ウィルグループ（6089） – [Delayed]Corporate Governance Report

Corporate Governance Report WILL GROUP, INC. Last Update: November 22, 2021 WILL GROUP, INC. Representative: Shigeru Ohara, President and Representative Director Contact: Tel: +81-(0)3-6859-8880 Stock code: 6089 https://willgroup.co.jp/en/ The corporate governance of WILL GROUP, INC. (“WILL GROUP,” or the “Company”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views In order to ensure management transparency and compliance, the Company will build a system that can respond quickly and flexibly to changes in the business environment of the entire Group while enhancing corporate governance. In addition, the Company develops company-wide activities through various measures in order to permeate corporate ethics and corporate philosophy throughout the entire Group. [Reasons for Non-compliance with the Principles of the Corporate Governance Code] Updated [Supplementary Principle 3.1.3] Full Disclosure (i) Initiatives for sustainability and initiatives for human capital WILL GROUP and its subsidiaries (the “Group”) are guided by the mission of serving as an agent of change to bring about positive changes to both individuals and organizations. As a company that creates positive changes, WILL GROUP is dedicated to grow in a sustainable manner with society. In recent years, the importance of non-financial information has been increasing from the standpoint of corporate value. WILL GROUP recognizes that activities for sustainability have become a key indicator of corporate value. The Group has been playing a role in solving social issues by meeting the needs of client companies while providing job seekers with learning and job opportunities. There will be more disclosures of information regarding self-assessments of sustainability activities, the implementation of necessary actions and progress regarding these actions. These disclosures will be made based on the perspective of sustainability guidelines such as ISO26000, ESG themes and the Sustainable Development Goals. WILL GROUP added a sustainability page to its website in October 2020 for the disclosure of information about the Group’s ESG activities. This page includes the environmental policy, human rights policy, other policies and guidelines such as standards for supplier conduct, and information about a variety of ESG initiatives and sustainability data. WILL GROUP started the SDGs Project in November 2020 for the purpose of integrating social value and economic value. This project identifies key topics and targets and KPIs for our sustainability initiatives, based on the SDG Compass guidelines. Through reporting progress to the Board of Directors, this project will obtain and reflect the opinions and advice from the Board of Directors. WILL GROUP plans to issue an Integrated Report and by using its website, more detailed information will be disclosed in an easily comprehensive format that is consistent with management strategies and challenges. *The SDG Compass, advocated by United Nations, provides guidance on how companies can align their strategies with contributions to the achievement of the SDGs. (ii) Impact of climate change on risk and profit earning opportunities – 1 – As an initiative for combating climate change, the Group has established the goal of reducing total CO2 emissions of the fiscal year ending in March 2023 by 20% compared to the level in the fiscal year that ended in March 2020 This goal is on the WILL GROUP website. Measures will be taken to increase the quality and quantity of information disclosed in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD) and other guidelines about risks, profit opportunities and other impacts of climate change. (Medium-term management plan: https://willgroup.co.jp/ir/strategy.html) (Sustainability: https://willgroup.co.jp/sustainability/index.html) [Supplementary Principle 4.10.1] Use of Optional Approach] WILL GROUP has a Nomination Committee (formerly the Selection Committee) and a Remuneration Committee for the purpose of increasing the transparency and objectivity of the examination process for the appointment of director candidates and the remuneration of directors. There are three internal directors and two independent outside directors. Although currently, independent outside directors are not the majority of members of these committees, to ensure the independence and objectivity of the functions of the Board of Directors at all committees, WILL GROUP plans to change the composition of these two committees by adding independent outside directors and outside Audit & Supervisory Board members. – Nomination Committee (formerly the Selection Committee) It discusses on matters related to the training and development of successors as part of the succession planning for the CEO, and matters related to the appointment and dismissal of directors. Committee members: Independent outside directors: 2 (including one chairperson) Internal directors: 3 – Remuneration Committee In accordance with authority granted by the Board of Directors, this committee discusses and evaluates the remuneration of the directors in compliance with the remuneration frameworks and limits established at the general meeting of shareholders and by the Board of Directors. From the standpoint of objectivity, fairness, and transparency, the evaluation by the Remuneration Committee is discussed and confirmed in advance by the Independent Officers Liaison Committee, which consists mainly of outside directors and Audit & Supervisory Board members, to ensure that it is in line with the decision-making policy regarding the details of remuneration for each individual director. Committee members: Internal directors: 3 [Disclosure Based on the Principles of the Corporate Governance Code] Updated [Principle 1.4 Cross-shareholdings] (i) Policies for strategic shareholdings The Company does not hold listed shares as cross-shareholdings. It is its policy not to hold listed shares as cross-shareholdings in the future either, unless the Company judges that it will contribute to the enhancement of the corporate value over the medium to long term, taking into consideration the creation of business opportunities and the establishment, maintenance, and strengthening of business and cooperative relationships. When WILL GROUP holds cross-shareholdings, its policy is to reduce these shares as quickly as possible when the significance of holding these shares is believed to have declined based on the above policy. (ii) Verifications related to cross-shareholdings For shares held as cross-shareholdings, the Board of Directors periodically evaluates the merits, risks, economic rationale such as return on investment against the cost of capital, and future prospects of holding the shares, and decides whether or not to retain these investments. (iii) Standards for voting rights in cross-shareholdings – 2 – When exercising its voting rights, WILL GROUP will evaluate each proposal to decide whether to approve or disapprove, rather than making a uniform decision. Each proposal will be considered from the perspective of improving corporate value and shareholder returns over the medium to long term, while fully respecting the management policies and strategies of the investee company. [Principle 1.7 Related Party Transactions] When there are transactions between related parties, in accordance with the Company rules, the Representative director deliberates the transaction and for significant transactions, the Company will obtain approval from the Board of Directors. The Company regularly checks and monitors the officers of our group companies regarding related party transactions. The conditions and policies for transactions are disclosed with the convocation notices for general meetings of shareholders, the securities report, and other channels. (Securities report: https://willgroup.co.jp/ir/library/sr.html) (Internet disclosure items: https://willgroup.co.jp/ir/library/report.html) [Supplementary Principle 2.4.1 Workforce Diversity, Including Initiatives for Empowering Women] As the business climate changes rapidly and with the difficulty to predict the future, WILL GROUP must continue to create business opportunities that are not restricted to current business domains. Accomplishing this will require the Group to operate with a diverse range of perspectives and values. The Group will continue to recruit and promote a diversified workforce regardless of gender and nationality and including mid-career employees with various work experience. Activities will also include improving workplace environments where people can maximize their attributes and capabilities, and to provide training and development programs to managers. The Group will continue to take initiatives with the goal of having the management personnel ratio of women, non-Japanese and people hired with previous work experience to be the same as the ratio of each of these categories of employees to all employees by 2030. (i) Appointment of women to key positions The Group has been actively promoting initiatives to support the advancement of women. Initiatives include career development seminars for young women and classes for enabling women to advance to management positions. Currently, 40.9% of the Group’s full-time employees are women, but only 27.6% of managerial positions are held by women. The Group’s goal is to have 40% of managerial positions filled by women by 2030. The Group will continue to improve workplace environments, encourage women to establish career goals and introduce other initiatives to reach this goal, which will result in more women being involved in management decision making processes. (ii) Appointment of non-Japanese employees to key positions Apart from having 31 consolidated subsidiaries outside of Japan, the Group has a substantial number of foreign employees in Japan as the Group provides temporary staffing of assistant language teachers, and services to foreigners who intend to be medium to long-term residents of Japan. The ratio of foreign employees has been high. Currently, 24.6% of the Group’s full-time employees are foreigners and 37.8% of managerial positions are held by foreigners. The Group will continue to actively recruit and promote foreign employees in and outside of Japan. (iii) Hiring of mid-career employees with job experience for key positions (applicable to companies in Japan) The Group hires a substantial number of employees with job experience covering many fields and promotes these employees to management positions. Currently 66.8% of all full-time employees have worked for at least one other company and these employees account for 73.1% of all employees in managerial positions, which is about the same as the full-time employee ratio. The Group will continue to provide training for all employees, whether hired as a new graduate or from another company, and assign employees to positions where they can fully utilize their skills. – 3 – [Principle 2.6 Roles of Corporate Pension Fund as Asset Owner] The Company is not an asset owner as it has not introduced a fund-type or contract-type defined benefit pension plan or welfare pension fund, as envisioned by the Corporate Governance Code. [Principle 3.1 Full Disclosure] (i) The Company discloses its corporate philosophy, management strategies and medium-term management plan on its website. (Corporate philosophy: https://willgroup.co.jp/profile/policy.html) (Medium-term management plan: https://willgroup.co.jp/ir/strategy.html) (ii) This is as written in Section I-1 titled “Basic Views” of this document. For the detailed policies and initiatives, please refer to the respective sections of this document. (iii) The policy for determining the remunerations of directors is written in Section II-1 “Organizational Composition and Operation, Director Remuneration” of this document. (iv) When appointing executives and nominating candidates for directors, the Company comprehensively considers the right person for the right position, taking into consideration the balance between accurate and prompt decision-making, appropriate risk management, oversight of business execution, and the ability to cover the various functions of the Company and the various business divisions of group companies, in accordance with internal rules. When nominating candidates for Audit & Supervisory Board members, the Company comprehensively considers the right person for the right position, while ensuring the balance between the knowledge of finance and accounting, the familiarity with the company’s business field, and diverse perspectives regarding business management. Based on these policies, Nomination Committee (formerly the Selection Committee), which includes outside directors, discusses selections in advance for final decisions by resolutions of the Board of Directors For the dismissal of executives, an advisory committee consisting mainly of outside directors and Audit & Supervisory Board members is formed on a case-by-case basis for deliberations in accordance with internal rules, and final decisions are made by a resolution of the Board of Directors (v) The Candidates for directors and Audit & Supervisory Board members, the reasons for their election, as well as their career summaries, are provided in the reference materials for the general meeting of shareholders, which are described in the convocation notice for a general meeting of shareholders in the Company’s website. In the event of dismissal, appropriate disclosure will be made in accordance with the Company’s policies and procedures. (Convocation notice for a general meeting of shareholders: https://willgroup.co.jp/ir/library/report.html) [Supplementary Principle 4.1.1 Summary of Scope of Matters Delegated by the Board of Directors to the Management] The Company’s Board of Directors regulations specify the items to be discussed and decided by the Board of Directors in accordance with laws and regulations. In addition, the regulations for delegation of authority specify the scope of management’s authority. [Principle 4.9 Independence Criteria and Qualification for Independent Directors] In selecting outside directors/Audit & Supervisory Board members (hereinafter “Outside Officers”) or candidates for Outside Officers, the Company ensures that they satisfy the requirements for independence set forth by the Tokyo Stock Exchange and the Company’s Criteria for Independence of Outside Directors/Audit & Supervisory Board Members as described below. Criteria for Outside Directors/Audit & Supervisory Board Members (hereinafter “Outside Officers”): – 4 – The Company judges Outside Officers or candidates for Outside Officers as independent if, as a result of the investigation conducted by the Company as far as reasonably possible, they do not fall under any of the following items: 1) An executive Note 1 of the Company and its affiliates; 2) A party that regards the Group as major client Note 2, or an executive thereof; 3) A major client of the Group Note 3, or an executive thereof; 4) A major shareholder of the Company (holding directly or indirectly 10% or more of total voting rights) 5) A party of which the Group directly or indirectly holds 10% or more of the total voting rights or an or an executive thereof; executive thereof; 6) A person who belongs to an audit firm appointed as Accounting Auditor of the Group; 7) An attorney, certified public accountant, licensed tax accountant, consultant and the like who receives a large amount Note 4 of monetary or other property benefits other than officers’ remuneration from the Group; 8) A person who belongs to corporations, cooperatives, and the like including law firms, auditing firms, tax accountant corporations, and consulting firms, which receive a large amount Note 4 of monetary or other property benefits from the Group; 9) A person, or a council member or other executive of a corporation or cooperative, which receives a large amount Note 4 of donations or assistance from the Group; 10) A person who serves as executive director, executive officer (shikko-yaku), executive officer (shikko-yakuin), manager or other important employee of such company in cases where executive directors, or full-time Audit & Supervisory Board members concurrently serve as outside directors or outside Audit & Supervisory Board members of other companies; 11) A person who falls under the definition of the above (2) to (10) in the last ten years; and 12) In cases where a person falling under the definition of the above (1) to (10) is an important person Note 5, their spouse or relative within the second degree of kinship. Notes: 1. An “executive” refers to a director, executive officer (shikko-yaku), executive officer (shikko-yakuin), employee with executive powers, council member, or party or employee equivalent thereto of corporations and other bodies, as well as a party who belonged to the Group in the past even once. 2. A “party regarding the Group as major client” refers to a party who has received from the Company the payment of 2% or more of their consolidated annual sales in the most recent fiscal year. 3. A “major client of the Group” refers to a party who pays the Company 2% or more of its consolidated annual sales in the most recent fiscal year, or who loaned the Company 2% or more of its consolidated total assets at the end of the most recent fiscal year. 4. A “large amount” refers to, in terms of the average for the past three fiscal years, 10 million yen or more for individuals, or for entities including corporations and cooperatives, more than 2% of the consolidated sales or total revenues. 5. An “important person” refers to a director (excluding outside director), audit & supervisory board member (excluding outside audit & supervisory board member), executive officer (shikko-yakuin) and an employee who is senior manager in the position of general manager or higher. [Supplementary Principle 4.11.1 Preconditions for Board and Audit & Supervisory Board Effectiveness] The Board of Directors has three internal directors who have a thorough knowledge of the Group’s business operations and two independent outside directors and three outside Audit & Supervisory Board members. These Outside Officers have considerable experience and knowledge that encompasses corporate management, finance and accounting, global business operations, and other areas of expertise. This composition of the board allows the directors to perform their functions effectively and efficiently as well as to effectively oversee business execution. – 5 – The Board of Directors nominates candidates for directors based on the discussions held by the Nomination Committee (formerly the Selection Committee). During this process, necessary skills to accomplish the goals of the medium-term management plan are identified. The selection process takes place with the goal of achieving diversity of the board in order to have a proper balance of knowledge, experience and skills. A skill matrix for knowledge, experience, skills and other characteristics of all directors is on the WILL GROUP website. (Skill matrix: https://willgroup.co.jp/sustainability/governance/governance.html) [Supplementary Principle 4.11.2 Preconditions for Board and Audit & Supervisory Board Effectiveness] In the business report and reference materials for the general meeting of shareholders, the status of concurrent positions held by each director and Audit & Supervisory Board member, including those at other listed companies, is disclosed. (Convocation notice for a general meeting of shareholders: https://willgroup.co.jp/ir/library/report.html) [Supplementary Principle 4.11.3 Preconditions for Board and Audit & Supervisory Board Effectiveness] In January 2021, the Board of Directors conducted an evaluation of the effectiveness of the Board of Directors for all directors (five) and all Audit & Supervisory Board members (three) in accordance with the Company’s Basic Policy on Corporate Governance. The method used for this evaluation and the results are as follows. 1. Evaluation method – Conduct a survey involving all directors and Audit & Supervisory Board members – 5-point scale evaluation and open-ended questions (20 items in 4 categories) Evaluation categories 1) Composition of the board 2) Operation of the board 3) Support system for Outside Officers 4) Overall evaluation 2. Results of evaluation As a result of the above implementation, the following information was confirmed regarding the effectiveness of the Board of Directors. 1) The frequency of meetings of the Board of Directors and the management of its proceedings are appropriate. 2) Materials are distributed or explained in advance, and sufficient time is set aside for active discussion, so that management issues can be sufficiently examined. 3) The Board of Directors has a well-balanced composition of people with diverse knowledge and experience, and is able to consider management issues from various perspectives. 4) Sufficient information is provided to Outside Officers on management, finance, risk management, and management and compliance issues faced by the Group. 5) The matters to be discussed at the Board of Directors meetings are reviewed from time to time in order to accurately deliberate important matters and hold more strategic discussions. 6) The progress or results of the matters resolved are reported accordingly and the Board of Directors is able to supervise the status of the duties executed by the directors. 3. Upcoming activities Based on the results of this evaluation of the effectiveness of the Board of Directors, the Company will continue its efforts to improve the effectiveness of the Board of Directors by optimizing the agenda, providing information to deepen discussions, and strengthening the secretariat system, in order to further strengthen the functions of the Board of Directors. – 6 – [Supplementary Principle 4.14.2 Training Policy for Directors and Audit & Supervisory Board Members] Directors and Audit & Supervisory Board members are selected from those who possess broad knowledge of business, financial affairs, laws and regulations, organizations, etc., and trained if necessary, when they are appointed. The Company continues to provide training for appointed directors and Audit & Supervisory Board members, such as by providing opportunities to participate in seminars and exchange meetings by external experts with content related to the Companies Act and business trends. [Principle 5.1 Policy for Constructive Dialogue with Shareholders] The Company has formulated the disclosure policy consisting of “Basic Policy on Information Disclosure,” “Criteria for Information Disclosure,” “Methods for Information Disclosure,” “Future Outlook,” and “Quiet Period,” which is disclosed on its website. (Disclosure policy: https://willgroup.co.jp/ir/disclosure.html) Moreover, the Company has the following policies to encourage constructive dialogue with shareholders. (i) In the investor relations activities, the Representative Director and the Executive Officer in charge of the Management Department will hold a proactive dialogue to facilitate good two-way communication about corporate strategies, business strategies, financing information, etc. while developing investor relations activities that emphasize fairness, accuracy and continuity. (ii) Under the leadership of the Management Department, the heads of the management planning, general affairs, financial affairs, accounting and legal affairs sections cooperate with one another in a coordinated manner, to disclose information timely, fairly, and properly. (iii) For facilitating communication, the Company holds corporate briefings for individuals and financial results briefings for institutional investors. In addition, the Company will continue to enhance its investor relations activities by posting videos of the briefings and the content of the question-and-answer sessions on its website. (iv) The Company accepts requests from shareholders, submitted to the IR Team of the Finance Affairs Department, for individual meetings with senior executives, outside and other directors or Audit & Supervisory Board members as much as reasonably possible. Approvals of requests for these meetings are based on the purpose and other reasons for requesting the meeting. (v) The opinions or concerns of shareholders ascertained during the dialogue will be appropriately and effectively fed back to the Company’s various committees on a quarterly basis through the Representative Director or the Executive Officer in charge of the Management Department. (vi) In addition to setting quiet periods in accordance with the Disclosure Policy, the Company will operate and thoroughly enforce regulations regarding the management of insider information. * The above disclosure documents are available at the Company’s website: https://willgroup.co.jp/ir/index.html 2. Capital Structure [Status of Major Shareholders] Foreign Shareholding Ratio From 10% to less than 20% Name / Company Name Percentage (%) Ryosuke Ikeda Ikeda Planning Office Co.,Ltd. Shigeru Ohara Custody Bank of Japan, Ltd. (Trust Account) The Master Trust Bank of Japan, Ltd. (Trust Account) WILL GROUP Employee Stock Ownership Plan Number of Shares Owned 4,204,100 1,707,500 1,680,000 925,800 850,500 570,200 18.64 7.57 7.45 4.11 3.77 2.53 – 7 – RE FUND 107-CLIENT AC BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC) Shingo Watanabe Ryoichi Taira 447,500 428,200 400,000 367,000 1.98 1.90 1.77 1.63 Controlling Shareholder (except for Parent Company) Parent Company – None Supplementary Explanation – 3. Corporate Attributes Listed Stock Market and Market Section Fiscal Year-End Type of Business Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) for the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Tokyo Stock Exchange First Section March Services 1000 or more From ¥100 billion to less than ¥1,000 billion From 10 to less than 50 4. Policy on Measures to Protect Non-controlling Shareholders in Conducting Transactions with Controlling Shareholder – 5. Other Special Circumstances which may have Material Impact on Corporate Governance (i) Position and policy regarding group management The Company has a listed subsidiary, for Startups, Inc., which is listed on the Tokyo Stock Exchange Mothers market. In aiming to maximize the corporate value of the Group as a whole, the Group will continue to maintain a system of flexible management while maintaining the independence of its listed subsidiary in order to record stable earnings and continuously improve consolidated performance in a manner consistent with the interests of all shareholders, including non-controlling shareholders. (ii) Significance of having a listed subsidiary The listed subsidiary aims to support growth industries under the management vision of “for Startups”. This company is positioning itself as a bridge between startups, large companies, job seekers and other ecosystem builders. However, in order to play a central role in supporting growth industries, the Company believes it is necessary to establish the relevant positioning and further enhance this subsidiary’s corporate value by improving its social credibility, securing autonomous funding mainstays and improve its human capital. Against this background, the Company believes that it is necessary to maintain this subsidiary’s listing because through the listing of the shares, it enables this company to raise funds without being restricted by the Group’s fund allocation policy and obtain its own credibility by being a listed company, which in turn will be beneficial to the enhancement of the Group’s corporate value. – 8 – (iii) Measures to ensure the effectiveness of the governance system of listed subsidiary The Company strives to maintain a common awareness of the Group’s management policies and strategies, but its basic principle is to allow the listed subsidiary to decide on its business activities and to make management decisions by its own. Therefore, from the viewpoint of protecting non-controlling shareholders, it is the Company’s policy not to conduct internal transactions between the Company and its other subsidiaries and the listed subsidiary. Furthermore, the basic principle of the composition of the Board of Directors is to have a majority of directors who are not officers or employees of the Company, and the acceptance of officers from the Company is limited to one director and one Audit & Supervisory Board member, thus establishing and operating a corporate governance system that is independent from the Company. – 9 – II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organization Form Company with the Audit & Supervisory Board [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation Term of Office of Directors Stipulated in Articles of Incorporation 9 One year Chairperson of the Board Number of Directors Election of Outside Directors Number of Outside Directors Number of Independent Outside Directors Chairman (except in the case of a person who concurrently serves as President) 5 Yes 2 2 Outside Directors’ Relationship with the Company (1) Name Attribute Certified public accountant From other company Shuhei Ito Chie Ikegawa * Categories for “Relationship with the Company” * a b Relationship with the Company* i f c g d h e j k “○” when the director presently falls or has recently fallen under the category; “△” when the director fell under the category in the past “●” when a close relative of the director presently falls or has recently fallen under the category; “▲”when a close relative of the director fell under the category in the past * a. Executive (a person who executes business; hereinafter the same) of the Company or its subsidiaries b. Executive or non-executive director of the parent company of the Company c. Executive of a fellow subsidiary of the Company d. A party whose major business partner is the Company or an executive thereof e. Major business partner of the Company or their executive f. Consultant, accountant or legal professionals who receive a large amount of money or other financial benefits from the Company other than compensation for their services as officers g. Major shareholders of the Company (or their executive if the shareholder is a legal entity) h. Executive of a business partner of the Company (which do not correspond to any of d, e, or f) (the director i. Executive of a company, between which and the Company outside officers are mutually appointed (the j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only) director himself/herself only) himself/herself only) k. Others – 10 – Outside Directors’ Relationship with the Company (2) Name Designation as Independent Director Supplementary Explanation of the Relationship Shuhei Ito ○ – Chie Ikegawa ○ – Reasons of Appointment Shuhei Ito has extensive experiences and a track record as a certified public accountant and has advanced knowledge of accounting. Having an abundant track record of serving as an outside officer of several companies, he has a wealth of experience in corporate management and provides advice actively at meetings of the Board of Directors. He has a perspective that is independent from the Company. He is expected to contribute to the Group’s sustainable growth, the enhancement of corporate value, the transparency and fairness of the management and the further enhancement of the Company’s corporate governance. In addition, he satisfies the “Criteria for Independence” independently established by the Tokyo Stock Exchange and the Company, and there is no concern that may cause conflicts of interest with general shareholders. Chie Ikegawa has a track record and extensive experiences in corporate management, as well as knowledge and experiences in a wide range of fields, including global business, M&A, and risk management. She has contributed to constructive discussions and effective assessments of the Board of Directors. She has a perspective that is independent from the Company. She is expected to contribute to the Group’s sustainable growth, the enhancement of corporate value, the strengthening of growth strategies from the perspective of global business, the enhancement of management supervisory functions in the fields of financial strategies and risk management, and the further enhancement of the Company’s corporate governance. In addition, she satisfies the “Criteria for Independence” independently established by the Tokyo Stock Exchange and the Company, and there is no concern that may cause conflicts of interest with general shareholders. Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson Updated – 11 – Committee Corresponding to Nomination Committee Committee Corresponding to Remuneration Committee Committee’s Name All Committee Members Full-time Members Inside Directors Outside Directors External Experts Other Chairperson Nomination Committee 5 0 3 2 0 0 Outside director Supplementary Explanations Remuneration Committee 3 0 3 0 0 0 Inside director From the standpoint of objectivity, fairness, and transparency, the evaluation made by the Remuneration Committee is discussed and confirmed in advance by the Independent Officers Liaison Committee, which is comprised of mainly outside directors and Audit & Supervisory Board members, to ensure that it is in line with the decision-making policy of each individual director’s remuneration. [Audit & Supervisory Board Members] Establishment of Audit & Supervisory Board Maximum Number of Audit & Supervisory Board Members Stipulated in Articles of Incorporation Number of Audit & Supervisory Board Members Established 4 3 Cooperation among Audit & Supervisory Board Members, Accounting Auditors and Internal Audit Departments The internal auditors, Audit & Supervisory Board members, and accounting auditors exchange opinions when formulating the annual internal audit plan, and work to ensure that internal audits are conducted in a coordinated manner. In addition, the results of internal audits are reported to the full-time Audit& Supervisory Board members in a timely manner, and the Audit & Supervisory Board members receive direct reports on the audit reports from the accounting auditors, in order to ensure cooperation among the three parties for more efficient audits. Appointment of Outside Audit & Supervisory Board Members Number of Outside Audit & Supervisory Board Members Number of Independent Outside Audit & Supervisory Board Members Appointed 3 3 Outside Audit & Supervisory Board Members’ Relationship with the Company (1) Name Attribute a Shizuka Sawada Kenji Omukai Katsumi Nakamura Attorney * Categories for “Relationship with the Company” Certified public accountant Certified public accountant b Relationship with the Company* g h d e f i j k c l m – 12 – * * “○” when the Audit & Supervisory Board member presently falls or has recently fallen under the category; “△” when the Audit & Supervisory Board member fell under the category in the past “●” when a close relative of the Audit & Supervisory Board member presently falls or has recently fallen under the category; “▲”when a close relative of the Audit & Supervisory Board member fell under the category in the past a. Executive of the Company or its subsidiaries b. Non-executive director or accounting advisor of the Company or its subsidiaries c. Executive or non-executive director of the parent company of the Company d. Audit & Supervisory Board member of the parent company of the Company e. Executive of a fellow subsidiary of the Company f. Persons who have the Company as a major business partner or their executive g. Major business partners of the Company or their executive h. Consultant, accountant or legal professionals who receive a large amount of money or other financial benefits from the Company other than compensation for their services as officers i. Major shareholders of the Company (or their executive if the shareholder is a legal entity) j. Executive of a major business partner of the Company (which do not correspond to any of f, g, or h) (the Audit & Supervisory Board member himself/herself only) k. Executive of a company, between which and the Company outside officers are mutually appointed (the Audit & Supervisory Board member himself/herself only) l. Executive of a company or organization that receives a donation from the Company (the Audit & Supervisory Board member himself/herself only) m. Others Outside Audit & Supervisory Board Members’ Relationship with the Company (2) Name Designation as Independent Audit & Supervisory Board Member Supplementary Explanation of the Relationship Shizuka Sawada ○ – Kenji Omukai ○ – Reasons of Appointment Shizuka Sawada has extensive knowledge and experiences as a certified public accountant and has been appointed as an outside Audit & Supervisory Board member in the expectation that she will monitor and provide advice on corporate management, particularly from the financial and accounting perspectives. In addition, she satisfies the “Criteria for Independence” independently established by the Tokyo Stock Exchange and the Company, and there is no concern that may cause conflicts of interest with general shareholders. Kenji Omukai has high expertise as a certified public accountant, as well as extensive experiences and knowledge in global group management. To strengthen the Company’s auditing system in order to reinforce the management advisory functions, and to build a better corporate governance system, the Company has appointed him as an Outside Audit & Supervisory Board Member. In addition, he satisfies the “Criteria for Independence” independently established by the Tokyo Stock Exchange and the Company, and there is no – 13 – Katsumi Nakamura ○ – concern that may cause conflicts of interest with general shareholders. Katsumi Nakamura has high expertise as an attorney, as well as extensive experiences and advanced knowledge in global corporate management that can effectively respond to changes in the business environment, and risk management. To strengthen the Company’s auditing system in order to reinforce the management advisory functions, and to build a better corporate governance system, the Company has appointed him as an Outside Audit & Supervisory Board Member…In addition, he satisfies the “Criteria for Independence” independently established by the Tokyo Stock Exchange and the Company, and there is no concern that may cause conflicts of interest with general shareholders. [Independent Officers] Number of Officers 5 Matters relating to Independent Officers All outside directors and outside Audit & Supervisory Board members who qualify as independent officers are designated as such. [Incentives] Incentive Policies for Directors Supplementary Explanation Performance-linked stock compensation plan and stock options The Company has introduced a stock option plan, which is conditional on the achievement of performance targets. In addition, the Company has introduced a performance-linked stock compensation plan with the aim of raising awareness among directors to contribute to the improvement of medium- to long-term business performance and the enhancement of corporate value by having a clearer linkage between the remuneration of directors and the Company’s performance and share value, and sharing the benefits and risks of share price fluctuations with shareholders. Recipients of Stock Options Supplementary Explanation Inside directors, outside directors, employees, and directors and employees of subsidiaries Stock options The Company grants stock options to directors and employees of the Company and its subsidiaries for the purpose of further improving their motivation and morale and further enhancing the unity of the Company as it aims to expand its business performance and increase its corporate value over the medium to long term. Performance-linked stock compensation plan The Company has introduced a performance-linked stock compensation plan, for directors (excluding outside directors and directors serving without remuneration; the same applies hereinafter), in addition to the fixed remuneration. – 14 – This plan consists of performance-linked stock-based compensation and position-linked stock-based compensation, and has been introduced with the aim of sharing interests with shareholders by raising awareness of the need to contribute not only to improving business performance but also to enhancing corporate value. The performance indicators for the performance-linked stock-based compensation are based on the points set for each grade rank which is set based on the job grade system stipulated in the share delivery regulations. The reason for selecting these indices is that the Company’s medium-term management plan sets forth a basic policy of creating a highly profitable structure and that the mission of each director is to fulfill the responsibilities expected by shareholders. In addition, the calculation method is to distribute stock-based compensation by granting points based on the position and each director’s performance contribution in accordance with the stock delivery regulations. There is no distribution of the performance-linked stock-based compensation as of March 31, 2021 as the shares will be delivered in the fiscal year ending March 31, 2023. The position-linked stock-based compensation is as described in “Non-monetary compensation, etc.” under the “Supplemental Explanation” in “(6) Director Remuneration” below. Disclosure of Individual Directors’ Remuneration Individual remuneration is not disclosed. [Director Remuneration] Supplementary Explanation Remuneration for directors and the Audit & Supervisory Board members for the fiscal year ended March 31, 2021 is as follows. Total amount of remuneration paid to directors: 136 million yen (of which, 11 million yen paid to three outside directors) Breakdown of total amount of remuneration: Fixed remuneration 118 million yen (of which, 11 million yen paid to three outside directors), Non-monetary compensation, etc. 18 million yen Total amount of remuneration paid to Audit & Supervisory Board members: 21 million yen (of which, 21 million yen paid to three outside Audit & Supervisory Board members) Policy for Determining Remuneration Amounts and Calculation Methods Established Disclosure of Policy for Determining Remuneration Amounts and Calculation Methods Policy for determining remuneration amounts and calculation methods The Company has adopted a resolution on the policy for determining the details of remuneration for each individual director. In addition, the Board of Directors has confirmed that the method of determining the details of remuneration and the details of remuneration determined for each individual director for the current fiscal year are consistent with the decision-making policy resolved by the Board of Directors, and that the report from the Independent Officers Liaison Committee, which mainly consists of outside directors and Audit & Supervisory Board members, has been taken into consideration, and the Board of Directors has determined that the remuneration is in line with the decision-making policy. The details of the policy for determining the details of remuneration for each individual director are as follows. a. Basic policy The Company’s basic policy is to link the remuneration of directors to shareholder interests so that it will fully function as an incentive for the sustainable enhancement of corporate value, and to determine the remuneration of individual directors at an appropriate level based on their respective responsibilities. Specifically, the – 15 – remuneration for executive directors consists of fixed remuneration and the performance-linked stock compensation plan. The latter plan aims to raise awareness among directors to contribute to the improvement of medium- to long-term business performance and the increase of corporate value by having a clearer linkage between the remuneration of directors and the Company’s performance and share value, and sharing the benefits and risks of share price fluctuations with shareholders. Outside directors, who are responsible for supervisory functions, are only paid in the form of basic remuneration in consideration of their duties. b. Policy for determining the amount of remuneration by individual for this remuneration The basic remuneration for directors (excluding outside directors and directors serving without remuneration; the same applies hereinafter) of the Company shall be a fixed monthly remuneration. The amount of remuneration is considered based on the basic remuneration predetermined according to their position as a basis, and the Company takes into consideration the organization under their control, responsibilities, and performance evaluation of the previous fiscal year to determine the amount of remuneration. Remuneration for outside directors is determined by comprehensively by taking into consideration factors such as their duties, contribution to society and the reasons for appointment. c. Policy for determining the details of non-monetary remuneration and the method for calculating the amount or number of such remuneration The performance-linked stock compensation plan for medium- to long-term incentives is a stock compensation plan in which a trust established and funded by the Company (hereinafter the “Trust”) will acquire the Company’s shares, and points will be granted to each director in accordance with his or her position and the degree of achievement of performance targets, based on the share delivery regulations established by the Board of Directors of the Company. The points will determine the number of shares to be granted. In principle, the timing of delivery of the Company’s shares to the directors for the “performance-linked stock-based compensation”, which the Company’s shares are granted based on the degree of achievement of performance targets, is at a certain time during their term of office (at the end of the applicable period). For “position-linked stock-based compensation” which is linked to the directors’ respective positions, the directors shall, in principle, receive the Company’s shares linked to the “position-linked stock-based compensation” at the time of retirement of directors. d. Policy for determining the ratio of the amount of monetary remuneration and the amount of performance-linked remuneration or the amount of non-monetary remuneration for individual remuneration of directors The Company places importance on the level of basic remuneration according to the responsibilities of the directors, with the aim of raising awareness among directors to contribute to the improvement of medium- to long-term business performance and the increase of corporate value by sharing the benefits and risks of share price fluctuations with shareholders. While this is the basic principle, the Company also considers the composition ratio of basic remuneration and stock-based remuneration, taking into account the pursuit of shareholder interests. The ratio of stock-based remuneration to the basic remuneration for directors is designed to be a maximum of 20%. e. Matters concerning the determination of the details of individual remuneration of directors The amount of remuneration for each individual shall be delegated to the representative directors based on the resolution of the Board of Directors regarding the specific details thereof. The content of this authority is the amount of fixed remuneration for each director. In order to ensure that such authority is exercised appropriately by the representative directors, the “Remuneration Committee,” consisting of full-time directors, evaluates the draft and from the viewpoint of objectivity, fairness and transparency, the “Independent Officers Liaison Committee,” consisting mainly of outside directors and Audit & Supervisory Board members, discusses and confirms the draft in advance to submit a report to the Board of Directors. The representative – 16 – directors who are delegated the above-mentioned authority, will make decisions in accordance with the content of the said report. For performance-linked stock-based compensation, points will be granted in accordance with the share delivery regulations established by the Board of Directors of the Company. Matters concerning delegation of authority to determine individual remuneration, of directors Ryosuke Ikeda, Chairman, and Shigeru Ohara, President and Representative Director, are delegated the authority to determine the specific amount of remuneration for each individual based on a resolution of the Board of Directors. The reason for the delegation was that they were deemed suitable to evaluate the divisions in charged by each director while taking into consideration the Company’s overall performance and other factors. The content of this authority is the amount of fixed remuneration for each director. In order to ensure that such authority is exercised appropriately by the representative directors, the “Remuneration Committee,” consisting of full-time directors, evaluates the draft and from the viewpoint of objectivity, fairness and transparency, the ” Independent Officers Liaison Committee,” consisting mainly of outside directors and Audit & Supervisory Board members, discusses and confirms the draft in advance to submit a report to the Board of Directors. For performance-linked stock-based compensation, points will be granted in accordance with the share delivery regulations established by the Board of Directors of the Company. Note: The maximum amount of monetary remuneration for directors is 300 million yen per year (as resolved at the Ordinary General Meeting of Shareholders held on June 27, 2008). In addition to monetary remuneration, the amount of non-monetary remuneration was resolved at the 14th Ordinary General Meeting of Shareholders held on June 23, 2020 to be no more than 210 million yen in total as stock-based remuneration from the fiscal year ended March 31, 2021 to the fiscal year ending March 31, 2023, and the maximum number of points to be granted is 80,000 points per fiscal year (excluding outside directors and directors serving without remuneration). The maximum amount of monetary remuneration for Audit & Supervisory Board members is 40 million yen per year (as resolved at the Ordinary General Meeting of Shareholders held on June 27, 2008). [Supporting System for Outside Directors and/or Audit & Supervisory Board Members] There is no full-time staff to assist the duties of outside directors and outside Audit & Supervisory Board members, but personnel of the Executive Office of the Management Department concurrently perform these support duties. The Executive Office of the Management Department distributes materials on matters to be resolved and reported in advance of regular and extraordinary meetings of the Board of Directors, and has a system in place to promptly respond to inquiries from outside directors and outside Audit & Supervisory Board members. [Retired Representative Directors, Presidents, Etc.] Profile of Senior Advisors, Etc. Who Are Former Representative Directors/Presidents, Etc. Name Position Job responsibilities – – – Employment terms (Full time or not, remuneration or not) – Date of resignation as president, etc. – Term – Number of Senior Advisors, Etc. Who Are Former Representative Directors/Presidents, Etc. 0 Other Matters The Company does not have a system for appointing retired representative directors as advisors or counselors. – 17 – 2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System) Updated Board of Directors The Company’s Board of Directors consists of five directors, namely Representative Director and Chairman Ryosuke Ikeda, President and Representative Director Shigeru Ohara, Takashi Tsugeno, Shuhei Ito and Chie Ikegawa (Shuhei Ito and Chie Ikegawa are outside directors), and in addition to the regular monthly meetings, extraordinary meetings of the Board of Directors are held as necessary. The Board of Directors, as a management decision-making body, resolves important matters in accordance with the Board of Directors regulations and supervises the status of business execution by the directors. The Board of Directors is attended by three auditors (including three outside Audit & Supervisory Board members) to ensure that important decisions are always audited. Audit & Supervisory Board The Company is a company with an Audit & Supervisory Board. The Company’s Audit & Supervisory Board consists of three outside Audit & Supervisory Board members, namely, Shizuka Sawada, Kenji Omukai and Katsumi Nakamura. Each Audit & Supervisory Board member audits the execution of duties by directors by attending meetings of the Board of Directors and other important meetings in accordance with the audit plan formulated by the Audit & Supervisory Board. The Audit & Supervisory Board, which meets regularly once a month and as necessary, determines audit policies and plans, and exchanges opinions on compliance issues. In addition, they receive quarterly explanations and reports on financial results from the accounting auditor, and exchanges information and opinions with the accounting auditor as necessary. Audit & Supervisory Board members Shizuka Sawada and Kenji Omukai are certified public accountants, and Katsumi Nakamura is a lawyer. Advisory Committees on Nomination and Remuneration To increase the transparency and objectivity of the examination process for the appointment of director candidates and the remuneration of directors, discussions and confirmations are performed in advance regarding matters on nomination and remuneration by the Nomination Committee and Remuneration Committee. The results of these discussions are then submitted to the Board of Directors, which makes final decisions. – Nomination Committee (formerly the Selection Committee) The Company’s Nomination Committee (formerly the Selection Committee) consists of five directors: Ryosuke Ikeda, Chairman and Representative Director, Shigeru Ohara, President and Representative Director, Takashi Tsugeno, Shuhei Ito and Chie Ikegawa (Shuhei Ito and Chie Ikegawa are outside directors). It deliberates on matters related to the training and development of successors as part of the succession planning for the CEO, and matters related to the appointment and dismissal of directors. – Remuneration Committee The Remuneration Committee consists of three full-time directors: Ryosuke Ikeda, Chairman and Representative Director, Shigeru Ohara, President and Representative Director, and Takashi Tsugeno. From the standpoint of objectivity, fairness, and transparency, the evaluation by the Remuneration Committee is discussed and confirmed in advance by the Independent Officers Liaison Committee, which consists mainly of outside directors and Audit & Supervisory Board members, to ensure that it is in line with the decision-making policy regarding the details of remuneration for each individual director. Compliance Committee – 18 – The Compliance Committee, chaired by the representative director and consisting of the Group’s directors and employees selected from within the Company, ensures that the Company is in compliance with the laws and regulations. Each director or executive officer works to raise awareness of compliance by ensuring that all departments under their control are thoroughly aware of compliance. Internal Audit Office The Internal Audit Office of the Company consists of four members. In accordance with the internal audit regulations, the Internal Audit Office provides guidance on compliance with laws, regulations and internal rules, and audits the entire Group on a regular and ad-hoc basis. Not only from the perspective of legality, the office also points out and provides guidance on improving the suitability and efficiency of business operations. Group Management Committee The Group Management Committee, led by the directors and executive officers of the Group, discusses important matters such as analysis of the recent business environment and performance trends, and medium- to long-term business strategies. 3. Reasons for Adoption of Current Corporate Governance System As mentioned above, the execution of duties by directors is thoroughly supervised by outside directors and outside Audit & Supervisory Board members. In addition, in order to enhance the effectiveness of the supervisory function, the Company appoints outside directors with sufficient management experience and insight. Moreover, all of the three Audit & Supervisory Board members are outside members, and their expertise enables them to verify compliance with laws and regulations and the Articles of Incorporation from an objective perspective. – 19 – III. Implementation of Measures for Shareholders and Other Stakeholders 1. Measures to Vitalize the General Shareholder Meetings and Smooth Exercise of Voting Rights Early Notification of General Shareholder Meeting Scheduling General Shareholder Meeting Avoiding the Peak Day Allowing Electronic Exercise of Voting Rights Participation in Electronic Voting Platform and Other Measures for Greater Ease of Voting by Institutional Investors Providing Convocation Notice in English Supplementary Explanations The convocation notice for the June 2021 General Meeting of Shareholders was sent three days ahead of the statutory deadline. The Company also posted this convocation notice on its website prior to the date on which it was sent. The Company’s fiscal year ends in March, which is a month in which General Meetings of Shareholders are concentrated, but the Company will endeavor to avoid as much as possible the days on which General Meetings of Shareholders are concentrated. The Company has established an environment where shareholders can exercise their voting rights from a personal computer, smartphone or cell phone via the voting website of the administrator of the shareholder registry designated by the Company. The Electronic Voting Platform operated by ICJ, Inc. is used. The convocation notice in English is posted on the Company’s website and the platform for electronic exercise of voting rights. The convocation notice is disclosed on the Company’s website and TDnet, the website of the Tokyo Stock Exchange, and measures are being implemented to facilitate the exercise of voting rights. Other 2. IR Activities Supplementary Explanations Presentation by President Preparation and Announcement of Disclosure Policy Regular Investor Briefings for Individual Investors Regular Investor Briefings for Analysts and Institutional Investors Regular Investor Briefings for Overseas Investors Posting of IR Materials on Website Disclosure Policy is posted on the Company’s website. The Company regularly holds briefings for individual investors, and post videos of the briefings for individual investors on its website. The Company holds financial results briefings twice a year (in May and November) for the second quarter and the full year, and posts the videos of the briefings and the questions and answers from the briefings on its website. The Company also visits institutional investors and holds meetings with securities analysts as appropriate. Meetings and other events are held as necessary, although not on a regular basis. The Company posts financial results, supplementary materials, Japanese and English versions of financial results briefing materials, securities reports or quarterly reports, and other timely disclosure materials on its website. Yes Yes Yes – 20 – Establishment of Department and/or Manager in Charge of IR The Executive Officer in charge of the Management Department has been appointed as the officer in charge of investor relations, and the IR Group of the Financial Affairs Department has been established as the department in charge of investor relations. 3. Measures to Ensure Due Respect for Stakeholders Stipulation of Internal Rules for Respecting the Position of Stakeholders Implementation of Environmental Activities, CSR Activities etc. Supplementary Explanations The Company has established the “WILL WAY” action guidelines and the Code of Conduct and communicate them through various methods to ensure that they are widely disseminated to the front lines of our business activities. Immediately after the Great East Japan Earthquake, the Company has been involved in a variety of initiatives, such as supporting an “after-school classroom” run by an NPO, and supporting extracurricular activities and education to create opportunities for children to be excited about their future. This is as written in Section I-1 “Disclosure Based on the Principles of the Corporate Governance Code, Principle 5.1” of this document. Development of Policies on Information Provision to Stakeholders – 21 – IV. Matters Related to the Internal Control System 1. Basic Views on Internal Control System and the Progress of System Development (i) System for ensuring that directors and employees perform their duties in compliance with laws and regulations and the Articles of Incorporation a) To ensure that all officers and employees, including those of group companies, comply with laws, regulations, the Articles of Incorporation, and other social norms, the Company has established compliance regulations and strives to practice highly ethical and compliance-conscious behavior. The Company establishes the Compliance Committee, chaired by the representative director, and provides all officers and employees with education regarding actions that comply with laws and regulations as well as social ethics. b) In the event that a director foresees an act by another director that may violate laws, regulations, or the Articles of Incorporation, he or she will immediately report it to the Audit & Supervisory Board and the Board of Directors, and strengthen the governance system to prevent such act from occurring in the future. c) As an internal whistleblowing system to strengthen compliance management, the Company has established the Compliance Hotline Regulations, which provide a contact point for reporting to outside attorneys and a Compliance Committee member as a direct recipient of information, and operate the system in accordance with these regulations. d) The Internal Audit Office, which is independent of the business execution divisions, has been established to provide a constant and professional monitoring system fo