資生堂（4911） – Corporate Governance Report_20220407

Corporate Governance Report Last Update: April 7, 2022 Shiseido Company, Limited President and CEO, Representative Director: Masahiko Uotani Contact: +81-3-6218-5530 Securities Code: 4911 https://corp.shiseido.com /en The corporate governance of Shiseido Company, Limited (the “Company”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views The Shiseido Group including the Company has established BEAUTY INNOVATIONS FOR A BETTER WORLD as OUR MISSION in its Corporate Philosophy THE SHISEIDO PHILOSOPHY, and defines the corporate governance as our “platform to realize sustainable growth through fulfilling OUR MISSION”. The Company is committed to maintaining and improving management transparency, fairness and speed, by putting into practice and reinforcing the corporate governance, and strives to maximize medium- and long-term corporate and shareholder value through dialogues with all stakeholders, “consumers”, “business partners”, “employees”, “shareholders”, and “society and the Earth”. In addition, while fulfilling social responsibilities, the Company aims to achieve optimized distribution of values to respective stakeholders. [Reasons for Non-compliance with the Principles of the Corporate Governance Code] This report is written based on the revised Corporate Governance Code from June 2021. Shiseido implements all principles in accordance with those established in the Corporate Governance Code. [Disclosure Based on the Principles of the Corporate Governance Code] Updated All of the General Principles, Principles, and Supplementary Principles (83 in total), including items to be disclosed in line with all principles of the Corporate Governance Code, are listed at the end of this report as “Principles of the Corporate Governance Code (CG Code) and Shiseido’s Response”. As of April 7, 2022, the Principles 1.3 and 4.9, and the Supplementary Principles 1.2.2, 1.4.1, 1.4.2, 3.2.1, 3.2.2, 4.1.1, 4.1.3, 4.2.2, 4.3.2, 4.3.4, 4.4.1, 4.11.1, 4.11.2, 4.13.1, 4.13.3, and 5.2.1 have been updated. 2. Capital Structure Foreign Shareholding Ratio More than 30% – 1 – 77,672,300 23,531,000 7,905,591 7,000,000 6,928,155 6,777,513 6,715,392 6,576,478 5,615,653 5,134,647 19.44 5.89 1.97 1.75 1.73 1.69 1.68 1.64 1.40 1.28 [Status of Major Shareholders] Name / Company Name The Master Trust Bank of Japan, Ltd. (Trust Account) Number of Shares Owned Percentage (%) Custody Bank of Japan, Ltd. (Trust Account) THE BANK OF NEW YORK 134104 Mizuho Trust & Banking Co., Ltd. Employees Pension Trust for Mizuho Bank re-trusted to Custody Bank of Japan, Ltd. JP MORGAN CHASE BANK 385632 BNYM TREATY DTT 15 SSBTC CLIENT OMNIBUS ACCOUNT STATE STREET BANK WEST CLIENT – TREATY 505234 Nippon Life Insurance Company JP MORGAN CHASE BANK 385781 Controlling Shareholder (except for Parent Company) Parent Company ― None Supplementary Explanation 1． All shares held by The Master Trust Bank of Japan, Ltd. (Trust Account) and Custody Bank of Japan, Ltd. (Trust Account) are in connection with the respective bank’s trust business. 2． A report of amendment to large shareholdings from BlackRock Japan Co., Ltd., that on November 21, 2018, it held 24,051 thousand shares through joint holdings (Percentage of shareholding: 6.02%), of which 8,130 thousand shares (2.03%) are held by BlackRock Japan Co., Ltd., and 5,962 thousand shares (1.49%) are held by BlackRock Fund Advisors and 5,791 thousand shares (1.44%) are held by BlackRock Institutional Trust Company, N.A., has been filed with the Director-General of the Kanto Finance Bureau. However, BlackRock Japan Co., Ltd., BlackRock Fund Advisors and BlackRock Institutional Trust Company, N.A. have been excluded from the above major shareholders, as the actual number of shares held by the said company has not been confirmed by the Company as of the end of the fiscal year. 3． A report of amendment to large shareholdings from Nomura Asset Management Co., Ltd., that on October 22, 2020, it held 23,411 thousand shares through joint holdings (Percentage of shareholding: 5.86%), has been filed with the Director-General of the Kanto Finance Bureau. However, Nomura Asset Management Co., Ltd. has been excluded from the above major shareholders, as the actual number of shares held by the said company has not been confirmed by the Company as of the end of the fiscal year. 4． A report of amendment to large shareholdings from Mitsubishi UFJ Financial Group, Inc., that on July 8, 2021, it held 33,076 thousand shares through joint holdings (Percentage of shareholding: 8.27%), of which 22,332 thousand shares (5.59%) are held by Mitsubishi UFJ Trust and Banking Corporation and 5,720 thousand shares (1.43%) are held by Mitsubishi UFJ Kokusai Asset Management Co., Ltd., has been filed with the Director-General of the Kanto Finance Bureau. However, Mitsubishi UFJ Trust and Banking Corporation and Mitsubishi UFJ Kokusai Asset Management Co., Ltd. have been excluded from the above major shareholders, as the actual number of shares held by the said company has not been confirmed by the Company as of the end of the fiscal year. – 2 – 5． A report of amendment to large shareholdings from Mizuho Bank, Ltd., that on November 8, 2021, it held 23,155 thousand shares through joint holdings (Percentage of shareholding: 5.79%), of which 13,140 thousand shares (3.28%) are held by Asset Management One Co., Ltd., has been filed with the Director-General of the Kanto Finance Bureau. However, Asset Management One Co., Ltd. has been excluded from the above major shareholders, as the actual number of shares held by the said company has not been confirmed by the Company as of the end of the fiscal year. 6． A report of amendment to large shareholdings from Sumitomo Mitsui Trust Bank, Ltd., that on November 19, 2021, it held 26,920 thousand shares through joint holdings (Percentage of shareholding: 6.73%), of which 16,006 thousand shares (4.00%) are held by Sumitomo Mitsui Trust Asset Management Co., Ltd. and 10,914 thousand shares (2.73%) are held by Nikko Asset Management Co., Ltd., has been filed with the Director-General of the Kanto Finance Bureau. However, Sumitomo Mitsui Trust Asset Management Co., Ltd. and Nikko Asset Management Co., Ltd. have been excluded from the above major shareholders, as the actual number of shares held by the said companies has not been confirmed by the Company as of the end of the fiscal year. 3. Corporate Attributes Listed Stock Market and Market Section Updated Fiscal Year-End Type of Business Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year Tokyo Stock Exchange Prime Market December Chemicals More than 1000 Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year From 50 to less than 100 From ¥100 billion to less than ¥1 trillion 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling 5. Other Special Circumstances which may have Material Impact on Corporate Governance Shareholder N/A None. – 3 – 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 Kansayaku Board [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation Term of Office Stipulated in Articles of Incorporation Chairperson of the Board Number of Directors Updated Appointment of External Director Appointed Number of External Directors Updated Number of Independent Directors Updated 1 year President 12 8 4 4 External Directors’ Relationship with the Company (1) Updated Name Attribute Shinsaku Iwahara Scholar Charles D. Lake II Originally from other Kanoko Oishi Originally from other Mariko Tokuno Originally from other company company 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. Executive of the Company or its subsidiaries b. Non-executive director or executive of a parent company of the Company c. Executive of a fellow subsidiary company of the Company d. A party whose major client or supplier is the Company or an executive thereof e. Major client or supplier of the listed company or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/kansayaku g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) legal entity) (the director himself/herself only) – 4 – i. Executive of a company, between which and the Company outside directors/kansayaku are mutually appointed (the director himself/herself only) j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only) k. Others External Directors’ Relationship with the Company (2) Updated Designation as Independent Director ○ Name Shinsaku Iwahara Supplementary Explanation of the Relationship Reasons of Appointment stated to Mr. Shinsaku With regard Iwahara, none of the relationship classification above (classification ”a” – classification “k”) applies to him. Mr. Iwahara’s “Important Position of Organizations Concurrently Assumed” stated in the Companies Act are as follows: • Professor, Faculty of Law, Other Waseda University The Company considers not only the the independence against Company, but also other various viewpoints such as “Principal Occupation” when it estimates the importance of Mr. Iwahara’s “Important Position of Other Organizations Concurrently Assumed.” as appointing Nomination for appointing as an roles and Mr. Iwahara has been appointed external director to reflect his legal knowledge, particularly regarding the Companies Act and Financial Laws, to the management of the Company, as well as his knowledge and experiences in the area of corporate governance. the Also, as a chairperson of Company’s & Remuneration Advisory Committee, he attended the meetings of these committees and actively expressed opinions. Mr. full Iwahara maintains independence as none of the items (1) through (5) stated below applies. Furthermore, the Company sets forth the Criteria for Independence of “External Directors.” Mr. Iwahara has fulfilled the Criteria in full. Hence Mr. Iwahara has been determined capable of sufficiently protecting the interests of the general shareholder and has been appointed independent director. (1) Corporate officer, etc. of a parent company or sister company; (2) A person whose main business partner is the Company, or a corporate officer, etc. thereof; a major business the Company, or a partner of corporate officer, etc. thereof; (3) A consultant, an accountant or a legal specialist receiving significant sums of money from the Company other than executive remunerations; – 5 – Charles D. ○ Lake II stated With regard to Mr. Charles D. Lake II, none of the relationship above classification (classification ”a” – classification “k”) applies to him. Mr. Lake’s “Important Position of Other Organizations Concurrently Assumed” stated in the Companies Act are as follows: • Director, President, Aflac International Incorporated • External Director, Tokyo Electron Ltd. • External Director, Japan Post Holdings Co., Ltd. • Representative Director, Chairman, Aflac Life Insurance Japan Ltd. The Company considers not only the independence against the Company, but also other various viewpoints such as “Principal Occupation” when it estimates the of Mr. Lake’s importance “Important Position of Other Organizations Concurrently Assumed.” or of Company’s the the Company’s for appointing as an roles and (4) A principle shareholder of the Company; (5) A close relative of a person (excluding inconsequential persons) meeting either condition (a) or (b) below (a) person described in items (1) through (4); (b) A corporate officer of Company subsidiary Mr. Lake has extensive experiences and achievements as an executive in several companies across Japan and the United States accompanying his experiences working for key U.S. government positions and as a U.S. lawyer. In addition, he has deep corporate about knowledge governance. We have selected him as the external director because we believe he can help us, with his knowledge and experiences, enhance corporate level governance, management, and supervision of execution by the Board of Directors. He is a member of the Company’s Nomination Remuneration & Advisory Committee. Mr. Lake maintains full independence as none of the items (1) through (5) stated below applies. Furthermore, the Company sets forth the Criteria for “External Independence Directors.” Mr. Lake has fulfilled the Criteria in full. Hence Mr. Lake has been of sufficiently protecting the interests of the general shareholder and has been appointed independent director. (1) Corporate officer, etc. of a parent company or sister company; (2) A person whose main business partner is the Company, or a corporate officer, etc. thereof; a major business the Company, or a partner of corporate officer, etc. thereof; determined appointing capable of as – 6 – or has she in efforts the the Company’s for appointing as an roles and (3) A consultant, an accountant or a legal specialist receiving significant sums of money from the Company other than executive remunerations; (4) A principle shareholder of the Company; (5) A close relative of a person (excluding inconsequential persons) meeting either condition (a) or (b) below (a) person described in items (1) through (4); (b) A corporate officer of Company subsidiary Ms. Oishi has many years of experience in managing businesses in Japan and overseas. Currently, she is involved to primarily transform industry the healthcare from the patient’s point of view. In addition, accumulated experience as an external director in multiple companies. We believe that Ms. Oishi can help to enhance the corporate value by Company’s and experience this leveraging knowledge, in addition to supervising management as an external director. Also, as a member of the Company’s Nomination Remuneration & Advisory Committee, she attended the meetings of these committees and actively expressed opinions. full Ms. independence as none of the items (1) through (5) stated below applies. Furthermore, the Company sets forth the Criteria for Independence of “External Directors.” Ms. Oishi has fulfilled the Criteria in full. Hence Ms. Oishi has been determined capable of sufficiently protecting the interests of the general shareholder and has been appointed independent director. (1) Corporate officer, etc. of a parent company or sister company; (2) A person whose main business partner is the Company, or a corporate appointing maintains Oishi as Kanoko Oishi ○ of stated With regard to Ms. Kanoko Oishi, relationship none the above classification (classification ”a” – classification “k”) applies to him. Ms. Oishi’s “Important Position of Other Organizations Concurrently Assumed” stated in the Companies Act are as follows: • CEO, MEDIVA Inc. • CEO, Seeds 1 Co., Ltd. • Outside Director, Ezaki Glico Co., Ltd. • External Board Member, Santen Pharmaceutical Co., Ltd. The Company considers not only the the independence against Company, but also other various viewpoints such as “Principal Occupation” when it estimates the importance of Ms. Oishi’s “Important Position of Other Organizations Concurrently Assumed.” – 7 – officer, etc. thereof; a major business partner of the Company, or a corporate officer, etc. thereof; (3) A consultant, an accountant or a legal specialist receiving significant sums of money from the Company other than executive remunerations; (4) A principle shareholder of the Company; (5) A close relative of a person (excluding inconsequential persons) meeting either condition (a) or (b) below (a) person described in items (1) or these experiences. the the Company’s for appointing as an roles and through (4); (b) A corporate officer of Company subsidiary Ms. Tokuno has extensive experiences as executives of a company with a global prestige brand as well as an abundance of knowledge gained through In addition, she has deep insight into corporate governance which has been accumulated through experiences as an external director at several companies. We have selected her as an external director because we believe that she can help us, with her knowledge and experiences, improve our management, marketing and governance as well as properly supervise business execution, and further enhance the effectiveness of the Board of Directors. She is a member of the Company’s Nomination Remuneration & Advisory Committee. Ms. full Tokuno maintains independence as none of the items (1) through (5) stated below applies. Furthermore, the Company sets forth the Criteria for Independence of “External Directors.” Ms. Tokuno has fulfilled the Criteria in full. Hence Ms. Tokuno has been determined capable of sufficiently protecting the interests appointing as Mariko Tokuno ○ stated regard With to Ms. Mariko Tokuno, none of the relationship above classification (classification ”a” – classification “k”) applies to him. Ms. Tokuno’s “Important Position of Organizations Concurrently Assumed” stated in the Companies Act are as follows: • External director, HAPPINET Other CORPORATION • External Director, Mitsubishi Materials Corporation • External Director, Yamato Holdings Co., Ltd. The Company considers not only the the independence against Company, but also other various viewpoints such as “Principal Occupation” when it estimates the importance of Ms. Tokuno’s “Important Position of Other Organizations Concurrently Assumed.” – 8 – of the general shareholder and has been appointed independent director. (1) Corporate officer, etc. of a parent company or sister company; (2) A person whose main business partner is the Company, or a corporate officer, etc. thereof; a major business partner of the Company, or a corporate officer, etc. thereof; (3) A consultant, an accountant or a legal specialist receiving significant sums of money from the Company other than executive remunerations; (4) A principle shareholder of the Company; (5) A close relative of a person (excluding inconsequential persons) meeting either condition (a) or (b) below (a) person described in items (1) through (4); (b) A corporate officer of Company subsidiary the the Company’s or – 9 – Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson Updated Corresponding Committee Nomination Committee Nomination & Remuneration Advisory Committee Committee Remuneration Committee to Corresponding to Committee’s Name All Committee Members Full-time Members Inside Directors External Directors Outside Experts Other Chairperson 5 0 1 4 0 0 Supplementary Explanation Updated External Director The Nomination & Remuneration Advisory Committee deliberates on the selection of candidates for directors and officers, their promotions and demotions, the remuneration system for them, their performance evaluation-based remuneration, etc. Currently, the committee members are four external directors and Masahiko Uotani, President and CEO. In fiscal 2021, 10 meetings were held. The committee discussed bonuses for directors and corporate officers for fiscal 2020, as well as the remuneration policy for directors and executive officers, and remuneration for said individuals for fiscal 2021, and discussed and reported the selection of candidates for directors and audit & supervisory board members, appointments of executive officers, etc. – 10 – [Audit & Supervisory Board Members (Kansayaku)] Establishment of Audit & Supervisory Board (Kansayaku Board) Maximum Number of Kansayaku Stipulated in Established Articles of Incorporation Number of Kansayaku The Company doesn’t set a ceiling on the number of corporate auditors Cooperation among Kansayaku, Accounting Auditors and Internal Audit Departments The Audit & Supervisory Board members receive reports on audit plans for audit system and schedule from the accounting auditors, and opinions are exchanged. The Audit & Supervisory Board members receive reports on audit results and its method from accounting auditors throughout the fiscal year. The Audit & Supervisory Board members receive reports on audit plans and the results of audits and surveys from the Internal Auditing Department, and opinions are exchanged on necessary commitments. In addition, representative directors and Audit & Supervisory Board members periodically hold meeting for exchanging opinions. Appointment of External Kansayaku Appointed Number of Outside Kansayaku Number of Independent Kansayaku 5 3 3 External Kansayaku’s Relationship with the Company (1) Name Attribute Relationship with the Company* A b c d e f g h i j k l m Yasuko Gotoh Originally from other company Ritsuko Nonomiya Originally from other company Hiroshi Ozu Attorney at Law * 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. Executive of the Company or its subsidiary b. Non-executive director or accounting advisor of the Company or its subsidiaries c. Non-executive director or executive of a parent company of the Company d. Kansayaku of a parent company of the Company e. Executive of a fellow subsidiary company of the Company f. A party whose major client or supplier is the Company or an executive thereof g. Major client or supplier of the Company or an executive thereof – 11 – h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a kansayaku i. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) j. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h) k. Executive of a company, between which and the Company outside directors/kansayaku are mutually (the kansayaku himself/herself only) appointed (the kansayaku himself/herself only) l. Executive of a company or organization that receives a donation from the Company (the kansayaku himself/herself only) m. Others External Kansayaku’s Relationship with the Company (2) updated Name Yasuko Gotoh Designation as Independent Kansayaku ○ regard Supplementary Explanation of the Relationship With to Ms. Yasuko Gotoh, none of relationship the classifications stated above (classification ”a” – classification “m”) applies to her. Ms. Gotoh’s “Important Position Other of Organizations Concurrently Assumed” stated in the Companies Act are as follows: • Outside Auditor and Supervisory Board Member, DENSO CORPORATION The Company considers the not only independence against the Company, but also other various viewpoints “Principal such as Occupation” when it estimates the importance Gotoh’s of “Important Position of Other Organizations Concurrently Assumed.” Ms. – 12 – Reasons of Appointment that Ms. Gotoh has been appointed as an Audit & Supervisory Board member (external) to ensure the execution of an accumulated audit based on her experience she obtained by assuming important posts at public offices, and by serving as CFO and as a committee members such as an auditor at some businesses. Ms. Gotoh has expressed necessary views from an independent perspective. Ms. Gotoh maintains full independence as none of the items (1) through (5) stated below applies. Furthermore, the Company sets forth the Criteria for Independence of “External Directors.” Ms. Gotoh has fulfilled the Criteria in full. Hence Ms. Gotoh has been determined capable of sufficiently protecting the interests of the general shareholder and has been appointed independent auditor. (1) Corporate officer, etc. of a parent company or sister company; (2) A person whose main business partner is the Company, or a corporate officer, etc. thereof; a major business partner of the Company, or a corporate officer, etc. thereof; (3) A consultant, an accountant or a legal specialist receiving significant sums of ○ Ritsuko Nonomiya the money from the Company other than executive remunerations; (4) A principle shareholder of Company; (5) A close relative of a person inconsequential persons) (excluding meeting either condition (a) or (b) below (a) person described in items (1) through (4); (b) A corporate officer of the Company or the Company’s subsidiary Ms. Nonomiya has been appointed as an Audit & Supervisory Board member (external) to ensure the execution of an audit based on her sophisticated financial and accounting knowledge as well as business management skills including M&A and business development that were acquired through her work experience at an accounting firm, etc. in the United States and Japan. Ms. Nonomiya has expressed necessary views from an independent perspective. Ms. Nonomiya has expressed necessary views from an independent perspective. full Nonomiya maintains Ms. independence as none of the items (1) through (5) stated below applies. Furthermore, the Company sets forth the Criteria for Independence of “External Directors.” Ms. Nonomiya has fulfilled the Criteria in full. Hence Ms. Nonomiya has been determined capable of sufficiently protecting the interests of the general shareholder and has been appointed independent auditor. (1) Corporate officer, etc. of a parent company or sister company; (2) A person whose main business partner is the Company, or a corporate officer, etc. thereof; a major business partner of the Company, or a corporate officer, etc. thereof; (3) A consultant, an accountant or a legal specialist receiving significant sums of money from the Company other than executive remunerations; regard to Ms. With Ritsuko Nonomiya, none of the relationship classifications stated above (classification ”a” – classification “m”) applies to her. Ms. Nonomiya’s “Important Position of Organizations Other Concurrently Assumed” stated in the Companies Act are as follows: • Director, GCA Corporation • Outside Director, Nagase & Co., Ltd. • CEO, Representative Director, Houlihan Lokey Corporation The Company considers the not only independence against the Company, but also other various viewpoints “Principal such as Occupation” when it estimates the importance of Ms. Nonomiya’s “Important Position of Other Organizations Concurrently Assumed.” – 13 – Hiroshi Ozu ○ the applies. (4) A principle shareholder of Company; (5) A close relative of a person (excluding inconsequential persons) meeting either condition (a) or (b) below (a) person described in items (1) through (4); (b) A corporate officer of the Company or the Company’s subsidiary Mr. Ozu has been appointed as an Audit & Supervisory Board member (external) to ensure the execution of an audit based on his experience and knowledge in the legal field. Mr. Ozu has expressed necessary views from an independent perspective. Mr. Ozu maintains full independence as none of the items (1) through (5) stated the below Company sets forth the Criteria for Independence of “External Directors.” Mr. Ozu has fulfilled the Criteria in full. Hence Mr. Ozu has been determined capable of sufficiently protecting the interests of the general shareholder and has been appointed independent auditor. (1) Corporate officer, etc. of a parent company or sister company; (2) A person whose main business partner is the Company, or a corporate officer, etc. thereof; a major business partner of the Company, or a corporate officer, etc. thereof; (3) A consultant, an accountant or a legal specialist receiving significant sums of money from the Company other than executive remunerations; (4) A principle shareholder of Company; (5) A close relative of a person (excluding inconsequential persons) meeting either condition (a) or (b) below (a) person described in items (1) through (4); (b) A corporate officer of the Company or the Company’s subsidiary Furthermore, the regard to Mr. With Hiroshi Ozu, none of the relationship classifications stated above (classification ”a” – classification “m”) applies to him. Mr. Ozu’s “Important Position Other of Organizations Concurrently Assumed” stated in the Companies Act are as follows: • Attorney at Law • External Audit & Supervisory Board Member of MITSUI & CO., LTD. • Outside Audit & Supervisory Board Member of TOYOTA MOTOR CORPORATION • Representative Director of Shimizu Scholarship Foundation, general incorporated foundations • President of Criminal Welfare Oasis Justice Forum (general incorporated association) • President of Japan Policy Criminal Society The Company considers the only not independence against the Company, but also other various viewpoints “Principal as such Occupation” when it estimates the importance – 14 – of Mr. Ozu’s “Important Position Other of Organizations Concurrently Assumed.” – 15 – [Independent Directors/Kansayaku] Number of Independent Directors/Kansayaku 7 Updated Matters relating to Independent Directors/Kansayaku The Company establishes its own rules of “Criteria for Independence of External Directors/Audit & Supervisory Board Members” (the “Criteria”) and “Insignificance Criteria for Omission of Description about Relationships between the Company and the External Directors/Audit & Supervisory Board Members in the Notification/Disclosure Documents” (the “Insignificance Criteria”), which is contingent upon the Criteria. In this report, some of the descriptions about the relationships between the Company and other organizations in which external directors/Audit & Supervisory Board members concurrently assume important position are omitted according to the Insignificance Criteria. ————————- Shiseido Company, Limited (the “Company”) deems an external director and Audit & Supervisory Board member (collectively the “External Director”) or a candidate for the External Director to have sufficient independence against the Company in the event that all the following requirements are fulfilled upon the Company’s research to the practically possible and reasonable extent. 1. He/She is not nor has been an executive personi of the Company or an affiliated companyii (collectively the “Shiseido Group”); In the case of an Audit & Supervisory Board members (external), in addition to the above, he/she has not been a non-executive director nor accounting advisor (in the case of accounting advisor being an artificial person, a staff in charge of the duty) of the Shiseido Group. 2. He/She does not fall under any of the following items for the current fiscal year and the last nine (9) fiscal years (all these fiscal years being referred to as the “Relevant Fiscal Years”): 1) A counterparty which has transactions principally with the Shiseido Groupiii, or its executive person (including a person having once been executive officer for the Relevant Fiscal Years. The same is applicable to Items 2) to 4) of this Clause below); 2) A principal counterparty of the Shiseido Groupiv, or its executive person; 3) A large shareholder who holds or has held directly or indirectly 10% or more of the voting rights of the Company in the Relevant Fiscal Years or its executive person; 4) An executive person of a company of which the Shiseido Group holds or has held directly or indirectly 10% or more of the total voting rights in the Relevant Fiscal Years; 5) A consultant, accounting professional or legal professional who has been paid a large amount of money or other assetsv in addition to the External Director’s remunerations in the Relevant Fiscal Years. In addition, in the event that the accounting professional or legal professional is an organization such as artificial person or association, a person who belongs to such organization (including a person who has once belonged to such organization in the Relevant Fiscal Years. The same is applicable to Items 6 and 7 below of this Clause) is included. 6) A person/organization who received donation of a large amount of money or other assets from the Shiseido Group in the Relevant Fiscal Years. In addition, in the event that those who received donation from the Shiseido Group are an organization such as artificial person or association, a person who belongs to such organization is included. 7) An accounting auditor of the Company. In addition, in the event that the accounting auditor is an organization such as artificial person or association, a person who belongs to such organization is included. 3. He/She is not a spouse of the following person, relative in second or less degree, relative living in the same place or a person with whom living costs are shared, provided, however that Item 2) is applicable only to make judgment on the independence of an Audit & Supervisory Board members (external). 1) An important personsvi among executive persons of the Shiseido Group; 2) Non-executive director of a company in the Shiseido Group; – 16 – 3) A person falling under any of Items 1) to 4) of Clause 2; provided, however, that with respect to these executive persons, applicable only to the important personsvi. 4) A person falling under any of Items 5) to 7) of Clause 2; provided, however, that with respect to a person belonging to the organization, applicable only to the important personsvii. 4. Any of the following situations that could be deemed as “Cross-Assumption of Offices of Directors, etc.” is not applicable: 1) In the event that the External Director of the Company or a candidate for the External Director of the Company currently assumes the office of an executive person, external director, corporate auditor or the office equivalent theretoviii of a company other than the Company, in Japan or overseas (the “Subject Company”), an executive person, an external director, corporate auditor (excluding the aforesaid External Director or candidate for the External Director) or person in the office equivalent thereto of the Shiseido Group assumes director (including an external director), executive officer, corporate auditor (including external corporate auditor), executive officer or person in the position equivalent theretoviii of the Subject Company. 2) In the event that the External Director of the Company or a candidate for the External Director of the Company currently assumes the office of an executive person, director, officer or the office equivalent to director or officer of an artificial person or other organization (other than a company) (the “Subject Organization”), an executive person, an external director, corporate auditor (excluding aforesaid executive officer or candidate for External Director) or person in the office equivalent thereto of the Shiseido Group assumes the office of director, officer or person in the position equivalent theretoix of the Subject Organization. 5. In addition to Clauses 1 to 4, there exist no circumstances in which duties imposed on an independent External Director are reasonably deemed not to be achieved. 6. It is presently expected that any event or matter stated in Clauses 1 to 5 would not occur or exist hereafter. Note: i. An “affiliated company” means the affiliated company stated in Article 2, Paragraph 3, Item 22 of the Ordinance on Company Accounting. ii. An “executive person” means an executive director, executive officer, corporate officer, staff executing business of a company divided into interest (mochibun kaisha) (in the event of the staff being a artificial person, a person to discharge duties stated in Article 598, Paragraph 1 of the Companies Act), a person executing business of artificial person or organization other than a company and an employed person (an employee, etc.) of a artificial person or organization including a company. iii. A “counterparty which has transactions principally with the Shiseido Group” means a person/organization falling under any of the following items: transactions with 1) The counterparty or the counter party group (a consolidated group to which the company that the has direct “counterparty”)which provides or provided products or services to the Shiseido Group and the aggregate amount of transactions between the counterparty and the Shiseido Group exceeds Yen10 million per fiscal year, and which exceeds 2% of consolidated net sales of the counterparty (or if the counterparty does not prepare consolidated financial statement, non-consolidated net sales of the counterparty) for the Relevant Fiscal Years. the Shiseido Group belongs (collectively to) 2) The counterparty group to which the Shiseido Group is or was indebted to the counterparty group and the aggregate amount of indebtedness of the Shiseido Group exceeds Yen10 million as at the end of each fiscal year, and which exceeds 2% of consolidated total assets (or if the counterparty does not prepare consolidated financial statement, non-consolidated total assets of the counterparty) of the counterparty for the Relevant Fiscal Years. iv. A “principal counterparty of the Shiseido Group” means a person/organization falling under any of the following items: 1) The counterparty to which the Shiseido Group provides or provided products or services and the aggregate amount of transactions between the counterparty and the Shiseido Group exceeds ¥10 million per fiscal year, and which exceeds 2% of consolidated net sales of the Shiseido Group for the Relevant Fiscal Years. 2) The counterparty to which the Company Group has account-receivable, advance and account due (collectively “account-receivable”) and the aggregate amount of the account-receivable of – 17 – the Shiseido Group exceeds Yen10 million as at the end of each fiscal year, and which exceeds 2% of consolidated total assets of the Shiseido Group as at the end of the Relevant Fiscal Years. 3) A financial institution group (to which the direct lender belongs) from which the Shiseido Group borrows or borrowed and the aggregate amount of the borrowing exceeds 2% of consolidated total assets of the Shiseido Group as at the end of the Relevant Fiscal Years. v. A “large amount of money or other assets” means in excess of Yen 10 million per fiscal year. vi. An “important person” from among executive persons means a director (excluding external director), an executive officer, corporate officer, and employed person in the office of senior management not lower than general manager. vii. An “important person” from among persons “belonging to the organization” stated in 5) and 7) in Clause 2 above means an officer such as certified public accountants belonging to audit corporation or accounting firm, lawyer (including so as to call associates) belonging to law firm, director and supervisor belonging to a judicial foundation, incorporated association, incorporated school and other artificial persons (collectively “Various Artificial Person”) In the event that an organization to which a person belongs is not any of audit corporation, accounting firm, law firm and Various Artificial Person, a person who is deemed objectively and reasonably important equivalent to the persons stated above in this note by the organization. viii. An “office of an executive person, external director, corporate auditor or the position equivalent thereto” includes the positions such as “Counselor”, “Advisor”, etc. assumed by retired director, retired corporate auditor, retired executive officer or retired corporate officer enabling them to give advice to the Company, in addition to an executive person defined in Note ii above, non-executive director (including external director), and corporate auditor (including external corporate auditor). ix. The “office of director or person in the position equivalent thereto” includes the positions such as “Counselor”, “Advisor”, etc. assumed by retired director, retired councilor or retired supervisor enabling them to give advice to the subject organization, in addition to director, councilor or supervisor. ————————- < Insignificance Criteria for Omission of Description about Relationships between the Company and the Eternal Directors/Audit & Supervisory Board Members in the Notification/Disclosure Documents > Shiseido Company, Limited (the “Company”) establishes its own rules of ” Insignificance Criteria for Omission of Description about Relationships between the Company and the Eternal Directors/Audit & Supervisory Board Members in the Notification/Disclosure Documents” (the “Insignificance Criteria”) in accordance with its own rules of “Criteria for Independence of External Directors/Audit & Supervisory Board Members” as described below. This Insignificance Criteria defines monetary amount standards by which the Company deems an external director and Audit & Supervisory Board member (collectively the “External Director”) or a candidate for the External Director to axiomatically have sufficient independence against the Company and it is allowed to omit detailed descriptions in the notification documents and disclosure documents (collectively the “Notification Documents”.) Descriptions about the independence of the External Directors in the Notification Documents are made according to this Insignificance Criteria and, in principle, some of the descriptions about the relationships between the Company and other organizations in which External Directors concurrently assume important position to be omitted according to this Insignificance Criteria. In addition, the “Relevant Fiscal Years” in this Insignificance Criteria means “the current fiscal year and the last nine (9) fiscal years.” 1. Descriptions on “A principal counterparty of the Shiseido Group, or its executive person” and “A counterparty which has transactions principally with the Shiseido Group, or its executive person ” The Company shall omit descriptions about the transactional relationships if all of transaction amount specified in the following 1) through 5) are smaller than Yen 10 million per year in the Relevant Fiscal Years. 1) Total amount of transactions of providing products or services from a counterparty group to the Shiseido Group in each Relevant Fiscal Years 2) Shiseido Group’s total unpaid amount to a counterparty group at the end of each fiscal year of the Relevant Fiscal Years – 18 – 3) Total amount of transactions of providing products or services from Shiseido Group to a counterparty group in each Relevant Fiscal Years 4) Shiseido Group’s total amount of trade receivable to a counterparty group at the end of each fiscal 5) Total amount of debt loan from a financial institution group at the end of each fiscal year of the year of the Relevant Fiscal Years Relevant Fiscal Years 2. Descriptions on “A consultant, accounting professional or legal professional who has been paid a large amount of money or other assets in addition to the External Director’s remunerations” The Company shall omit descriptions about a consultant, accounting professional, or legal professional who has been paid some money from Shiseido Group in addition to the External Director’s remunerations if the amount of payment is smaller than Yen 10 million per year in the Relevant Fiscal Years. 3. Descriptions on “A person/organization who received donation of a large amount of money or other assets” The Company shall omit descriptions about a person/organization who received donation from Shiseido Group if the amount of donation is smaller than Yen 5 million per year in the Relevant Fiscal Years. 4. Descriptions on “Relatives of the External Directors” The Company shall omit descriptions about relatives in fourth or more degree. However, descriptions about a relative living in the same place with the External Directors or a person with whom living costs are shared with the External Directors can not be omitted. 5. Descriptions on “Cross-Assumption of Offices of Directors, etc.” The Company shall omit descriptions about “cross-assumption of offices of directors, etc. (*)” if ten years or more have passed after severing such situations. * In the event that the External Directors or a candidate for the External Director currently assumes the office of an executive person, external director, corporate auditor or the office equivalent thereto of a company other than the Company, in Japan or overseas (the “Subject Company”), an executive person, an external director, corporate auditor (excluding the aforesaid External Director or candidate for the External Director) or person in the office equivalent thereto of the Shiseido Group assumes director (including an external director), executive officer, corporate auditor (including external corporate auditor), executive officer or person in the position equivalent thereto of the Subject Company. And also in the event that the External Director of the Company or a candidate for the External Director of the Company currently assumes the office of an executive person, director, officer or the office equivalent to director or officer of an artificial person or other organization (other than a company) (the “Subject Organization”), an executive person, an external director, corporate auditor (excluding aforesaid executive officer or candidate for External Director) or person in the office equivalent thereto of the Shiseido Group assumes the office of director, officer or person in the position equivalent thereto of the Subject Organization. – 19 – [Incentives] Incentive Policies for Directors Supplementary Explanation Updated Introduced Performance-linked Remuneration and Stock Options and Others The Company regards the directors, Audit & Supervisory Board members and corporate officers remuneration policy (remuneration policy for the executive officers including directors who concurrently serve as the executive officers) as an important matter for the corporate governance. For this reason, in accordance with the following basic philosophy, the directors, Audit & Supervisory Board members and executive officers remuneration policy of the Company is deliberated in the Nomination & Remuneration Advisory Committee, chaired by external directors by incorporating objective points of view, and the outcome is reported to the Board of Directors for the resolution. < Basic philosophy of the directors, Audit & Supervisory Board members and corporate officers remuneration policy> 1. contribute to realizing corporate mission; 2. aim to provide the amount of remuneration commensurate with the Company’s capability to secure and maintain superior personnel in a global human resource market; 3. aim to increase the corporate value over the long term and shall be designed to provide a strong motivation to achieve the Company’s long-term vision and medium-to-long-term strategy; 4. have a mechanism incorporated to prevent overemphasis on short-term views while instilling motivation to achieve short-term goals; 5. be designed to be transparent, fair, and reasonable from the viewpoint of accountability to stakeholders, including shareholders and employees, and shall ensure these points by determining remuneration through appropriate deliberations and evaluation processes; 6. be designed to establish remuneration standards based on the significance (grade) of role/responsibility reflecting the mission of respective directors and executive officers, and differentiate remuneration according to the level of strategic target accomplished (achievements). Based on the above basic philosophy, the Company determines its policy on decisions regarding matters including remuneration of individual directors at the Board of Directors meetings. The details of the directors, Audit & Supervisory Board members and executive officers remuneration system of the Company based on this policy is as described in “Director Remuneration” in “1. Organizational Composition and Operation” of “II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management” in this report. Recipients of Stock Options Inside Directors, Directors of subsidiaries and others Supplementary Explanation Updated While the Company has introduced new long-term incentive-type remuneration using PSU (performance share units), stock options granted as remuneration up to and through fiscal 2018 are still surviving. . [Director Remuneration] Disclosure of Individual Directors’ Selected Directors Remuneration – 20 – Supplementary Explanation Updated Total amounts paid to non-external directors, external directors, Audit & Supervisory Board members, and Audit & Supervisory Board members (external) are disclosed of basic fixed remuneration, bonuses and long-term incentive-type remuneration. Amounts of remunerations, etc. paid to directors whose total amount of remunerations, etc. exceeds Yen 100 million, by type of remuneration, are individually disclosed. Amount of remunerations, etc. of Directors and Audit & Supervisory Board Members for Fiscal 2021 Basic Remuneration Bonus Total of the left* (a) Former Long-Term Incentive (Stock Option) (b) Directors (9 persons) 343 200 543 -91 156 External directors (4 persons) Audit & Supervisory Board Members (5 persons) External Audit & Supervisory Board Members Among Audit & Supervisory Board Members (3 persons) 55 104 55 104 39 39 – – – – – – (millions of yen) Long-Term Incentive (Stock Compensation) (c) Total [(a)+(b)+(c)] 608 55 104 39 – – – Total 447 200 648 -91 156 712 Notes: 1. The total amount of the basic remuneration and bonus for directors has a ceiling of ¥2.0 billion annually (including a total of ¥0.2 billion or less for external directors) as per the resolution of the 118th ordinary general meeting of shareholders held on March 27, 2018. The number of directors at the conclusion of the said general meeting of shareholders was six (three of whom were external directors). Furthermore, it was resolved at the 121st ordinary general meeting of shareholders (March 25, 2021) that, separate from the monetary remuneration, up to 78,000 shares would be provided as performance-linked stock compensation (performance share units) (of which, with a maximum of 39,000 shares, the portion equivalent to 50% of the remuneration based on the aforesaid remuneration policy is provided in monetary remuneration claims for the delivery of shares of the common stock of the Company and the rest in cash) to directors excluding external directors. The number of directors at the conclusion of the said general meeting of shareholders was eight (four of whom were external directors). Basic remuneration for audit & supervisory board members has a ceiling of ¥10 million per month as per the resolution of the 105th ordinary general meeting of shareholders held on June 29, 2005. The number of audit & supervisory board members at the conclusion of the said general meeting of shareholders was five. 2. The bonuses of directors for fiscal 2021 indicated above represent the amounts that will be paid upon the resolution of the Board of Directors based on the resolution of the ordinary general meeting of shareholders, as stated in note 1. Regarding the calculation of those amounts, please refer to the following “Performance-linked targets, actual performance and payment percentage, etc. of annual bonuses paid to directors excluding external directors”. Representative Director, Masahiko Uotani proposed to voluntarily decline 20% of the annual bonus, which had been calculated in accordance with the remuneration policy and proposed by the Nomination & Remuneration Advisory Committee. His decision was based on the current state of the COVID-19 pandemic despite achieving a business recovery that exceeds the target set at the beginning of the fiscal year and accomplishing structural reforms that led to a strong earnings base in fiscal 2021. Following discussions by the said – 21 – Committee, the Board of Directors has approved the proposal. The above amounts of bonuses have been already adjusted based on the reduced amounts. (Mr. Uotani declined 50% of the annual bonus in fiscal 2020 for the same reasons.) 3. The amount of former long-term incentive-type remuneration (stock options) for directors indicated above represents the total amount of expenses associated with the stock options (stock acquisition rights) recorded for the fiscal year ended December 31, 2021, upon the approval of the ordinary general meeting of shareholders, in consideration of duties executed by directors. In these stock options, performance conditions are assessed at two points in time, at the time of allotment of stock acquisition rights as stock options and at the start of the rights exercise period for the allotted stock acquisition rights. Stock options for fiscal 2018 entail an adjustment amount of negative value that arose based on the performance achievement rate as a result of determining the number of exercisable rights in August 2021 immediately before the start of the rights exercise period. 4. The amount of long-term incentive-type remuneration (stock compensation) indicated above represents the total amount of the expenses recognized for the fiscal year ended December 31, 2021, on the performance-linked stock compensation (performance share units), upon the approval of the ordinary general meeting of shareholders, in consideration of duties executed by directors. It has been resolved that the portion equivalent to 50% of the remuneration based on the aforesaid remuneration policy is provided in monetary remuneration claims for the delivery of shares of the common stock of the Company and the rest in cash. The said amount of the expenses recognized includes -¥14 million in adjustment to the expenses recognized based on the performance achievement rate of the delivered long-term incentive-type remuneration (stock compensation). 5. In addition to the above payments, an adjustment of -¥19 million was recorded for the fiscal year ended December 31, 2020 to expenses associated with stock options granted to two directors of the Company, at the time the directors served as corporate officers not holding the office of directors. In addition, an adjustment of -¥1 million was recorded to the expenses recognized for the fiscal year ended December 31, 2020, on the performance-linked stock compensation (performance share units) delivered to three directors of the Company, at the time the directors served as corporate officers or employee not holding the office of directors. 6. None of the directors or the audit & supervisory board members was paid remuneration other than described above (including that described in notes 1. through 5.). Amounts of remunerations, etc. of directors whose total amount of remunerations, etc. exceeds 100 million yen, by type of remuneration for Fiscal 2021 Basic Remuneration Bonus Total Remuneration in Cash* (a) Former Long-Term Incentive (Stock Option) (b) (millions of yen) Long-Term Incentive (Stock Compensation) (c) Total [(a)+(b)+(c)] 169 164 333 -78 123 378 Masahiko Uotani, President and CEO Notes: 1. The bonuses of directors for fiscal 2021 indicated above represent the amounts that will be paid upon the resolution of the Board of Directors based on the resolution of the ordinary general meeting of shareholders, as stated in note 1. of “Amount of remunerations, etc. of Directors and Audit & Supervisory Board Members for Fiscal 2021”. Regarding the above amount of bonus indicated above, please refer to note 2. of “Amount of remunerations, etc. of Directors and Audit & Supervisory Board Members for Fiscal 2021”. 2. The amount of former long-term incentive-type remuneration (stock options) for directors indicated above represents the total amount of expenses associated with the stock options (stock acquisition rights) recorded for the fiscal year ended December 31, 2021, upon the approval of the ordinary general meeting of shareholders, in consideration of duties executed by directors. In terms of these stock options, as stated in note 3. of “Amount of remunerations, etc. of Directors and Audit & Supervisory Board Members for Fiscal 2021”, 2021, stock options for fiscal 2018 entail an adjustment amount of negative value that arose based on the performance achievement – 22 – rate as a result of determining the number of exercisable rights in August 2021 immediately before the start of the rights exercise period. 3. The amount of long-term incentive-type remuneration (stock compensation) indicated above represents the total amount of the expenses recognized for the fiscal year ended December 31, 2021, on the performance-linked stock compensation (performance share units), upon the approval of the ordinary general meeting of shareholders, in consideration of duties executed by directors. The said amount of the expenses recognized includes an adjustment of -¥11 million to the expenses recognized based on the performance achievement rate of the delivered long-term incentive-type remuneration (stock compensation). 4. No director above was paid rem