クボタ（6326） – Corporate Governance Report

[Translation] Corporate Governance Report Last updated on March 29, 2022 Representative Director: Yuichi Kitao Contact: Corporate Planning and Control Dept. TSE Securities code: 6326 https://www.kubota.com/ The corporate governance of Kubota Corporation (hereinafter, the “Company”) is described below. I. Basic Policy on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Policy The Company has designated “long-term and stable growth of corporate value” as its highest management priority. To realize this aim, the Company considers enhancement of the satisfaction of all the Company’s stakeholders and improvement of overall corporate value, while balancing economic value and social value, to be important. Especially, in order to achieve the long-term objectives of building “Global Major Brand Kubota” on the basis of its corporate philosophy “Kubota Global Identity,” the Company must be an enterprise that is trusted not just in Japan but also worldwide. In order to enhance the soundness, efficiency, and transparency of management, which are essential to earn trust, the Company is striving to strengthen its corporate governance. [Reasons for Non-Compliance with the Principles of the Corporate Governance Code] The Company implements all the principles of the Corporate Governance Code. [Disclosure Based on the Principles of the Corporate Governance Code] updated The Company’s statements here are based on the Code as it stands after its revision in June 2021. (The principles for the Prime Market to be applied effective from April 4, 2022 are also included.) Please refer to the “Implementation Status of Corporate Governance Code” presented at the back of this report for the implementation statuses for each principle set forth in the Code. 1. Corporate Philosophy (Principle 3.1.(i)) The Kubota Group (hereinafter, the “Group”) positions its corporate philosophy, the “Kubota Global Identity,” as the foundation of its corporate management. In keeping with this philosophy, the Group makes it its mission to continue to support the future of the earth and humanity by contributing products that help the abundant and stable production of food, help supply and restore reliable water, and help create a comfortable living environment. Kubota Global Identity: https://www.kubota.com/corporate/identity/index.html 2. Business Strategies, Business Plans and Sustainability Initiatives (1) Long-term business strategies (Principle 3.1.(i)) The Company’s long-term goal is to realize a Global Major Brand, or in other words a brand that can make the greatest social contribution as a result of being trusted by the largest number of customers. In order to accelerate the realization of this goal, the Company has created its long-term vision for 10 years – 1 – from now, “GMB2030” and held up “Essentials Innovator for Supporting Life,” Committed to a Prosperous Society and Cycle of Nature as what the Company should be. The Company aims to achieve sustainable development over the long-term by making the greatest contribution to realization of a sustainable society through solutions to enhance the productivity and safety of food, solutions to promote the circulation of water resources and waste, and solutions to improve urban and living environments. Long-Term Vision “GMB2030”: https://www.kubota.com/corporate/vision/index.html (2) Mid-term business plan (Principle 3.1.(i)) The Company has positioned the five years from 2021 to 2025 as the period for completing the establishment of foundation for the realization of GMB2030 and formulated the Mid-term Business Plan 2025. The Company will engage in each of the following themes: (i) shift to business operations that position ESG at the core of management; (ii) initiatives to secure candidates of growth drivers for the next generation; (iii) promotion of business strategies that take advantage of growth opportunities; (iv) improvement of profit structure by strengthening the business foundation in the mid- term; (v) development of Infrastructure that supports sustainable growth; (vi) promotion of DX as a common theme. Mid-term Business Plan 2025: https://www.kubota.com/ir/corporate/plan/index.html (3) Sustainability initiatives (Principle 3.1.3) “For the prosperity of society, we need to put all our efforts into creation.” “Our products should not only be technically excellent, but also useful for the good of society.” These beliefs are the unbroken founding spirit that the Company has inherited. The Company thinks that the beliefs lead to the modern idea of sustainability. Since the Company’s business is closely related to the global environment and human society, the Company recognizes that environmental and social issues are also directly connected to its sustainability. Based on this recognition, roles that the Group should play have been defined with a view to future environmental and social issues and megatrends. Then, the Company formulated and disclosed the Long-term Vision “GMB2030” as the direction for solving environmental and social issues through the business, and the “Mid-term Business Plan 2025” as an initiative to realize that vision. The Mid-term Business Plan calls for shift to business operations that position ESG as the foundation of management. The “ESG Management Strategy Meeting” was established in 2021 to promote ESG management, and important issues and measures to improve corporate value of the Group over the medium to long term are discussed at the meeting. i) Environmental initiatives With the Environmental Vision toward 2050 “While challenging to achieve zero environmental impact, we will contribute to realizing carbon-neutral and resilient society in the fields of ‘food, water, and the environment,’” the Company is promoting initiatives including reduction of CO2 emissions. As specific initiatives, the Company expressed its support for the TCFD (Task Force on Climate-related Financial Disclosures) recommendations in January 2020, and has made disclosure in line with the framework. KUBOTA REPORT: https://www.kubota.com/ir/financial/integrated/index.html The Company will continue to develop insight on impact of climate change on its business and reflect it in business strategies. ii) Investment in human capital The Company states “Initiatives to secure and strengthen human resources” in “Development of infrastructure that supports sustainable growth,” one of the main themes for the Mid-term Business Plan 2025. As the direction for the initiatives, “Strengthening human resources who support sustainable growth of the company by strengthening recruitment and cultivation, as well as providing opportunities” has been set. In terms of hiring, the Company maintains and continues a certain number of mid-career hires to enhance work-readiness and internal diversity without overly focusing on regular recruitment of new – 2 – graduates, and concurrently, will encourage growth and great achievements in a career track that employees want to pursue by expanding regular recruitment of new graduates by job type. In terms of cultivation, the Company will enrich rank-based training for new employees to senior management level, and implement on-demand training to provide fostering opportunities to a wide range of human resource levels and encourage them. In addition, career design training is also provided for the purpose of encouraging independent-minded and planned self-growth as a business person. In terms of working styles, Kubota Smart Work has been introduced to promote flexible working styles not restricted by time or place, such as working from home, mobile work, satellite offices, remote work and super flextime system. At the same time, the age of mandatory retirement will be raised from 60 to 65 from April 2022 to encourage active participation of seniors. While confirming, in the implementation of 1-on-1 meetings, engagement survey, ESG awareness survey and other efforts, whether the above initiatives work effectively, the Company will continue to strengthen human resources. In its Long-term Vision “GMB2030” and “Mid-term Business Plan 2025,” the Company has set “promotion of ESG management” as one of what the Company should be, and stated provision of all stakeholders with opportunities to contribute to solving social issues through gaining empathy with and participation in Kubota’s business for the S (Society) of ESG. Naturally stakeholders include employees. With regard to “empathy” and “participation,” “diversity & inclusion” in which diverse values of women, people with disabilities, foreign nationals, mid-career workers, etc. are utilized for business operation is also regarded as an important viewpoint. For example, the Company has introduced schemes to provide employment conditions considerate of women’s needs such as the system for transfer, leave of absence, or re-employment after resignation from the Company, which was devised for cases where the employee’s spouse has transferred. The Company has set a ratio of 7.0% women among employees serving in a management role (Kubota Corporation, currently 3.5%) as its target for 2030. In addition, the Company continues to maintain a balanced ratio between employees hired as new graduates and employees hired in mid-career. The Company has set a ratio of 30.0% of employees hired in mid-career among employees serving in a management role (Kubota Corporation, currently 23.8%) as its target for 2030. The Company will also continue aiming to improve the ratio of each employee category in management roles through the recruitment of motivated foreign talents who hope to take on a challenge in Japan or at the Company, and other measures. Promotion of Diversity Management: https://www.kubota.com/sustainability/employee/diversity/index.html iii) Investment in intellectual property As one of the main themes for the Mid-term Business Plan 2025, the Company has taken up “Initiatives to secure candidates of growth drivers for the next generation” and proceeds with establishment of the foundation for realizing GMB2030. Also, the Company proactively devotes resources to research and development and invests in intellectual property to succeed in global competition and realize its sustainable growth. Inventions, which are outcomes of research and development, and designs and brands appealing to customers are important management assets. The Company will make growth by globally and strategically establishing rights for them as intellectual property such as patents, design rights and trademarks, and utilizing them. In addition, the Company mitigates intellectual property risk by positioning intellectual property as a “risk management item for internal control over the basic functions of the entire Company” to respect other companies’ intellectual property and not to infringe it, and conducting audits. As a result of such efforts, the Company received the “Award from Commissioner of the Japan Patent Office” in the “Intellectual Property Achievement Awards” for FY2021 hosted by the Japan Patent Office of the Ministry of Economy, Trade and Industry. For the status of research and development activities, the number of patents, etc. held and the status of intellectual property risk management activities of the Company, please refer to its Securities Report (“Yukashoken Hokokusho”) and Integrated Report (KUBOTA REPORT). – 3 – Securities Report: https://www.kubota.com/ir/financial/yuho/index.html Integrated Report: https://www.kubota.com/ir/financial/integrated/index.html 3. Basic Views and Guidelines on Corporate Governance (Principle 3.1.(ii)) Please see the “I. 1. Basic Policy” section of this report. 4. Roles and Responsibilities of the Board of Directors, Etc. (1) Scope of delegation to management (Principle 4.1.1) The Company has clearly stipulated matters requiring resolution by the Board of Directors in the Regulations of the Board of Directors and the Detailed Regulations of the Board of Directors, in addition to those specified within the scope by laws and regulations and the Articles of Incorporation, and the important matters that affect the management are determined by resolution of the Board of Directors. Furthermore, from 2021, a place to discuss important issues including business strategies has been set in order to improve corporate value over the medium to long term. On the other hand, aiming to strengthen the management and supervisory functions and expedite decision-making through clarification of responsibilities for execution of business operations and delegation of authority, the Company adopted the Executive Officer System in 2009 revised in 2021, and separates supervision and execution by delegating decision-making within an appropriate scope to Executive Officers and each member of management at a lower level in the Management Committee, etc. (2) Views on balance of knowledge, experience and capabilities, diversity, and size of the Board of Directors (Principle 4.11.1) The Company configures its Board of Directors from the perspectives of maintaining a number of members appropriate for ensuring effective discussions at the Meetings of the Board of Directors, manifesting its function as a board of directors and ensuring its diversity (business domains, knowledge, experience, areas of expertise, etc.), and maintaining soundness and transparency in management (four of the ten Directors (one-third or more) are Outside Directors; seven of the 16 Directors attending meetings of the Board of Directors are outside officers). In addition, the Company has set the Long-term Vision “GMB2030” and the “Mid-term Business Plan 2025,” which will be the foundational period for realizing the vision, and believes it is important for members of the Board of Directors to exert respective knowledge, experience and capabilities and complement each other based on diverse values in order to achieve the vision and plan. To this end, the Nomination Advisory Committee in which Outside Directors have a majority deliberates the composition of the Board of Directors, which includes a review of the skills required for the Board of Directors to appropriately and agilely perform its function, while reflecting on management strategies, in order to ensure the Board of Directors operates effectively. (The skills matrix is provided at the end of this report.) Of four currently serving Independent Outside Directors, all four have management experience in other companies. Reasons for appointment and background are explained in each proposal for appointment stated in the Convocation Notice for the Ordinary General Meeting of Shareholders. Convocation Notice for the General Meeting of Shareholders: https://www.kubota.com/ir/sh-info/meeting/convocation/index.html 5. System to Fulfill the Role and Responsibilities of the Board of Directors, Etc. Appropriately (1) Policies for appointing candidates for Directors and Audit & Supervisory Board Members and management (Principles 3.1 (iv), 4.9) i) Policies in the election and nomination of Directors In its wide-ranging business domains encompassing the areas of food, water, and the environment, the Company aims to bring about sustainable growth and increase corporate value on a Group-wide basis, thereby engaging in appropriate decision-making and supervising operations. To such ends and in accordance with its rules governing the Board of Directors (requirements for nominating candidates for Directors), the Company appoints persons from inside the Company who have a wide perspective and extensive experience relating to the Company’s business management, and appoints persons from outside the Company who have a practical and objective perspective along with deep knowledge, having satisfied – 4 – requirements for an independent officer as stipulated by the Tokyo Stock Exchange (hereinafter the “TSE”) and requirements of the independence criteria set forth by the Company (four of the ten Directors are Outside Directors). [Independence Criteria for Outside Directors] The Company has established the Independence Criteria for Outside Directors, considering laws and regulations, and provisions of the TSE, among other regulations, to ensure transparency and objectivity in the governance of the Company. The Company shall deem that an Outside Director does not satisfy independence from the Company if any of the following items applies to that person. 1. A person who is an executive* of the Company, or who was such an executive within the 10-year period prior to the appointment as Outside Director. * The term “executive” herein refers to an executive defined as a person who executes business in Article 2, paragraph 3, item 6 of the Regulation for Enforcement of the Companies Act. It includes executive director, executive officer (shikkoyakuin) and employee who execute business, but it does not include audit & supervisory board member. 2. A person who is an Audit & Supervisory Board Member of the Company (excluding Outside Audit & Supervisory Board Member) or who was such an Audit & Supervisory Board Member (excluding Outside Audit & Supervisory Board Member) for the past ten years before his/her appointment. 3. A major business partner of the Company*, or an executive of such an organization. * The term “major business partner of the Company” herein refers to a business partner such as a major purchaser of the Company’s goods and services in the recent three fiscal years, whose amount of trade with the Company in that fiscal year exceeded 2% of the consolidated revenues of the Company for the same fiscal year. 4. An organization whose major business partner is the Company*, or an executive of such an organization. * The term “organization whose major business partner is the Company” herein refers to an organization of which the Company is a business partner such as a major purchaser of its goods and services (e.g. a supplier to the Company) in the recent three fiscal years, and the amount of trade with the Company in that fiscal year exceeded 2% of the consolidated revenues of the organization for the same fiscal year. 5. A major lender to the Company*, or an executive of such an organization. * The term “major lender to the Company” herein refers to a financial institution from whom the Company has obtained loans in the recent three fiscal years, and the outstanding amount of the loans from the lender at the end of that fiscal year exceeded 2% of the consolidated total assets of the Company thereat. 6. A consultant, accounting professional or legal professional who has received economic benefits for services exceeding ¥10 million annually other than remuneration as an officer from the Company in the recent three fiscal years (or, in the case where the receiver of such benefits was an organization such as a corporation or partnership, a person affiliated with such an organization). 7. A major shareholder of the Company*, or if the major shareholder is a corporation, an executive of such a corporation. * The term “major shareholder of the Company” herein refers to a shareholder who holds more than 10% of the Company’s shares on a voting-right ownership basis at the end of the relevant fiscal year, regardless of whether the shares are held in the shareholder’s own name or in another name. 8. A director, audit & supervisory board member, accounting advisor, executive officer (shikkoyaku) or executive officer (shikkoyakuin) of a corporation with a relationship with the Company concerning mutual outside director appointments. – 5 – 9. A receiver of endowments of economic benefits exceeding ¥10 million annually from the Company in the recent three fiscal years (or, in the case where the receiver of such endowments was an organization such as a corporation or partnership, an executive of such an organization). 10. A spouse or a relative within two degrees of kinship of a person (limited to persons of important position*) set forth in above items 1 to 9. * The term “person of important position” herein refers to a director, executive officer (shikkoyaku), executive officer (shikkoyakuin) or any person holding a position equivalent thereto. ii) Policies in the election and nomination of Audit & Supervisory Board Members To adequately facilitate auditing and monitoring of management, the Company appoints persons who have diverse experience, knowledge, expertise and insight in accordance with the Standards for Auditing by Audit & Supervisory Board Members (the policy for selecting candidates for Audit & Supervisory Board Members). The Company appoints half or more of the candidates from among persons who satisfy requirements for an independent officer as stipulated by the TSE, of which the Company appoints one person (certified public accountant, etc.) who has a high degree of expert knowledge and experience relating to accounting and finance (three of the six Audit & Supervisory Board Members are Outside Audit & Supervisory Board Members). iii) Policies in the appointment of Executive Officers So that the Company is able to realize its long-term vision, it appropriately appoints Executive Officers who have capabilities and experience to execute duties promptly. (2) Procedures for nomination and dismissal of candidates for Directors and Audit & Supervisory Board Members, and appointment and dismissal of management (Principle 3.1 (iv)) i) Procedures in the election, nomination and dismissal of Directors Appointment of Directors is implemented by resolution of the General Meeting of Shareholders after resolution of the Board of Directors, following deliberations by the Nomination Advisory Committee (four out of seven of whose members are Outside Directors). The Nomination Advisory Committee conducts deliberations with appropriate involvement and advice from the Outside Directors from the perspectives of each candidate’s eligibility (such as experience, abilities, expertise, and internationality) and diversity of the Board of Directors. Should reason for dismissal arise, dismissal procedures are implemented by resolution of the General Meeting of Shareholders after resolution of the Board of Directors in accordance with the rules governing the Board of Directors. ii) Procedures in the election, nomination and dismissal of Audit & Supervisory Board Members To elect the Audit & Supervisory Board Members, the candidates for Audit & Supervisory Board Members are determined from among the candidates who are selected in accordance with the Standards for Auditing by Audit & Supervisory Board Members (the policy for selecting candidates for Audit & Supervisory Board Members) after approval of the Audit & Supervisory Board. The candidates are elected by resolution of the General Meeting of Shareholders. Dismissal of Audit & Supervisory Board Members is implemented by special resolution of the General Meeting of Shareholders in accordance with the Companies Act. iii) Appointment and dismissal of Executive Officers Appointment and dismissal of Executive Officers are implemented by resolution of the Board of Directors in accordance with the rules governing Executive Officers. (3) Explanation about individual nomination and election of Directors, Audit & Supervisory Board Members and management (Principle 3.1 (v)) In accordance with the views in (1) and procedures in (2), Directors, Audit & Supervisory Board Members and management are nominated and elected. For reasons for individual nomination as Director – 6 – and Audit & Supervisory Board Member, please refer to each proposal for appointment stated in the Convocation Notice for the Ordinary General Meeting of Shareholders. If any reason for dismissal arises, the Company makes a necessary explanation each time. Convocation Notice for the General Meeting of Shareholders: https://www.kubota.com/ir/sh-info/meeting/convocation/index.html (4) Concurrent positions of officers (Principle 4.11.2) The Company considers matters with respect to concurrent positions held by its Directors and Audit & Supervisory Board Members as officers of other companies upon their appointment, in order to avert situations where such positions could act as a hindrance with respect to the Company’s business affairs. For information regarding the concurrent positions of each Director and Audit & Supervisory Board Member, please refer to each proposal for appointment stated in the Convocation Notice for the Ordinary General Meeting of Shareholders. Convocation Notice for the General Meeting of Shareholders: https://www.kubota.com/ir/sh-info/meeting/convocation/index.html (5) Current efforts for making effective use of independent officers, etc. (Principles 4.8, 4.10.1) Of ten Directors, four (one-third or more) are Independent Outside Directors. Subjects for discussion and presentation materials for the Meetings of the Board of Directors are sent to all members in attendance including Outside Directors at least a week before the meetings. For Outside Directors, materials for the Management Committee meetings held internally, etc. are also shared before a report is made to the Board of Directors, and prior briefing sessions are held for the purpose of further deepening the understanding of proposals such as the background business environment. Through such efforts, the Company strives to create an atmosphere that encourages Outside Directors to make positive contributions to the discussion at the Meetings of the Board of Directors. In addition, the Company has a Nomination Advisory Committee (four out of seven of the members are Outside Directors) and a Compensation Advisory Committee (four out of six of the members are Outside Directors) in place as the advisory body of the Board of Directors. The Nomination Advisory Committee and Compensation Advisory Committee meet to deliberate on nomination of candidates for the Directors, and compensation system and compensation level of the Directors over appropriate involvement and advice from the Outside Directors with extensive management experience and wide perspective on matters. In both committees, of which Outside Directors account for more than half of the constituent members, an Outside Director is appointed as chairperson, and as their system, matters discussed under the lead of the chairperson are taken into account and deliberated by the Board of Directors. In addition, a place for discussions conducted by only Outside Directors and Audit & Supervisory Board Members, such as discussion on evaluation of the effectiveness of the Board of Directors, is set as needed to enhance cooperation with Audit & Supervisory Board Members. (6) Analysis and evaluation of the effectiveness of the Board of Directors, and overview of results thereof (Principle 4.11.3) In order to maintain and improve the function of the Board of Directors, the Company employs a continuous cycle for improvement, where it evaluates of the Board of Directors’ effectiveness at the end of each fiscal year, identifies issues in light of the evaluation findings, and develops an action plan to address them, and this plan is then implemented by the Board of Directors the following year. The evaluation of the Board of Directors’ effectiveness for fiscal 2021 was conducted, and the report is as follows.( https://www.kubota.com/sustainability/governance/governance/data/20220225.pdf) i) Evaluation method and process 1)Questionnaire (November,2021) The questionnaire based on questions compiled by a third-party organization was given to Directors and Audit & Supervisory Board Members (total 14 persons). – 7 – Evaluation major items: Composition of the Board of Directors/ Operations of the Board of Directors/ Role and Contribution of Members/ Leadership of Chair/ Setting of Corporate Strategy and Direction/ Risk Management/ Monitoring of Management Resources (Personnel, Goods, Funds)/ Creation of Synergies/ Response to Stakeholders/ Monitoring of Execution and Performance/ Analysis of Management Decisions/ Sound Decision-making/ Culture of the Board/ Effectiveness of Committees on Nominations and Remuneration/ Successor Planning Oversight of Election and Dismissal of Directors/ Oversight of Remuneration Plan/ Utilization of Effectiveness Evaluation/ Own Contribution to the Board of Directors 2) Discussion among Outside Directors and Audit & Supervisory Board Members (December,2021) Four Outside Directors and five Audit & Supervisory Board Members (including three Outside Audit & Supervisory Board Members) analyzed the results of the questionnaire and discussed issues based on these results. 3) Discussion at Board of Directors Meeting (January,2022) During a meeting of the Board of Directors, all Directors and Audit & Supervisory Board Members discussed future action plans after sharing the evaluation results and the issues identified in light of the questionnaire results and the Outside Directors and Audit & Supervisory Board Members’ discussion. ii) Evaluation Results The results of the above questionnaire and discussions indicate that the Company’s Board of Directors is functioning effectively, sufficiently exercising both its decision-making function and supervisory function. High marks were given to the “Value Up Discussion Meeting,” which was newly started as part of the previous fiscal year’s action plan, and other meetings that created more opportunities to have discussions from a medium- to long-term perspective, briefings for Outside Directors that improved the quality of discussions, as well as a corporate culture that allowed free and vigorous discussions. On the other hand, there were remarks highlighting the importance of strengthening the monitoring function for the progress of important projects and creating synergy in the Company’s business areas of food, water, and the environment. iii) Action Plan for Enhancing Effectiveness In response to the above remarks, the Company will primarily implement the following action plan to further enhance discussions and improve the effectiveness of the Board of Directors. – Identify points of discussion and materials that clarify the correlation between individual projects and the Company’s business strategies in order to further enhance discussions from a medium- to long-term perspective. – Develop a system for ensuring timely reporting on important projects related to improving corporate value. – Establish a Group-wide management system from a risk-based perspective. – Create opportunities to discuss the creation of further synergies in the Company’s business areas of food, water, and the environment. – 8 – (7) Measures to improve understanding and knowledge necessary for Directors and Audit & Supervisory Board Members to fulfill their role and responsibilities (Principle 4.14.2 “Policy on training for Directors and Audit & Supervisory Board Members”) The Company conducts training hosted by external organizations for all newly appointed Executive Officers, featuring content pertaining to laws and regulations, and corporate governance. For newly appointed Outside Directors and Outside Audit & Supervisory Board Members, the Company explains the corporate spirit, business strategies, business portfolio and other information when they assume office and proactively provides them with opportunities to conduct inspections of our main factories and on-site inspections overseas. Following their appointment, the Company holds multiple annual executive forums related to ESG, human rights, health and safety, the environment, quality, public relations, legal affairs DX, compliance, etc. for all of its Directors, Audit & Supervisory Board Members and Executive Officers. Based on the format of inviting external lecturers and those in attendance were provided with opportunities to acquire and update knowledge necessary for company management by also using online distribution. Moreover, the Company conducts inspections and engages in discussions with on-site executives at its overseas affiliates, and at the regional offices in Japan, so that those in attendance, including Outside Directors and Outside Audit & Supervisory Board Members, can gain a deeper understanding of the Group’s business activities and make appropriate management decisions. (8) Policies and procedures in determining the remuneration of Directors and management(FY2021) (Principle 3.1 (iii)) i) Basic views on remuneration The Company aims to have a remuneration plan that achieves sustainable and stable growth in the business areas of food, water, and the environment and sharing value with the shareholders. ii) Maximum aggregate amount of remuneration for officers The maximum aggregate amount of cash remuneration for the Directors was set at ¥900 million or less per year (¥160 million or less per year for the Outside Directors) at the 132nd General Meeting of Shareholders held on March 18, 2022. The maximum aggregate amount of stock remuneration for the Directors was set at ¥900 million or less per year at the 132nd General Meeting of Shareholders held on March 18, 2022. The maximum aggregate amount of remuneration for the Audit & Supervisory Board Members was set at ¥250 million or less per year at the 132nd General Meeting of Shareholders held on March 18, 2022. iii) Procedures in determining the amount of remuneration In order to increase fairness and transparency, this policy is determined at the meetings of the Board of Directors after it has been deliberated by the Compensation Advisory Committee. The Compensation Advisory Committee is composed of Outside Directors, the Director in charge of secretarial affairs, and the Director in charge of financial affairs. Majority of members of the committee are Outside Directors and a chairman is also appointed from the Outside Directors. One Outside Advisory & Supervisory Board Member attends the committee as an observer. The Compensation Advisory Committee deliberates on the following issues: other matters delegated by the Board of Directors. ‣ matters related to remuneration for the Directors and the Executive Officers; ‣ matters related to bonuses for the Directors and the Executive Officers; ‣ matters related to remuneration for the Special Corporate Adviser and Advisers; and ‣ The Compensation Advisory Committee met seven times during the fiscal year and deliberated on the consistency of levels of compensation paid to the Directors, Executive Officers, and Advisers, and the adequacy of the stock compensation system. The adequacy of compensation levels is verified by the Compensation Advisory Committee, based on the management compensation database of major Japanese companies by an external specialized institution. iv) Procedures in determining individual remuneration Regarding the remuneration paid to each Director, the determination of the specific amounts is delegated to the President and Representative Director based on a resolution of the Board of Directors in – 9 – order to reflect a comprehensive evaluation of the business conditions. In addition, since the President and Representative Director determines the amounts within the range for total remuneration, etc. approved at the General Meeting of Shareholders and based on the standards deliberated by the Compensation Advisory Committee, the details of the remuneration, etc. paid to individual Directors are in accordance with the policy for determining remuneration, etc. v) Composition of remuneration and composition ratio thereof The remuneration for the Directors, excluding Outside Directors, consists of “basic remuneration,” which is set by corporate rank, “performance‐linked remuneration (bonuses for the Directors)” which is a short‐term incentive linked to performance of a single fiscal year, and “restricted stock compensation” which is regarded as a medium‐to long‐term incentives. The remuneration for the Outside Directors consists solely of “basic remuneration” considering the roles they play and the need to preserve their independence. Directors, excluding Outside Directors, receives “ basic remuneration, ” “ performance ‐ linked remuneration” and “restricted stock compensation” amounting to approximately 45%, 40% and 15% of the total remuneration, respectively. 1) Basic remuneration In addition to the “basic remuneration” set by corporate rank, the Company pays an additional allowance for the Directors and the Representative Directors (eligible persons only). The basic remuneration is determined within the range of the maximum aggregate amount of remuneration approved at the General Meeting of Shareholders, in consideration of operating results and other factors. The individual basic remuneration is determined in March, and if a Director is promoted or demoted during a term of office, the basic remuneration for such Director is increased or decreased according to their corporate rank. the Company has adopted an annual pay scheme from April every year to March of the following year. The annual amount is divided by 12 according to the payment calculation period for employees and paid on the same date as the payment date for employee salaries every month. 2) Performance-linked remuneration (bonuses for Directors) for a single fiscal year the Company does not fix the ratio of performance‐linked remuneration, and it is designed so that the ratio of performance‐linked remuneration to total remuneration for the Directors, excluding Outside Directors, increases as profit for the year increases, with the higher corporate rank, the higher the ratio of performance‐linked remuneration. Performance‐linked remuneration is decided by determining a bonus table for each corporate rank in conjunction with “profit attributable to owner of the parent,” which is the indicator representing results of business activities and constitutes the source of funds for shareholder return, taking into consideration the degree of performance achievement in organizations of which the individual is in charge. The individual performance‐linked remuneration is determined and paid in March after the total amount is approved at the Ordinary General Meeting of Shareholders. 3) Restricted stock compensation The Company has adopted the restricted stock compensation plan as an incentive for the Directors, excluding the Outside Directors, to continuously increase corporate value and to further promote shared value with shareholders. The restricted stock is granted by the payment date following the resolution at the Board of Directors’ meeting held in March to allocate the stock, and the transfer restriction period is from the payment date of the monetary compensation claims to the retirement date of the eligible Director from the position of Director or Executive Officer of the Company. Under the restricted stock compensation plan, restricted stock is also granted to the Senior Managing Executive Officers and Managing Executive Officers who are not Directors. vi) Remuneration for Audit & Supervisory Board Members The remuneration for the Audit & Supervisory Board Members is determined after consultation among the Audit & Supervisory Board Members within the range of the maximum aggregate amount of remuneration approved at the General Meeting of Shareholders in consideration of the roles of the respective Audit & Supervisory Board Members. (9) Policies and procedures in determining the remuneration of Directors and management (and after FY2022) (Principle 3.1 (iii)) Currently, the Company is committed to shift to business operations with ESG positioned at the core of management under the long‐ term vision “GMB2030,” with the aim of further strengthening the – 10 – supervisory function of the Board of Directors. Under these circumstances, the Companyreviewed the remuneration plan for the Directors as responsibilities and expectations of the Directors are increasing. Following is the policy for determination of remuneration, etc. and its calculation method for the Directors and Executive Officers as of the submission date of this Corporate Governance Report. i) Basic policy for determination of remuneration, etc. for the Directors 1) The purpose of the remuneration for the Directors, excluding Outside Directors, is to encourage the Directors, excluding Outside Directors, to take the lead for sustainable growth while fulfilling social responsibilities as a company aiming to become a GMB. ‐ Motivate the Directors to achieve performance targets by reflecting in their remuneration quantitative and objective evaluation results based on financial performance indicators. ‐ Accelerate K‐ESG management initiatives by reflecting evaluation results of the progress of the K‐ESG in remuneration of the Directors. ‐ Encourage the Directors to hold shares of the Company during their tenure and make them strongly aware of the need to sustainably improve corporate value through a remuneration system that is closely linked to shareholder value. ‐ Set the levels of remuneration and performance linkage so that the Directors may receive remuneration that is equivalent to or greater than the standard remuneration at other GMB companies defined by the Company, in line with the achievement of the performance targets and K‐ESG, and improvement of corporate value. 2) To achieve the purpose of the remuneration, transparency and objectivity must be ensured in the administration of the remuneration plan. ‐ Decisions on the development and administration of remuneration policies shall be reviewed by the Compensation Advisory Committee, where a majority of members are Outside Directors, before being determined by the Board of Directors’ resolution. ‐ In order to fulfill accountability for shareholders precisely, disclosure shall be made not limited to the scope required by laws and regulations, but also to facilitate shareholders ’ understanding and dialogue with them. ii) Remuneration structure 1) Directors, excluding Outside Directors The remuneration for the Directors, excluding Outside Directors, consists of basic remuneration, which is fixed, and performance‐linked remuneration. The composition ration of basic remuneration to performance‐linked remuneration for the President and Representative Director is generally set at 1:2, to secure a high level of performance linkage suitable for a competitive remuneration level. As for the remuneration structure for the Directors other than the President and Representative Director, the Directors at a higher corporate rank earn a greater portion of performance ‐ linked remuneration, given the size of their duties, etc. of each corporate rank. The performance‐linked remuneration consists of annual bonuses intended to encourage the Directors to achieve the business size and profitability targets of each fiscal year, and stock compensation (restricted stock unit and performance share unit) intended to share shareholder value and promote the maximization of medium‐ to long‐term corporate value. The ratio of annual bonuses to stock compensation is generally set at 1:1. Following is an overview of the elements of remuneration: ・Basic remuneration: [Fixed remuneration set in proportion to the size of duties by corporate rank, etc.] ‐ The individual amount of basic remuneration shall be decided at the meeting of the Board of Directors based on the details of confirmation and deliberation by the Compensation Advisory Committee: the amount of total basic remuneration divided by 12 is paid monthly on the same pay day as employees’ salary. ・ Annual bonus: [Cash remuneration intended to encourage the achievement of business size and profitability‐related performance targets set for each fiscal year and accelerate the K‐ ESG management efforts] ‐ Consists of a portion linked to company‐wide performance (50‐70% of the bonus based on corporate rank), a portion of individual evaluation (10‐30%), and portion of K‐ESG evaluation (20%). – 11 – ‐ The portion linked to company‐wide performance changes between 0% and 200% of the base amount in proportion to the degree of achievement in the targeted consolidated revenue and operating profit margin, which are key indicators under the Mid‐Term Business Plan 2025. ‐ The portion of individual evaluation changes between 0% and 200% of the base amount in proportion to the degree of achievement in strategic company‐wide targets, specific targets in the efforts under the Mid‐Term Business Plan 2025, financial targets for the area(s) the person is in charge of, etc. which are set at the beginning of the fiscal year based on individual responsibilities/jurisdiction. ‐ The portion of K‐ESG evaluation changes between 0% and 200% of the base amount in proportion to the degree of achievement in K‐ESG promotion targets set at the beginning of the fiscal year. ‐ The target setting in and the evaluation result of each evaluation category shall be decided at the meeting of the Board of Directors based on the details of confirmation and deliberation by the Compensation Advisory Committee: paid annually in March, in principle. ・Restricted stock unit: [Stock compensation intended to encourage continued shareholding while in service / office, through which the sharing of and improvements in shareholder value are promoted] ‐ The number of restricted stocks specified for each corporate rank shall be issued generally after the closing of each fiscal year, from the trust that sets the Company as the entruster. In principle, the transfer restriction of issued share shall be lifted at the time of retirement (which means the point of time when they are no longer Directors or Executive Officers of the Company; the same applies hereinafter). ・Performance share unit: [Stock compensation for the purpose of improving the shareholder value by achieving the medium‐ to long‐term performance target] ‐ Restricted stocks are generally issued after the end of each performance evaluation period from the trust that sets the Company as the entruster, in accordance with the results of the financial evaluation of the three‐year performance evaluation period. In principle, the transfer restriction of issued shares shall be lifted when Directors, etc. retire. ‐ Return on invested capital (ROIC) on a net income basis is used as a financial evaluation indicator to encourage the maximization of corporate value over the medium to long term through efficient profit generation on invested capital. The number of shares to be issued in proportion to the degree of achievement changes between 0% and 200%. 2) Remuneration level In order to properly secure competitiveness in terms of compensation suitable for a GMB company, v appropriately sets the level of remuneration for the Directors, excluding Outside Directors, based on their corporate ranks and duties, by using data on objective executive remuneration surveys conducted by an external specialized institution (“Executive Compensation Database”), etc. to identify a group of companies whose size, profitability, type of business, overseas networks, etc. are comparable to the Company as a benchmark for comparison. 3) Shareholding guideline For the purpose of deepening the level of shared value with its shareholders, the Company encourages the Directors, excluding Outside Directors, to hold the Company’s stock basically as follows: President and Representative Director: stock worth three times the basic remuneration by five years from taking office Other Directors: stock worth 2.4 to 2.7 times the basic remuneration by five years from taking office 4) Clawback / recovery of remuneration, etc. (malus and clawback clauses) the Company has compensation clawback clauses (i.e. malus and clawback clauses) for the restricted stock unit and the performance share unit to be granted to the Directors. If an incident of misconduct, etc. involving the Directors (including those retired) of the Company arises or such a fact comes to light, the Company may claim the return, etc. of a pre‐issue points to receive shares, and all or part of the issued restricted stock and shares after the transfer restriction is lifted. The decision on claims for return, etc. and their details shall be reviewed by the Compensation Advisory Committee before being determined by the Board of Directors’ resolution. 5) Remuneration determination process the Company’s policy on the decision of the details of remunerations for the Directors and the details of individual remuneration, etc. shall be decided by the resolution of the Board of Directors based on the – 12 – result of objective deliberation by the Compensation Advisory Committee, of which a majority of whose members are Outside Directors. The review by the Compensation Advisory Committee shall be attended or observed by a compensation advisor, an external specialized institution, where necessary, for the purpose of providing an objective point of view as well as expert knowledge and information concerning compensation plans. 6. Constructive Dialogue with Shareholders (Principle 5.1) The Company, recognizing that constructive dialog with shareholders and investors contributes to the improvement of the Company’s sustainable growth and medium- to long-term corporate value, regularly stays abreast of the shareholder composition, makes timely and appropriate disclosure of a wide range of information ranging from financial information to non-financial information and promotes constructive dialog with shareholders and investors. The policies for development of systems and operations for this activity are as follows. (i) Basic policy The Company holds briefings where the President and General Manager of Planning & Control Headquarters present the basic management policy, priority measures, and results of operation, with the aim of promoting constructive dialogue with domestic and foreign institutional investors. Furthermore, the Company promotes two-way communication, such as timely disclosure to all stakeholders including individual investors through active use of the Company website and executing questionnaire surveys. (ii) IR organizational structure General Manager of Planning & Control Headquarters is in overall charge of directing and promoting IR. The department in charge of IR plays a central role in developing its IR activities through organic coordination with each related department, such as Corporate Planning & Control Dept., Accounting Dept., Secretary and Public Relations Dept., ESG Promotion Dept., General Affairs Dept. and Legal Dept. (iii) Feedback to management Subjects of dialogue with investors are reported back to the Board of Directors, the Executive Officers’ Meeting, and relevant departments by the President and General Manager of Planning & Control Headquarters as necessary. (iv) Dialog with institutional investors and analysts The Company holds individual and group meetings, product exhibitions and briefings on business operations, and results briefings with institutional investors and analysts. In addition, the Company discloses the results materials and the results briefings materials in both English and Japanese at the same time, and regularly holds tours and briefings on business operations in Japan and overseas. (v) Dialog with individual shareholders and investors The Company aims to promote lively communication through hosting various events for individual shareholders. Also, in addition to holding company information sessions for individual investors to provide an opportunity for the President and individual investors to directly engage in dialog, the Company also works on public relations to improve understanding of the Company’s business activities. (vi) Policy for insider information management when engaging in dialogue Insider information, such as any undisclosed material facts, is not conveyed at the meetings with investors. The following section describes the structure and procedures regarding the timely disclosure of the Company information. 1) Financial Information Disclosure Committee The Company has established the Financial Information Disclosure Committee so as to monitor and control financial information disclosure and, thereby, ensure its fairness, correctness, timeliness, and comprehensiveness. The committee consists of a committee chairperson, who is General Manager of Planning & Control Headquarters; committee members, who are General Manager or Deputy General – 13 – Manager of Corporate Compliance and Risk Management Headquarters, General Manager of Corporate Planning & Control Dept., General Manager of General Affairs Dept., General Manager of Secretary and Public Relations Dept., General Manager of Accounting Dept., and General Manager of Corporate Auditing Dept.; and observers, who are one full-time Audit & Supervisory Board Members and one Audit & Supervisory Board Members specializing in Finance. The committee meets periodically in order to draft and assess the Annual Securities Reports (“Yukashoken Hokokusho”) and the Quarterly Reports (“Shihanki Hokokusho”) pursuant to the Financial Instruments and Exchange Act. And the committee also meets in response to extraordinary events such as important decisions and material facts that must be disclosed immediately. In accordance with the intent and meaning of fair disclosure rules set out in the Financial Instruments and Exchange Act, the Company takes all reasonable care to avoid selective disclosure of information, such as by simultaneously releasing Japanese and English versions of results briefing materials with attached explanations and the minutes of question and answer sessions via the corporate website, and by working to enhance the timely and fair disclosure of information in order to promote proactive dialogue with investors. 2) Company regulations for information disclosure The Company has declared that “The Kubota Group makes appropriate and timely disclosure of corporate information and fulfills its responsibilities for transparency and accountability in corporate activities” in the “Kubota Group Charter for Action” and has stipulated “Appropriate and Timely Disclosure of Corporate Information” and “Prohibition of Insider Trading” in the “Kubota Group Code of Conduct.” The Company strives to promote awareness and ensure thorough efforts in regard to the “Kubota Group Code of Conduct” and prevention of insider trading before it occurs through conducting education tailored to each management level within the Company. 7. Basic Strategy for Capital Policy, Policy for Cross-Shareholdings, and Standards for Exercise of Voting Rights (Principles 1.3, 1.4) (1) Basic strategy for capital policy The Company’s basic strategy for capital policy is to fully utilize capital in order to improve profitability, maintain an adequate level of capital to support future business expansion, and work to further enhance shareholder returns. The Company will strive to sustainably enhance shareholder value with the well-balanced promotion of the three aforementioned policies. (2) Policy for cross-shareholdings The Company believes it is necessary to cooperate with various companies in every business process, such as product development, manufacturing, distribution, sales, service, and funding, to succeed in global competition and realize its sustainable growth and improvement of corporate value over the medium to long term. From this perspective, the Company maintains cross-shareholdings based on comprehensive consideration of business relationships and the business strategies. The Company’s policy for cross-shareholdings is to examine each individual share at the Meetings of the Board of Directors every year to see whether or not the shareholding is appropriate, based on comprehensive consideration of the holding purpose, benefits and risks involved in the shareholdings and others, and decrease its shareholdings gradually in light of the market environment and other factors when it determines that maintaining them is no longer appropriate. In fiscal 2021, the Company sold ¥3.8 billion of its listed equity securities. (3) Standards for exercise of voting rights When the Company exercises voting rights, it does not make its decisions uniformly by criteria based on a short-term perspective but rather comprehensively considers the proposals from the perspective of whether they will contribute to sustainable growth of the issuing company and improvement of corporate value over the medium to long term, whether they could be detrimental to shareholder value, and others. 8. Responsibilities of Corporate Pension Funds as Asset Owners (Principle 2.6) To ensure pension payments to its employees, the Company manages plan assets through Kubota Corporate Pension Fund from the medium- to long-term perspective. Decisions on asset management are made at the Executive Board of Kubota Corporate Pension Fund in consideration of deliberations and reports by the Asset Management Committee. – 14 – Personnel such as department heads of the accounting department and the human resources department of the Company, who have appropriate qualifications, and executive members of the labor union, as a representative of beneficiaries, have been assigned to the Asset Management Committee and the Executive Board of Kubota Corporate Pension Fund. In addition, specialist capabilities and insight are supplemented through the use of external advisers. The Asset Management Committee monitors the entrusted asset management companies semiannually from the perspectives of investment products, their performance and others. 9. Procedures for Approval for Transactions Among Related Parties (Principle 1.7) Based on the Companies Act and the rules governing the Board of Directors, the Board of Directors may approve transactions that represent a conflict of interest between the Company and the Directors after receiving reports of material facts, such as the content of transactions and transaction amount (maximum amount). Furthermore, the Company reports the actual results to the Board of Directors. Transactions with major shareholders are reported to the Board of Directors as needed, and the Directors and the Audit & Supervisory Board Members review them so as not to harm the common interests of shareholders. 2. Capital Structure Foreign Shareholding Ratio More than 30% [Status of Major Shareholders] updated Name / Company Name The Master Trust Bank of Japan, Ltd. (Trust Account) Nippon Life Insurance Company Meiji Yasuda Life Insurance Company Custody Bank of Japan, Ltd. (Trust Account) Sumitomo Mitsui Banking Corporation Mizuho Bank, Ltd. Moxley & Co. LLC MUFG Bank, Ltd. Custody Bank of Japan, Ltd. (as trustee for Retirement Benefit Trust of Sumitomo Mitsui Trust Bank, Limited) BNYM TREATY DTT 15 Number of Shares Held 190,314,900 62,542,265 59,929,501 58,870,700 36,006,000 31,506,000 31,230,903 18,156,729 17,872,000 17,470,458 (Note) Holding ratio is calculated excluding treasury shares as of December 31, 2021. Percentage (%) 15.86 5.21 4.99 4.90 3.00 2.62 2.60 1.51 1.49 1.46 Controlling Shareholder (except for Parent Company) – Parent Company None Supplementary Explanation – 3. Corporate Attributes Fiscal Year-End Type of Business Listed Stock Market and Market Section TSE First Section December Machinery – 15 – Number of Employees (consolidated) as of the End of the Previous Fiscal Year Revenues (consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year More than 1,000 More than ¥1 trillion From 100 to less than 300 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling 5. Other Special Circumstances which may have Material Impact on Corporate Governance Shareholder – – – 16 – 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 Audit & Supervisory Board [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation updated Term of Office Stipulated in Articles of Incorporation 1 year Chairman (except when concurrently serving as President) Chairperson of the Board Number of Directors updated Election of Outside Directors Number of Outside Directors Number of Independent Directors 13 10 Elected 4 4 Outside Directors’ Relationship with the Company (1) Name Attribute Yuzuru Matsuda Koichi Ina Yutaro Shintaku Kumi Arakane * Categories for “Relationship with the Company” * From another company From another company From another company From another company Relationship with the Company* a b c d e f g h i 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 t