21–FY25) ending in the fiscal year ending December 2025, following the end of the previous Medium-Term Management Plan (FY16–FY20) in the fiscal year ended December 2020. While our Company plans to grow the mainstay “Short-Term Operational Support Business” without any significant changes to our basic management strategies, COVID-19 infections continue to spread uninterruptedly and it is still extremely difficult to predict when the COVID-19 pandemic will end. Thus, we have decided to postpone the announcement of our new Medium-Term Management Plan, as we deem that it is not appropriate to release medium- to long-term forecasts at the current point in We will focus on quickly restoring our performance in the mainstay “Short-Term Operational Support Business” and continuing our work to establish a new Medium-Term Management Plan to be published in the future at a point in time when the situation surrounding the pandemic becomes clearer. Details pertaining to the Medium-Term Management Plan (FY16–FY20), review of the Medium-Term Management Plan (FY16–FY20), and postponement of the publication of the new Medium-Term Management Plan are disclosed on the Company’s website. Medium-term Management Plan (FY16–FY20) https://www.fullcastholdings.co.jp/dcms_media/other/2015_04_2_e.pdf 4 Notice Concerning Review of the Medium-Term Management Plan (FY16–FY20) https://www.fullcastholdings.co.jp/dcms_media/other/timelydisclosure_20190208_3_eng.pdf Notice of Postponement of Publication of the Medium-Term Management Plan (FY21–FY25) https://www.fullcastholdings.co.jp/dcms_media/other/timelydisclosure_20210212_3_eng.pdf Consolidated Business Results for the Fiscal Year Ended December 2020 (Jan.–Dec. 2020) (pp. 23–24) https://www.fullcastholdings.co.jp/dcms_media/other/presentation_20204Q_eng.pdf 2. Basic philosophy and policy concerning corporate governance Our Group considers the basic principles and aims of corporate governance to ensure transparent management for all concerned parties including shareholders as well as to improve the efficiency of management in order to realize the “sustained improvement of corporate value.” (1) Secure shareholders’ rights and equality The Company is now working to strengthen corporate governance following the basic policy outlined below. The Company will provide necessary information in a timely and accurate manner and respond appropriately following laws and regulations in order to effectively secure the rights of shareholders. In addition, in light of the composition of shareholders, the Company will consider improvements in the environment so that foreign shareholders and minority shareholders can exercise their rights appropriately. (2) Appropriate cooperation with stakeholders other than shareholders The Company strives to engage in appropriate cooperation with all stakeholders by implementing management that places top priority on compliance, given the awareness that the Company’s staffing services have a highly social and public nature. (3) Ensure appropriate information disclosures and transparency The Company will disclose not only financial information, but also non-financial information, in an appropriate and proactive manner, with emphasis placed on fairness, equality, and speed. The Company will also ensure the transparency of this information. (4) Duties of the Board of Directors, etc. Supervisory Committee. (5) Constructive engagement with shareholders The Company will strive to make the decision making of management more efficient and streamlined by clearly demarcating the Board of Directors, the Audit & Supervisory Committee, and the roles and duties of the Audit & The Company will engage with shareholders with the General Manager of the Finance and IR Department in charge and the President, Representative Director and CEO supervising, in order to contribute the sustained improvement of corporate value. These roles will be supplemented by the dedicated department in charge of investor relations. This structure will ensure constructive engagement takes place with shareholders. 3. Policy and procedures for determining the remuneration of executive management and Directors (excluding those who are Audit & Supervisory Committee Members) by the Board of Directors 5 The relevant policy and procedures are provided in “II. Business Management Organizations and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management > 1. Organizational Composition and Operation > [Director Compensation] > Disclosure of Policy on Determining compensation amounts and calculation method” of this report. 4. Plans and procedures for the election and dismissal of management executives by the Board of Directors and nomination of candidates for Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members) The nomination of candidates for Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members and the selection of executive management by the Board of Directors is made involving persons determined to have appropriate knowledge, experience and skills to fulfill their duties, irrespective of age, gender and nationality, from the perspective of contributing to sustainable growth and the enhancement of medium to long-term corporate value. The Board of Directors, comprised of 3 Independent Outside Directors, deliberates on proposals from the President, Representative Director and CEO and makes decisions only after ensuring objectivity and fairness. The Company has a policy to dismiss the President, Representative Director and CEO, if necessary, based on deliberations by the Board of Directors including 3 independent outside directors, in cases where it is acknowledged the President, Representative Director and CEO did not fully exhibit his/her roles, taking into account an appropriate evaluation of business performance, etc. 5. Explanation of individual Elections, Nominations and Dismissals when Nominating Candidates for Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members and Electing Executive Management by the Board of Directors based on 4. Above The reasons for nominating, electing or dismissing individual Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members is as follows. In addition, this information can be found in the convocation notice for the General Meeting of Shareholders. ■ Reason for selection of Takehito Hirano Takehito Hirano has sufficiently fulfilled his role in supervising business execution and the management of Board of Directors Meetings utilizing his wealth of experience as an entrepreneur and business owner as well as his broad scope of knowledge in the staffing services industry. Therefore, the Company has selected him as Director because it believes he will continue to fulfill an appropriate role as Director in supervising management and business execution. ■ Reason for selection of Kazuki Sakamaki As a Director in charge of business execution, Kazuki Sakamaki has sufficiently fulfilled his role in supervising business execution and decision making regarding material matters of the Company’s management, having provided appropriate explanations for resolutions and reports presented to the Board of Directors. He has also led management as the President, Representative Director and CEO and has contributed to sustained enhancement of corporate value by realizing further business growth, having pushed forward with the Medium-Term Management Plan that commenced in the fiscal year ended December 2016. Based on these qualifications, the Company has selected him as Director because it believes he is an ideal choice and will continue to work to achieve sustained growth of the Company 6 through his leadership of management as President, Representative Director and CEO. ■ Reason for selection of Takahiro Ishikawa Takahiro Ishikawa possesses knowledge and experience as a business manager in the specialized short-term operational support service industry within the broader staffing services industry. He has played an important role in the oversight management and business execution by the Board of Directors. Given these qualifications, the Company has selected him as Director because it is believed he is a suitable choice for continuing to carry out the oversight of management and business execution as Director. ■ Reason for selection of Shiro Kaizuka Shiro Kaizuka possesses knowledge and experience as a business manager in the specialized short-term operational support service industry within the broader staffing services industry. He has played an important role in the oversight management and business execution by the Board of Directors. Given these qualifications, the Company has selected him as Director because it is believed he is a suitable choice for continuing to carry out the oversight of management and business execution as Director. ■ Reason for selection of Kouji Sasaki Kouji Sasaki possesses a wealth of experience in finance and accounting as a licensed tax accountant, and the Company believes that his knowledge and experience can be utilized to enhance the Company’s audit functions and risk management functions. In addition, he provides useful opinions and suggestions based on his past background, from the viewpoints of compliance and management. For this reason, the Company has selected him as Outside Director who is an Audit & Supervisory Committee Member. ■ Reason for selection of Masataka Uesugi Masataka Uesugi possesses a wealth of experience as an Attorney-at-Law and experience as an Audit & Supervisory Board Member for other companies, and the Company believes that his knowledge and experience can be utilized to enhance the Company’s audit functions and risk management functions. For this reason, the Company has selected him as Outside Director who is an Audit & Supervisory Committee Member. ■ Reason for selection of Hideyuki Totani Hiduyuki Totani possesses a wealth of experience as an Accounting Auditor and experience as an Audit & Supervisory Board Member for other companies, and the Company believes that his knowledge and experience can be utilized to enhance the Company’s audit functions and risk management functions. For this reason, the Company has selected him as Outside Director who is an Audit & Supervisory Committee Member. Supplementary Principle 3-1-3 [Initiatives, etc. on Sustainability] As described in Supplementary Principle 4-2-2, the Group’s basic policy on sustainability is contributing to solving sustainability issues and gaining the trust of all stakeholders involved in our business by realizing sustainable enhancement of corporate value. We will implement the following sustainability initiatives: 7 ・ The Group will constantly offer employment opportunities to job seekers and a workforce to hiring companies by continually providing matching opportunities for short-term positions to job seekers and hiring companies. By doing so, we will contribute to job satisfaction for job seekers and economic growth for hiring companies. In particular, in Japan’s labor market, which is experiencing a declining workforce, we will continually provide matching opportunities for short-term positions to both job seekers and hiring companies with a focus on young people, women, seniors, and foreign nationals as these are groups with room for labor force participation who can or want to work in short-term positions only, as well as through the growth of the Group, we will expand the opportunities for job seekers and hiring companies. ・ We will contribute to the realization of gender equality by providing employment opportunities to job seekers not tied to age, gender or other attributes. In particular, women account for 47.4% (fiscal year ended December 31, 2020) of dispatched workers in the Short-Term Operational Support Business, the Group’s mainstay segment, and through the growth of the Group, we will contribute to the expansion of employment opportunities for female job seekers. We will also contribute to expanding employment opportunities for seniors through Fullcast Senior Works Co., Ltd., a subsidiary providing staffing services specializing in older workers. ・ We will contribute to eliminating inequalities among people and countries by providing employment opportunities to job seekers throughout Japan not tied to nationality. In particular, we will contribute to expanding employment opportunities for foreign nationals through Fullcast Global, Co., Ltd., a subsidiary providing staffing services specializing in foreign nationals with resident status in Japan, and Fullcast International, Co., Ltd., a subsidiary providing staffing services specializing in foreign nationals with specified skill worker status. ・ In response to Japan’s labor environment, which is experiencing a declining workforce, we will contribute to industrial growth and building infrastructure for technological innovation by satisfying workforce needs through the provision of staff matching services to companies seeking growth or innovation. In particular, in providing staff matching services or job opportunities, it is essential to improve the convenience and efficiency of the core systems for human resource matching, and we will strive to make continuous improvements in this area to expand matching opportunities. In addition, there are increasing opportunities for digital transformation (DX), which we will actively implement. With regard to investment in human capital, increasing the number of personnel is essential for the Group to achieve sustainable enhancement of corporate value, and we are making the necessary investments to enable us to continually recruit new graduates and midcareer hires, with an annual increase. Besides this, the Group will also increase the number of personnel by regularly providing the opportunity for the Group’s temporary employees and staff dispatched and placed through the Group to become regular employees. In addition, as described in Supplementary Principle 2-4-1, for the Group to achieve sustained enhancement of corporate value, it is essential for new graduates and midcareer hires to become competitive quickly after joining, and we have a full menu of training programs with a focus on practical training for employees up to their third year. In addition to increasing the precision and opportunities offered under our menu of training programs, we will consider gradually expanding the menu for each level of upper management and establishing training programs aimed at increasing awareness of sustainability among officers and employees. With regard to investment in intellectual property, improving the convenience and efficiency of core systems related to 8 human resource matching is essential for the Group to carry out its mainstay staffing service business. This will not only streamline internal operations, but will also contribute to improving the satisfaction and customer experience of job seekers who are dispatched or placed through the Group and client companies, thereby supporting the sustainable enhancement of the Group’s corporate value, and, as such, we will continue to invest in this area. In addition, due to the speedup and sophistication of digital and IT technologies, as well as the proliferation of these technologies among job seekers and client companies, there are increasing opportunities for digital transformation (DX) in all the business processes of the staffing services industry, where digitization and use of IT has been slow to penetrate. The Group will make the necessary investment to actively utilize these opportunities. As the Group is primarily engaged in short-term staffing services, it is difficult to imagine that climate change will have a major impact on the Group’s business. The Group does not disclose the impact of climate change-related risks and earning opportunities on its business activities and profits based on the TCFD recommendations or an equivalent framework because climate change is not considered a materiality (key issue) for the Company. However, in the future, we will consider collecting and analyzing the necessary data, disclosing information based on a framework such as TCFD, and enhancing the quality and quantity of disclosure. Supplementary Principle 4-1-1 [Summary of Scope of Matters Delegated from the Board of Director to the Management] The Board of Directors determines matters in accordance with laws and regulations and matters considered to be of importance to the management of the Group defined in the Regulations of the Board of Directors. The Articles of Incorporation stipulate that all or partial decisions of important business matters be delegated to the Board of Directors. As for decisions on other matters of business execution, the Company Regulations have been created that clearly indicate approval authority in order to speed up decision making and achieve more in-depth deliberation among Directors. Decision making is sped up by transferring authority as appropriate to the President, Representative Director and CEO, who is appointed executive Director by the Board of Directors. Supplementary Principle 4-2-2 [Development of Basic Policy for Sustainability Initiatives] Fullcast Group Sustainability Basic Policy The Fullcast Group’s basic policy on sustainability is to contribute to solving social issues and to win the trust of all stakeholders involved in our business by achieving sustainable enhancement of corporate value with a corporate philosophy of “Providing the best place for people to bring out their best.” We will implement the following sustainability activities: 1. As we are primarily engaged in short-term staffing services, it is difficult to imagine that climate change will have a major impact on our business. However, we will reduce environmental impact and use resources efficiently in areas where it can contribute for the sustainable development of the global environment. 2. We will respond appropriately to the human rights impact and risks of corporate activities and strive to prevent human rights violations. 3. We are aware that the growth of employees is the source of sustained enhancement of corporate value and we will strive for recruitment and training not tied to race, nationality, age, gender, and other attributes, as well as for 9 improvements in the working environment giving consideration to work-life balance. 4. We will strive to establish trust and engage in fair and appropriate transactions with jobseekers and client companies, our important business partners in operating the staffing services business. Principle 4-9 [Independence Standards and Qualification for Independent Directors] The Company has stipulated the following standards for determining the independence of the Company’s Outside Directors as part of its efforts to strengthen corporate governance. [Conditions of Independence for Independent Officers] The Company’s independent officers are Outside Directors as stipulated in the Companies Act and Ordinance for Enforcement of the Companies Act and they are persons who satisfy the following conditions, in addition to the conditions for independence set forth by financial instrument exchanges in Japan, including the Tokyo Stock Exchange. 1. Persons who do not fall into any of the following categories (1) A Director who is not an executor of business or executor of business of the Company’s parent company; (2) An executor of business of the Company’s sister company; (3) An organization for whom Company or the Company’s subsidiaries (hereinafter, “the Group”) is the major customer or a person who executes the business of that major customer; (4) A major customer of the Group or a person who executes the business of that major customer; (5) A consultant, accounting expert or legal expert who, in addition to Director’s remuneration receives money exceeding a certain amount or other assets from the Group (or an organization that receives the said assets or person who belongs to the said organization); (6) A person who fell into any of the categories described in (1) to (5) above in the last one year; (7) A relative of a person (excluding unimportant persons) who falls into any of the following categories (i) to (iii) within the second degree of the relationship: (i) A person who falls into any of the above categories (1) to (6); (ii) An executor of business for a subsidiary of the Company; (iii) A person who falls into (ii) or was an executor of business for the Company in the last year. 2. Individuals who do not have other circumstances that prevents them from fulfilling their duties as independent officer. 3. Even when 1 or 2 above applies, an individual can still be appointed as independent officer if it is determined they effectively possess independence and the reason is explained and disclosed at the time of their appointment as outside officer. (Notes) 1. An “executor of business” means a Director in charge of business execution, an executive officer, or an employee. 2. A “major customer” means a company whose payments or receivables account for over 2% of annual consolidated sales of the Group within most recent business year. 3. “In addition to Director’s remuneration receives money exceeding a certain amount or other assets from the Group” means a person who received monetary proceeds of 10 million yen or more or interests with the equivalent value from the Group, in addition to Director’s remuneration, in the most recent business year. 10 Supplementary Principle 4-10-1 [Nomination Committee and Remuneration Committee] The Company’s Board of Directors consists of 7 Directors, 3 of whom are Independent Outside Directors, and agenda items at Board of Directors meetings are deliberated and decided upon after obtaining appropriate involvement and advice from the Independent Outside Directors. In order to establish a system that can adequately ensure the independence and objectivity of the functions of the Board of Directors in areas related to the remuneration of senior management and the Directors, the Company established the Remuneration Committee composed of 3 Outside Directors, who are Audit & Supervisory Committee Members and are independent, and the President, Representative Director and CEO in the fiscal year ending December 31, 2021. The majority of the members of the Remuneration Committee are Independent Outside Directors. In addition, in terms of its authority and roles, the Remuneration Committee deliberates and reports to the Board of Directors on the (1) Policy in determining the remuneration, etc. of Directors; (2) Draft proposals regarding the remuneration, etc. of Directors to be submitted to the General Meeting of following matters: Shareholders; (3) Policy related to determining the details of remuneration, etc. for individual Directors; (4) Matters related to the details of remuneration, etc. for individual Directors; (5) Other important matters related to the above referred to the committee by the Board of Directors. The Company also established the Nomination Committee, which consists of 3 Independent Outside Directors who are Audit & Supervisory Committee Members, and the President, Representative Director and CEO, in order to strengthen the supervisory function of the Board of Directors and enhance the corporate governance system by increasing the transparency and objectivity of the evaluation and decision-making process regarding the nomination of Directors. As is the case with the Remuneration Committee, the majority of the members of the Nomination Committee are Independent Outside Directors. In addition, in terms of its authority and roles, the Nomination Committee deliberates and reports to the Board of Directors on the following matters: (1) Matters related to the election and dismissal of Directors; (2) Matters related to the selection and dismissal of the President and CEO; (3) Matters related to the successor plan for the President and CEO; (4) Other important matters related to the above referred to the committee by the Board of Directors. Supplementary Principle 4-11-1 [View on Balance between Knowledge, Experience and Skills of the Board as a Whole, and on Diversity and Appropriate Board Size] The Company has elected 4 Directors (excluding those who are Audit & Supervisory Committee Members) and 3 Directors who are Audit & Supervisory Committee Members. The Company nominates Directors who are not Audit & Supervisory Committee Members as we believe them to be capable of playing a sufficient role in making decisions on important management matters and supervising the execution of duties by the President, Representative Director and CEO, who is an executive Director, in order to realize the management plan. In addition, all of the Directors who are Audit & Supervisory Committee Members are Independent Outside Directors, and we place an emphasis on their highly specialized knowledge and insight and experience in areas related to management which cannot be obtained solely from the Directors who are not Audit & Supervisory Committee Members. We expect all the Directors to fully demonstrate their abilities supported by their respective experience, to make 11 decisions on important matters related to basic management policies, and to supervise the execution of business. Also, the 3 Directors who are not Audit & Supervisory Committee Members other than the President, Representative Director and CEO are non-executive Directors with management experience. Therefore, the execution of duties by the President, Representative Director and CEO, is substantially supervised by all other Directors. The policies and procedures related to the election of Directors are provided in “I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information > 1. Basic Views, [Disclosures Based on the Principle of the Corporate Governance Code] > Principle 3-1 [Full Disclosure] > 4.” of this report. Please see the table of Directors’ Skills in the appendix for the overview of the skills that the Directors possess as of December 2021. Supplementary Principle 4-11-2 [Concurrent Posts Assumed by Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members] The Company discloses the status of concurrent posts assumed by Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members in the convocation notice for General Meeting of Shareholders and securities reports. The status of concurrent posts assumed by Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members is provided below. [Status of Other Important Mandates of Directors (excluding those who are Audit & Supervisory Committee Members)] Takehito Hirano Kazuki Sakamaki Takahiro Ishikawa Representative Director and Chairman of F-PLAIN Corporation Director of Advancer Global Limited President and Representative Director of Fullcast Co., Ltd. Representative Director and Chairman of Beat Co., Ltd. Director of STARTLINE Co., Ltd. Representative Director and Chairman of Beattech Co., Ltd. Shiro Kaizuka Representative Director of Dimension Pockets Co., Ltd. Representative Partner of One Suite G.K. Director of Interbiz Limited Representative Director of Rearvio Co., Ltd. Representative Partner of IPM G.K. Kouji Sasaki Sasaki Tax Accounting Office Masataka Uesugi 12 [Status of Other Important Mandates of Directors who are Audit & Supervisory Committee Members] Sakurada Dori Partners (partner) Director (Audit & Supervisory Committee Member) of Digital Arts Inc. Outside Audit & Supervisory Board Member of Commerce One Holdings Inc. Outside Audit & Supervisory Board Member of Ceres Inc. Outside Audit & Supervisory Board Member of Aiming Inc. Hideyuki Totani Representative Partner at RSM Seiwa Audit Corporation Auditor of F-PLAIN Corporation Outside Audit & Supervisory Board Member of Ichigo Holdings, Inc. (Reference) Convocation Notice of the Ordinary General Meeting of Shareholders for the 28th Fiscal Year https://www.fullcastholdings.co.jp/dcms_media/other/convocationnotice_20210305_eng.pdf Securities Report for the Fiscal Year Ended December 31, 2020 https://www.fullcastholdings.co.jp/dcms_media/other/annualreport_20210329_eng.pdf Supplementary Principle 4-11-3 [Preconditions for Ensuring the Effectiveness of the Board of Directors] From the fiscal year ended December 2016, the Company has conducted surveys with regard to the effectiveness of the Company’s Board of Directors in order to enhance the effectiveness of the Board of Directors and further enhance corporate value. We conducted a similar survey of all Directors (including those who are Audit & Supervisory Committee Members) in the fiscal year ended December 2020. The results of this survey were analyzed and evaluated. Within the survey, Directors were asked to self-assess 25 items, including composition of the Board of Directors, management of the Board of Directors, structure underpinning the Board of Directors and a comprehensive evaluation for the fiscal year ended December 2020. The results indicated almost as high scores as the previous survey for each item, and that Directors believe the effectiveness of the Company’s Board of Directors continues to At the same time, it has been brought to the attention of the Company that there is ongoing room for improvement so as to further deepen and stimulate discussion at the Board of Directors Meeting. Those are sufficient discussion time for individual proposals at the Board of Directors Meeting and how and when documents are provided to ensure sufficient time for Directors to review proposals in advance, as well as the need to have even deeper discussions at the Board of Directors regarding the Company’s medium- to long-term management Going forward, based on the results of the evaluation of effectiveness, the Company will aim to heighten the effectiveness of the Board of Directors and realize further enhancements in corporate value by making improvements with regard to the issues brought to light. be ensured. strategy. Supplementary Principle 4-14-2 [Training Policy for Directors (excluding those who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members] Necessary training opportunities are provided, including short courses provided by external institutions, at the time of appointment and continually after appointment, so that Directors (excluding those who are Audit & Supervisory 13 Committee Members) and Directors who are Audit & Supervisory Committee Members can obtain and update the knowledge and information needed for fulfilling their roles and duties appropriately. When appointing new Outside Directors from different industry that are non-executive Directors, the President, Representative Director and CEO provides opportunities for them to acquire the knowledge and information concerning the market structure and business and service structure as it relates to the Company. Principle 5-1 [Policy for Constructive Dialogue with Shareholders] The Group considers shareholders to be an important stakeholder and for this reason it encourages constructive dialogue with shareholders within a reasonable scope, even outside the venue of the General Meeting of Shareholders, from the perspective of realizing sustainable growth and enhancing medium- to long-term corporate value. Additionally, the Company encourages discussions on important management policies and corporate governance, among other topics, with major shareholders who have an investment policy that particularly requires them to seek out medium to long-term returns. shareholders is outlined below. The Company’s policy on establishing a system and making efforts to promote constructive dialogue with (1) General dialogue with shareholders, including meetings with investors, will be supervised by the President, Representative Director and CEO, while the General Manager of the Finance and IR Department will engage in dialogue with shareholders as the person responsible and the dedicated investor relations department will support these efforts. (2) The Company’s investor relations department will take the lead in gathering necessary information from dialogue with shareholders, including meetings with investors, and opinions gained through dialogue with shareholders will be shared at regular meetings held involving the General Managers of Indirect Departments so that operations are conducted while incorporating proactive collaboration with related departments. (3) In order to enhance means of dialogue outside of individual meetings, the Company will engage in activities to deepen understanding of the Company, by holding business performance briefings will be made to institutional investors semi-annually, making efforts to conduct sincere question and answer sessions at General Meetings of Shareholders, and providing information disclosures through the Company’s website. Going forward, the Company will seek to enhance the nature of dialogue based on the opinions and requests of investors. (4) All matters of dialogue with shareholders, including meetings with investors and dialogue outside of meetings, is reported to the President, Representative Director and CEO. In addition, the opinions of shareholders gained from dialogue are reported to executive management and the Board of Directors as needed based on the level of importance. (5) The management of insider information is conducted in a thorough manner with an emphasis placed on the equality of information, pursuant to company regulations. Supplementary Principle 5-2-1 [Basic Policy Regarding the Business Portfolio] Basic Policy Regarding the Business Portfolio at the Fullcast Group The Group’s business portfolio consists of the mainstay Short-Term Operational Support Business, which accounts for approximately 90% of consolidated net sales, and other two segments, which are the Sales Support Business and the 14 Security, Other Businesses segments. The Group believes that continuing to grow the mainstay Short-Term Operational Support Business will enable it to enhance the Group’s corporate value, and its basic management strategy is to focus on the growth of this business. In addition, with regards to M&A, our policy is to consider and implement M&A primarily in areas peripheral to the Short-Term Operational Support Business, targeting companies that will contribute to further growth and expansion in this business. In the other two segments, our policy is to aim for stable growth. At present, the Group has postponed the announcement of the new Medium-Term Management Plan (FY21–FY25), the five-year plan that will end in the fiscal year ending December 31, 2025. (Please see “Notice of Postponement of Publication of the Medium-Term Management Plan (FY21–FY25)” published on February 2, 2021 for details.) Going forward, we plan to grow the mainstay Short-Term Operational Support Business without any significant changes to our basic management strategies, but we will conduct reviews of the business portfolio as necessary in order to optimize it. 2. Capital Structure Foreign Shareholding Ratio From 20% to less than 30% 【Status of Major Shareholders】 Name / Company name Hirano Associates Co., Ltd. Hikari Tsushin Co., Ltd. The Master Trust Bank of Japan, Ltd. (Trust Account) Custody Bank of Japan, Ltd. (Trust Account) UH Partners 2, Inc. Custody Bank of Japan, Ltd. (Trust Account 9) Number of shares held (shares) Percentage (%) 13,826,600 37.67 3,529,500 1,919,500 1,522,200 1,321,100 502,700 493,800 410,000 9.61 5.23 4.15 3.60 1.37 1.35 1.19 1.15 1.12 JP Morgan Chase Bank 385632 (Standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division) State Street Bank and Trust Company 505019 (Standing proxy: 435,900 The Hongkong and Shanghai Banking Corporation Limited, Tokyo branch, Custody Division) Victory Trivalent International Small-Cap Fund (Standing proxy: 423,200 Citibank N.A., Tokyo Branch) BNP Paribas Securities Services Luxembourg/JASDEC/FIM/Luxembourg Funds/UCITS Assets (Standing proxy: The Hongkong and Shanghai Banking Corporation Limited, Tokyo branch, Custody Division) Controlling Shareholders (except for Parent Company) Parent Company Supplementary Explanation － None 15 1. In addition to the above, there are 1,777,898 shares of treasury shares owned by the Company. 2. Hikari Tsushin, Inc., which was a principal shareholder at the end of the previous fiscal year, is no longer a principal shareholder as of the end of the current fiscal year, and Hikari Tsushin Co., Ltd. and its joint owners have newly become a principal shareholder. 3. Corporate Attributes Year-end Type of Business Fiscal Year Fiscal Year Shareholder － － Listed Stock Market and Market Section Tokyo Stock Exchange First Section Number of Employees (consolidated) as of the End of Previous More than 1,000 December Services Sales (consolidated) as of the End of the Previous Fiscal Year From 10 billion yen to less than 100 billion yen Number of Consolidated Subsidiaries as of the End of the Previous From 10 less than 50 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling 5. Other Special Circumstances which may have Material Impact on Corporate Governance 16 II. Business Management Organizations and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Company with an Audit & Supervisory Committee Format of Organization [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation 10 Term of Office Stipulated in Articles of Incorporation Chairperson of the Board Number of Directors Appointment of Outside Directors Number of Outside Directors Number of Outside Directors Designated as Independent Directors Outside Directors’ Relationship with the Company (1) 1 year President Appointed 7 3 3 Name Attribute Kouji Sasaki Tax accountant Masataka Uesugi Attorney Hideyuki Totani Certified Public Accountant * Conditions met regarding the relationship with the Company Relationship with company (*) a b c d e f g h i j k * The table above is marked with a “○” if the principal presently satisfies or has recently satisfied the specified conditions mentioned below, or is marked with a “△” if the principal has satisfied the specified conditions mentioned below in the past * The table above is marked with a “●” if the person as a close relative presently satisfies or has recently satisfied this condition, or is marked with a “▲” if they as the close relative satisfy condition in the past satisfies the condition in the past a. An executor of business of a listed company or its subsidiary b. An executor of business or non- executor of business Director of the parent company of a listed company c. An executor of business of a sister company of a listed company d. An individual or executor of business that undertakes major transactions with a listed company e. The main business partner of a listed company or its executor of business f. A consultant, accounting professional, or legal professional who receives large sums of monetary or other compensation from a listed company in addition to the compensation received as an officer g. A major shareholder of a listed company (if the major shareholder is a corporation, an executor of business of the h. An executor of business (individual only) of a business partner of a listed company (in which d, e, and f above are i. An executor of business (individual only) of a company which has a relationship of mutual appointment of j. An executor of business (individual only) of an organization receiving donations from a listed company 17 corporation) not applicable) Outside Directors k. Other Outside Directors’ Relationship with the Company (2) Designation as Audit & Supervisory Committee Members Designation as Independent Director Name Supplementary explanation of the Relationship Reason for Appointment Kouji Sasaki ● ● Apr. 1966 Joined Tokyo Regional Taxation Bureau and worked Kouji Sasaki possesses a wealth of experience in in the general affairs division, before later working finance and accounting as a licensed tax in tax offices accountant, and the Company believes that his Dec. 1984 Passed the tax accountant examination knowledge and experience can be utilized to June 1995 Retired as a special examiner at Nakano tax office enhance the Company’s audit functions and risk Sept.1995 Opened Sasaki Tax Accounting Office management functions. Besides, he makes useful Dec. 1999 Outside Audit & Supervisory Board Member of the opinions and suggestions based on his past Company background, from the viewpoints of compliance Sept. 2008 Audit & Supervisory Board Member of Fullcast HR and management. For this reason, the Company Research Institute Co., Ltd. (currently Fullcast Co., has selected him as Outside Director who is an Ltd.) Audit & Supervisory Committee Member. Mar. 2016 Director (Full-time Audit & Supervisory Committee (Reason for designated an independent officer) Member) of the Company (present post) He satisfies the requirements of independence stipulated by the Tokyo Stock Exchange and he also satisfies the “Standards for Independence of Outside Officers” stipulated by the Company. He was designated as independent officer based on the judgment that there is no concern of special interests with the Company and conflict of interest with general shareholders. Apr. 1999 Founded Uesugi Law Office as an Attorney-at-Law and experience as an Audit June 2003 Partner of Amlec Law and Accounting Firm & Supervisory Board Member for other companies June 2003 Audit & Supervisory Board Member of Digital Arts Inc. and the Company believes that his knowledge and June 2004 Audit & Supervisory Board Member of Nextech Co., experience can be utilized to enhance the Ltd. Company’s audit functions and risk management Dec. 2012 Outside Audit & Supervisory Board Member of functions. For this reason, the Company has F-PLAIN Corporation. selected him as Outside Director who is an Audit & June 2013 Outside Audit & Supervisory Board Member of Supervisory Committee Member. Commerce One Holdings Inc. (present post) (Reason for designated an independent officer) Dec. 2013 Outside Audit & Supervisory Board Member of Ceres He satisfies the requirements of independence Inc. (present post) stipulated by the Tokyo Stock Exchange and he Nov. 2014 Outside Audit & Supervisory Board Member of Aiming also satisfies the “Standards for Independence of Inc. (present post) Outside Officers” stipulated by the Company. He Mar. 2015 Founded Sakurada Dori Partners (Partner; present post) was designated as independent officer based on the 18 Masataka Uesugi ● ● Apr. 1995 Registered as an attorney-at-law (Tokyo Bar Association) Masataka Uesugi possesses a wealth of experience Hideyuki Totani ● ● Oct. 2003 Joined Ernst & Young ShinNihon LLC Hiduyuki Totani possesses a wealth of experience Mar. 2016 Director (Audit & Supervisory Committee Members) of judgment that there is no concern of special the Company (present post) interests with the Company and conflict of interest June 2016 Director (Audit & Supervisory Committee Member) of with general shareholders. Digital Arts Inc. (present post) June 2007 Registered as Certified Public Accountant as an Accounting Auditor and experience as an July 2007 Partner at Seiwa Audit Corporation (currently RSM Audit & Supervisory Board Member for other Seiwa Audit Corporation.) companies and the Company believes that his June 2013 Outside Audit & Supervisory Board Member of knowledge and experience can be utilized to F-PLAIN Corporation enhance the Company’s audit functions and risk July 2014 Outside Audit & Supervisory Board Member of Ichigo management functions. For this reason, the Holdings, Inc. (present post) Company has selected him as Outside Director Dec. 2015 Auditor of F-PLAIN Corporation (present post). who is an Audit & Supervisory Committee Mar.2016 Director (Audit & Supervisory Committee Member) of Member. the Company (present post) (Reason for designated an independent officer) July 2016 Representative Partner at Seiwa Audit Corporation He satisfies the requirements of independence (currently RSM Seiwa Audit Corporation.) (present post) stipulated by the Tokyo Stock Exchange and he also satisfies the “Standards for Independence of Outside Officers” stipulated by the Company. He was designated as independent officer based on the judgment that there is no concern of special interests with the Company and conflict of interest with general shareholders. 【Audit & Supervisory Committee】 Composition and Attribution of Chairperson All Committee Full-time members members Inside Directors Chairperson Outside Directors 3 1 0 3 Outside Director Audit & Supervisory Committee Presence of Directors or employees that should support the duties of the Audit & Supervisory Committee None Reason for adopting the current system The Company has determined the system as for supporting the activities of Audit & Supervisory Committee Members for conducting audits appropriately is in place and a sufficient support system is also in place, based on the establishment of support personnel in case Audit & Supervisory Committee Members deem it necessary, the personnel evaluations of support personnel will be conducted by the Audit & Supervisory Committee, and the Company will bear the costs required for audits, etc. Cooperation between the Audit & Supervisory Committee, the Accounting Auditor and the Internal Audit Department In the Board of Directors Meetings, Outside Directors who are Audit & Supervisory Committee Members provide 19 necessary comments for resolutions and discussions as required, and state opinions on resolutions and discussions as the need arises, from the perspective of decision-making processes used in execution of duties by Directors (excluding Audit & Supervisory Committee Members) and in corporate resolutions are appropriate. Audit & Supervisory Committee Members and the Internal Audit Department work towards mutual cooperation through formulation of audit plans and reporting on outcomes of internal audits. As the Audit & Supervisory Committee meetings audit plans and detailed explanations on audit plans are carried out in a timely manner by PricewaterhouseCoopers Aarata LLC., the Company’s Accounting Auditor. The internal control department (the Personnel and Legal Department) summarizes findings from effectiveness assessments on the state of operation and maintenance of internal controls. The President, Representative Director and CEO then report the summarized findings to the Board of Directors Meetings, the Audit & Supervisory Committee and Accounting Auditor as required in a timely manner. Even in cases where dishonest actions have been committed by people with roles that are crucial for internal control as part of financial reporting, or where major changes have been made in internal control, they still report to the Board of Directors Meeting, the Audit & Supervisory Committee and Accounting Auditors as required in a timely manner. [Voluntary Establishment of Committees] Voluntary Establishment of Committees Corresponding to Nomination Committee or Remuneration Committee Yes All committee members All committee members Details of Establishment, Members, and Attribute of Chairperson Committees Corresponding to Nomination Committee Committee name Nomination Committee Full-time Inside Outside In-house members Directors Directors expert Others Chairperson 4 2 1 3 0 0 Committees Corresponding to Remuneration Committee Committee name Remuneration Committee Full-time Inside Outside In-house members Directors Directors expert Others Chairperson 4 2 1 3 0 0 Inside Director Inside Director Supplementary explanation The supplementary explanation on Nomination Committee and Remuneration Committee is provided in “I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information > 1. Basic Views > [Disclosures Based on the Principle of the Corporate Governance Code] > Supplementary Principle 4-10-1 [Nomination Committee and Remuneration Committee]” of this report. 20 [Independent Directors] Number of Independent Directors 3 Matters relating to Independent Directors － [Incentives] Incentives Policies for Directors Performance-linked compensation and stock option Supplementary explanation of this item The Company discussed and ap