日本ペイントホールディングス（4612） – Corporate Governance Report

Corporate Governance CORPORATE GOVERNANCE Nippon Paint Holdings Co., Ltd. Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Last Update: March 31, 2022 Nippon Paint Holdings Co., Ltd. Representative Executive Officer & Co-President Yuichiro Wakatsuki Contact for inquiries: Hiroshi Kanamori, Corporate Governance dept. General Manager TEL: +81-3-6433-0711 Securities Code: 4612 https://www.nipponpaint-holdings.com/en/ The corporate governance of Nippon Paint Holdings Co., Ltd. (the “Company”) is described below. Ⅰ. Basic approach to corporate governance and basic information about the Company including capital structure and corporate attributes. 1. Basic Concepts ■ The Company, based on its “Purpose”, which shows the significance of existence common to the Group, and its “Business Philosophy”, which is its policy, shall promotes its business and engage in ongoing efforts to enhance and strengthen its corporate governance, and thereby, will “maximize the financial value remaining after the performance of obligations to customers, employees, trading partners, and society, etc.” (hereinafter referred to as “MSV” or “Maximization of Shareholder Value.), including obligations relating to sustainability, as its ultimate objective. ■ ”Purpose” Enriching our living world through the power of Science + Imagination ■“Business Philosophy” Prosper Together We prosper with absolute integrity and fairness by fulfilling our obligations and maximizing our commitments to all stakeholders (consumers, customers, communities, employees, suppliers, governments). Powerful Partnership Our unique approach between our partner companies is based on respect, trust, empowerment, and accountability. These partnerships form a powerful catalyst for innovation and growth. Science + Imagination The unlimited power of science and imagination, leading to ground-breaking technology and useful innovation that preserve, enhance and enrich the world. ■ The Company has formulated and published the “Nippon Paint Holdings Corporate Governance Policies”, which presents the basic concepts and initiatives concerning corporate governance, and which can be viewed at the URL indicated below. https://www.nipponpaint-holdings.com/en/sustainability/governance/cg/ ■ The Company established a Global Code of Conduct to be observed by all Directors of the Board, Executive Officers, and employees of the Group with respect to compliance, ethics and sustainability, and which can be viewed at the URL indicated below. https://www.nipponpaint-holdings.com/en/sustainability/governance/gcoc/ [Reason for not implementing the principles of the Corporate Governance Code] The Company has implemented the principles of the Corporate Governance Code. [Disclosure based on the principles of the Corporate Governance Code] Updated The following statements are based on the Corporate Governance Code(including content for the prime market) revised in June 2021. [General Principle 1-4] ■ Policy on cross shareholdings 1 ･ The Company makes a decision every year on the continued holding of cross-shareholders at the Board of Directors based on the policy described below and disposes of or reduces holdings of shares for which the rationality of their holding can’t be recognized. Company Policy: The Company holds shares of other listed companies as Cross-Shareholdings, limited to where it can be determined to be reasonable in consideration of, among others, the necessity of it for business activities (e.g., to maintain and strengthen the relationship with the business partner), the status of the issuer, and the return on the capital cost. ■ Standards for the exercising of voting rights of cross-shareholdings ･ The Company, based on the policy of the preceding paragraph and internal standards, exercises voting rights upon making comprehensive judgment, from the perspectives of maximization of corporate value in the medium to long term of the other company to the Cross-Shareholding, the effect on the Group, etc. [General Principle 1-7] ■ Mechanism for checks on transactions between related parties ･ The Company reports to the Board of Directors and discloses significant related party transactions exceeding a certain monetary threshold (such as transactions between the Company and a major shareholder, competing transactions between the Company and Directors or the Executive Officers, transactions for itself, and conflict of interest transactions, etc.) in Notice of convocation of the Annual General Meeting of Shareholders and Securities report. ･ When the Company intends to carry out a related party transaction, the Company will make a comprehensive judgment regarding the reasonableness of the transaction taking into consideration its terms and condition, profit and cost levels, etc., to ensure that the transaction will not harm the interests of the Company or the interests of its minority shareholders and obtain the approval of the appropriate decision-maker. ･ In particular, when conducting transactions with the Controlling Company of the Company, the Company shall ensure appropriate involvement and supervision by the Independent Outside Directors of the Board, such as obtaining approval at the Board of Directors with the majority of the Independent Directors, etc. ･ The Company has prescribed the “monitoring for conflicts of interests between the Company and its Directors of the Board, Executive Officers, and controlling shareholders, etc.” as one of the “Roles of Independent Directors of the Board” in Article 22 (Roles of Independent Directors of the Board) of the Company’s “Corporate Governance Policies”. ･ Notice of convocation of the Annual General Meeting of Shareholders (https://www.nipponpaint-holdings.com/en/ir/stock/meeting/) ･ Securities report(https://www.nipponpaint-holdings.com/en/ir/library/statements/) [Supplementary General Principle 2-4-1] ■Ensuring diversity in the promotion to core human resources ･ Although no measurable targets have been set, the Company is promoting the appointment, etc. of foreign nationals and midcareer hires to middle managerial positions. Further, through the Group’s Action Plan, which was formulated after the implementation of the Act on Promotion of Women’s Participation and Advancement in the Workplace, we have promoted the training of women from a long term perspective and the establishment of organizational development and systems; as a result of which, we have established a goal of having 10% of the Group’s overall management positions being held by women by 2025, and since 2015, we have conducted women’s leadership training and development, and change in the attitudes of the management class is progressing. In addition, as of March 31, 2022, among officers, there is 2 female Directors of the Board, 1 female Executive Officer, and 1 female Corporate Officer. [General Principle 2-6] ■ Demonstration of function as a corporate pension asset owner ･ The Company, in the management and operation of the “Nippon Paint Corporate Pension Fund (hereinafter the “Fund”),” in order to be able to demonstrate the function expected as the asset owner of the Fund, systematically secures personnel with the qualities required for the management and operation of the Fund from both within and outside the Group, and deploys such personnel as representatives of the corporate pension fund, and to the Asset Management Committee and Corporate Pension Fund Secretary’s Office. In addition, in partnerships with investment consultants, efforts are made to promote the understanding of the operation status and individual strategies of the pension assets in general, and to further improve the level of expertise. ･ In the operation of the Fund, decisions are made by the representative committee, based on the activities status report for the investment period, as well as the opinions of the Asset Management Committee, and investment consultants, with the objective of the maximization of the interest of the beneficiaries. ･ The selection of investment institution shall be determined in accordance with the standards prescribed in the Basic Policy on Asset Management, upon the performance of a comprehensive assessment of both quantitative 2 aspects, such as investment performance, and qualitative aspects, such as investment policy and compliance. ･ In addition, in the exercising of voting rights in companies receiving investment, etc., we are appropriately managing any conflicts of interest that arise between the beneficiaries and the Company. ･ As part of corporate governance reforms, in December 2020, the Fund declared that it had received a Stewardship Code. Toward the resolution of social issues relating to global sustainability, through the Stewardship Code, we are promoting the improvement of the corporate value of investee companies and their sustainable growth and making efforts to increase the interests of final beneficiaries. Nippon Paint Corporate Pension Plan “Regarding the Receiving of a Stewardship Code （https://www.nipponpaint-kikin.jp/stewardship/） Members of the “Nippon Paint Group Defined Contribution Pension” plan are provided with education on asset management, such as through training, as well as support for the stable asset formation of members. [General Principle 3-1] ■ General Principle 3-1 (i) What the Company is aiming for (Management philosophy, etc.), management strategy, and management plan of the Company. ･ The Company has adopted and published the “Purpose” and “Business Philosophy”. The Company has also published its “Purpose” and “Medium-Term Management Plan” on the website of the Company. ･ https://www.nipponpaint-holdings.com/en/company/purpose/ ･ Medium-term management plan (https://www.nipponpaint-holdings.com/en/ir/library/materials_01/) ■ [General Principle 3-1] (ii) The basic concepts and basic policies in relation to corporate governance, based on each of the principles in this code Stated in “1. Basic concepts” of this Report. ■ General Principle 3-1(iii) Policy and procedures when the Board of Directors determines the remuneration of Directors of the Board and management executives ･Stated in Article 26 (The Compensation Committee) and Article 27 (Decision Making Policy for Remuneration, etc., of Directors of the Board and Executive Officers) of the “Corporate Governance Policies” ■ General Principle 3-1(iv) Policies and procedures for the appointment and dismissal of management executives and the nomination of candidate Directors of the Board and Audit and Supervisory Board Members ･Stated in Article 19 (Composition of the Board of Directors), Article 20 (Director of the Board Appointment and Qualification Standards), Article 25 (The Nominating Committee), Article 31 (Policies and Procedures for the Election and Dismissal of Executive Officers), and Article 32(Successor Plan for the Representative Executive Officers, etc.). ■ General Principle 3-1 (v) When the Board of Directors selects management executives or nominates Directors of the Board or Audit and Supervisory Board Members based on (iv) above, they will explain each selection and nomination ･Stated in “Notice of Annual General Meeting of Shareholders” published in the website of the Company [Supplementary General Principle3-1-3] ■ Ensuring diversity in the promotion to core human resources Stated in the “Implementation of environmental protection activities, CSR activities, etc.” section of “3. Measures to ensure due respect for the position of stakeholders” in “III Implementation status of measures concerning shareholders and other stakeholders” of this Report. [Supplementary General Principle 4-1-1] ■ Overview of scope of delegation from the Board of Directors to management personnel ･ Stated in Article 18 (Roles of the Board of Directors) of the “Corporate Governance Policies” of the Company. [General Principle 4-8] ■ Effective use of Independent Directors of the Board ･ The principle of a majority of the Directors of the Board being Independent Directors of the Board is stated in Article 19 (Composition of the Board of Directors) of the “Corporate Governance Policies” of the Company. [General Principle 4-9] ■ Independence Criteria for Outside Director of the Board ･ Stated in “II.1 [Independent Officers] Other matters relating to Independent Officers” of this Report. [Supplementary General Principle 4-11-1] 3 ■ Concepts on the balancing of knowledge, experience, and abilities, as well as the diversity and size of the Board of Directors overall ･Stated in Article 19 (Composition of the Board of Directors) and Article 20 (Director of the Board Appointment and Qualification Standards) of the “Corporate Governance Policies” of the Company. [Supplementary General Principle 4-11-2] ■ Situation of concurrent service of Directors of the Board ･ Stated on page 13 of the “Notice of Convocation of the 197th Annual General Meeting of Shareholders” ･ Further, the obtaining of the prior approval of the Board of Directors of the Company in the event of an Outside Director of the Board being newly appointed as an Officer of another company is stated in Board of Directors Rule of the Company. [Supplementary General Principle 4-11-3] ■ Overview of analysis and assessments on the effectiveness of the Board of Directors ◇ Continuing from the fiscal year ending December 31, 2020, for the fiscal year ending December 31, 2021, the Company conducted an evaluation of the effectiveness of the Board of Directors using questionnaire and individual interviews by a third party organization, Board Advisors Japan, Inc. ◇ An overview of the results of the assessment for the period ending December 2021 is as per the below. ･ It was confirmed that the Board of Directors is proactively and positively responding to the evolution of the Company’s management, including the transition to a co-president system. In addition, the agenda setting and facilitation by the new Chairperson of the Board of Directors, who is an independent director, has greatly contributed to the effectiveness of the Board of Directors meetings. It was also confirmed that preparations are underway to nominate directors with the experience, skills, and so on required for the Board of Directors of the Company in order to further improve the function of the Board of Directors. ･ Among the issues pointed out to be strengthened in the evaluation of the effectiveness of the Board of Directors for the fiscal year ending December 31, 2020, it was confirmed that significant progress has been made in further strengthening the audit function, and that progress is also being made in upgrading the monitoring model, expanding discussion of important agenda items, and strengthening the nomination function. ･ Based on the above, the Company’s Board of Directors was evaluated to be generally effective. On the other hand, as issues to be strengthened in the fiscal year ending December 31, 2022, it was recognized that the Board of Directors should enhance discussions on growth strategies, improve the efficiency of the Board of Directors meeting’ operations, make further contributions by Independent Directors, and strengthen the Board of Directors’ secretariat functions to support Independent Directors. ◇ Based on the results of the above, the Company’s Board of Directors will continue to aim for “Maximization of Shareholder Value” and make efforts to improve effectiveness. [Supplementary General Principle 4-14-2] ■ Policy on training for Directors of the Board ･ Stated in Article 34 (Policy on Training for Directors of the Board) of the “Corporate Governance Policies” of the Company. [General Principle 5-1] ■ Policies on the establishment of a system and initiatives for the promotion of constructive dialog with shareholders. ･ Stated in Article 15 (Disclosure of Information), Article 36 (Basic Policy on Dialogue with Shareholders), and Article 37 (System for Dialogue with Shareholders) 2. Capital structure Foreign shareholding ratio Above 30% [Status off major shareholders] Updated Name Nipsea International Limited (Standing proxy City Bank, NA Tokyo Branch, The Bank of Tokyo-Mitsubishi UFJ, Ltd.) The Master Trust Bank of Japan ,Ltd. Number of shares held 1,293,030,000 Shareholding ratio (%) 55.06 101,100,700 4.30 4 Fraser (HK) Limited (Standing proxy City Bank, NA Tokyo Branch) Clearstream Banking S.A. (Standing proxy The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch) HSBC Bank plc A/C CLIENTS 3 (Standing proxy The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch) Nippon Life Insurance Company (Standing Proxy The Master Trust Bank of Japan, Ltd.) Sumitomo Life Insurance Company (Standing Proxy Custody Bank of Japan, Ltd.) Sumitomo Mitsui Banking Corporation MUFG Bank, Ltd. Sumitomo Mitsui Trust Bank, Limited (Standing proxy Custody Bank of Japan, Ltd.) Controlling shareholders (other than the parent company) ――― 76,244,385 3.24 85,000,000 83,840,653 54,085,665 53,750,000 49,998,305 35,667,470 35,265,000 3.62 3.57 2.30 2.28 2.12 1.51 1.50 Parent company Nipsea International Limited (Unlisted) Supplementary explanation Updated 1. The total number of issued shares written are as of December 31, 2021. 2. The ratio of the number of shares owned to the total number of issued shares is calculated excluding treasury stock of 22,261,037 shares. 3. Nipsea International Limited is a wholly owned subsidiary of Wuthelam Holdings Ltd. where Goh Hup Jin, a Director of the Board of our Company, serves as Managing Director. 4. On January 25, 2021, the Company conducted a third-party allotment of shares with Nipsea International Limited and Fraser (HK) Limited as underwriters, where it issued 148,700,000 new shares of the Company, and as a result, the total number of issued shares was 474,102,443. 5. Based on the resolution of the Board of Directors meeting held on February 10, 2021, the Company set March 31, 2021 as the record date and April 1, 2021 as the effective date, and as of April 1, 2021, the number of common shares owned by shareholders noted or recorded in the final shareholder registry on the record date has been split at a rate of 5 shares for each share. As a result, the total number of issued shares (474,102,443 shares) after the above third-party allotment has increased by 1,896,409,772 shares to 2,370,512,215 shares. 6. A large shareholding report dated January 31, 2022 (submitted by Mitsubishi UFJ Financial Group, Inc. and its joint holders Mitsubishi UFJ Trust and Banking Corporation, Mitsubishi UFJ Kokusai Asset Management Co., Ltd., First Sentier Investors (Australia) IM Ltd. and First Sentier Investors (Hong Kong) Limited) has been made available for public inspection. However, the portion for which the actual number of shares held as of December 31, 2021 cannot be confirmed by the Company is not included in the above status of the major shareholders. 7. Since the Company was able to confirm the intention of the financial institutions to sell the shares of the Company’s common stock held by them, the Company resolved at the Board of Directors the meeting held on January 7, 2022 to conduct a secondary offering of shares in the overseas market, in order to provide such sellers with a smooth opportunity to sell their shares and to resolve the issue of the low market liquidity of the Company’s shares relative to its market capitalization. This secondary offering of shares in overseas markets is intended to increase the market liquidity of the Company’s shares, build a global investor base that understands the Company’s growth strategy from a long-term perspective, and alleviate concerns about the potential sale of Cross-shareholdings. This secondary offering will also contribute to the improvement of the tradable share ratio required to maintain listing on the Prime Market, a new market segment of the Tokyo Stock Exchange. 5 3. Company attributex Listed exchanges and market section Tokyo Stock Exchange, 1st Section Fiscal year-end Business category December Chemical Number of employees (consolidated) as of the end of the previous fiscal year More than 1000 Net sales (consolidated) as of the end of the previous fiscal year Not less than 100 billion yen, but less than 1 trillion yen Number of consolidated subsidiaries as of the end of the previous fiscal year Not less than 100, but less than 300 4. Guidelines for measures to protect minority shareholders in conducting transactions with the controlling shareholder ･ To protect minority shareholders, when the company intends to conduct a transaction with its parent company, the Independent Directors appropriately conduct engagement and supervision, such as obtaining approval at the Board of Directors with the majority of the Independent Directors, etc. 5. Other special circumstances that may have material impact on corporate governance ･ The Company’s parent company is Nipsea International Limited, which belongs to the Wuthelam group. There are no agreements between the Company and the Wuthelam Group regarding the holding and sale of the Company’s shares held by the Wuthelam Group, the exercise of voting rights, or other contracts that restrict management. Also, the Company has secured a certain level of independence since it has taken the measures described in “4. Guidelines for measures to protect minority shareholders in conducting transactions with the controlling shareholder” above. 6 II. Status of the corporate governance system including the business management organization pertaining to management decision-making, execution and supervision 1. Matters concerning governing institution structure, operations of organization, etc. Organizational form Company with a Nominating Committee, etc. Chair of the Board of Directors Outside Director of the Board [Directors] Maximum number of Directors of the Board stipulated in the articles of incorporation 11 people Term of office of Directors of the Board stipulated in the articles of incorporation 1 year [Matters relating to outside directors of the board] Number of Directors of the Board Updated Number of Outside Directors of the Board Updated Number of Outside Directors of the Board who are designated as Independent Director of the Board Updated 11 8 8 Relationship with the Company (1) Updated Name Attributes Hisashi Hara Peter M Kirby Miharu Koezuka Lim Hwee Hua Attorney Formerly a member of another company Formerly a member of another company Formerly a member of another company Relationship with the Company (*) a b c d e f g h i j k Certified public accountant Masataka Mitsuhashi Toshio Morohoshi Formerly a member of another company Formerly a member of another company Formerly a member of another company * Selections regarding the relationship with the company * “○” if the person falls under each item in “current / recent,” “△” if the person falls under “past” * “●” if a close relative falls under each item in “current / recent,” “▲” if they fall under “past” Masayoshi Nakamura Takashi Tsutsui △ △ △ a Executive of a listed or its subsidiary b Executive or Non-Executive Director of the Board of the parent company of a listed company c Executive of a brother company of a listed company d Person whose major client or supplier is a listed company or an executive thereof 7 e Major client or supplier of a listed company or an executive thereof f Consultant, accounting expert or legal expert who receives a large amount of monetary consideration or other property from a listed company besides executive compensation h g Major shareholder of a listed company (or an executive of the said major shareholder if it is a corporation) Executive of a client or supplier company of a listed company (which does not fall under any of d, e, or f) (the executive himself/herself only) The previous executive in a relationship where there is a mutual appointment of outside officers (the executive himself/herself only) Executive of a company or organization that receives a donation from the Company (the Outside Audit & Supervisory Board Member himself/herself only) j i k Other Relationship with the company (2) Updated Name Affiliated Committee Compensation Committee Nominating Committee Audit Committee Independent Officers Supplementary explanation regarding conforming items Reason for appointment With a career of over 40 years as an attorney, Hisashi Hara has been involved in numerous cross-border M&A deals and has assisted in various corporate legal matters. In 2011, he received the Chambers Asia-Pacific Lifetime Achievement Award from Chambers Partners, which is just one of many commendations in recognition of his good reputation as an attorney involved in cross-border M&A deals. As Chairman of the Special Committee, he provided objective advice from the perspective of protecting the interests of minority shareholders in making the Company’s joint venture in the Asian region a wholly owned subsidiary and during the acquisition of the Indonesian business announced in August 2020, and in the share transfer of the European and Indian subsidiaries decided in August 2021. As Chairman of the Nominating Committee, he played an important role in the appointment and election of candidates for the Director of the Board and Executive Officer, and also demonstrated strong leadership by leading the nomination process for the establishment of the Co-President structure in April 2021. In light of these contributions, the Company’s Nominating Committee deems his advice based on his knowledge and experience to be essential for establishing the corporate governance to pursue “Maximization of Shareholder Value” from a medium- to long-term perspective after fulfilling responsibilities to all the stakeholders surrounding the Company, and nominates him again as a candidate for Outside Director of the Board. In addition, he was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, Hisashi Hara ○ ○ (Concurrent Position) Senior Counsel at T&K Partners 8 the Company designated him as an independent director. Peter M Kirby has worked globally in the paint industry since 1972, culminating in his appointment as Chairman/CEO of ICI Paints world-wide which was the largest paint company in the world based in the UK. From 1998 to 2003 he was CEO/MD of CSR Ltd, a listed international building materials group. From 2003 he served as an independent director of Australian-listed Orica which became the largest producer of mining explosives and chemicals in the world. In 2010 Orica demerged DuluxGroup and he became its Chairman until retiring in 2018. Dulux is the market leader in Oceania and is now a subsidiary of Nippon Paint Holdings. From 2003 to 2014 he was also an independent director of Macquarie Bank and Group which is an Australian-listed investment bank and a leader in financing infrastructure internationally. The Nominating Committee of Nippon Paint Holdings judges that his global business experience mainly in the paint and coatings industry and his extensive experience and expertise serving on the boards of multinational corporations are indispensable for establishing the corporate governance structure of the Company to pursue Maximization of Shareholder Value with a long-term perspective after fulfilling its obligations to its stakeholders, and nominates him as a candidate for Director of the Board. In addition, he was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, the Company designated him as an independent director. Miharu Koezuka was involved in business management of Takashimaya Company, Limited, a leading company in the Japanese department store industry, as part of its management team for many years and served as its Representative Senior Managing Director. Miharu Koezuka currently serves as Outside Director of both Japan Post Holdings Co., Ltd. and Nankai Electric Railway Co., Ltd. She has contributed to the vitalization of discussions at the Company’s Board of Directors meetings by providing multifaceted and accurate advice based on her experience in building marketing strategies in local markets and improving employee engagement, which she gained through her management of a retail business. In addition, she has performed duties as an Audit Committee Member, such as by providing Peter M Kirby ○ Miharu Koezuka ○ ○ (Concurrent Position) Outside Director of the Board of Japan Post Holdings Co., Ltd. and Nankai Electric Railway Co., Ltd. 9 advice on the Group’s risk assessment and establishing the framework of “Audit on Audit” system. In light of these contributions, the Company’s Nominating Committee deems her advice based on her knowledge and experience to be essential for establishing the corporate governance to pursue “Maximization of Shareholder Value” from a medium- to long-term perspective after fulfilling responsibilities to all the stakeholders surrounding the Company, and nominates her again as a candidate for Outside Director of the Board. In addition, she was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, the Company designated her as an independent director. Lim Hwee Hua was elected to the Parliament of Singapore in 1996 and held several important ministerial positions in the Singapore Government until 2011. From 2002 to 2004, she served in important positions of the Parliament including Deputy Speaker of Parliament and Chairman of the Public Accounts Committee. Prior to joining the Singapore Cabinet, she was engaged in investment banking services at Swiss Bank Corporation and Jardine Fleming. She also served as Managing Director at Temasek Holdings, an investment company owned by the Singapore Government, where she oversaw restructuring and divestment of companies, realigned boards, established strategic relations with key foreign counterparts including China and Vietnam, and sat on the boards of investee companies. After retirement from politics in 2011, she has sat on the boards of directors of several financial institutions while engaging in private equity activity such as Kohlberg Kravis Roberts. Her post-politics career also included her academic posts as Distinguished Visiting Fellow of National University of Singapore at both the Business School and the Lee Kuan Yew School of Public Policy. The Nominating Committee of Nippon Paint Holdings judges that her experience and expertise are indispensable for establishing the corporate governance structure of the Company to pursue Maximization of Shareholder Value with a long-term perspective after fulfilling its obligations to its stakeholders, and nominates her as a candidate for Director of the Board. In addition, she was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Lim Hwee Hua ○ (Concurrent Position) Independent Director, Jardine Cycle & Carriage Limited Senior Advisor, Kohlberg Kravis Roberts & Co. L.P. 10 Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, the Company designated her as an independent director. Masataka Mitsuhashi has many years of experience as a certified public accountant at PwC Japan Group, where he was engaged in accounting audit and M&A-related activities. He also has extensive experience in long-term value creation for companies from an ESG perspective as Representative Director of a consulting firm. He assumed the position of Advisor for the Company’s Governance Advisory Committee in June 2019 and offered helpful advice to the Company’s Board of Directors meeting in relation to the structural reform for the shift to a Company with Three Committees in March 2020. As a Special Committee Member, he provided objective advice from the perspective of protecting the interests of minority shareholders in making the Company’s joint venture in the Asian region a wholly owned subsidiary and during the acquisition of the Indonesian business announced in August 2020, and in the share transfer of the European and Indian subsidiaries decided in August 2021. In addition, as Chairman of the Audit Committee, he led the establishment of the Company’s global audit system and established the framework of “Audit on Audit” system by leveraging his extensive experience at audit firms and other organizations. In light of these contributions, the Company’s Nominating Committee deems his advice based on his knowledge and experience to be essential for establishing the corporate governance to pursue “Maximization of Shareholder Value” from a medium- to long-term perspective after fulfilling responsibilities to all the stakeholders surrounding the Company, and nominates him again as a candidate for Outside Director of the Board. In addition, he was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, the Company designated him as an independent director. With a career of over 40 years as an IT specialist, Toshio Morohoshi was formerly involved in the management of Fujitsu Limited, Japan’s leading global electronics company. After serving as Japan representative for multiple global enterprises, he had managed Yaskawa Information Systems Corporation as its President & CEO (Concurrent Position) Outside Audit & Supervisory Board Member of Fujifilm Holdings Corporation and Integral Corporation, and an Outside Director of the Board of Skymark Airlines Inc. The Company has a trading relationship with the PwC Japan Group, which includes PwC Advisory LLC and PricewaterhouseCoopers Aarata LLC, where Masataka Mitsuhashi has previously served as a business executive; said trading relationship has included the receipt of support for corporate acquisitions and the construction of an internal audit system. In addition, Mr. Masataka Mitsuhashi worked as an advisor of the Governance Advisory Committee established as an advisory committee for the Board of Directors of the Company until December 31, 2019. However, as the amount of such transactions was less than the amount prescribed in the “Outside Director of the Board Independence Judgment Standards” of the Company, the Company has determined that there is no concern of a conflict of interest arising with general shareholders. (Concurrent Position) Outside Director of the Board of T-Gaia Corporation 11 Masataka Mitsuhashi ○ ○ Toshio Morohoshi ○ ○ ○ until May 2018. With his experience in management of IT companies in Japan and overseas, he has added diversity to the composition of the Company’s Board of Directors, contributing to vitalizing discussions by the Board, and has provided accurate advice in the development of IT strategies. In addition, as a Nominating Committee Member, he was responsible for the nomination process when the Co-President structure was established in April 2021, and as an Audit Committee Member, he established the framework of “Audit on Audit” system for the Group. In light of these contributions, the Company’s Nominating Committee deems his advice based on his knowledge and experience to be essential for establishing the corporate governance to pursue “Maximization of Shareholder Value” from a medium- to long-term perspective after fulfilling responsibilities to all the stakeholders surrounding the Company, and nominates him again as a candidate for Outside Director of the Board. In addition, he was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, the Company designated him as an independent director. Since 1984, Masayoshi Nakamura has built up over 30 years of hands-on experience as a specialist in M&A advisory and capital market financing, at major US investment banks Lehman Brothers and Morgan Stanley, as well as at Mitsubishi UFJ Securities, a core member of Mitsubishi UFJ Financial Group. During this time, he has helped globalize Japanese companies by guiding them through a number of major cross-border M&A deals. He provides appropriate and useful comments to the Company’s management according to his keen insight based on his long years of rich practical experience in the global financial and capital markets, as well as his knowledge and network in various industries. As the Lead Independent Director of the Board since 2020, and as the Chairman of the Board of Directors meetings since 2021, he has been leading vitalizing discussions at the meetings. As a Nominating Committee Member and Compensation Committee Member, he contributed to the process of establishing the Co-President structure and compensation design when it was established in April 2021. As a Special Committee Member, he played an important role in making the Company’s joint venture in the Asian region a wholly owned subsidiary and during the acquisition Masayoshi Nakamura ○ ○ ○ Masayoshi Nakamura has been an executive officer of Mitsubishi UFJ Securities Co., Ltd., a subsidiary of Mitsubishi UFJ Financial Group, Inc., and although Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., which took over the company, and its brother company, MUFG Bank, Ltd., have a business relationship, more than 10 years have passed since he retired from all positions of Mitsubishi UFJ Financial Group, and we believe that there is no risk of conflict of interest with general shareholders. 12 of the Indonesian business announced in August 2020, and in the share transfer of the European and Indian subsidiaries decided in August 2021. In light of these contributions, the Company’s Nominating Committee deems his advice based on his knowledge and experience to be essential for establishing the corporate governance to pursue “Maximization of Shareholder Value” from a medium- to long-term perspective after fulfilling responsibilities to all the stakeholders surrounding the Company, and nominates him again as a candidate for Outside Director of the Board. In addition, he was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, the Company designated him as an independent director. As an employee for many years at Nomura Securities Co., Ltd., and having served as Representative Director of Jasdaq Securities Exchange, Inc. and member of management responsible for M&A, investor relations, etc. at LIXIL Group Corporation, Takashi Tsutsui has ample experience in global business operations and keen insight into corporate governance, such as the need to safeguard the rights of minority shareholders. After the shift to a Company with Three Committees in March 2020, he has continuously led the design of executive compensation that contributes to maximizing shareholder value, including the establishment of the compensation philosophy as Chairman of the Compensation Committee and the development of a new executive compensation system after the establishment of the Co-President structure in April 2021. In light of these contributions, the Company’s Nominating Committee deems his advice based on his knowledge and experience to be essential for establishing the corporate governance to pursue “Maximization of Shareholder Value” from a medium- to long-term perspective after fulfilling responsibilities to all the stakeholders surrounding the Company, and nominates him again as a candidate for Outside Director of the Board. In addition, he was elected as a director at the General Meeting of Shareholder and satisfies the requirements for independent directors set forth by the Tokyo Stock Exchange and the Company’s “Independence Criteria for Outside Director of the Board”. Since the Company judged that there is no risk of conflict of interest with general shareholders, Takashi Tsutsui ○ ○ (Concurrent Position) Outside Director of the Board of MetaReal Corp.(former Rozetta Corp.) Nomura Securities Co., Ltd., at which Takashi Tsutsui previously served as executive officer, is the lead securities companies of the Company, however over 10 years have passed since he retired as an advisor of said company, and we have determined that there is no concern of a conflict of interest arising with general shareholders. 13 the Company designated him as an independent director. [Various Committees] Composition of Members and Affiliation of Chairpersons of Each Committee Updated Total number of committee members Number of full-time committee members Number of Inside Directors Number of Outside Directors Committee Chair (Chairperson) Nominating Committee Compensation Committee Audit Committee 4 3 3 0 0 0 1 1 0 3 2 3 Outside Director of the Board Outside Director of the Board Outside Director of the Board [Executive Officers] Number of Executive Officers 3 Concurrent service status Updated Presence or absence of representation rights Presence or absence of concurrent service as director of the board Nominating Committee Member Compensation Committee Member Presence or absence of concurrent service as employee Yes Yes Adopted Adopted × × Not adopted Not adopted × × × × Not adopted Not adopted Not adopted Name Yuichiro Wakatsuki Wee Siew Kim Yuri Inoue [Audit System] Whether there are directors or employees to assist in the duties of the Audit Committee Updated Yes Matters concerning the independence of directors and employees from Executive Officers Updated ･ The Company has established the Audit Department as an organization to assist in the duties of the Audit Committee. The Audit Department shall serve as secretariat of the Audit Committee, and furthermore, based on the instructions of the Audit Committee, investigate, analyze, and report on matters subject to auditing, and support the audit activities of the Audit Committee. ･ Furthermore, in order to ensure independence from the Executive Officers of the Audit Department, the Company’s Audit Committee rules stipulate that matters related to the personnel rights of the General Manager of the Audit Department, basic policy of the Audit Department, the Audit Committee’s authority to consent to audit plan and budget, and the Audit Committee’s instructions concerning audits take precedence over those of the Representative Executive Officer & Co-President. Status of coordination among Audit Committee, the Accounting Auditor, and the Internal Audit Department Updated ･ The Audit Committee is working to establish the framework of “Audit on Audit” system that relies on the results of internal audits conducted by each location, while holding the Group Audit Committee, which brings together the heads of the internal audit departments of the Audit Department and domestic and overseas partner companies to share best practices and exchange opinions on internal audits, thereby developing and 14 strengthening the internal audit system for the entire Group and enhancing the internal audit system implemented by each site. ･ In addition, the Audit Committee is making efforts to improve the effectiveness of audits through various activities, such includes the holding of three-way audit meetings attended by the Accounting Auditor and the General Manager of the Audit Department, regular meetings with Audit & Supervisory Board Members of domestic partner companies, and interviews with local audit firms of overseas subsidiaries, and sharing information and exchanging opinions on issues identified through audits. [Independent officers] Number of independent officers Updated 8 Other matters concerning independent officers The Company has specified all Outside Directors of the Board who meet the qualifications for to be independent officers as independent officers. The < Independence Criteria for Outside Director of the Board> prescribed by the Company are as set forth below. 1. The Company will determine that Outside Directors of the Board or candidates for Outside Directors of the Board are sufficiently independent from the Company if they are found to satisfy all the requirements prescribed in the following items as a result of a reasonable investigation by the Company. (1) The person in question is not a controlling shareholder (Note 1). (2) The person in question is not an executive (Note 3) or director or former executive or director (Note 4) of a parent company (Note 2) of the Company. (3) The person in question is not an executive or ex-executive (Note 5) of the Company or a subsidiary of the Company (hereinafter referred to as “the Group”). (4) The person in question is not an executive or ex-executive of a fellow subsidiary of the Company (Note 6). (5) The person in question does not fall under any of the following persons either currently or anytime during the past three years: (i) A major shareholder (Note 7) of the Company, or an executive of such a major shareholder (ii) A person whose major business partner is the Group (Note 8) or an executive of such a person (iii) A major trading partner (Note 9) of the Group or an executive of such a trading partner (iv) A person belonging to an audit corporation that conducts statutory audits of the Group (v) A person who receives a significant amount (Note 10) of money, etc. from the Group aside from officer remuneration (vi) An executive of an organization that receives a significant amount (Note 10) of donation or aid from the Group (6) The person in question is not the spouse or a relative within the second degree of a person who falls applicable under any of the items of (1) and (5) above. 2. Outside Directors of the Board shall strive to maintain the independence prescribed by these Independence Criteria until their resignation from office. If an Outside Director of the Board no longer satisfies these Independence Criteria, he/she shall promptly notify the Company of the fact. (Notes) 1. A controlling shareholder means an individual who is a controlling shareholder a defined by the “Securities Listing Rules (Tokyo Stock Exchange)” (Listing Rules) Article 3, No. 42-2 and the Enforcement Rules thereof Article 3-2 2. A parent company means parent company as define in the “Regulation on Terminology, Forms, and Preparation Methods of Financial Statements” (Financial Statement Rules), Article 8, Paragraph 3. 3. An executive means an Executive Director, an Executive Officer, a Corporate Officer, or a person holding a similar position at a corporation or other organization. 4. A former executive or director means a person who has been an executive or director anytime during the past 10 years. 5. An ex-executive means a person who has been an executive anytime during the past 10 years. 6. A fellow subsidiary means another company that has the same parent company as the Company. 7. A major shareholder means a person who directly or indirectly holds 10% or more of the total voting rights. 8. A person whose major business partner is the Group means a person who has received from the Group a payment equivalent to 2% or more of the annual consolidate sales revenue or annual consolidated net sales for the latest fiscal year of that person. 9. A major business partner of the Group means a person who has paid to the Group an amount equivalent to 15 2% or more of the annual consolidated sales revenue for the latest fiscal year of the Company or a person who has an outstanding balance of loans to the Company that is equivalent to 2% or more of the consolidated total assets of the Company as of the end of the latest fiscal year of the Company. 10. A significant amount means an amount exceeding an annual amount of 10 million yen on average over the past three fiscal years of the Company. [Incentives] Implementation status of measures to provide incentives to Directors of the Board and Executive Officers Introduction of a performance-linked remuneration plan, stock option plans, and others Supplementary explanation of the applicable items Updated The performance-linked remuneration system is disclosed in the “Composition and Calculation Method of Directors’ Remuneration, etc.” in Securities Report. The stock option plan is disclosed in “Details of Stock Option Plan” in Securities Report. ･ Securities Report for the 196th Fiscal Year (https://www.nipponpaint-holdings.com/ir/library/securities_report/) Persons to whom stock options are granted Inside Directors of the Board, employees Supplementary explanation of the applicable items Updated With regard to share remuneration as a part of “long-term incentive remuneration,” stock options are converted to Restricted Stock in Fiscal Year 2019. In addition, there were no new grants of stock options in the period ending December 2021. ･ Securities Report for the 196th Fiscal Year (https://www.nipponpaint-holdings.com/ir/library/securities_report/) [Director of the board and executive officer remuneration] Disclosure status (of remuneration of individual Directors of the Board) Disclosure status (of remuneration of individual Directors of the Board) Remuneration of only some of the Directors of the Board is disclosed Remuneration of only some of the Directors of the Board is disclosed Supplementary explanation of the applicable items Updated ･ In Securities Report, the “total amount of remuneration, etc., for each officer category, total amount of remuneration, etc., by type, and number of target officers” are disclosed and, with regard to officers whose total amount of consolidated remuneration, etc., is 100 million JPY or more, the “total amount, etc., of consolidated remuneration by officer” is disclosed. ･ Securities Report for the 196th Fiscal Year (https://www.nipponpaint-holdings.com/ir/library/securities_report/) Policy for determining the amount of remuneration or its calculation method Updated Yes Disclosure of policy for determining the amount of remuneration or its calculation method ･ With regard to the determination policies for the remuneration of Directors of the Board and Executive Officers, the Compensation Committee has stipulated the following remuneration philosophy and Design Policies for remuneration of Representative Executive Officers and Co-Presidents. The FY2022 remuneration system has been determined after fair and transparent deliberations in accordance with such determined policies. [Remuneration Philosophy] Overarching Principle ･ In order to implement ”Maximization of Shareholder Value” (MSV), to build a remuneration system that is transparent and satisfactory and to continue to provide appropriate motivation, incentives, etc., to key executives by implementing individual treatment based on the system. Guiding Principles 16 ・To be able to attract and keep management talent that excels at practicing MSV. ・To be able to continuously provide motivation so that maximum potential can be encouraged even under changing environment. ・To function effectively and in harmony with the current state of business development, level of maturity of organizational systems, organizational values, and the community. In accordance with this remuneration philosophy, the design policies for the remuneration of the Representative Executive Officer and President has been determined to be the below. [“Design Policies for the remuneration of the Representative Executive Officer and President] ・Compensation that contributes to MSV ・A total amount of remuneration that is commensurate with the performance of the Representative Executive Officer and Co-President ・A remuneration structure that promotes appropriate and decisive risk taking The “Composition and Calculation Method of Directors’ Remuneration, etc.” determined in accordance with the above decision-making policy is disclosed in Securities Report. Securities Report for the 196th Fiscal Year (https://www.nipponpaint-holdings.com/ir/library/securities_report/) [Support system for Outside Directors of the Board] ･ The Company will strive to put in place an environment that encourages lively discussion to ensure that discussions at the board meetings are rewarding. For example, the Company will notify board meeting agenda and deliver materials related to them to Directors of the Board in advance in addition to the provision of prior explanation to Outside Directors of the Board as necessary. ･ The Board of Directors, Nominating Committee, Compensation Committee, Audit Committee, and Independent Director of the Board Committee may appoint attorneys, chartered public accountants, tax accountants, consultants, and other external specialists at the cost of the Company as necessary, and may receive advice therefrom. ･ The Company, in order to ensure the effectiveness of the Board of Directors, the Nominating Committee, the Compensation Committee, the Audit Committee, as well as meetings of the Independent Directors of the Board, shall establish a secretary’s office for each meeting body that has been assigned an appropriate budget and personnel. 2. Matters concerning such functions as business execution, audit, oversight, nomination, and the determination of remuneration (overview of the current corporate governance system) Updated 1. An overview of the corporate governance system of the Company is set forth below. (1) Board of Directors and Directors of the Board ･ The Board of Directors supervises the general management of the Group. The Board of Directors delegates decision-making authority for the execution of business to executive officers, with the exception of matters requiring the resolution of the Board of Directors pursuant to laws and ordinances and the Articles of Incorporation, matters delegated to the Board of Directors by resolution of a shareholders’ meeting, and important matters relating to the management of the Group. ･ As a general rule, the Board of Directors shall be composed of a majority of Independent Directors of the Board. ･ As of March 31, 2022, eight-elevenths of Directors of the Board are Independent Directors of the Board. ･ By a resolution of the Board of Directors, the Board Chair is Masayoshi Nakamura who is Lead Independent Director of the Board, since Independent Director of the Board, in a position of independence from controlling shareholders, etc.(Article 22, item 4 of the Company’s Corporate Governance Policies), plays a role in protecting minority shareholder . ･ The number of members of the Board of Directors, as of March 31, 2022, is as set forth below (9 males and 2 females). Yuichiro Waktsuki Wee Siew Kim Goh Hup Jin Hisashi Hara Peter M Kirby Miharu Koezuka Lim Hwee Hua (Director, Representative Executive Officer & Co-President) (DIrector, Representative Executive Officer & Co-President) (Director, Chairman) (Independent Director) (Independent Director) (Independent Director) (Independent Director) 17 (Independent Director) (Independent Director) (Board Chair, Lead Independent Director) (Independent Director) Masataka Mitsuhashi Toshio Morohoshi Masayoshi Nakamura Takashi Tsutsui ･ 21 meetings of the Board of Directors were held in FY2021. ･ In regard to the tenure of Outside Directors of the Board, as a general rule, the same person may be nominated as a candidate for Outside Director of the Board by the Nominating Committee up to four times, however, if agreed beforehand by a majority of the Directors of the Board, the same person may be nominated a maximum of eight times. ･ The Company, through a mutual election by Independent Directors of the Board, has appointed Masayoshi Nakamura as the Lead Independent Director of the Board. The Lead Independent Director of the Board, upon collecting the opinions of the other Independent Directors of the Board as necessary, conveys the opinion of the Independent Directors of the Board to the Chairman, Representative Executive Officer & Co-President and other Executive Officers, and holds consultation as needed. ･ The Lead Independent Director of the Board may convene a meeting of the Independent Directors of the Board, composed of all Independent Directors of the Board, before or after a meeting of the Board of Directors, etc., as necessary. (2) Committees The following committees prescribed by the Companies Act have been established as of March 31, 2022. (i) Nominating Committee (Role) To make decisions on the content of proposals on the appointment and dismissal of Directors of the Board to be submitted to the General Meeting of Shareholders, and to deliberate and report to the Board of Directors on the Directors of the Board successor plan, as well as the appointment, dismissal, and successor plan for Representative Executive Officer and President. (Composition) Pursuant to the Nominating Committee Rules of the Company, the Nominating Committee has three or more Committee Members. A majority of the Committee Members are Independent Directors of the Board and the Committee Chairperson is elected from among the Committee Members who are Independent Directors of the Board. Further, among the Executive Officers, Representative Executive Officer and President or Directors of the Board holding an equivalent position cannot become Nominating Committee Members. (Number of times convened) 16 meetings were convened in FY2021. (Attendance rates) Committee Chairperson Hisashi Hara (Independent Director) Committee Member Committee Member Committee Member (ii) Compensation committee (Role) To make decisions on the decision-making policy for the individual remuneration, etc., of Directors of the Board and Executive Officers, and to make decisions on the content of remuneration, etc., for individuals (Composition) Pursuant to the Compensation Committee Rules of the Company, the Compensation Committee has three or more Committee Members. A majority of the Committee Members are Independent Directors of the Board and the Committee Chairperson is elected from among the Committee Members who are Independent Directors of the Board. Further, among the Executive Officers, Representative Executive Officer and President or Directors of the Board holding an equivalent position cannot become Compensation Committee Members. (Number of times convened) 19 meetings were convened in FY2021. (Attendance rates) Committee Chairperson Takashi Tsutsui (Independent Director) Goh Hup Jin Committee Member Committee Member Masayoshi Nakamura (Independent Director) (iii) Audit Committee (Role) The auditing of the execution of duties of Executive Officers and Directors of the Board, the creation of audit reports, and the making of decisions on the content of proposals relating to the appointment, dismissal, and non-reappointment of the Accounting Auditor to be submitted to a General Meeting of Shareholders (Composition) Pursuant to the Audit Committee Rules of the Company, the Audit Committee has three or more Committee Members. A majority of the Committee Members are Independent Directors of the Board and the Committee Chairperson is elected from among the Committee Members who are Independent Directors of the Board. Further, an Audit Committee Member may not concurrently serve as an Executive Officer, Director of the Board who executes business, or employee of the Company or a subsidiary of the Company. In addition, a Director of the Board who concurrently serves as an Executive Officer and, at present or within the past 10 years, is, or has been a Director of the Board, Executive Officer, Audit & Supervisory Board Member, or Goh Hup Jin Toshio Morohoshi (Independent Director) Masayoshi Nakamura (Independent Director) Attendance rate: 16/16 (100%) Attendance rate: 16/16 (100%) Attendance rate: 16/16 (100%) Attendance rate: 16/16 (100%) Attendance rate: 19/19 (100%) Attendance rate: 19/19 (100%) Attendance rate: 19/19 (100%) 18 Toshio Morohoshi (Independent Director) Miharu Koezuka (Independent Director) Attendance rate: 17/17 (100%) Attendance rate: 17/17 (100%) Attendance rate: 17/17 (100%) employee (includes positions equivalent to these) of a major shareholder with 10% or more of the total number of issued shares of the Company (includes the parent company, etc., thereof), may not become an Audit Committee Member. (Number of times convened) 17 meetings were convened in FY2021. (Attendance rates) Committee Chairperson Masataka Mitsuhashi (Independent Director) Committee Member Committee Member (3) Executive Officers As of March 31, 2022, there are 3 Executive Officers, and the Executive Officers make decisions on the execution of business of the Company that they have been delegated by resolution of the Board of Directors, and execute such business (2 males, 1 female). The company has established a Co-President system with the aim to further accelerate global business growth to pursue Maximization of Shareholder Value on April 28, 2021. Yui