ピジョン（7956） – [Delayed]Corporate Governance Report of Pigeon Corporation

[Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE Please note that the following is an unofficial English translation of the Japanese original text of the Corporate Governance Report of Pigeon Corporation, which is reported to the Tokyo Stock Exchange. The Company provides this translation for reference and convenience purposes only and without any warranty as to its accuracy or otherwise. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail. Latest Revision: April 8, 2022 Company: Representative: Norimasa Kitazawa, Pigeon Corporation Inquiries: President and CEO Nobuo Takubo, Managing Officer, Business Strategy Division Securities Code: 7956 URL: https://www.pigeon.com/ An Overview of Corporate Governance at Pigeon Corporation (the “Company”) is Described Below. I Basic Policy Regarding Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information 1. Basic Policy The Company has developed the “Pigeon Way,” as described below, comprising its Purpose, Values, Action Principles and Vision, under its Corporate Philosophy of “Love” and its Credo of “Only love can beget love,” as the basis of its spirit and actions to be shared by all Pigeon Group employees, both in Japan and abroad. The “Pigeon Way” is more than a mere slogan. The Company believes that having all employees become strongly aware of the “Pigeon Way” and putting it into action will inevitably improve corporate value, and that its corporate value encompasses both social and economic value. We are aiming to achieve the goal of improving social value mainly by becoming an indispensable part of society, while delivering joy and happiness to our target customers, by providing solutions and new value. The Company established the following six (6) priority materialities (Key Issues) to be addressed in terms of Sustainable Development Goals (SDGs) and Environmental, Social, and Governance (ESG): 1) enhancement of business competitiveness and R&D capabilities; 2) sustainable reduction of environmental impact; 3) enhancement of stakeholder support capability; 4) improvement of the quality of human resources; 5) creation of comfortable working environment; and 6) development of a solid management base, all of which will be incorporated into our business strategies. Meanwhile, we are aiming to achieve the goal of improving economic value mainly by increasing free cash flow consistently, efficiently, and strategically, as we move into the future. Based on this approach, the Company defines corporate governance as “the system that pays due respect to the views of our employees, customers, business partners, shareholders and local communities, and that ensures transparent and fair as well as prompt and bold decision-making” and the purpose of corporate governance as the means to achieving “the Company’s sustained growth and the improvement of corporate value in the medium- to long-term.” The Company will continue to further strengthen this system in accordance with the above definition and make efforts to continuously enhance its corporate governance in pursuit of further improving its corporate value. – 1 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE Corporate Philosophy: Love Credo: Only love can beget love Values: – Integrity – Communication, Consent, Trust – Passion Action Principles: – Agility – Keep sight of consumers – Global collaboration among competent individuals – Leadership and logical working style – Willingness to change Purpose: We want to make the world more baby-friendly by furthering our commitment to understanding and addressing babies’ unique needs Vision: To be the baby product manufacturer most trusted by the world’s babies and families, i.e. “Global Number One” [Reasons for Non-Compliance with the Principles of the Corporate Governance Code] The Company implements all principles (including principles for the Prime Market) of the Corporate Governance Code (revised June 11, 2021), excluding Supplementary Principle 2.4.1. The reason for not implementing Supplementary Principle 2.4.1 is included in 2. Appropriate Cooperation with Stakeholders Other Than Shareholders, (Supplementary Principle 2.4.1) of the below [Disclosure Based on the Principles of the Corporate Governance Code]. [Disclosure Based on the Principles of the Corporate Governance Code] The Company has included disclosure based on the Principles of the Corporate Governance Code revised in June 2021. (This includes principles for the Prime Market.) 1. Securing the Rights and Equal Treatment of Shareholders (Principle 1.2 Exercise of Shareholder Rights at General Shareholder Meetings) In recognition of the General Meeting of Shareholders as the highest decision-making body, as well as the opportunity for constructive dialogue with shareholders, the Company provides sufficient time and setting for shareholders to appropriately exercise their rights, while at the same time determining the date and location and developing an environment to facilitate shareholder attendance. Specifically, the Company is engaged in the following initiatives. The Company strives to prepare a convocation notice that is easy to read by using graphs, images, and plain language in its explanations. The Company reflects feedback from shareholders in the operation of the General Meeting of Shareholders by means such as providing a special child-care room and assistance through a sign language interpreter at the meeting venue, in order to create an environment that promotes attendance. – 2 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE At the 65th Ordinary General Meeting of Shareholders held on March 30, 2022, as we did last year, we conducted an online live stream so that shareholders who could not make it to the venue can watch the General Meeting of Shareholders. In order to provide our shareholders with sufficient time for considering proposals, the Company sends the convocation notice no later than three weeks before the date of the General Meeting of Shareholders. Prior to dispatching the convocation notice, it also discloses information included in the notice in both Japanese and English at the Tokyo Stock Exchange, Inc. (referred to below as the “Tokyo Stock Exchange”), on the Electronic Voting Platform, and on the Company’s website no later than approximately one month before the date of the General Meeting of Shareholders. Bearing in mind the percentage of foreign and institutional investors, the Company, in an effort to ensure convenience of the exercise of voting rights, offers voting via the Internet and uses the Electronic Voting Platform. When investors who hold shares of the Company in street names express an interest in attending the General Meeting of Shareholders, the Company allows them to sit in after undergoing the necessary procedures, although it does not permit the exercise of voting rights. The necessary procedures are disclosed on the Company’s website. (Principle 1.3 Basic Strategy for Capital Policy) The Company’s business model is to generate profits efficiently from slim assets. We believe that the Company’s current capital structure is fully capable of underpinning the future growth of the Group’s businesses, without major reliance on outside financing. The Company sets a WACC of 5% and sets high targets that greatly exceed the Company’s capital costs for PVA (Pigeon Value Added, a performance indicator), ROIC (return on invested capital), and ROE (return on equity). The Company carries out concrete measures to achieve these targets and discloses progress in biannual results briefings. In addition, we are promoting the management of working capital based on CCC (cash conversion cycle), thus, the Pigeon Group as a whole is striving to improve its efficiency and reduce it. The WACC of 5% is used as the base hurdle rate for investment projects. As for dividend policy, pursuant to our Seventh Medium-Term Business Plan, our target is to reach approximately 56.0 billion yen in operating cash flow over a three-year period, and to direct approximately 25.0 billion yen of that cash flow into capital investments and strategic M&As for growth. Meanwhile, our basic policy is to proactively return profits to shareholders while stabilizing our financial position, targeting year-on-year increases in cash dividends in each fiscal period and a total shareholder return ratio of 55% on a consolidated basis. (Principle 1.4 Cross-Shareholdings) The Company may hold shares as cross-shareholdings, with the aim of improving relations and collaboration with business partners. However, the company has sold the two stocks listed in Japan that were previously held as cross-shareholdings, and as of the submission date of this report, the Company holds only one stock listed overseas as a cross-shareholding. The Company discloses the purpose and holding status of these shares in the annual securities report. Regarding individual cross-shareholdings, the Company confirms the background and objectives of holding the shares, the status of transactions, and risks associated with holding the shares, etc. The Company reviews whether or not shares can continue to be held each year, as well as the number of shares to hold, and obtains approval for cross-shareholdings by the Board of Directors, as a disclosure item of the annual securities report. Furthermore, the Pigeon Group exercises voting rights for cross-shareholdings after considering proposals from the perspective of improving the corporate value of the Pigeon Group, while paying due respect to the management policy of the company it invests in. (Principle 1.7 Related Party Transactions) The Company believes that the monitoring of conflicts of interest is a typical role and function expected of Outside Directors. The Company directly confirms with the Directors and Audit & Supervisory Board Members every six months the existence of important transactions between the Company and its major shareholders, competing transactions between the Company and its Directors or Audit & Supervisory Board – 3 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE Members, conflict-of-interest transactions (self-dealing and indirect transactions) as well as related party transactions, and reports the results to the Board of Directors. In addition, the “Board of Directors Rules” stipulate that a resolution of the Board of Directors is required when engaging in such transactions. 2. Appropriate Cooperation with Stakeholders Other Than Shareholders (Supplementary Principle 2.4.1) The Pigeon Group believes that in order to deliver high-quality products to the world, we must create an environment that motivates employees to work, and if we do not take care of our employees, we cannot succeed in business. For this reason, in an effort to provide a rewarding workplace that encourages our employees to have pride and motivation in working for the Pigeon Group, we have set forth the following in our Corporate Ethics Policies: “Value the diversity and individuality of each employee at any time and provide for its employees a great work environment with consideration given to their health and security. Pigeon will work out to provide a workplace where its employees can achieve self-realization and feel fulfilled.” (1) Promotion of women to management positions In order to obtain continued support from customers for our products, we must incorporate perspectives unique to women into product planning and marketing. As a result, the hiring and promotion of women have taken root as natural processes within the company. Across the group, the ratio of female employees is 62.1%, and the percentage of management positions occupied by women is 42.7% (as of the end of December 2021). (2) Promotion of foreign employees to management positions As a result of the growth of our businesses overseas, the number of employees working overseas has exceeded the number of employees working in Japan, standing at 67.1% (as of the end of December 2021) of all employees across the Group. Amidst this situation, we are promoting employees regardless of nationality to management positions in the Group according to the situation at each company or location. In addition, as the potential for growth in sales is higher at our three overseas businesses (China business, Singapore business, and Lansinoh business) than in Japan, we are expecting to increase employment and promotion of foreign employees in line with the growth of our businesses overseas. (3) Promotion of mid-career hires to management positions The Group conducts a certain amount of mid-career recruitment annually. These employees can immediately impact our business due to the high level of expertise and practical skills that they have gained at other companies. This allows us to accelerate efforts to improve management quality and respond to the expansion in the scale of our business and changes in the business environment. Accordingly, we promote employees to core positions within the organization equally for graduate and mid-career hires without discrimination. The percentage of management positions in the Company occupied by mid-career hires stands at 42.2% (as of the end of December 2021). In the future, due to further changes to the business environment, we predict that we will need to constantly acquire experienced professionals that possess expertise that differs from that of the Company employees. That is why we will continue to position mid-career recruitment as a measure to strengthen our human resources portfolio. As stated above, various factors are at play, including the response to business characteristics requiring the promotion of women, the expansion of overseas businesses, changes in the business environment, and the acceleration of efforts to improve management quality. Amidst this backdrop, we recognize that we have ensured a certain degree of diversity by actively promoting employment and promotion to management positions of women, foreign employees, and mid-career hires. Based on this recognition, we have not set any voluntary and measurable targets for ensuring diversity. However, the percentage of management positions held by women of 28.8% (as of the end of December 2021) in Japan, although improved from the previous year, remains low compared with 42.7% for the entire Group. In this way, we are aware that issues exist to further ensure diversity. We will continue to strengthen our efforts to address these issues. – 4 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE The Company is concentrating its efforts on human resource development by providing ample opportunities to nurture employees’ motivation and abilities so that each employee can improve their abilities and reach their full potential. Also, we are supporting the career development of each individual while respecting diverse values and perspectives. In addition, we are promoting an environment where diverse employees can work with enthusiasm. (1) Personnel development policy The Company has set forth a personnel development policy and is working on achieving the policy with an emphasis on the following initiatives: “Business skills and business stance development that transcends the boundaries between specific roles;” “professional development allowing employees to bring highly specialized skills and knowledge to bear on specific domains;” “development of personnel who can contribute in a global environment;” “fostering business cultures and providing opportunities with respect for diverse viewpoints and value systems;” and “fostering a mindset of individual career visualization and proactive pursuit of career opportunities.” In this way, we are implementing education and training tailored to the role of each employee. In addition, we are offering opportunities to acquire diverse work styles and perspectives through training menus that include personnel development for next-generation management, global personnel development, and diversity training. Also, through the Accelerate My Career (AMC) program we offer opportunities to work outside the company, volunteering, and open recruitment within the company. Further, the Company introduced a new human resource system in 2021 as a mechanism for evaluation and promotion based on individual abilities and performance, regardless of attributes such as age or gender. We are aiming to create an environment where “each employee can work as a professional,” and to that end, while accepting diverse working styles and career development, we ensure the fair evaluation of employee ability and performance based on the following perspectives: 1) Increasing human resource value by developing expertise, 2) clarification of the role of each employee, 3) fair evaluation not dependent on years of service, 4) remuneration according to job grade not dependent on age, and 5) flexible response to employees’ life stage. (2) Internal environment development policy The Company regards the development of an environment where female employees can play a more active role than ever before as a particularly important issue and has set forth the “Three-Year Action Plan for Promoting the Active Participation of Women.” The three pillars of the Action Plan are “expansion of the support system for work-life balance,” “reforming awareness in the workplace” and “supporting the feelings and skills of women.” The Company is also providing support in terms of further institutional enhancement and employee mindset. The Company has been implementing measures to improve work-life balance and labor productivity, including the introduction of teleworking in April 2019. A working environment is being developed at the Company where all employees can take childcare leave or family-care leave as a given, and through developing employees who have knowledge and experience of childcare, we are promoting initiatives to utilize this childcare experience in work such as product development. Furthermore, in 2021 we set forth and announced the Health Management Policy, and we are working towards creating “a company where employees can work with vitality in good health.” Please refer to our website for details: Action Plan for Promoting the Active Participation of Women: https://www.pigeon.co.jp/about/companyinfo/female/ Occupational Health Management Policy: https://www.pigeon.com/sustainability/social_top/health_management_policy/ For employees: https://www.pigeon.com/sustainability/social_top/members/ (Principal 2.6 Roles of Corporate Pension Funds as Asset Owners) The Company has introduced a corporate defined contribution pension plan to support the asset formation of its employees. The Company’s financial status will never be affected by the future performance of pension management. Furthermore, in order to support our employees’ asset formation, we brief all new permanent employees regarding the features of the pension management institutions, managed products, and methods of – 5 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE selection. We also strive to enrich our employees’ knowledge regarding asset management, through use of the educational tools provided by the pension management institutions, etc. 3. Ensuring Appropriate Information Disclosure and Transparency (Principle 3.1 Full Disclosure) (i) Corporate philosophy, credo, management strategies and business plans Corporate philosophy and credo Please refer to “Basic Policy” presented in I. 1., above. Management strategies and business plans The Company has publicized its Seventh Medium-Term Business Plan on its website. Please refer to the following URL: https://www.pigeon.com/ir/management/midplan/ The Company also reports on its progress in IR materials, such as Integrated Reports and HEART REPORTs, which are also available on the Company’s website at the following URL: https://www.pigeon.com/ir/library/ (ii) Basic policy regarding corporate governance Please refer to “Basic Policy” presented in I. 1., above. (iii) Policies and procedures of the Board of Directors for determining remuneration for the senior management and directors For details, please see <>, below. The retirement benefits system for Directors was abolished as of the conclusion of the 62nd Ordinary General Meeting of Shareholders, held on April 25, 2019. Remuneration for executives is determined by the Board of Directors, following deliberations by the Voluntary Remuneration Committee, within the limit for the remuneration for Directors approved by the 62nd Ordinary General Meeting of Shareholders, held on April 25, 2019 (a maximum of 800 million yen per year (including a maximum of 100 million yen per year for Outside Directors); however, this amount does not include the employee salary portion for those Directors who serve concurrently as employees. Separate from the above remuneration, executives may be granted up to a maximum of 600 million yen over a three-fiscal-year period, as performance-linked stock remuneration; however, performance-linked stock remuneration for the fiscal year ended December 31, 2019 was up to a maximum of 200 million yen for that one-fiscal-year period.) <> 1. Basic policy regarding corporate governance Please refer to “Basic Policy” presented in I. 1., above. 2. Basic policy on executive remuneration The Company’s basic policy on remuneration for Directors (hereinafter referred to as “executive remuneration”) shall be as follows, in accordance with the aforementioned “1. Basic policy regarding corporate governance”: (i) It should contribute to “management that improves the corporate value” of the Group over the medium- to long-term; (ii) It should contribute to the hiring of talented managers toward the achievement of “Global Number (iii) The remuneration system should be highly independent, objective, and transparent, and accountable to One,” based on the “Pigeon Way”; and stakeholders. 3. Remuneration levels The Company determines levels of executive remuneration in accordance with the aforementioned “2. Basic policy on executive remuneration,” after surveying and analyzing its business environment and the compensation levels in its peer group of companies in the same industry (manufacturing) and of the same – 6 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE size, through external databases, etc. Remuneration levels for each position are listed as below (with president as 100%) Position Remuneration Level President 100% Chairman, vice president 80% 60% Senior managing executive officer 50% Managing executive officer Director 40% 4. Remuneration mix The remuneration for the Company’s Directors (excluding Independent Outside Directors) consists of “basic remuneration” commensurate with position, “bonuses” provided as short-term incentives, and “stock remuneration (performance-based and non-performance-based)” provided as a medium- to long-term incentive. The remuneration for Independent Outside Directors and Audit & Supervisory Board Members consists of “basic remuneration” only. (Note) “Bonuses” and “stock remuneration (performance-based) is applicable to performance-based remuneration etc., “stock remuneration (performance-based and non-performance-based)” is applicable to non-monetary remuneration listed in Article 98, paragraph (5) of the Regulation for Enforcement of the Companies Act. (i) Overview of remuneration types Positions are determined in accordance with roles and responsibilities of each Director in the Company’s five business departments. Monetary amounts are decided by position and paid as monthly remuneration every month. Bonuses are paid in March every year for the purpose of granting incentives according to the Group’s consolidated performance and the performance of the Director’s respective departments each fiscal year. Consolidated performance will vary within a range from 0 to 150%, in accordance with the achievement level of targeted “net sales,” which indicates the scale of the Company’s main businesses; “operating income,” which indicates the profitability of the Company’s main businesses; and, “PVA” (Pigeon Value Added, the Company’s original performance indicator), which indicates the amount of corporate value created in excess of capital costs. These targets utilize the performance forecasts published in the summary of financial results at the beginning of each period for net sales and operating income, and in the initial fiscal-year plan for PVA. The Chairman of the Board, President and CEO, and Director in charge of GHO dare evaluated only based on consolidated performance. However, for other Directors, bonuses will vary within a range from 0 to 150% based on the base amount of bonuses set for each position, in accordance with the achievement level of targets, with consolidated performance accounting for 70%, and the performance of the Directors’ respective departments (net sales, operating income, and PVA) accounting for 30%. The valuation ratio for each indicator is as follows: Indicator Valuation Ratio Net sales 50% Operating income 30% PVA 20% Stock remuneration is paid at the time of retirement for the purpose of granting an incentive to improve the Group’s medium- to long-term company performance and corporate value, and to place Directors in the “same boat” as the shareholders (thus, giving Directors and shareholders a shared interest). The base amount of share remuneration is set for each position, and this base amount consists of 60% performance shares and 40% restricted stock. Performance shares – 7 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE In principle, performance shares will vary within a range from 0 to 150%, primarily in accordance with the achievement level of target financial indicators set out in the Medium-Term Business Plan (consolidated net sales CAGR, EPS growth rate, ROE and TSR (Total Shareholder Return)) as well as non-financial indicators (e.g., sustainable reduction of environmental impact, development of products and services that help solve social issues, and engaging in dialogue with shareholders and investors in a responsible manner). Financial indicators are used because they promote the continuous growth of the top line (net sales), further improvement of business profitability and efficiency, as well as an increase in corporate value over the medium- to long-term. With regard to non-financial indicators, we will work to solve social issues surrounding babies, their mothers and their families, as well as reduce factors that lead to environmental load in all countries and regions in which the Group operates, with the aim of making the world more baby-friendly. Furthermore, we will establish a solid management base to continuously support babies by actively engaging with shareholders and investors to gain their understanding and consent to these measures. If the targets set out in the Medium-Term Business Plan are changed significantly, the Board of Directors determines the appropriateness of the target values for stock remuneration, after deliberation by the Voluntary Remuneration Committee. The valuation ratio for each indicator is as follows: Indicator Valuation Ratio Financial Indicators 80% Consolidated net sales CAGR 30% EPS growth rate 30% ROE 10% TSR (relative comparison) 10% Non-financial indicators 20% Sustainable reduction of environmental impact 5% Development of products and services that help solve social issues 10% Engaging in dialogue with shareholders and investors in a responsible manner 5% Restricted stock From the same-boat perspective, a fixed number of shares will be allocated as stock remuneration. The Company recommends that in principle, Directors (excluding Independent Outside Directors) hold at least one year’s worth of basic remuneration in Company shares. Stock remuneration is allocated through a trust-based stock remuneration system. This system grants units (points) to the trustees each year, and issues shares in the Company corresponding to the number of units (points) from the trust at the time of retirement. From the same-boat perspective, the determined number of units (points) is disclosed in the Reference Documents for the General Meeting of Shareholders. Management of Company shares is entrusted to Mitsubishi UFJ Trust and Banking Corporation. (ii) Standard model for the composition of Director (excluding Independent Outside Directors) remuneration (if the achievement level of each indicator is 100%) Type of remuneration Composition Percentage Basic remuneration 60% Bonuses 20% Stock remuneration 20% 5. Governance In order to increase the independence, objectivity, and transparency of the details of the executive remuneration system, a Voluntary Remuneration Committee has been established as an advisory panel to the Board of Directors, chaired by and with a majority consisting of Independent Outside Directors. In principle, the Voluntary Remuneration Committee shall meet at least four times per year, deliberate primarily on the following main agenda items regarding executive remuneration amounts, calculation methods, and policy for deciding the content of remuneration per individual, and provide advice and proposals to the Board of Directors. The Board of Directors, in turn follows such advice and proposals to the greatest extent possible in its decision-making. Please note that executive remuneration will be paid within the limit of remuneration adopted at the General Meeting of Shareholders. In order to introduce an objective perspective from outside of the Company, as well as expertise on the – 8 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE executive remuneration system, the Company employs an outside consultant, with whose support it considers the details of the remuneration system, while taking into account matters such as external data, the economic environment, industry trends, management conditions, employee remuneration amount, and dividend amount. In addition, to enhance the effectiveness of the Board of Directors, we are working to coordinate the Voluntary Nominating Committee and Remuneration Committee on activities related to director nomination and remuneration. We also evaluate the effectiveness of the Voluntary Remuneration Committee in evaluating the effectiveness of the Board of Directors.

Whether it is necessary to revise the executive remuneration policy Remuneration levels of individual executives (base amount by position) Performance targets and evaluation table for bonuses Performance evaluations and individual payment amounts, etc. for bonuses in the previous fiscal year Performance evaluations and individual payment amounts, etc. for stock remuneration in the previous Level, composition, indicators, etc. of executive remuneration using external data, etc. The necessity of response to executive remuneration due to environmental changes such as the novel fiscal year coronavirus pandemic. Date of Resolution of the General Meeting of Shareholders 62nd Ordinary General Meeting of Shareholders held on April 25, 2019 Number of members on the day of resolution at the General Meeting of Shareholders* 10 (of which three are Outside Directors) Resolution Details Monetary remuneration Under ¥800 million per year（Under ¥100 million for Outside Directors, not including salary as an employee for Directors that are also employees） Share remuneration Eligible parties：Directors (excluding Outside Directors) Payment limits：¥600 million for three fiscal years （However, for the fiscal year ended December 2019 under ¥200 million） Limit on shares：41,000 points for one fiscal year (equivalent to 41,000 shares) 7 *The number of members as of March 30, 2022, was 10（of which five are Outside Directors）. 6. Forfeiture and return of remuneration If the Board of Directors resolves to correct its financial statements after the disclosure, due to major accounting errors or fraud, or if the Board of Directors, etc. determines that a Director (excluding Independent Outside Directors) has violated his or her duty of care as a prudent manager or duty of loyalty, or committed other serious violations of his or her legal or contractual obligations during his or her term of office, the Voluntary Remuneration Committee, in consultation with the Board of Directors, deliberates on whether to seek forfeiture of the right to receive some or all bonuses and stock remuneration, or to seek the return of some or all bonuses and stock remuneration which have already been paid, and also provides advice and proposals to the Board of Directors regarding the results of its deliberations. The Board of Directors shall resolve on whether to demand from the Director in question the forfeiture of the right to receive some or all bonuses and stock remuneration, or the return of some or all bonuses and stock remuneration which have already been paid, while following the advice and proposals of the Remuneration Committee to the greatest extent possible. – 9 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE 7. Policy on information disclosure, etc. The Company swiftly and actively discloses the details of the executive remuneration system, based on its Disclosure Policy, through the annual securities reports, Reference Documents for the General Meeting of Shareholders, business reports, Corporate Governance Reports, Integrated Reports, websites, and other materials created and disclosed in accordance with statutory and other obligations. The Company, led by the CEO and the Directors (including Independent Outside Directors), also actively engages with shareholders and investors. The Company positions engagement with shareholders and investors who understand the Pigeon Way as a core value. It shares the views of shareholders and investors gained through engagement with the Board of Directors and other meetings, and uses these views to increase its corporate value (social and economic value). (iv) Policies and procedures of the Board of Directors for the appointment and dismissal of senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members For details, please see <>, below. <> 1. Basic policy regarding corporate governance Please refer to “Basic Policy” presented in I. 1., above. 2. Human resource requirements of the Chief Executive Officer (CEO) The ideal human qualities necessary for the role of Chief Executive Officer (CEO) of the Company are “Human qualities that can enhance resourcefulness and continuously increase the Company’s corporate value (social and economic value), based on the values of the Pigeon Way.” The human resource requirements of the CEO (responsibilities and authority, main duties and expected results, and required competencies (behavioral characteristics, personality characteristics, experience and achievements, and knowledge and skills)) are determined based on “1. Basic policy regarding corporate governance,” above. (i) Responsibilities and authority The responsibilities and authority of the CEO are determined based on “1. Basic policy regarding corporate governance,” above. Responsibilities: Is responsible for processes and results that increase corporate value (social and economic value) based on the values of the Pigeon Way, in order to contribute to the improvement of social sustainability. Authority: Has the authority to make final decisions regarding the optimal allocation of management resources, in order to improve corporate value (social and economic value). (ii) Main duties and expected results The main duties and expected results of the CEO are determined based on “(i) Responsibilities and authority,” above. Social value Item Enhancement of business competitiveness and R&D capabilities Sustainable reduction of environmental impact Enhancement of stakeholder Main duties Expected results Build frameworks that promote the development of next-generation businesses and products that help solve social issues. Build frameworks that promote the sustainable reduction of environmental impact. Carries out the development of next-generation businesses and products that help solve social issues, with consideration for the entire value chain. Sets numerical targets for each separate challenge, and executes measures to achieve these targets. Build win-win relationships with stakeholders, rather than following Meticulously provides information to stakeholders, – 10 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE support capability Improvement of the quality of human resources the Company’s interests in a one-sided manner, in order to continue to be loved by our stakeholders (e.g., employees, customers, business partners, shareholders, and local communities). Develop professional human resources who can participate actively on the global stage, and develop the next generation of management human resources. Creation of comfortable working environment Development of a solid management base Setting vision and management objectives Thoroughly create workplaces that make our employees desire to continue working at Pigeon, because employees need comfortable working environments in order to provide higher-quality products and services to the world. Build a solid management base that supports sustainable growth. Define future visions for business and the organization, and define management objectives in order to continue to grow free cash flow efficiently and strategically into the future. Creating business models Build business models and strategies to make the world more baby-friendly. Overseeing management resources Prioritize the allocation of management resources and carry out strategic investment focused on both efficient returns and sustainable growth, with an awareness of sustainability management (SDGs and ESG). engages in two-way communication with them, and gets them on board with the Company’s plans and actions. Ensures global human resources by clearly stating the personnel development policy and enhancing the development program. Ensures that there are future CEO candidates for the next and following generations. Promotes diversity and work-life balance, and carries out initiatives toward diverse work styles. Carries out both proactive and reactive measures to strengthen the management base. The Company is recognized by customers and the markets as the “Global Number One,” and wins the number-one market share for our core products (nursing bottles and nipples, breast pumps, oral care, and skincare). Establishes a business model that achieves sustainable growth and improves corporate value over the medium- to long-term. Drives a strategic and active approach in the market by making effective use of management resources. Economic value (iii) Required competencies Behavioral characteristics Item Innovative leadership Details Has foresight and leads reform personally, without being hindered by past success or common knowledge. Develops and spreads our vision and corporate culture Promotes the wide adoption of the Pigeon Way as well as a healthy corporate culture through strategic engagement with stakeholders. – 11 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE Passion and romanticism Has the courage to pursue dreams and take on challenges, Personality characteristics Envisioning, planning, and execution of strategies Development of human resources and the organization Building corporate governance Interest and curiosity Sensitivity and empathy Sensibility and ingenuity Sincerity and trustworthiness Experience and achievements Knowledge and skills Proposes management strategies and a grand design that reflects our corporate culture, and allocates management resources in an optimal manner. Develops successors to the CEO and other management positions, and develops an organization that is accepting of diversity, in order to ensure sustainable growth over the medium- to long-term. Increases the quality and speed of management by building a proactive and reactive governance system. Has a strong interest in and diverse perspectives regarding the Company’s products and services, and displays an attitude of learning through a cycle of “creating, making, and selling.” and a strong commitment and passion to persevere until success is achieved. Carries out two-way communication with stakeholders, displays sensitivity, and focuses energy on having empathy. Continually develops sensibility, and devises ways to carefully consider, and carry out what is not being done by others. Is sincere, achieves missions in the proper way, and is trusted by employees. Has a record of contributing to the improvement of corporate value (social and economic value) in the top management of Group subsidiaries. Has created new value by inventing new businesses, products, and services. Has managed multiple functions, regions, or locations. Has experience conducting management under chaotic conditions, including startups, reorganization, rehabilitation, and restructuring. Has knowledge of all businesses, customers, and market trends. Has management knowledge (marketing, accounting, management strategy, finance, human resource and organizational strategy, governance, business management, etc.) Has the English-language ability to converse directly with global stakeholders. 3. Standards for appointment and dismissal The policy for appointing senior management shall be to make appointments from an objective perspective, based on “2. Human resource requirements of the Chief Executive Officer (CEO),” above, and with reference to external assessments and other information. The appointment is referred to the Board of Directors to be decided, after deliberation by the committee. The appointment of Directors and the CEO is referred to the Board of Directors to be decided, after deliberation by the Voluntary Nominating Committee, based on “2. Human resource requirements of the Chief Executive Officer (CEO),” above. If a Director or the CEO meets the criteria for dismissal defined below, or there is a concern that they have taken actions that meet these criteria, the Voluntary Nominating Committee shall swiftly seek advice from – 12 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE the Board of Directors, and deliberate based thereupon. a) Suspected misconduct, inappropriate actions, or disloyalty b) Recognized illegal or otherwise disqualifying actions c) It has been determined that the process or results of carrying out duties are inadequate, and it is no longer appropriate for the individual to continue his or her current duties d) ROE is below 5% for three consecutive fiscal years (CEO only) 4. Successor plans Successor plans for the CEO are deliberated by the Voluntary Nominating Committee, in accordance with “2. Human resource requirements of the Chief Executive Officer (CEO),” above. Namely, the results and content of outside assessments of training for the development and selection of the next generation of management human resources for CEO candidates, evaluation regarding personnel, and career planning are deliberated. The Board of Directors oversees successor plans to verify that they are conducted appropriately, based on reports on deliberations by the Voluntary Nominating Committee. 5. Term of office The term of office of Directors (including Independent Outside Directors) shall be one year. 6. Governance In order to increase the independence, objectivity, and transparency of the determination process for appointment, dismissal, and nomination of Directors, a Voluntary Nominating Committee has been established as an advisory panel to the Board of Directors, chaired by and with a majority consisting of Independent Outside Directors. In principle, the Voluntary Nominating Committee shall meet at least four times per year, deliberate on issues including the standards for appointment and dismissal of Directors as well as CEO successor plans, and provide advice and proposals to the Board of Directors. The Board of Directors, in turn follows such advice and proposals to the greatest extent possible in its decision-making. In order to introduce an objective perspective from outside of the Company, as well as expertise on nominations, the Company employs an outside consultant, with whose support it considers the details of the standards for appointment and dismissal of Directors as well as CEO successor plans and other issues, taking into account matters such as external data, the economic environment, industry trends, and management conditions. In addition, to enhance the effectiveness of the Board of Directors, we are working to coordinate the Voluntary Nominating Committee and Remuneration Committee on activities related to Director nomination and remuneration. We also evaluate the effectiveness of the Voluntary Nominating Committee in evaluating the effectiveness of the Board of Directors.

・Executive nomination policy ・Skill matrix of the Board of Directors ・Personnel requirements for CEO ・Succession planning for CEO and management ・Candidates for Directors ・Standards for the appointment and dismissal of Directors ・Term of office and tenure for Directors 7. Policy on information disclosure, etc. The Company swiftly and actively discloses information such as the details of the standards for appointing and dismissing Directors as well as CEO successor plans, based on its Disclosure Policy, through the annual securities reports, Reference Documents for the General Meeting of Shareholders, business reports, Corporate Governance Reports, Integrated Reports, websites, and other materials created and disclosed in accordance with statutory and other obligations. The Company, led by the CEO and the Directors (including Independent Outside Directors), also actively engages with shareholders and investors. The Company positions engagement with shareholders and investors who understand the Pigeon Way as a core value. It shares the views of shareholders and investors – 13 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE gained through engagement with the Board of Directors and other meetings, and uses these views to increase its corporate value (social and economic value). Candidates for Audit & Supervisory Board Members are nominated by the Board of Directors and deliberated by the Audit & Supervisory Board. After obtaining the consent of the Audit & Supervisory Board, they are proposed for election by the General Meeting of Shareholders. For Outside Audit & Supervisory Board Members, individuals with high perception of corporate activities such as finance and law shall be nominated as candidates. The majority of these individuals shall be CPAs and lawyers. (v) Board of Directors’ explanations with respect to individual appointments and dismissals of senior management and nominations of candidates for Directors and Audit & Supervisory Board Members based on (iv) above Regarding individual reasons for the election of Directors and Audit & Supervisory Board Members, please refer to the Notice of the 62nd Ordinary General Meeting of Shareholders (Reference Documents for the General Meeting of Shareholders) (URL: https://www.pigeon.com/ir/assets/pdf/190403e_syousyu.pdf), the Notice of the 64th Ordinary General Meeting of Shareholders (Reference Documents for the General Meeting of Shareholders) (URL: https://www.pigeon.com/ir/assets/pdf/210308e_syousyu.pdf), the Notice of the 65th Ordinary General Meeting of Shareholders (Reference Documents for the General Meeting of Shareholders) (URL: https://www.pigeon.com/ir/assets/pdf/220308e_syousyu.pdf) posted on the Company’s website. If a senior management is dismissed, the Company shall disclose the dismissal in a timely and appropriate manner. (Supplementary principle 3.1.3) (1) Information disclosure of efforts concerning sustainability We want to make the world more baby-friendly by furthering our commitment to understanding and addressing babies’ unique needs. We aim to achieve sustainable growth as a company by reducing environmental impacts and solving social issues surrounding babies and mothers in all countries and regions where we conduct our business activities. To this end, we identify the issues we need to address as “materiality (Key Issues)” and formulate specific action plans for solving social issues in conjunction with the Medium-Term business plan. Among these initiatives, those considered especially important are incorporated into the non-financial targets in the Medium-Term business plan. We disclose the Company’s business policy on the Company’s website, including the Medium-Term business plan, materiality (Key Issues), goals and status of efforts of the Seventh Medium-Term Business Plan to resolve materiality, internal promotion system for sustainability, and various information and performance data on sustainability. Medium-Term business plan: https://www.pigeon.com/ir/management/midplan/ Materiality: https://www.pigeon.com/sustainability/policy/#headline-1581391283 Sustainability: https://www.pigeon.com/sustainability/ ESG data book: https://www.pigeon.com/sustainability/databook/ Recognizing that climate change, among other sustainability-related issues, is a challenge that must be addressed globally, in December 2021 we expressed our support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in order to understand the risks and opportunities that climate change poses to the business of the Company group and the financial impact that climate change may cause, as well as to properly manage our material risks and opportunities. In 2021, we started analyzing and assessing climate-related risks and opportunities for our nursing bottle and nipple and skin care businesses in Japan and China, which are relatively large in terms of sales among the Group’s core products. The results of the analysis are disclosed on the Company’s website. Responding to climate change: https://www.pigeon.com/sustainability/environment_top/warming/ – 14 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE (2) Information disclosure regarding human capital The Company believes that it cannot succeed if it doesn’t take care of its employees. We are working towards improving the internal environment by enhancing systems and creating a comfortable workplace culture. Also, we are providing all employees with opportunities for training, learning, and developing their skills. We are continuously implementing “training course for selected next-generation managerial human resources” to develop human resources who will lead management in the future. In 2013 and 2016, we implemented the Global Leadership Program, a training where employees of all nationalities participated. The training was attended by employees selected from each Group company. We publish initiatives regarding our employees in the integrated report and on our home page. For employees: https://www.pigeon.com/sustainability/social_top/members/ (3) Information disclosure regarding intellectual capital We are proactively implementing investment in intellectual property as we believe that this is essential to contribute to the development of a sustainable society and improve our corporate value. In particular, we are aiming to increase our brand value. Accordingly, we renewed the Pigeon Brand Guidelines in 2020, promoting related activities. We uphold “Celebrate babies the way they are” as our Brand Promise, which is a promise by Pigeon to society, and the various points of contact with our customers, we are promoting and enhancing a globally consistent Pigeon brand. We publish our initiatives regarding the Pigeon brand in the integrated report and on our website. Celebrate Babies in Action: https://www.pigeon.com/celebrate/ In addition, the Intellectual Property Department is promoting business expansion and improvement in management quality by securing the creations—such as design and naming—of R&D Departments in Japan and overseas as intellectual property. In addition, the Department is implementing measures to respond to imitation Pigeon products which have been identified in recent years, as we believe that inferior goods inhibit the healthy growth of the end-users, babies. 4. Responsibilities of the Board (Supplementary Principle 4.1.1) The Company’s Board of Directors makes decisions or reports on matters that are to be solely determined by the Board of Directors, pursuant to laws and regulations and the Articles of Incorporation, as well as important matters stipulated in the “Board of Directors Rules.” The “Board of Directors Rules” and other internal rules specifically stipulate matters to be resolved by the Board of Directors and matters to be reported thereto. Furthermore, the Company has structured its corporate governance by means of meetings of the Management Committee with the President and CEO acting as chairperson and an internal audit system, in addition to a Board of Directors and Audit & Supervisory Board System. The Board of Directors, which includes Internal Directors and Outside Directors who do not concurrently serve as executive officers and Audit & Supervisory Board Members, responds promptly and appropriately to changes in the business environment and strives to make management decisions rationally and effectively to establish sustained growth and a solid operating foundation, while seeking mutual partnership between decision-making/management functions and execution of business. Under such circumstances, expectations are high for the role of Outside Directors in the supervising functions for the execution of business. Accordingly, the Board of Directors operates in a way that elicits lively opinions from Outside Directors, who give advice, etc., on the Company’s management strategies and take the role of enhancing corporate governance and supervising the appropriateness of decision-making. The four Audit & Supervisory Board Members, including two Outside Audit & Supervisory Board Members, in accordance with the audit policy, the division of audit work, etc., conduct rigorous supervision and auditing through measures such as attending important meetings including those of the Board of Directors, carrying out interviews with the Directors, reviewing important resolution documents and other documentation, and investigating the status of operations and property. – 15 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE (Supplementary Principle 4.2.2) The Group’s fundamental approach to sustainability is “continuing to exist as an integral part of society” by improving social and economic value, and in turn, enhancing the sum of these values, corporate value. Also, the Company has set forth the Pigeon Sustainable Vision, and by reducing our environmental impact and solving social issues, we are pursuing initiatives for sustainable corporate growth. Pigeon Sustainable Vision: “Celebrate Babies with All” “We want to make the world more baby-friendly by furthering our commitment to understanding and addressing babies’ unique needs. We aim to achieve sustainable growth as a company by reducing environmental impacts and solving social issues surrounding babies and mothers in all countries and regions where we conduct our business activities. Together with our stakeholders, we strive to encourage curiosity, celebrate diversity, and open horizons, because a society that treasures these things is one that will grow up to be creative, inclusive, and free.” In striving to improve the Group’s corporate value and promoting initiatives regarding sustainability from the perspective of “continuing to exist as an integral part of society,” we consider that the standpoints of 1) the sustainable growth of the Group, and 2) the realization of a sustainable society are essential, and that 3) enhancement of corporate governance at the Company is vital to support 1) and 2). As basic policies to realize the above, we set forth the below three policies after receiving approval from the Board of Directors and have published them on the Company’s website. Medium-Term business plan: https://www.pigeon.com/ir/management/midplan/ Pigeon ESG/SDGs Policy https://www.pigeon.com/sustainability/policy/ Basic policy concerning corporate governance https://www.pigeon.com/sustainability/governance_top/governance/ In addition to implementing measures based on the above policies, we have established the Corporate Governance Committee as an advisory panel to the Board of Directors. We are conducting discussions based on diverse and long-term viewpoints regarding a wide range of topics related to corporate governance, such as the role of the Board of Directors and committees, and organizational design to further demonstrate the capabilities of the Board of Directors. Also, we have established the Sustainability Committee as an executive organization. Here we set long-term objectives and identify and periodically review materiality (Key Issues) related to the environment and society. We also conduct progress reviews of initiatives to solve materiality and report the status of these activities to the Board of Directors. At the Company, through the Governance Committee and Sustainability Committee, we promote initiatives related to sustainability, such as the medium- to long-term improvement of corporate value and the solution of issues concerning society and the environment. Also, during the formulation of the medium-term business plan, we review the allocation of management resources such as investment into human capital and intellectual property and strategy related to the business portfolio. These matters are then reflected in the medium-term business plan, and oversight is conducted by confirming the progress of the medium-term business plan at the Board of Directors. (Principle 4.9 Independence Standards and Qualification for Independent Directors) The Company stipulates the standards for the independence of its Outside Directors and Outside Audit & Supervisory Board Members (“outside officers”), as follows. (i) Relationships with the Company and its subsidiaries (hereinafter collectively referred to as “Pigeon Group”) An outside officer shall not be currently acting and shall not have acted in the past 10 years as a director, auditor or employee of Pigeon Group. (ii) Relationships with business partners An outside officer shall not be currently acting and shall not have acted in the past three years as either of the – 16 – [Translation for Reference and Convenience Purposes Only] Pigeon Corporation CORPORATE GOVERNANCE following: 1) A major business partner of Pigeon Group (Note 1) (or in cases where the major business partner is a corporation, a director, auditor or employee thereof) 2) A business partner who has major transactions with Pigeon Group (Note 2) (or in cases where the party is a corporation, a director, auditor or employee thereof) (iii) Relationships with shareholders An outside officer shall not currently be or shall not have been in the past three years a major shareholder of the Company (Note 3) (or in cases where the major shareholder is a corporation, a director, auditor or employee thereof). (iv) Relationships with advisors and consultants An outside officer shall not be currently acting and shall not have acted in the past three years as either of the following: 1) A proper employee, partner or employee of Pigeon Group’s Independent Auditor or a proper employee, partner or employee of a certified public accountant or an audit firm that provides advice to Pigeon Group on accounting matters 2) A person who does not fall under any of the above, but is a certified public accountant, tax accountant, attorney or other consultant (or in cases where the person is a corporation, association or other entity, a proper employee, partner or employee thereof) and who gains from Pigeon Group a substantial amount of cash (Note 4) or other assets other than remuneration for Directors and Audit & Supervisory Board Members (v) Relationships with donation recipients An outside officer shall not be currently acting and shall not have acted in the past three years as director, auditor or employee of a corporation or other entity that receives substantial donations (Note 5) from Pigeon Group. (vi) Relationships involving close relatives An outside officer shall not be a close relative (Note 6) of any person mentioned in (i) to (v) above (excluding immaterial person). (Note 1) A “major business partner of Pigeon Group”