スズキ（7269） – [Delayed] Corporate Governance Report

(This document is an English translation of the original Japanese document. If there are any discrepancies between this document and the original Japanese document, the original Japanese document prevails.) Last Update: 21 December 2021 SUZUKI MOTOR CORPORATION Toshihiro Suzuki Representative Director, President Contact: Corporate Planning Office Telephone: 053-440-2032 Securities Code Number: 7269 http://www.suzuki.co.jp/ Corporate Governance Report Corporate governance at Suzuki Motor Corporation (the “Company”) is as follows: I. Basic Policy on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information 1. Basic Policy Through fair and efficient corporate activities, the Company aims to earn the trust of our shareholders, customers, suppliers, local communities, employees, and other stakeholders, and to make further contribution to the international community in order to continue to grow and develop as a sustainable company. To achieve this goal, the Company recognizes that continuous improvement of corporate governance is essential, and as a top priority management issue, we are actively working on various measures. In consideration of the meaning of the respective principles of the Corporate Governance Code, the Company will make continuing efforts to ensure the rights and equality of the shareholders and the effectiveness of the Board of Directors and the Audit & Supervisory Board as well as to upgrade the internal control system. Also, in order to be trusted further by society and stakeholders, we will disclose information quickly in fair and accurate manner prescribed in laws and regulations and actively disclose information that we consider is beneficial to deepen their understanding of the Company. Thus we will further enhance the transparency of the Company. 【Reasons for not implementing principles of the Corporate Governance Code】Revised The following description is based on the Corporate Governance Code revised in June 2021 (including the content for the Prime Market). 【Supplementary Principle 2.4.1 Ensuring Diversity in Appointment of Core Human Resources, Etc. 】 At the Company, female, elderly, foreign national and other various human resources are actively working in various departments. As for female employees, we have set a target to triple the number of females employees with job titles in 2025, compared to FY2015, before the Act on the Promotion of Female Participation and Career Advancement in the Workplace was enforced. Likewise, we have positively promoted human resources development and appointment of foreign nationals and mid-career hires. In addition, the Company will improve our disclosure on ensuring diversity in appointment of core human resources, etc. For our initiatives related to human resources, please see “With Our Employees” in the “Sustainability Report.” https://www.globalsuzuki.com/corporate/environmental/report/pdf/2021_enve_all.pdf 【Supplementary Principle 3.1.3 Efforts for Sustainability, Etc. 】 For disclosure of our efforts for sustainability and “Influence of Climate Change Risks and Income Opportunities on Company’s Business Activities and Income, Etc.” under the framework of TCFD, please see the “Integrated Report” and the “Sustainability Report.” Integrated Report https://www.globalsuzuki.com/ir/library/annualreport/pdf/2021/2021.pdf Sustainability Report https://www.globalsuzuki.com/corporate/environmental/report/pdf/2021_enve_all.pdf We will make efforts for investment in human capital and intellectual properties by making both goods and things, with primary importance placed on “Sho-Sho-Kei-Tan-Bi” which represent the base of our corporate thought and culture. Further, we will establish rights on, or utilize as know-how, intellectual properties generated through such efforts. We will make information disclosure based on such efforts. “Sho-Sho-Kei-Tan-Bi” is an abbreviation for Japanese meaning “smaller” “fewer” “lighter” “shorter” and “neater“. 【Supplementary Principle 4.11.1 Attitude toward Balance, Diversity and Scale of Board of Directors】 The Board of Directors will be maintained in an appropriate scale for reasonable and expeditious decision-making through adequate discussion and be constituted in consideration of the overall balance in terms of knowledge, experience, ability, performance, diversity, etc., based on our business strategies and issues we face, including ESG. As for a skill matrix of directors, we will make efforts to make it a tool to be utilized for upskilling of current directors, planning of successor development and planning of leader development. We plan to disclose such skill matrix starting from the notice of convocation of the shareholders’ meeting in June 2022. Procedures for election of directors are stated in “Establishment of Optional Committee(s), Composition, and Attributes of Chairperson” of “1. Organizational Structure and Operation, etc.” of “II Overview of Business Management Organization and Other Corporate Governance Systems related to Decision-making, Execution of Business and Management Supervision” below in this report. 【Disclosure based on principles of Corporate Governance Code】Revised 【Principle 1.4 Cross-Shareholdings】 The Company will hold shares of business partners and others for realizing sustainable growth and enhancing our mid- and long-term corporate value when we determine that such shareholdings will contribute to creation of business opportunities, business alliances as well as establishment, retention, reinforcement, etc. of stable transactions and cooperative relations. Appropriateness of individual cross-shareholdings is examined by the Board of Directors every year. The Company makes a comprehensive judgment on the accompanying benefits, risks, etc. of holdings taking into consideration nature, scale, etc. of transactions and setting qualitative criterion including aspect of enhancement of corporate value and quantitative criterion including comparison with capital costs for judgment and once a stock is decided to be sold, then the company shall advance reduction. The Company will exercise the voting rights under cross-shareholdings examining for each agenda from the viewpoint of conditions of their operation, contribution to raising our mid- and long-term corporate value and whether subject agenda does not spoil stakeholders’ value while respecting the management policy of the companies in which we hold shares. As specially focused agendas, the Company assumes introduction of anti-takeover measure, business reorganization, agendas relating to appointment of directors in the cases of continuously deteriorating business performance, etc. 【Principle 1.7 Related Party Transactions】 When Directors and Company Auditors of the Company assume the post of officers in other companies concurrently, prior approval must be obtained from the Board of Directors. Transactions involving conflict of interest between the Company and Directors are required to obtain prior approval from the Board of Directors, and regular reporting on material facts to the Board of Directors about such transactions has enabled the Board of Directors to monitor them appropriately. In addition, we disclose related party transactions appropriately pursuant to the applicable laws, regulations and accounting standards. 【Principle 2.6 Roles of Corporate Pension Funds as Asset Owners】 In order to ensure appropriate management of corporate pension, the Company has established a pension management committee consisting of personnel having appropriate capacity, such as directors or general managers in charge of finance, human resources, and audit divisions. The committee hears opinions from asset management institutions, etc., and conducts regular monitoring on the status of management, and it makes decision on investment policy of pension assets, selects entrusted management institutions, and conducts reviews on investment products, asset allocation, etc. 【Principle 3.1 Enhancement of Information Disclosure】 (i) Company objectives, business strategies and business plans The Company group has established the motto “Develop products of superior value by focusing on the customer” in the prime agenda of its mission statement. The Company group will continuously strive for manufacturing of really valuable products appreciated by customers. The Company group commits itself to make efforts to promote the production of small and subcompact vehicles and the development of environmentally benign products needed by customers with the slogan “Small Cars for a Big Future”. The Company group makes efforts to promote the “Smaller, Fewer, Lighter, Shorter, and Neater” (Sho-Sho-Kei-Tan-Bi) on every side and has been working for the efficient, well-knit and healthy management. Mission Statement 1. Develop products of superior value by focusing on the customer 2. Establish a refreshing and innovative company through teamwork 3. Strive for individual excellence through continuous improvement In addition, the New Mid-Term Management Plan SUZUKI NEXT 100 (April 2021 to March 2026) ~ “Sho-Sho-Kei-Tan-Bi” ~ announced on 24 February 2021 is available at our homepage. https://www.globalsuzuki.com/ir/library/financialpresentation/pdf/2020/plan.pdf “Sho-Sho-Kei-Tan-Bi” is an abbreviation for Japanese meaning “smaller” “fewer” “lighter” “shorter” and “neater“. (ii) Basic policy and guidelines on corporate governance Please refer to “1. Basic Policy” above. (iii) Basic policies and procedures in determining the remuneration of the senior management and Directors Please refer to “1. Organizational Structure and Operation, etc. 【Director Remuneration】in “II. Overview of Business Management Organization and Other Corporate Governance Systems related to Decision-making, Execution of Business and Management Supervision” below in this report. (iv) Basic policies and procedures in the nomination/dismissal of the senior management and the nomination of the candidates for Directors and Company Auditors The standard for nominating Directors includes that they must have rich experience and knowledge in their respective fields, that they must be capable and qualified managers, and that they must have a broad perspective required for global business management. For candidate Outside Directors, the Company looks for people who have broad knowledge, experience and sufficient achievements in their field of origin, and who satisfy the Company’s “Standard for Independence of Outside Directors and Outside Company Auditors” in order to strengthen their ability to supervise management. For candidate Company Auditors, the nomination standard includes that the candidate must possess a high level of knowledge and proficiency in auditing all fields of the Company’s business, including auditing accounts. For candidate Outside Company Auditors, the Company seeks for people who have a high level of specialist knowledge and rich experience in finance, accounting, technology, law, etc., and who satisfy the Company’s “Standard for Independence of Outside Directors and Outside Company Auditors” in order to secure the neutrality of the auditing system. As a policy, the Company does not regard whether or not the candidate is from within the Company, gender, nationality, etc. when looking to candidate Directors and Company Auditors. The suitability of candidate Directors and Company Auditors is deliberated by the Committee on Personnel and Remuneration, etc., where Outside Directors make up a majority of the membership, and based on the result of this deliberation, and with the assent of the Board of Company Auditors in the case of candidate Company Auditors, the Board of Directors then decides on the candidates to propose for election as an agenda item for a General Meeting of Shareholders. As for senior Managing Officers, the Committee on Personnel and Remuneration, etc. deliberates suitability and based on the results the Board of Directors elects Managing Officers. In the event of violation of laws and regulations, etc. by a Director or Managing Officer or of other cases where the needs of discharge or removal arises, the Board of Directors makes a resolution for discharge or removal (removal of a director is subject to a resolution through an agenda of a general shareholders’ meeting). (v) Explanations with respect to the individual appointments and nominations Please refer to the “Notice of Convocation of the 155th Ordinary General Meeting of Shareholders held on 25 June 2021 (Agenda Item 2 and 3)”, which is available at our homepage. https://www.globalsuzuki.com/ir/stock/toShareholders/pdf/2021/convocation155.pdf 【Supplementary Principle 4.1.1 Scope of delegation to management】 The Board of Directors is clearly defining the matters to be resolved at its meetings including those required by laws, regulations and the Articles of Incorporation. Also, the Company is taking measures for agile execution of operation and to clarify the individual responsibilities such as introduction of Managing Officers System and revision of organization structure as necessary, and has established an internal regulation on approval standard for execution of operation by Directors and Managing Officers. To quickly deliberate and decide important managerial issues and measures to be taken, the Company holds Executive Committee attended by Representative Directors and other Directors and Managing Officers concerned periodically and whenever necessary. 【Principle 4.9 Independence Standards and Qualification for Independent Directors】 Please refer to “1. Organizational Structure and Operation, etc. 【Independent Directors/ Company Auditors】” in “II. Overview of Business Management Organization and Other Corporate Governance Systems related to Decision-making, Execution of Business and Management Supervision” below in this report. 【Supplementary Principle 4.10.1 Attitude toward Independence of Committees, Etc. This information is stated in “Establishment of Optional Committee(s), Composition, and Attributes of Chairperson” of “1. Organizational Structure and Operation, etc.” of “II Overview of Business (1) Method Management Organization and Other Corporate Governance Systems related to Decision-making, Execution of Business and Management Supervision” below in this report. 【Supplementary Principle 4.11.2 Current positions of Directors and Company Auditors held at other listed companies】 Please refer to the “Notice of Convocation of the 155th Ordinary General Meeting of Shareholders held on 25 June 2021 (Matters relating to Directors/Company Auditors and Agenda Item 2 and 3)” which is available at our homepage. https://www.globalsuzuki.com/ir/stock/toShareholders/pdf/2021/convocation155.pdf 【Supplementary Principle 4.11.3 Board evaluation】 The Company carried out analysis and evaluation in order to further improve the effectiveness of the Board of Directors. The outline is as follows. The Company carried out a survey on how the Board of Directors should be in terms of information materials for meetings, time spent for deliberations, proceedings, decision-making, oversight, etc. by sending questionnaires to Directors and Company Auditors and reported the results to the Board of Directors. (2) Outline of Results While there was an opinion that constructive discussions had been done with Directors and Company Auditors actively making statements at meetings of the Board of Directors, there were suggestions on oversight over the progress of a mid-term management plan, discussions on sustainability/ESG issues, explanation to Outside Directors and Outside Company Auditors, allocation of time for deliberations, improvement of information materials, etc. The Company will further improve the effectiveness of the Board of Directors by making efforts for improvement in those aspects and continuously carrying out evaluation. 【Supplementary Principle 4.14.2 Training policy for Directors and Company Auditors】 The Company implements trainings that allow Directors and Company Auditors to deepen their understanding of their respective roles, responsibilities, etc. We intend to make the training an opportunity in which Directors and Company Auditors take part together in principle, so that they can share the information on their respective roles, responsibilities, etc. When a new Outside Director or a new Outside Company Auditor assumes post in the Company, the Company will explain to the person the Company objectives, lines of business, finances, organizations, etc. In addition, the Company will prepare opportunities, such as interaction with Directors, Managing Officers and employees in the Company, attending various meetings related to corporate management and business execution, and joining factory inspections, to ensure that the person can deepen understanding of the Company. 【Principle 5.1 Policy for Constructive Dialogue with Shareholders】 In the belief that understanding the interests and concerns of the shareholders through constructive dialogues from a mid- and long-term perspective will contribute to our sustainable growth and the mid- and long-term enhancement of our corporate value, the Company is striving to promote dialogues with the shareholders. The following are the policies for advancing constructive dialogues with the shareholders. 1. IR organization • The Corporate Planning Office is responsible for promoting dialogues with our shareholders, etc., supervised by the Director or Managing Officer in charge of corporate business planning. The contact of IR will be established in Tokyo and the Head Office. • Dialogues with our shareholders, etc. will be advanced within a reasonable scope in consideration of requests of the shareholders and main matters that they are interested in. In principle, this duty will be executed within a reasonable scale by Directors or managers in senior positions who have ample knowledge and experience to make appropriate explanations. 2. Interdivisional cooperation The Corporate Planning Office will engage in activities including preparing materials through discussing and building a common understanding with related organizations in advance, depending on dialogue themes with shareholders, etc. 3. Measure of dialogue In addition to individual interviews, the Company will hold regular financial result briefings for securities companies’ analysts and institutional investors every quarter; investors’ conferences at home and abroad, IR events (including new car presentation meetings, factory tours and information meetings on technologies) when the need arises. In parallel, we intend to upgrade IR-related materials that are posted on the Company’s homepage (including the English version). 4. Feedback Opinions, interests, concerns and others, obtained from meetings with our shareholders, etc. will be reported to the top management, as necessary, with the aim of reflecting them in sustainable growth and the mid-and long-term enhancement of the corporate value in the Company. 5. Measures to control insider information • Thoroughly control insider information in order to prevent it from leaking from the Company. • Observe a silent period of a month or so prior to the announcement of financial results in order to limit dialogues with our shareholders, etc. regarding information on financial results. • Make multiple staffers involved in dialogues with our shareholders, etc. in principle from the viewpoint of monitoring one another. 6. Fair Disclosure of information We will comply with the Financial Instruments and Exchange Act when disclosing information to the investors, securities companies’ analysts and stock trading related parties. 2. Capital Structure Percentage of shares held by foreign investors More than 30% 【Principal Shareholders】Revised Name Number of Shares Held The Master Trust Bank of Japan, Ltd. (Trust Account) Custody Bank of Japan, Ltd. (Trust Account) Toyota Motor Corporation Tokio Marine & Nichido Fire Insurance Co., Ltd. MUFG Bank, Ltd. Resona Bank, Ltd. The Shizuoka Bank, Ltd. Sompo Japan Insurance Inc. Nippon Steel Corporation State Street Bank and Trust Company 505001 Shareholding Ratio (%) 15.43 5.54 4.94 3.70 3.29 2.68 2.39 1.60 1.60 1.51 74,967,500 26,926,000 24,000,000 17,961,766 16,000,858 13,000,000 11,600,723 7,761,500 7,759,531 7,331,900 Controlling Shareholder (excluding parent company) Parent Company ― None Supplementary Explanation Revised (1) Principal shareholders listed above are as of 30 September 2021. (2) In addition to the above, the Company owns 5,418,204 shares as treasury stock. (3) According to the Change Report Pertaining to Report of Possession of Large Volume dated 20 July 2020, Nomura Asset Management Co., Ltd. and its joint holders held 28,177,674 shares as of 15 July 2020. However, the Company has not been able to confirm the practical number of shares held by them as of 30 September 2021, and therefore they are not included in principal shareholders listed above. Nomura Asset Management Co., Ltd. NOMURA INTERNATIONAL PLC 27,196,200 shares 981,474 shares (4) According to the Change Report Pertaining to Report of Possession of Large Volume dated 21 December 2020, Sumitomo Mitsui Trust Bank, Limited and its joint holders held 32,222,340 shares as of 15 December 2020. However, the Company has not been able to confirm the practical number of shares held by them as of 30 September 2021, and therefore they are not included in principal shareholders listed above. Sumitomo Mitsui Trust Bank, Limited 5,500,000 shares Sumitomo Mitsui Trust Asset Management Co., Ltd. 14,433,094 shares Nikko Asset Management Co., Ltd. 12,289,246 shares (5) According to the Change Report Pertaining to Report of Possession of Large Volume dated 8 January 2021, MUFG Bank, Ltd. and its joint holders held 35,430,562 shares as of 28 December 2020. However, the Company has not been able to confirm the practical number of shares held by joint holders as of 30 September 2021, and therefore they are not included in principal shareholders listed above. MUFG Bank, Ltd. Mitsubishi UFJ Trust and Banking Corporation Mitsubishi UFJ Kokusai Asset Management Co., Ltd. 5,529,100 shares 16,000,858 shares 9,776,100 shares MUFG Securities EMEA plc 2,900,000 shares Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. 1,224,504 shares 3. Corporate Attributes Stock Exchange Listings and Market Section First Section, Tokyo Stock Exchange Fiscal Year-End March Industry Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Transportation Equipment More than 1,000 More than 1 trillion yen From 100 to less than 300 4. Policies for Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder ― 5. Other Special Situations that may have significant influence on Corporate Governance The Company does not hold any listed subsidiary company in Japan, but has 2 listed subsidiary companies abroad. The Company will retain necessary cooperation with subsidiary companies from the view point of sustainable growth and enhancing corporate value in the Group, but at the same time will hold independency in estimation with subsidiary companies. II. Overview of Business Management Organization and Other Corporate Governance Systems related to Decision-making, Execution of Business and Management Supervision 1. Organizational Structure and Operation, etc. Organization Form Company with Audit & Supervisory Board [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation Directors Term of Office Stipulated in Articles of Incorporation Chairperson of the Board of Directors Number of Directors Appointment of Outside Directors Number of Outside Directors Number of Independent Directors and Outside Directors Relationship with the Company (1) 15 persons 1 year President 9 persons Yes 3 persons 3 persons Name Attribute Relationship with the Company* a b c d e f g h Osamu Kawamura From another company Hideaki Domichi From another company Yuriko Kato From another company 〇 △ 〇 * Relationship with the Company i j k * * ”○” when the person presently falls or has recently fallen under the category; “△” when the person fell under the category in the past “●” when a close relative of the person presently falls or has recently fallen under the category; “▲”when a close relative of the person fell under the category in the past a. A person executing business of the Company or its subsidiaries b. A person executing business or non-executive director of a parent company of the Company c. A person executing business of a fellow subsidiary of the Company d. A person whose major business partner is the Company or a person executing business of a company of which major business partner is the Company e. A person who is a major business partner of the Company or a person executing business of a major business partner of the Company f. A consultant, accounting expert or legal expert who receives a large amount of remuneration from the Company other than remuneration for director g. Major shareholder of the Company (or a person executing business of such shareholder if the shareholder is a legal entity) h. A person executing business of a business partner of the Company (which does not correspond to any of d, e, or f) (the outside director himself/herself only) i. A person executing business, between which and the Company outside directors/outside company auditor are mutually appointed (the outside director himself/herself only) j. A person executing business of an entity which receives a donation from the Company (the outside director himself/herself only) k. Others Relationship with the Company (2) Name Independent Director Supplementary Information of the Relationship the purchase Kawamura Director is Mr. Osamu Representative of CHANSON COSMETICS Inc. and its group companies. The Group has transactions with said group including of management devices and renting a part of the roof of the building owned by said company, but the annual payment from the Group in the latest business year was less than 0.1% of the annual net sales of said group or the consolidated the Group, and net sales of the Company has therefore judged this presents no issues to his independence. that Osamu Kawamura 〇 in and Reason Reasons for Selecting as Outside Director for Designation as an Independent Director in corporate Having engaged cosmetic management business and other businesses, Mr. Osamu Kawamura has ample experience and knowledge as a business in specialist management. In addition, through business is activities, proactively working on supporting women’s advancement in society, environmentally friendly manufacturing that emphasizes the SDGs. The quality, and Company has judged that Mr. Osamu Kawamura to perform the duties as Outside Director properly based on his experience and knowledge. The company has established its “Standard for Independence of Outside Directors and Outside the Company Auditors Company”, into consideration the independence criteria set by Tokyo Stock taking of Exchange, Inc., and the Company believes that Mr. Osamu Kawamura meets the Standard and has no risk of having conflicts of ordinary interest shareholders. with Mr. Hideaki Domichi has held important positions such as the Ambassador of Japan to India, which is a focus market for the Group, and has a wealth of international experience as a diplomat and deep insight into world affairs. In addition, he has been engaged in various issues such as the environment and society on a global scale. The Company has judged that Mr. Hideaki Domichi is able to perform the duties as Outside Director properly based on his experience and knowledge. of taking The company has established its “Standard for Independence of Outside Directors and Outside the Company Auditors Company”, into consideration the independence criteria set by Tokyo Stock Exchange, Inc., and the Company believes that Mr. Hideaki Domichi meets the Standard and has no risk of having conflicts of interest with ordinary shareholders. in research of Ms. Yuriko Kato founded her own the aim of company with contributing to the achievement of a sustainable society after having engaged and industrial development machinery and robots in a private company and as a sole proprietor, and she is proactively working on the development of agricultural machinery and robots, the efficient distribution agricultural of products, and human resource development through agriculture in order to solve social issues such as a decrease in the number of agricultural workers and the aging of society. The Company has judged that Ms. Yuriko Kato is able to perform the duties as Mr. Hideaki Domichi served as Senior Managing Officer of Hotel Management International Co., Ltd. from October 2016 to January 2019 after working for the Ministry of Foreign Affairs and Japan International Cooperation Agency. The Group has transactions with Grand Hotel Hamamatsu, an affiliate of said company, regarding facility usage, etc., but these transactions have been ongoing since before February 2014 (before Mr. Hideaki Domichi assumed the office of Senior Managing Officer of said company), when Hotel Management International Co., Ltd. took over the business operations of Grand Hotel Hamamatsu. Additionally, the annual payment from the Group in the latest business year was less than 0.3% of the annual net sales of said group and less than 0.1% of the consolidated net sales of the Group, and therefore the Company has judged that this presents no issues to his independence. Ms. Yuriko Kato is Representative Director of M2Labo. Inc. and its group company, VegiBus Inc. Said group and buys machinery vegetables from a consolidated subsidiary of the Company, but the to the annual payment consolidated subsidiary of the Company in the latest fiscal year was around 14 million yen. In addition, the Company and M2Labo. Inc. jointly develop an electric transportation vehicle for their own agriculture, but pay expenses themselves, with no sales or payments. Therefore, the Company has judged that this presents no to her independence. issues Hideaki Domichi 〇 Yuriko Kato 〇 (A consolidated subsidiary of the Company has invested 5 million yen in M2Labo. Inc., the investment relationship was dissolved in December 2020.) experience Outside Director properly based on and her knowledge. of taking The company has established its “Standard for Independence of Outside Directors and Outside the Company Auditors Company”, into consideration the independence criteria set by Tokyo Stock and Exchange, the Inc., Company believes that Ms. Yuriko Kato meets the Standard risk of having and has no conflicts of interest with ordinary shareholders. Establishment of Optional Committee(s) Corresponding to Nomination Committee or Remuneration Committee Yes Establishment of Optional Committee(s), Composition, and Attributes of Chairperson Optional Committee Correspondingto Nomination Committee Committee on Personnel and Remuneration, etc. Optional Committee Correspondingto Remuneration Committee Committee on Personnel and Remuneration, etc. Name of Committee Total Number of Members Full-time Members Internal Directors Outside Directors Outside Experts Other Chairperson Supplementary Explanation 5 – 2 3 – – 5 – 2 3 – – Internal Director Internal Director Aimed to enhance clarity and objectivity upon electing candidates for Directors and Auditors, as well as deciding remuneration of Directors, the Company establishes “Committee on Personnel and Remuneration, etc.”. as an optional committee. The Committee discusses issues such as election standards and adequacy of candidates for Directors and Auditors, as well as adequacy of system and level of Director’s remuneration. The Board of Directors decides based on their results. Further, the committee is delegated the decisions on certain matters. Decision for election of senior Managing Officers and remuneration of Managing Officers are also based on results of the Committee’s discussion. Members of the Committee are Representative Director and President Toshihiro Suzuki, Representative Director and Senior Technical Executive Osamu Honda, Outside Directors Osamu Kawamura, Hideaki Domichi and Yuriko Kato. In addition, Outside Company Auditors Norio Tanaka, Nobuyuki Araki and Norihisa Nagano attend the committee meetings as an observer. The Committee meetings are held as needed and the frequency of meetings varies from year to year. The Committee has the functions of both the Nominating Committee and the Remuneration Committee. [Company Auditors] Establishment of Audit & Supervisory Board Maximum Number of Company Auditors Stipulated in Articles of Incorporation 5 persons Yes 5 persons Number of Company Auditors Cooperation among Company Auditors, Independent Auditor and Audit Department Please refer to “2. Matters Related to Business Execution, Audit and Supervision, Nominations and Decisions on Remuneration (Overview of Current Corporate Governance System)” below in this report. Appointment of Outside Company Auditors Number of Outside Company Auditors Number of Independent Company Auditors Relationship with the Company (1) Name Attribute Norio Tanaka CPA Nobuyuki Araki Academic Norihisa Nagano Lawyer * Relationship with the Company * Yes 3 persons 3 persons Relationship with the Company* a b c d e f g h i j k l m 〇 〇 〇 ”○” when the person presently falls or has recently fallen under the category; “△” when the person fell under the category in the past “●” when a close relative of the person presently falls or has recently fallen under the category; “▲”when a close relative of the person fell under the category in the past * a. A person executing business of the Company or its subsidiaries b. Non-executive director or accounting advisor of the Company or its subsidiaries c. A person executing business or non-executive director of a parent company of the Company d. A company auditor of a parent company of the Company e. A person executing business of a fellow subsidiary of the Company f. A person whose major business partner is the Company or a person executing business of a company of which major business partner is the Company g. A person who is a major business partner of the Company or a person executing business of a major business partner of the Company h. A consultant, accounting expert or legal expert who receives a large amount of remuneration from the Company other than remuneration for company auditor i. Major shareholder of the Company (or a person executing business of such shareholder if the shareholder is a legal entity) j. A person executing business of a business partner of the Company (which does not correspond to any of f, g, or h) (the outside company auditor himself/herself only) k. A person executing business, between which and the Company outside directors/outside company auditor are mutually appointed (the outside company auditor himself/herself only) l. A person executing business of an entity which receives a donation from the Company (the outside company auditor himself/herself only) m. Others Relationship with the Company (2) Name Independent Company Auditor Supplementary Information of the Relationship Norio Tanaka 〇 ― Nobuyuki Araki 〇 ― Norihisa Nagano 〇 ― Reasons for Selecting as Outside Company Auditor and Reason for Appointing as Independent Company Auditor Auditor properly, Since his appointment as Outside Company Auditor of the Company, Mr. Norio Tanaka has been performing his duties as Outside Company including expressing beneficial opinions at the meetings of the Board of Directors, etc. based on his ample experience and expertise as a Certified Public Accountant and a Certified Tax Accountant. The Company expects him to the continue from an management of objective and neutral position. The Company has established its “Standard for Independence of Outside Directors and Outside Company Auditors of the Company”, taking into consideration the independence criteria set by Tokyo Stock Exchange, Inc., and the Company believes that Mr. Norio Tanaka meets the Standard and has no risk of having conflicts of interest with ordinary shareholders. Auditor properly, Since his appointment as Outside Company Auditor of the Company, Mr. Nobuyuki Araki has been performing his duties as Outside Company including expressing beneficial opinions at the meetings of the Board of Directors, etc. based on his ample experience and expertise as doctor of engineering and other important offices such as in the field of academy/environment. The Company expects him to continue to oversee and supervise the the management of Company from an objective and neutral position. The Company has established its “Standard for Independence of Outside Directors and Outside Company Auditors of the Company”, taking into consideration the independence criteria set by Tokyo Stock Exchange, Inc., and the Company believes that Mr. Nobuyuki Araki meets the Standard and has no risk of having conflicts of interest with ordinary shareholders. Since his appointment as Outside Company Auditor of the Company, Mr. Norihisa Nagano has been performing his duties as Outside Company including expressing beneficial opinions at the meetings of the Board of Directors, etc. based on based on his ample experience and expertise as an properly, Auditor to oversee and supervise attorney at law. The Company expects him to the continue management of from an objective and neutral position. The Company has established its “Standard for Independence of Outside Directors and Outside Company Auditors of the Company”, taking into consideration the independence criteria set by Tokyo Stock Exchange, Inc., and that Mr. Norihisa the Company believes Nagano meets the Standard and has no risk of having conflicts of interest with ordinary shareholders. [Independent Directors/ Company Auditors] Number of Independent Directors/Company Auditor 6 persons Other Matters relating to Independent Directors/ Company Auditor All of Outside Directors and Outside Company Auditors of the Company that qualify as an Independent Director/Company Auditor are designated as Independent Directors/Company Auditors. As to independence from the Company with regard to the election of Outside Director/Company Auditor, the Company judges their independence under the below “Standard for Independence of Outside Directors and Outside Company Auditors of the Company” based on “independence criteria” set by Tokyo Stock Exchange, Inc. The Company will not elect any person who falls under any of the followings as a candidate Outside Director or Outside Company Auditor in order to ensure the independence: 1. Persons concerned with the Company and its subsidiaries (“the Group”) (1) With regard to Outside Directors, any person who is or was a person executing business (Note 1) of the Group at present or in the past, (2) With regard to Outside Company Auditors, any person who is or was a Director, Managing Officer or employee of the Group at present or in the past, or (3) A spouse or a relative within the second degree of kinship of the present Director or Managing Officer of the Group. 2. Persons concerned such as business partners or major shareholders, etc. (1) Any person who is a person executing business of any of the followings: 1) A company of which major business partner is the Group (Note 2) 2) A major business partner of the Group (Note 3) 3) A major shareholder having 10% or more of total voting rights of the Company 4) A company for which the Group has 10% or more of total voting rights (2) A person who is or was a representative partner or a partner of the Group’s Accounting Auditor at present or in the past five years (3) A person who receives a large amount of remuneration from the Group other than remuneration for Director/Company Auditor (Note 4) (4) A person who receives a large amount of donation from the Group (Note 5) (5) A spouse or a relative within the second degree of kinship of the person who falls under category from (1) through (4) above (Note 1) A person executing business: A director executing business, an executive officer, a managing officer or an employee (Note 2) A company of which major business partner is the Group: A company which belongs to the group of the business partner who receives 2% or more of its consolidated net sales in the latest business year ended of the group from the Group in any of the business year in past three years (Note 3) A major business partner of the Group: A company which belongs to the group of the business partner who makes payment 2% or more of the Group’s consolidated net sales or provides the Group with 2% or more of loans of its consolidated total assets in the latest business year ended of the Group in any of the business year in past three years (Note 4) A person who receives a large amount of remuneration: A consultant or legal or accounting expert who receives annual compensation 10 million yen or more (for the organization, 2% or more of its annual total revenues) in any of the business year in past three years (Note 5) A person who receives a large amount of donation: A person who receives annual donation 10 million yen or more (for the organization, a person directly involved in activities which is the purpose of the donation) in any of the business year in past three years [Incentives] Implementation of Measures Provide Incentives to Directors to Introduction of Performance-linked Remuneration System, etc, Supplementary Explanation [Bonus (Performance-linked Remuneration)] It is paid to Directors (excluding Outside Directors) in order to raise awareness of improvement of each fiscal year’s performance and to function as an incentive for continuous improvement of the corporate value. The specific amount of remuneration for each individual is calculated by multiplying the performance indicators predetermined by the Board of Directors by a stipulated percentage and the multiplication rate by position predetermined by the Board of Directors. The performance indicator is consolidated operating profit from the perspective of company profitability. Bonus for Directors (excluding Outside Directors) for FY2021 are calculated using the method as per (Supplement) below. 1. Calculation method Paid amount = Consolidated Operating income x 0.020% x Multiplying Factor by Position 2. Multiplying Factor by Position President Multiplying Factor 1.00 (1 person) Senior Technical Executive Multiplying Factor 0.60 (1 person) Director Multiplying Factor 0.30 (4 persons) Note: Above number of persons are based on the number of Directors eligible for the bonus as of 25 June 2021 [Restricted stock remuneration] It is paid to Directors (excluding Outside Directors) in order to function as an incentive for continuous improvement of the corporate value and to further promote shared value with shareholders. Directors (excluding Outside Directors) receive ordinary shares of the Company by paying all remuneration paid based on the resolution of the Board of Directors (monetary remuneration rights) as contribution in kind. The transfer restriction period is until the date of retirement from the position of Director. If a Director falls under certain grounds, such as the Director retires for any reason other than that deemed as reasonable by the Board of Directors, the Company shall acquire the shares allotted for no fee Grantees of Stock Options ― Supplementary Explanation ― [Remuneration of Directors] Disclosure Status (of Remuneration for Individual Director) Partial individual Supplementary Explanation remuneration of 100 million yen or more. The Company makes it a rule to disclose in its Securities Report, each case of those with consolidated The Securities Report is posted on the website of the Company for public viewing. During FY2020, the total amount of remuneration that the Company paid to six Directors (excluding Outside Directors) was 457 million yen (basic remuneration of 219 million yen, performance-linked bonus of 129 million yen and restricted stock remuneration of 108 million yen). Performance-linked bonus and restricted stock remuneration are amounts reported as expenses for FY2020. The total amount of remuneration paid to five Outside Directors was 34 million yen (basic remuneration) which includes remuneration for two Outside Directors who retired as of the conclusion of the 154th Ordinary General Meeting of Shareholders held on 26 June 2020. The total amount of remuneration paid to Representative Director Osamu Suzuki was 149 million yen (basic remuneration of 67 million yen, performance-linked bonus of 38 million yen and restricted stock remuneration of 43 million yen). Existence of Policy on Determining the Amounts of Remuneration and Calculation Methods Yes Disclosure of Policy on Determining the Amounts of Remuneration and Calculation Methods Regarding the decision-making policy for individual remuneration of Directors (hereinafter referred to as the “Decision-making Policy”), a report on the validity of the proposed Decision-making Policy is received from the Committee on Personnel and Remuneration, etc., with a majority of the members as Outside Directors. The Board of Directors deliberates and makes a resolution based on the report. The outline of the Decision-making Policy as of the filing of this report is as follows. Remuneration of Directors (excluding Outside Directors) consists of basic remuneration, bonuses linked to the Company’s performance of each fiscal year, and restricted stock remuneration linked to the medium- to long-term stock price to function as an incentive for continuous improvement of the Company’s corporate value. The ratio is roughly 40% basic remuneration, 30% bonuses, and 30% restricted stock remuneration. Outside Directors’ remuneration shall be solely basic remuneration, given their duties. Basic remuneration for Directors is fixed monthly remuneration, which is determined and paid in consideration of duties and responsibilities, remuneration levels at other companies, and employee salary levels. Bonuses are calculated based on a formula for each position linked to consolidated operating profit and are paid at a certain period each year. In addition, the content of restricted stock remuneration is determined based on the criteria for each position and is delivered at a certain period every year. The annual amount of basic remuneration for Directors and bonuses for Directors excluding Outside Directors were resolved to be within 750 million yen (including an annual amount of 36 million yen for Outside Directors) at the 151st Ordinary General Meeting of Shareholders held on 29 June 2017. The number of Directors after the conclusion of such General Meeting of Shareholders was eight including two Outside Directors. Separate from this framework of remuneration, it was resolved at the 154th Ordinary General Meeting of Shareholders held on 26 June 2020 that the total amount of remuneration to be paid to Directors excluding Outside Directors for the purpose of granting of restricted stock (monetary remuneration right) shall be within the annual amount of 300 million yen, the total annual limit of the ordinary shares to be granted shall be within 100,000 shares, and the transfer restriction period shall be from the date of allotment until the date of retirement from the position of Director. The number of Directors excluding Outside Directors after the conclusion of such General Meeting of Shareholders was six. The remuneration of Company Auditors shall be basic remuneration only. With the resolution of the 151st Ordinary General Meeting of Shareholders held on 29 June 2017 that the annual amount should not exceed 120 million yen, the payment within the limit shall be determined by consultation among Company Auditors. The number of Company Auditors after the conclusion of such General Meeting of Shareholders was five including three Outside Company Auditors. During FY2020, the total amount of remuneration that the Company paid to two Company Auditors (excluding Outside Company Auditors) was 56 million yen. The total amount of remuneration paid to three Outside Company Auditors was 33 million yen. [Outside Directors] [Support System for Outside Directors (Outside Company Auditors)] The Company has assigned a liaison to each Outside Director to assist in their duties. Through liaison, Outside Directors have been provided information by receiving agenda for Board of Directors meetings in advance as well as having access to documents at their request and others. [Outside Company Auditors] The Company has established the Company Auditors Secretariat. Please refer to “2. Matters Related to Business Execution, Audit and Supervision, Nominations and Decisions on Remuneration (Overview of Current Corporate Governance System)”. [Retired presidents/CEOs holding advisory positions, etc.)] Information on retired presidents/CEOs holding advisory positions Name Job title/ position Responsibilities Osamu Suzuki Senior Advisor Telling young directors and officers of his own experiences by providing consultation. Conditions (Full/part time, with/without compensation, etc.) Full time, with compensation Date when former role as president/ CEO ended Term 2021/6/25 One year (Renewable) Number of retired presidents/CEOs holding advisory positions 1 person Others ― 2. Matters Related to Business Execution, Audit and Supervision, Nominations and Decisions on Remuneration (Overview of Current Corporate Governance System) [Board of Directors] In June 2006, the Company reduced the number of Directors from 29 to 14 persons in connection with the introduction of Managing Officers System aiming at agile execution of operations and clarification of a responsibility framework and, after that, has continued to further streamline the structure of the Board of Directors in order to speed up decision-making processes thereat. Further, the Company has appointed two Outside Directors since June 2012 and has appointed three Outside Directors since June 2020, in order to strengthen the management oversight function and receive useful advice, suggestions, etc. on the Company’s business management based on their respective extensive experience and expertise and various perspectives. In principle, the Board of Directors meets once a month and also as needed to strengthen supervision by making decisions on basic management policies, important business execution matters, matters authorized by the General Meeting of Shareholders to the Board of Directors, and other matters prescribed by law and the Articles of Incorporation based on sufficient discussion, including from the perspective of legal compliance and corporate ethics, as well as receiving reports on the execution of important business operations as appropriate. Members of the Board of Directors are Toshihiro Suzuki (Board Chair), Osamu Honda, Masahiko Nagao, Toshiaki Suzuki, Kinji Saito, Yukihiro Yamashita, and Outside Directors Osamu Kawamura, Hideaki Domichi and Yuriko Kato. [Company Auditor’s Audit] a. Company Auditors’ audit organization, staffing and procedures Members of Audit & Supervisory Board are Full-time Company Auditors Taisuke Toyoda and Masato Kasai, and Outside Company Auditors Norio Tanaka, Nobuyuki Araki and Norihisa Nagano. Full-time Company Auditor Taisuke Toyoda has many years of operational experience in the financial and audit divisions. Outside Company Auditor Norio Tanaka has extensive experience as a certified public accountant. Both have considerable knowledge of finance and accounting. Outside Company Auditor Norihisa Nagano has extensive knowledge in law as a solicitor, Full-time Company Auditor Masato Kasai and Outside Company Auditor Nobuyuki Araki have considerable knowledge in the fields of technology, environment, etc. In addition, to assist the Company Auditors in their duties, we have established the Company Auditors Secretariat as a full-time staff division independent of the chain of command of the directors and others. There are three staff members with expertise and experience in accounting and finance, auditing, overseas assignment, technology divisions, etc. Company Auditors’ audit procedures conform to the auditing standards of the Audit & Supervisory Board, and according to the auditing policy and division of duties, which are formulated after the General Meeting of Shareholders, Company Auditors audit the proper execution of corporate management and communicate their opinions by attending meetings of the Board of Directors, Executive Committee and other important meetings, inspecting ringi (request for approval) documents and minutes of meetings, and receiving reports and interviews from directors and employees on the status of operations. In addition, Company Auditors review and discuss the audit plan and topics formulated by Audit HQ, which is an internal audit division, and the results of operational audits conducted by Audit HQ. b. Activities of Company Auditors and Board of Company Auditors The Company holds a meeting of the Audit & Supervisory Board once a month in principle, and such meeting takes a little over three hours each time on average. The meetings of Audit & Supervisory Board were held in total of 13 times in FY2020, and the attendance of individual company auditors is as follows. Full-time Company Auditor Toyokazu Sugimoto 13 times/13 times Full-time Company Auditor Masato Kasai Outside Company Auditor Norio Tanaka 13 times/13 times 13 times/13 times Outside Company Auditor Nobuyuki Araki 13 times/13 times Outside Company Auditor Norihisa Nagano 13 times/13 times Full-time Company Auditors actively and proactively exercise their authority to express their opinions at meetings of the Board of Directors and other important meetings as appropriate. Specifically, important meetings include full-time Directors’ meetings, business reporting meetings, monthly reporting meetings, the ringi (request for approval) deliberation meetings, product planning meetings, and division meetings for the reform of motorcycle business. In addition, as an observer, Company Auditors participate in the Advisory Committee on Personnel and Remuneration, etc. (former name), the Inspection Reform Committee, the Corporate Governance Committee, the Quality Assurance Committee, and the Environment Committee, and express their opinions as necessary. In addition, Company Auditors inspected the status of operations and properties at the Head Office and major places of business by carrying out the inspection of important decision documents, etc. and the audit, etc. on the performance of duties by the senior management. With respect to subsidiaries, Company Auditors inspected the status of operations and properties, etc. by receiving business reports and collecting management data, etc. and made proposals for improvement in business management through discussions with executives of subsidiaries by means of video conference, etc. Further, Company Auditors received reports of audits conducted over the Head Office, major places of business and subsidiaries from Audit HQ, which is an internal audit division, conveyed their opinions, and confirmed the status of activities under the internal control reporting system for financial reporting. Outside Company Auditors attend meetings of the Board of Directors, the Audit & Supervisory Board as well as various meetings related to business management and execution of operations as appropriate and express their opinions as needed, and exchange opinions with the Representative Director. All of them were members of the Advisory Committee on Personnel and Remuneration, etc., which is an advisory committee for the Board of Directors in FY2020 and are observers of the Committee on Personnel and Remuneration, etc. as of the date of filing of this report. Based on the above structure, the Audit & Supervisory Board received reports on the status and results of audits from respective Company Auditors, had discussions and made efforts to share information. Further, the Audit & Supervisory Board regularly receives reports from accounting auditors on the audit plan, the results of quarterly review and the status of annual audits, etc., witnesses accounting audits to recognize the status of the audits and made efforts to strengthen collaboration through necessary exchange of opinions and information sharing, for example, by receiving reports on approaches made as an auditing firm for quality control of audits. Regarding “Key Audit Matters (KAM),” the Audit & Supervisory Board had discussions several times, received reports on the status of audits on such matters and sought explanation as needed. [Executive Committee and other various meetings on management and execution of operation] In order to promptly deliberate and decide on important management issues and measures, the Executive Committee, which is attended by Executive Officers and divisional responsible persons (Managing Officers and divisional general managers, etc.) as well as the Company Auditors as an observer, and other various meetings attended by Directors, Company Auditors, Managing Officers and divisional general managers are held regularly and as needed to report and share information on management and business execution. Also, various meetings are held periodically and whenever necessary to deliberate business plans etc. and to receive reporting on operation of the company, enabling the Company to appropriately plan, identify administrative issues and grasp the situation on execution of operation. In such way, the Company is enhancing efficiency of decision making at the meetings of Board of Directors and supervision on execution of operation. [Committee on Personnel and Remuneration, etc.] Please refer to “Establishment of Optional Committee(s)” in “1.Organizational Structure and Operation, etc.”. Act. [Corporate Governance Committee] Corporate Governance Committee has been established to examine matters to ensure compliance and risk management, as well as to promote the implementation of measures and policies for the Company Group’s sustainable growth and the medium- to long-term enhancement of corporate value. The Committee also verifies the results of effectiveness evaluation of internal controls over financial reporting in accordance with Article 24-4-4, Paragraph 1 of the Financial Instruments and Exchange The committee is composed by divisional genera