パナソニック（6752） – Corporate Governance Report

Corporate Governance Report Last updated on April 1, 2022 Panasonic Holdings Corporation Representative Director, President: Yuki Kusumi Contact: 06-6908-1121 TSE Securities Code: 6752 https://holdings.panasonic/global/ The corporate governance of Panasonic Holdings Corporation (the “Company”) is described below. I. Basic Policy on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Policy The Company, since its establishment, has operated its business under its business philosophy, “contributing to the progress and development of society and the well-being of people worldwide through its business activities”. Also, the Company believes it is important to increase corporate value by fulfilling accountability through dialogue with various stakeholders such as shareholders and customers, making effort to execute transparent business activities, and swiftly conducting business activities with fairness and honesty based on its basic philosophy of “a company is a public entity of society”. The Company recognizes that corporate governance is the important basic structure for the aforementioned purpose, and is endeavors to establish and strengthen the effective corporate governance structure based on the Audit & Supervisory Board System composed of the Board of Directors and Audit & Supervisory Board Member (A&SB Member) / Audit & Supervisory Board (A&SB). [Reasons for not complying each principle of the Corporate Governance Code] [updated] The Company complies all of the principles set forth in the Corporate Governance Code revised in June 2021. [Disclosure based on each principle set forth in the Corporate Governance Code] [updated] – 1 – 【Principle 1.3 Basic Strategy for Capital Policy】 The Company operates its business placing considerable weight on “return on invested capital” and development of “financial stability”. As for the “return on invested capital”, the Company runs business with consciousness of the cost of capital by calculating business division-based ROIC (Return on Investment Capital) and WACC (Weighted Average Cost of Capital), and utilizing it for portfolio management and investment decision making, to create sustainable return which outweighs the profit forecast of the capital market. The Company aims continuously 10% or more of ROE (*) the Company-widely. As for the “financial stability”, we are increasing our shareholders fund by building up the net profit so that we are able to build up firm financial base to fully promote business restructuring and active investments. Under the capital allocation policy, the Company will allocate capital for implementing the Mid-term strategy with cash flow generated from business (operating CF, divestiture) in manner of financial discipline consciousness. From the perspective that shareholder return is the return on the capital invested by shareholders, the Company, in principle, distributes profits to shareholders based on its business performance and strives to provide stable and continuous of dividends, targeting a dividend payout ratio of approximately 30% with respect to consolidated net profit attributable to Panasonic Corporation stockholders. * ROE (Return on Equity): Net income attributable to the owners of the parent company / Average of the equity attributable to the owners of the parent company at the beginning and the end of the fiscal year. 【Principle 1.4 Strategic Shareholdings (So-called “Cross-Shareholdings” in the Corporate Governance Code)】 Other than holding shares of affiliated companies, the Company acquires and holds shares or interests of other companies, limiting the holdings to those of strategic partners to which the Company has a close business relation. The Company also judges whether the holding is necessary to increase its mid- to long-term corporate value, considering comprehensively its business strategies and business relation with such partners, among other factors. For the shares other than those of affiliated companies, the Company determines that the holding of the shares be limited to a minimum necessary, and every year at the Board of Directors Meeting, examines the purpose of the acquisition and holdings per share and cost & benefit with consideration of capital cost, and periodically judges the appropriateness of holding. Based on its examination result, the Company considers disposing and reducing the shares if it determines that the holding cannot be justified. In exercising voting rights of the shares that the Company holds, the Company decides and exercises each agenda, considering in a comprehensive manner with the concrete voting right check list, whether the Company can expect, among other things, the increases of the mid- to – 2 – long-term corporate value of the investee company. The Company does not make affirmative decision on the agenda which might damage the shareholders’ value. 【Principle 1.7 Related Party Transactions】 The “Rules for Board of Directors Meeting” and “Standards for the Discussions at Board of Directors Meetings” require that conflict of interest transactions between the Company and any of its Directors be approved by the Board of Directors. The regulations of the Company also require the Board approval for conflict of interest transactions between the Company and any individual who, having been elected by a board resolution, accepts a position in charge of executing the business of the Company or a Group Company (“Executive Officers”), and does not serve concurrently as Directors. All important facts regarding such transactions are brought before the Board, and the Board then resolves on these transactions taking into due consideration the opinions of the independent Outside Directors, for whom there is no risk of any conflict of interest. 【Supplementary Principle 2.4.1 Views on diversity of core human resources】 The Company have established the “Panasonic Group DEI Policy” on October 1, 2021. https://holdings.panasonic/jp/corporate/sustainability/diversity.html DEI stands for “Diversity, Equity & Inclusion” and it is defined as follows; Diversity: To accept and respect each other and find values in individual personality Equity: To fairly provide opportunities to individuals who take on challenges Inclusion: To let individual personality shine and leverage each other as an organization for the people who take on challenges By promoting DEI, the Company aim to become the “most rewarding company where all employees can make the most of their abilities,” regardless of differences in inner and outer aspects of individuals: values, sexual orientation, gender identity, nationality, gender, disability, health, family, job history and so on. In line with this policy, we keep creating opportunities for all employees to take on challenges and perform actively, and developing the systems and initiatives to promoted various personnel to management/executive positions, and to provide various work styles. Since 2017, the Company have been launching initiatives to increase employee satisfaction such as “Connect with outside and create opportunity to grow,” “Support proactive reformation”, and “Environment where diversity makes sense”. In 2021, the Company introduced remote working system. The Company also agreed on the signature campaign “Equity Act Japan” to establish the LGBT Equality Act, and signed. As of April 2021, the number of female employees was 3,001 (2.1 times of 2004) and the female managers was 607 (7.6 times of 2004). (Data is based on the number of Panasonic Corporation and major domestic affiliates in April 2004) – 3 – In 2021, the Company announced to support “30% Club Japan”, a global campaign aimed at “increasing the proportion of female in important corporate decision-making”. Furthermore, as the Company are promoting our business on a global scale, recruitment of non-Japanese and mid-career personnel, who are essential for the growth the business is enhanced. The specific numeric target is not set yet, however, the Panasonic Global Competencies (PGC) was established to encourage innovative change of mindset of each of all leaders. The Company have also established a common platform to assess candidate of executives, to monitor the progress of their training, and to select/promote the right person so that the Company can implement systematic career development and identify the most qualified personnel who can realize the sustainable growth of our company. 【Principle 2.6 Roles of Corporate Pension Funds as Asset Owner】 The Company has adopted the defined-benefit corporate pension plan (“the pension plan”) as a domestic corporate pension plan. In asset management of the pension plan, the Company exerts its function as expected as the asset owner, such as accepting the Stewardship Code and working on Stewardship activities for the fund operating agencies. The Company continues to develop the human resources for the pension plan in a well-planned manner to increase not only the investment management expertise but also the quality of its overall operations. In cases where the operating agencies of the pension plan exercise voting rights for other companies than our group companies, we, the Company respects the decision of the operating agencies of the pension plan and ensures that conflicts of interest which could arise between the pension beneficiaries and the Company are avoided. http://nenkin.jpn.panasonic.com/swship/index.html 【Principle 3.1 Full Disclosure】 (1) Company objectives (e.g., business philosophy), business strategies and business policy The Company has established its “Basic Business Philosophy”. This Basic Business Philosophy is the foundation for our practice of “contribution to the development of society”, or our resolve to “devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world” as proclaimed in the Basic Management Objective. In line with this Basic Management Objective, the “Panasonic Group Code of Ethics & Compliance”, which is based on this Basic Management Objective, defines the commitment that each and every employee of all the companies of the Panasonic Group is expected to fulfill. Basic Business Philosophy: https://holdings.panasonic/jp/corporate/about/philosophy.html “Panasonic Group Code of Ethics & Compliance: https://holdings.panasonic/jp/corporate/about/code-of-conduct.html (2) Basic view and policy on corporate governance The Company has worked on the corporate governance under its basic philosophy “a company is a public entity of society”, and established the corporate governance system based on the Board of Directors and A&SB Members / A&SB. The Board is responsible for deciding important operational matters for the whole Panasonic Group and monitoring the execution of – 4 – business by Directors. A&SB Members / A&SB are independent from the Board and responsible for auditing the performance of duties by Directors. The Company conducts the following activities to enhance effectiveness of its corporate governance. 1. Secures the rights and equal treatment of shareholders 2. Endeavors to appropriately cooperate with stakeholders such as employees, customers, business partners and local societies with the recognition that its sustainable growth is brought about as a result of receiving resources and contributions from such stakeholders. 3. Appropriately discloses corporate information and ensure transparency of the management. 4. Given its fiduciary responsibility and accountability to shareholders, the Board of Directors set the broad direction of corporate strategy, establish an environment where appropriate risk-taking is supported and carry out effective oversight of Directors and management from an independent and objective standpoint. 5. Engages in constructive dialogue with shareholders in order to contribute to the sustainable growth and the increase of corporate value over the mid- to long-term. (3)Board policies and procedures in determining the compensation of the senior management and Directors i) Policy The Company’s remuneration system for Directors and Executive Officers comprises a fixed remuneration which is the “basic remuneration,” a short-term incentive which is the “performance-based remuneration,” and a long-term incentive which is the “restricted stock as remuneration,” based on the duties of Directors. The Company determines the amounts of the basic remuneration based on the roles of recipients, taking also into account the management environment, their responsibilities and the remuneration trends of other companies. The “performance-based remuneration” is provided to boost motivation to improve business performance, and its amount is determined based on a single-year performance evaluation of the entire Company and a specific business of which a Director is in charge. The “performance-based remuneration” is designed in a way that the amount of payment will increase according to the results. The payment rate of the basic remuneration ranges from 0% to 150% (when the standard value is achieved: 75%). The performance is measured using a combination of key management indicators which the Company should continue to attach importance to, such as adjusted operating profit (*), net profit attributable to Panasonic Corporation stockholders and operating cash flows. Specifically, the performance of Directors is evaluated based on the comparison between the results of each of such indicators in the previous fiscal year and numerical targets of the fiscal year in which they are evaluated. The “restricted stock as remuneration” is a type of stock compensation in which the restriction of transfer of shares is lifted subject to Directors serving the Company for a specified period of – 5 – time, and is allocated with the aim of providing an incentive to continuously improve corporate value and promote further value sharing with the Company’s shareholders. The ratio of the incentive option to the overall remuneration package is designed to increase as the position of the recipient Director gets higher. In addition, the total amount for each recipient is set based on overall considerations of various factors, such as duties of each Director and the balance with monetary remuneration. (*)A management indicator for Panasonic calculated by subtracting Cost of sales and Selling, general and administrative expenses from Net sales. ii) Procedure i) Policy Compensations of Directors and Executive Officers are decided by Directors, who were given the authority by the Board, based on the Company’s Director and Executive Officer Compensation System. In November 2015, the Company has established an optional Nomination and Compensation Advisory Committee, chaired by an independent Outside Director. In response to inquiries from the Board, this committee deliberates and reports on the appropriateness of the Company’s Director and Executive Officer Compensation System. (4) Policies and procedures in the appointment of the senior management and the nomination of Director and A&SB Member candidates Regarding Directors, in light of the broad and diverse nature of its businesses, the Company appoints, in a well-balanced manner, those who have broad knowledge, experience and qualification. Regarding Outside Directors, the Company appoints, from among such as management or experts of external entities, those who have knowledge and extensive expertise, that is difficult to be brought if it is relying only on Inside Directors. The Company, also, considering importance of independency of an appointee, appoints Outside Directors, from the perspective that there is no conflict of interest between the Company and the appointee, and that the appointee can increase and enhance the effectiveness of the oversight of the Board based on objective and neutral standpoint. Please refer to 【Principle 4.9 Independence Standards and Qualification for Independent Outside Directors with regard to the qualification for the Company’s Outside Directors】/ Outside A&SB Members. Regarding A&SB Members, the Company appoints those who have knowledge, experience and qualification for exercising their responsibilities and duties. Also the Company appoints A&SB Member who has substantial finance, accounting and legal knowledge. Regarding Outside A&SB Members, the Company appoints, from among such as management of external entities, lawyer and certified public accountant, those who have knowledge and extensive expertise, that is difficult to be brought if it is relying only on Inside A&SB Members. The Company, also, considering importance of independency of an appointee, appoints Outside A&SB Members, from the perspective that there is no conflict of interest between the Company – 6 – and the appointee, and that the appointee may increase and enhance the effectiveness of the auditing by A&SB Members on the execution of business by Directors based on objective and neutral standpoint. Please refer to 【Principle 4.9 Independence Standards and Qualification for Independent Outside Directors with regard to the qualification for the Company’s Outside Directors】/ Outside A&SB Members. Regarding dismissals of Executive Officers, the prohibited matters and the procedures are established by the Company’s rules and decisions are made at the Board of Directors Meeting. As for replacement of the Group Chief Executive Officer (Group CEO), please refer to the Supplementary Explanation of Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Compensation Committee under II 1. [Directors] in this report. ii) Procedure Director and Executive Officer candidates are deliberated upon by the Chairman, the Group CEO, and the Group Chief Human Resources Officer (Group CHRO) before being decided by the Board of Directors. A&SB Member candidates are deliberated upon by the Chairman, the Group CEO, and the Group CHRO and consented to by the A&SB before being decided by the Board. In November 2015, the Company has established an optional Nomination and Compensation Advisory Committee, chaired by an independent Outside Director. In response to inquiries from the Board, this committee deliberates and reports to the Board on the results of internal considerations of Director, Executive Officer and A&SB Member candidates. (5) Explanations with respect to the individual appointments and nominations Work records and the reasons of appointment for Directors and A&SB Members are stated in the reference materials for the general meeting of shareholders. The reasons of appointment for Outside Directors and Outside A&SB Members are also stated in Reason of Appointment of Relationship with the Company (2) of II.1. [Directors] and [Audit & Supervisory Board Members (A&SB Members)/Audit & Supervisory Board (A&SB)] in this report. 【Supplementary Principle 3.1.3 Initiatives for sustainability and others】 Our mission is to put the basic management policies into practice, face up to social issues to realize an ideal society that is rich in both goods and spirit, and strive to make a significant contribution to society. Our top priority is to tackle the global environmental issues. The Company are making efficient investments in personnel and intellectual property to strengthen our competitiveness through both strategic and operational capabilities. The Company have launched GX (Green Transformation) as a specific initiative to move forward. In 1991, The Company have established the “Environmental Charter” relatively quickly than other companies, and in 2017 the Company announced the “Environmental Vision 2050”. Regarding to the Scope 1 & 2 of the “GHG Protocol: Guidance for accounting for greenhouse gas emission *1” , each of our business division has set a roadmap and committed to a target of reducing CO2 emissions from our production activities to 0 by 2030. Plus, the Company are – 7 – putting our effort on scope 3 as our responsibility, which refers to the CO2 emissions from our suppliers and product users. Moreover, the Company have launched Panasonic Transformation (PX) to support digital transformation (DX) in business divisions which is essential for strengthening operational capabilities, and to promote enhancement of IT management base for the entire Group. With this transformation the Company aim to realize the evolution of work processes through IT in response to the changing society and business environment. In December 2021, the Company established the Sustainability Management Committee, chaired by the Group CEO to undertake efforts for the development of Group-wide measures on global environmental and social issues and for the monitoring of the progresses. For example, as a measure to reduce CO2 emissions from our production activities by promoting introduction of equipment that contributes to energy saving and renewable energy equipment such as solar power, the Company laid out a plan of introducing internal carbon pricing in capital investment decisions and the plan was resolved at the Group Management Committee. This measure will be introduced throughout the Group in April 2022. To accomplish our missions, the Company also must face the human rights and compliance issues, and promise to establish the working environment where employees feel satisfaction and human rights are respected. In order to address these issues, the Company has established an organization comprehensively controlling human rights and labor compliance matters under the Strategic Human Resources Department, and also discusses these topics at the Board of Directors meetings with the participation of independent outside directors. As part of our efforts to globally comply with Standards concerning human rights and labor established by the United Nations and the International Labor Organization and/or relevant laws and regulation, the Company has established and disclosed the Group Global Human Rights and Labor Policies externally. Such initiatives by the Company extend even further to developing, promoting, monitoring, and continuously improving compliance measures throughout entire group in line with the Panasonic Group Code of Ethics & Compliance and other company rules, while referring findings from the dialogue with stakeholders and the advice from outside experts. The Company disclose information on these initiatives. In May 2019, the Company announced to agree on the Recommendations of TCFD *2. The Company identify the risks and opportunities and verify the resilience of strategies through scenario analysis. Also, on the assumption of engaging with investors, the Company publish a Sustainability Data Book that includes the disclosure items recommended by the TCFD: Governance, Strategy, Risk Management, and Metrics and Targets. For the detail of “Initiatives for Sustainability”, visit the link below; https://holdings.panasonic.com/jp/corporate/sustainability.html ※1 GHG Protocol: Guidance for accounting and reporting for GHG emissions and emission reduction – 8 – ※2 Task Force on Climate-related Financial Disclosures established by the Financial Stability Board (FSB) 【Supplementary Principle 4.1.1 The Scope of Matters Delegated to Management by the Board of Directors】 In order to ensure the full-fledged autonomous management by Divisional Companies, and to perform both swift, strategic decision-making and sound, appropriate monitoring, the Board of Directors, as the decision-making body for Group-wide matters, focuses on corporate strategy decisions and Divisional Company oversight, and delegates other decisions to the Management. Therefore, the Board, based on the Company’s internal regulations (such as “Rules for Board of Directors Meeting,” “Standards for the Discussions at Board of Directors Meetings,” and “Rules of Approval for Decision-making in Important Matters”), performs decision-makings regarding important business executions, such as (a) matters that requires the Board resolution under law, ordinance, or the articles of incorporation, (b) important matters concerning management, (c) the acquisition and disposition of assets including shares or credits, or the execution, revision, and termination of agreements, each of which exceeds a certain amount as prescribed by item type. 【Principle 4.8 Effective Use of Independent Outside Directors】 The Company currently elects six (6) Outside Directors. All of Outside Directors are notified as “independent directors / audit & supervisory board members” required by financial instruments exchanges such as Tokyo stock exchange. Please refer to 4. of i) Policy of Principle 【3.1 Full Disclosure for the qualification of independent Outside Directors 】 which the Company requires. The Board of Directors revolved that the minimum ratio of Outside Directors should be one third on and after June 29, 2017. Also, three (3) independent Outside Directors serve as the members of Nomination and Compensation Advisory Committee, and one of them serves as the chairperson of this Committee. In light of contribution to discussions at the Board, the Company has established a committee where Outside Directors and Outside A&SB Members exchange information and share recognitions. 【Principle 4.9 Independence Standards and Qualification for Independent Outside Directors】 The outline of the independence standards for independent Directors / Audit & Supervisory Board Members (A&SB Members) that the Company established based on the independence standard required by financial instruments exchanges such as Tokyo stock exchange. The following persons are not considered independent. (1) A person executing the operations of a parent company or a subsidiary of the parent company of the Company. (Including those who corresponds to the person recently or previously, hereinafter, “executing person”) – 9 – (2) A person or an executing person of such person who has a major business relationship with the Company, or a person or an executing person of such person with whom the Company has a major business relationship. (3) A consultant, accounting expert, or legal expert who receives a significant amount of money or other property from the Company other than compensation as a Director / A&SB Member. If the person who receives such property is an organization such as a legal entity or association, those who belongs or belonged to the organization corresponds to the relevant person. (4) A principal shareholder of the Company (If a principal shareholder is a legal entity, An executing person of such legal entity) (5) A close relative listed in items numbered (1) to (4) above (A second-degree or closer relative applies. The same applies, hereinafter) or a close relative of an executing person of the Company or subsidiary of the Company (If an Outside A&SB Member is appointed to as an independent Directors / A&SB Member, the person who is or who was an non-executing director / accounting advisor is included in the executing person). Notes) i) In the items numbered (1), (2), (4) and (5) above, an “executing person” corresponds to any of the following. ・A Director who is an executive director, an executive officer (shikkouyaku) or a director / A&SB Member who executes business of a legal entity, etc. ・An employee who executes business, a person responsible of serving duties of an employee who executes business of a legal entity in the case that the legal entity is an employee executing business, or other such equivalent person. ・An employee Also, the wording “recently” shall be assumed to be the point of time when the item of the agenda of the shareholders’ meeting appointing the person as a Director or an A&SB Member are decided, and the wording “previously” shall be assumed to be “within the last three years”. ii) In the item (2) above, “major” shall be applied to the case in which the amount of the transaction between the Company and a person whom the Company has a business relationship, exceeds 2% of either of their annual consolidated sales. iii) In the item (3) above, “significant” shall be applied to the case in which the person (individual) or the organization such as a legal entity or association to which a service provider belongs, in providing a service to the Company, corresponds to any of the followings. A person “belongs or belonged” includes not only a partner, but also an associate as it is so called. ・A person oneself who provides a service: Receives compensation of more than or equal to 12 million yen per year from the Company. – 10 – ・An organization to which a service provider belongs: The amount of the transaction between the Company and the organization exceeds 2% of either of their annual consolidated sales. “A person who belonged to an organization” shall be assumed to be identified based on whether the person belonged to the organization within the last three years. iv) In the item (4) above, “a principal shareholder” shall mean a shareholder holding 10% or more of the voting rights of the Company. v) In the item (5) above, “A person who was a non-executive director / an accounting advisor” shall be assumed to be identified based on whether the person was in the position in the last three years. Please refer to 【Principle 3.1 Full Disclosure】4. i) Policy with regards to Qualification for independent Outside Directors 【Supplementary Principle 4.11.1 Nomination and Compensation Advisory Committee】 In November 2015, the Company has established an optional “Nomination and Compensation Advisory Committee” that is chaired by an independent Outside Director. In response to inquiries from the Board of Directors, this committee deliberates and reports to the Board, on the results of its deliberation regarding the Company’s internal reviews on the nomination of candidates for Directors, Executive Officer, and A&SB Member, and on the appropriateness of the Company’s Director and Executive Officer Compensation System and amount and content of individual compensation. As of the filing date of this report, the members of this Committee are (a) Ms. Ota, an Independent Outside Director and the chairman of this Committee, (b) Mr. Toyama, an Independent Outside Director, (c) Mr. Tsutsui, an Independent Outside Director, (d) Mr. Tsuga, Director, Chairman of the Board, and (e) Mr. Kusumi, Representative Director, Group CEO. The Company has enhanced the objectivity, transparency and independence of the committee, by ensuring that it is chaired by an Outside Director and that Outside Directors constitute a majority of its membership. 【Supplementary Principle 4.11.1 Disclosure of View on Diversity and Size of the Board of Directors】 The Board of Directors shall concentrates on the roles of decision-making of management strategies from group-wide perspective and the supervision of Divisional Companies, in order to ensure the balance of “swift and strategic decision-making” and “sound and appropriate monitoring”, for the decision-making of group-wide matters and autonomous management of Divisional Companies. For the purpose of fulfilling this role, Board of Directors is composed of thirteen (13) Directors including two (2) female Directors and one (1) non-Japanese Director, and six (6) Outside Directors (at least one-third of Directors must be Outside Directors), and seeks to ensure the diversity of knowledge, experience and qualifications as a whole Board of – 11 – Directors. Chairperson is the Chairman of the Board who is not involved in execution of business. The Company discloses the expertise of directors (skill matrix) in the Reference Documents for the General Meeting of Shareholders. https://holdings.panasonic.com/jp/corporate/ir/stockholder/sok_syosyu.html 【Supplementary Principle 4.11.2 Restrictions on Concurrent Positions of Directors and Audit & Supervisory Board Members (A&SB Members); Disclosure of Status Thereof】 To the extent that it does not hinder their roles or duties within the Company, Directors (excluding Outside Directors), A&SB Members (excluding Outside A&SB Members), and Executive Officers may take positions as directors or audit & supervisory board members of other business companies or as representative officers of government agencies, institutions or bodies of national organizations, or the like with the prior approval of the President and the Group CHRO pursuant to the “Rules of Approval for Decision-making in Important Matters.” Important concurrent positions held by Directors (including Outside Directors) and A&SB Members (including Outside A&SB Members) are stated in the convocation notice of the ordinary general meeting of shareholders each year and published on the Company’s official website. The reference materials for the general meeting of shareholders also state any important concurrent positions, including those in other listed companies, held by each Director and A&SB Member. 【Supplementary Principle 4.11.3 Analysis and Evaluation of Effectiveness】 the Board of Directors The Company, to enhance effectiveness of the Board of Directors, conducts a survey to all the Board members who attend the meeting annually, and reports the results and evaluations of the survey at the Board. Drawing on a third-party point of view, the Company conducted interviews this year in addition to a survey. The items of the survey in the fiscal 2021 are; ・ Verification of the Board of Directors operation policy for fiscal 2021 ・ The role of the Board of Directors in a holding company ・ The role of the Directors in a holding company ・ Others, including effectiveness evaluation methods Upon analyzing the results of the survey, the Company’s findings with respect to the effectiveness of the Board of Directors are such that the current state of the Board is essentially appropriate in terms of its monitoring and decision-making function. Findings with respect to the transition to a holding company system, however, included opinions that discussion on the role of the Board of Directors, and on other needed issues should be further studied. As such, the Company is methodically addressing such issues and implementing improvements. – 12 – 【Supplementary Principle 4.14.2 Disclosure of its Training Policy for Directors and A&SB Members】 At the assignment of new Directors and A&SB Members, the Company provides them with opportunities to deepen their understanding of the expected roles and responsibilities and acquires necessary knowledge for performing such roles and responsibilities. Also, during the course of their assignment, the Company appropriately provides them with opportunities to acquire necessary knowledge such as those gained by attending seminars about management and compliance, among other matters, conducted by external experts. At the assignment of newly appointed Outside Directors and Outside A&SB Members, the Company provides and arranges visits to operating sites to deepen the understanding about management strategy and business of the Company. Also, the Company appropriately provides them with information, explaining materials of agendas, and situation of management and businesses prior to the attendances to the Board meeting held monthly. In addition, the Company provided them with the opportunity to visit major operating sites and plants from fiscal 2017. The Company will continue such opportunity in fiscal 2022. 【Principle 5.1 Policy for Constructive Dialogue with Shareholders】 (1) Basic Policy Under its basic philosophy, “A company is a public entity of society,” the Company has committed to highly transparent business activities and endeavored to be accountable its accountability to its stakeholders. The Company clearly defines its basic policy on information disclosure in the “Panasonic Group Code of Ethics & Compliance,” the guideline for putting the Group’s Basic Business Philosophy into practice. The Company also publishes relevant practical standards, methodologies, internal processes, etc., as the “Disclosure Policy.” The Company’s basic policy is to provide the Company’s fair and accurate financial information and corporate information, including management policies, business activities and Environment, Social, Governance (ESG) activities, in a timely, appropriate and easily understandable manner. (2) Structure pursuing constructive dialogue i) Dialogue between management and shareholders The Group Chief Financial Officer (Group CFO) is responsible for Investor Relations (IR) activities. Mainly the President, the Group CFO, each Director of Business Division, and each President of Divisional Companies engage in dialogues with shareholders and investors at financial announcements and individual meetings, etc. ii) IR Department Corporate Finance & IR Department is in charge of planning, making policy of overall IR activities, and day-to-day communication with shareholders and investors. iii) Collaboration with related Department – 13 – Dialogue with shareholders and investors are mainly engaged by Corporate Finance & IR Department. They collaborate with Financial & Accounting Center, Group-wide Strategy Group, Corporate Public Relations Center, and Divisional Companies’ Accounting Department, Planning Department and Public Relations Department (hereinafter, collectively, the “IR related Department”) to collect information across Panasonic Group. vi) Structure for disclosure The Company has established a structure in which matters required to be disclosed under relevant laws and ordinances in Japan and overseas or the rules of financial instruments exchanges or any other regulations shall be immediately reported to the “Corporate Finance & IR Department” or the “Financial & Accounting Center” and disclosed timely and accurately. Moreover, the Company has established disclosure control procedures in order to implement fair, accurate and timely disclosure of information, such as corporate information about Panasonic Group. In the process of preparation and confirmation of reports such as annual securities reports, quarterly reports, the Disclosure Committee, which is comprised of general managers of the Company’s principal departments that handle relevant information, confirms the validity of the content of the descriptions and the appropriateness of the procedures concerning the disclosure under the supervision of the Group CEO and the Group CFO. (3) IR activities aside from individual meetings i) Institutional Investors and Security Analysts The Company conducts presentation meetings of quarterly financial results announcements, annual presentation regarding business policy of the Company and Divisional Companies, as well as tours to individual business sites. Also, for overseas investors, the Company holds presentation meetings utilizing conference hosted by financial institutions. ii) Individual Investors The Company, for timely disclosure to individual investors, actively discloses its management information through the Company’s official website and etc. (4) Relaying shareholders views to the management The views and concerns for management issues obtained from shareholders and investors through IR activities are appropriately shared as the feedbacks with senior managements in internal meetings such as the Group Strategy Meeting. These views and concerns are also shared to relevant departments such as Divisional Companies through IR related Department, and are utilized to improve quality of management as appropriate. (5) Controlling insider information The Company sets forth in the Panasonic Group Code of Ethics & Compliance that employees never engage in insider trading, abiding relevant laws and ordinances in Japan and overseas. Also the Company establishes the internal rule to prevent insider trading for all directors, executives, and employees of Panasonic Group including those of IR related Departments. – 14 – Also, managements including the Group CEO and person in the IR related Departments are fully aware of the significance of handling insider information, and promote to engage fair dialogue to avoid conducting a selective disclosure*. In concrete terms, the Company sets “silent period” from 15 business days prior to the financial announcement until the day of the announcement. The Company does not engage in a preview interview about the financial announcements, even if it is outside the “silent period”, refraining from having dialogues about financial outlook that has not been disclosed. * To individually provide the material nonpublic information to specific business partners, investors, security analysts or media, regardless of intention. 【Principle 5.2 Establishing and Disclosing Business Strategies and Business Plans】 In the Mid-term strategy that has been in place since fiscal 2020, the Company has been executing portfolio management, including “Core growth business,” “Co-creation business,” and “Revitalization business,” as well as strengthening management structure by reducing fixed costs. Amid the accelerating social changes due to the novel coronavirus crisis, the Company is working to contribute to resolving social issues through our businesses. In addition, among all of the businesses, the Company will determine the areas in which it should focus and thoroughly enhance its competitiveness. In November 2020, the Company resolved to transition to a holding company system scheduled for April 2022. The aim of the transition is to strengthen the competitiveness of its business from a medium- to long-term perspective. With the transition to a holding company structure, the group will be divided into operating companies. Each operating company will work to significantly enhance its business competitiveness through swift decision-making in response to the external environmental changes and flexibly develop systems in accordance with business characteristics. On the other hand, the holding company will continue to support the business growth of each operating company and define growth areas from the perspective of optimizing the group as a whole, thereby striving to enhance the corporate value of the entire group. Aiming to continuously generate returns that exceed the expectations from the capital market, the Company has been conscious on its capital cost management. ROIC (Return on Investment Capital) and WACC (Weighted Average Cost of Capital) are calculated according to each https://holdings.panasonic.com/global/corporate/ir/presentation.html Dialogues between the shareholders and the investors are made as a part of IR activities which are articulated in 【Principle 5.1 Policy for Constructive Dialogue with Shareholders】. – 15 – business division, and are used in portfolio management and making investment decisions, etc. As a Company-wide KPI, the Company continuously aims to reach ROE of 10% or more. The Company’s business strategies and policies are posted on its official web site. * ROE (Return On Equity): Net profit attributable to Panasonic Corporation stockholders / Average Panasonic Corporation stockholders’ equity at the beginning and the end of each fiscal year. – 16 – 2. Capital Structure Percentage of Shares Held by Foreign Investors Not less than 30% [Status of Major Shareholders] Name / Company Name Number of Shares Owned Percentage (%) The Master Trust Bank of Japan, Ltd. (trust account) Note 2 Custody Bank of Japan, Ltd. (trust account) Note 3 Nippon Life Insurance Company Custody Bank of Japan, Ltd. (trust account 7) Note 3 Panasonic Corporation Employee Shareholding Association Sumitomo Life Insurance Co. MOXLEY AND CO LLC(Standing proxy: Sumitomo Mitsui Banking Corporation) STATE STREET BANK WEST CLIENT – TREATY 505234 (Standing proxy: Mizuho Bank, Ltd.) Custody Bank of Japan, Ltd. (trust account 5) Note 3 207,193 174,974 69,056 46,859 38,992 37,465 35,324 34,165 8.87 7.49 2.95 2.00 1.67 1.60 1.51 1.46 32,701 1.40 Matsushita Real Estate Co., Ltd. 29,121 1.24 Controlling Shareholder (except for Parent Company) Parent Company N/A None – 17 – Supplementary Explanation 1. Holdings of less than 1,000 shares have been omitted. 2 .Status of Major Shareholders is as of March 31, 2021. 3. Percentage (%) is calculated by deducting the Company’s treasury stock (120,239,132) and rounded down to two decimal places. 4. The number of shares held by The Master Trust Bank of Japan, Ltd. (trust account) reflects the shares entrusted by Mitsubishi UFJ Trust and Banking Corporation and other corporations, which have been originally entrusted in their trust services. 5. The numbers of shares held by Custody Bank of Japan, Ltd. (trust account), Custody Bank of Japan, Ltd. (trust account 7) and Custody Bank of Japan, Ltd. (trust account 5) reflect the shares entrusted by Sumitomo Mitsui Trust Holdings, Inc. and other corporations, which have been originally entrusted in their trust services.. 6. Amendment to Report of Possession of Large Volume was submitted by BlackRock Japan Co., Ltd. and its five joint holders dated March 22, 2017. The Company cannot confirm the actual status of shareholdings as of the end of fiscal 2020. The shareholding status of the report as of March 15, 2017 is as follows. ・BlackRock Japan Co., Ltd. Number of share certificates, etc. held (in thousands of shares): 42,283 Percentage of share certificates held (%): 1.72 ・BlackRock Life Limited Number of share certificates, etc. held (in thousands of shares): 5,403 Percentage of share certificates held (%): 0.22 ・BlackRock Asset Management Ireland Limited Number of share certificates, etc. held (in thousands of shares): 8,843 Percentage of share certificates held (%): 0.36 ・BlackRock Fund Advisors Number of share certificates, etc. held (in thousands of shares): 28,729 Percentage of share certificates held (%): 1.17 ・BlackRock Institutional Trust Company, N.A. Number of share certificates, etc. held (in thousands of shares): 33,041 – 18 – Percentage of share certificates held (%): 1.35 ・BlackRock Investment Management (UK) Limited Number of share certificates, etc. held (in thousands of shares): 4,409 Percentage of share certificates held (%): 0.18 ・Total Number of share certificates, etc. held (in thousands of shares): 122,710 Percentage of share certificates held (%): 5.00 7. Amendment to Report of Possession of Large Volume was submitted by Sumitomo Mitsui Trust Asset Management Co., Ltd. and its one joint holders dated December 22, 2020. Panasonic Corporation cannot confirm the actual status of shareholdings on the standard date of voting exercise. The shareholding status as of December 15, 2020 according to the report is as follows. ・Sumitomo Mitsui Trust Asset Management Co., Ltd. Number of share certificates, etc. held (in thousands of shares): 77,957 Percentage of share certificates held (%): 3.18 ・Nikko Asset Management Co., Ltd. Number of share certificates, etc. held (in thousands of shares): 46,113 Percentage of share certificates held (%): 1.88 ・Total Number of share certificates, etc. held (in thousands of shares): 124,071 Percentage of share certificates held (%): 5.06 3. Corporate Attributes Listed Stock Market and Market Section Tokyo Stock Exchange and Nagoya Stock Exchange / First Section Fiscal Year-End Type of Business March Electric Equipment Number of Employees (consolidated) as of the End of the Previous Fiscal Year Not less than 1,000 – 19 – Sales (consolidated) as of the End of the Previous Fiscal Year Not less than 1 trillion yen Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Not less than 300 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder 5. Other Special Circumstances which may have Material Impact on Corporate Governance 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 Members Maximum Number of Directors Stipulated in Articles of Incorporation Maximum number not stipulated Term of Office Stipulated in Articles of Incorporation 1 year Chairperson of the Board Chairman Number of Directors Appointment of Outside Directors Appointed Number of Outside Directors Number of Independent Directors Outside Directors’ Relationship with the Company (1) 13 6 6 – 20 – N/A N/A [Directors] Name Attribute Yoshinobu Tsutsui From another company Hiroko Ota Academic Kazuhiko Toyama Kunio Noji Michitaka Sawada Shinobu Matsui 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 ○ △ △ ○ * Categories for “Relationship with the Company” * “○” when the director presently falls or has recently fallen under the category; “△” when the director fell under the category in the past * “●” when a close relative of the director presently falls or has recently fallen under the category; “▲”when a close relative of the director fell under the category in the past a. Executing person of the Company or its subsidiaries b. Non-executive director or executing person of a parent company of the Company c. Executing person of a subsidiary of the parent company of the Company d. A party whose major client or supplier is the Company or an executing person thereof e. Major client or supplier of the Company or an executing person thereof f. Consultant, accountant or legal expert who receives a significant amount of money or other property from the Company other than compensation as a director/audit & supervisory board member g. Principal shareholder of the Company (or an executing person of the said major shareholder if the shareholder is a legal entity) h. Executing person of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only) i. Executing person of a company, between which and the Company outside directors/audit & supervisory board members are mutually appointed (the director himself/herself only) – 21 – j. Executing person of a company or organization that receives a donation from the Company (the director himself/herself only) k. Others Outside Directors’ Relationship with the Company (2) Name Reasons of Appointment Designation as Independent Director Supplementary Explanation of the Relationship (Reason for Appointment as an Outside Director) His extensive managerial experience and his deep insight can be brought to the management of the Company. (Reason for Appointment as an Independent Director) Mr. Yoshinobu Tsutsui does not have any conflict of interests in light of relationships between the Company and Mr. Tsutsui, other entities or organizations to which he belongs, and may enhance and strengthen the effectiveness of the monitoring performed by the Board of Directors on the execution of business by Directors from an objective and neutral standpoint. (Reason for Appointment as an Outside Director) Her extensive experience in economics and finance, and her deep insight can be brought to the management of the Company. Mr. Yoshinobu Tsutsui is an Outside Director designated as an independent director. Mr. Tsutsui has served at Nippon Life Insurance Company. However, the total transaction amount between the Company and Nippon Life Insurance Company in fiscal 2021 was (a) less than 1% of the consolidated sales of the Company in fiscal 2021 and (b) less than 1% of the consolidated sales of Nippon Life Insurance Company in fiscal 2021. Ms. Hiroko Ota is an Outside Director designated as an independent director. The Company had made a consulting contract with Ms. Ota. However, the – 22 – Yoshinobu Tsutsui ○ Hiroko Ota ○ Company already had terminated the contract in May 2013. Also, the amount of compensation for the contract was 3 million yen for approximately half a year. Mr. Kazuhiko Toyama is an Outside Director designated as an independent director. The Company had made a consulting contract with Mr. Toyama. However, the Company already had terminated the contract in March, 2016. Also, the amount of compensation for the contract was 6 million yen for a year. (Reason for Appointment as an Independent Director) Ms. Hiroko Ota does not have any conflict of interests in light of relationships between the Company and Ms. Ota, and or other entities or organizations to which she belongs, may enhance and strengthen the effectiveness of the monitoring performed by the Board of Directors on the execution of business by Directors from an objective and neutral standpoint. (Reason for Appointment as an Outside Director) His extensive managerial experience and deep insight can be brought to the management of the Company. (Reason for Appointment as an Independent Director) Mr. Kazuhiko Toyama does not have any conflict of interests in light of relationships between the Company and Mr. Toyama, and or other entities or organizations to which he belongs, may enhance and strengthen the effectiveness of the monitoring performed by the Board of Directors on the execution of business by Directors from an objective and neutral standpoint. (Reason for Appointment as an Outside Director) His extensive managerial experience and his deep insight can be brought to the management of the Company. Kazuhiko Toyama ○ Mr. Kunio Noji is an Outside Director designated as an independent director. Mr. Noji has served at Komatsu Ltd. However, the total transaction amount – 23 – Kunio Noji ○ Michitaka Sawada ○ Shinobu Matsui between the Company and Komatsu Ltd. in fiscal 2021 was (a) less than 1% of the consolidated sales of the Company in fiscal 2021 and (b) less than 1% of the consolidated sales of Komatsu Ltd. in fiscal 2021. Mr. Michitaka Sawada is an Outside Director designated as an independent director. Mr. Sawada has served at Kao Corporation. However, the total transaction amount between the Company and Kao Corporation in fiscal 2021 was (a) less than 1% of the consolidated sales of the Company in fiscal 2021 and (b) less than 1% of the consolidated sales of Kao Corporation in fiscal 2021. Ms. Shinobu Matsui is an Outside Director designated as an independent director. Ms. Matsui has served at Uzabase, Inc. However, the total – 24 – (Reason for Appointment as an Independent Director) Mr. Kunio Noji does not have any conflict of interests in light of relationships between the Company and Mr. Noji, other entities or organizations to which he belongs, and may enhance and strengthen the effectiveness of the monitoring performed by the Board of Directors on the execution of business by Directors from an objective and neutral standpoint. (Reason for Appointment as an Outside Director) His extensive managerial experience and his deep insight can be brought to the management of the Company. (Reason for Appointment as an Independent Director) Mr. Michitaka Sawada does not have any conflict of interests in light of relationships between the Company and Mr. Sawada, other entities or organizations to which he belongs, and may enhance and strengthen the effectiveness of the monitoring performed by the Board of Directors on the execution of business by Directors from an objective and neutral standpoint. (Reason for Appointment as an Outside Director) Her extensive experience and deep insight on accounting and management can be brought to the management of the Company, and can contribute to changing transaction amount between the Company and Uzabase, Inc. in fiscal 2021 was (a) less than 1% of the consolidated sales of the Company in fiscal 2021 and (b) less than 1% of the consolidated sales of Uzabase, Inc. in fiscal 2021. corporate culture and promoting diversity of the Company. (Reason for Appointment as an Independent Director) Ms. Shinobu Matsui does not have any conflict of interests in light of relationships between the Company and Ms. Matsui, other entities or organizations to which she belongs, and may enhance and strengthen the effectiveness of the monitoring performed by the Board of Directors on the execution of business by Directors from an objective and neutral standpoint. 〇 Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Compensation Committee Established – 25 – Committee’s Name, Composition, and Attributes of Chairperson Committee Corresponding Nomination Committee to Committee Corresponding Compensation Committee to Committee’s Name Nomination and Compensation Advisory Committee Same as on the Left All Committee Members Full-time Members Inside Directors Outside Directors Outside Experts Other 5 – 2 3 – – Chairperson Outside Director Outside Director Supplementary Explanation [updated] In November 2015, the Company has established an optional “Nomination and Compensation Advisory Committee” that is chaired by an independent Outside Director. In response to inquiries from the Board of Directors, this committee deliberates and reports to the Board, on the results of its deliberation regarding the Company’s internal reviews on the nomination of candidates for Directors, Executive Officer, and A&SB Member, and on the appropriateness of the Company’s Director and Executive Officer Compensation System and amount and content of individual compensation. The Committee monitors the candidates for the Group CEO successor and can propose the replacement timing of the Group CEO. The committee deliberated on the timing of replacement of the Group CEO and the candidates for the Group CEO successor and on the result of internal discussion regarding candidates such as Directors at the five meetings held in fiscal 2021 (Attendance ratio: 100%), and reported to the Board of Directors. In particular, in appointing the candidate for a new Group CEO, the committee selected multiple candidates, carefully conducted a series of selection processes, including monitoring, and deliberated on the appropriateness of the candidates based on the qualities required of the role of a new Group CEO, taking into account the fact that there will be a significant change, which was the transition to a holding company structure, and reported the results of the deliberations at the Board of Directors. 5 – 2 3 – – – 26 – As of the filing date of this report, the members of this Committee are (a) Ms. Ota, an Independent Outside Director and the chairman of this Committee, (b) Mr. Toyama, an Independent Outside Director, (c) Mr. Tsutsui, an Independent Outside Director, (d) Mr. Tsuga, Director, Chairman of the Board, and (e) Mr. Kusumi, Representative Director, Group CEO. The Company has enhanced the objectivity, transparency and independence of the committee, by ensuring that it is chaired by an Outside Director and that Outside Directors constitute a majority of its membership. [Audit & Supervisory Board Members (A&SB Members) / Audit & Supervisory Board (A&SB)] Establishment of A&SB Established Maximum Number of A&SB Members Stipulated in Articles of Incorporation Maximum number not stipulated Number of A&SB Members 5 Cooperation among A&SB Members, Accounting Auditors and Internal Audit Departments A&SB Members and the A&SB regularly hold meetings with Accounting Auditors in order to receive an overview of Accounting Auditors’ audit plan; to receive explanations on the status of the internal control system known to Accounting Auditors, risk evaluation and items that Accounting Auditors’ audits focus on; and to exchange opinions. In addition, it is stipulated in the Audit Standards for A&SB Members that, in cases where A&SB Members receive a report from Accounting Auditors to the effect that an improper act or material fact that violates laws and ordinances or the articles of incorporation was detected with respect to the Directors’ or Executive Officers’ execution of business, then the A&SB Members or the A&SB shall take necessary measures after deliberations at the A&SB, such as conducting a necessary investigation and giving advice or recommendation to the Directors or Executive Officers. A&SB Members make efforts to perform efficient audits by maintaining close collaboration with the Internal Audit Group and other sections in executing an investigation of the Company’s business and financial situation and other duties. In addition, A&SB Members receive from the Internal Audit Group or other sections regular reporting regarding the status involving the internal control system, the result of audits, etc. A&SB Members may request an investigation if necessary. Appointment of Outside A&SB Members Appointed – 27 – Number of Outside A&SB Members Number of Independent A&SB Members 3 3 Outside A&SB Members’ Relationship with the Company (1) Name Attribute Yoshio Sato From another company Toshio Kinoshita CPA Setsuko Yufu Lawyer Relationship with the Compan