すかいらーくホールディングス（3197） – Corporate Governance Report_20220330

コーポレートガバナンス CORPORATE GOVERNANCE [TRANSLATION] This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation. March 30, 2022 SKYLARK HOLDINGS CO., LTD. Chairman, President & CEO Makoto Tani Inquiries: ＋81 422 51 8111 Administrative contact: General Affairs Group Toshiaki Hayashi The status of the Company’s corporate governance is as follows Ⅰ．Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information １．Basic Approach Under its Corporate Philosophy of “Creating Richness with Value to Society” and its Purpose of “Contributing to Life Enrichment and Advancement of Society by Creating the Future of Dining,” the Skylark Group operates approximately 3,100 outlets, mainly table service restaurants, patronized by a cumulative total of approximately 300 million customers annually. The Group aims to offer great-tasting food at affordable prices with good service in its comfortable restaurants to as many people as possible. The Company considers continuously enhancing its corporate value by contributing to society through this food-related business to be its most important management task. The Company aims to operate a corporate group that is trusted not only by its customers, but by all of its stakeholders, including its shareholders, business partners, local communities and employees. To achieve these objectives, the Company has established the Skylark Group Charter of Corporate Behavior, and shares it among all executives and employees, observes laws and international rules and their spirit, and strives to behave with a social decency. The Company also works to enhance corporate governance by implementing various initiatives to ensure the soundness, effectiveness and transparency of management. with them. of Directors. << General Policies on Corporate Governance Basic Policy on Corporate Governance >> (1) Respect the rights of shareholders and ensure equality. (2) Consider the interests of stakeholders, including shareholders, and cooperate appropriately (3) Appropriately disclose Company information and ensure transparency. (4) Ensure the effectiveness of supervisory functions for business execution through the Board (5) Conduct constructive dialogues with shareholders who have an investment policy that matches their medium-to-long-term interests. [Reasons for Non-compliance with the Principles of the Corporate Governance Code] The Company implements / complies with all of the principles of the Corporate Governance Code. 1 コーポレートガバナンス CORPORATE GOVERNANCE [Disclosure Based on the Principles of the Corporate Governance Code] The following is based on the Corporate Governance Code after the revision in June 2021 (Although Supplementary Principle 4-10-1 is aimed at the prime market, the Company is disclosing information in advance.) The Company has no past record of holding shares of other listed companies as cross-shareholdings, and has no plans to do so at this time. When considering the possibility of holding shares of other listed companies as cross-shareholdings in the future, the Company will formulate a policy regarding reduction of cross-shareholdings of shares of other listed companies, and appropriately discuss the matter before executing such cross-shareholdings. In such cases, the Company will appropriately disclose the policy, the results of validation of the propriety of individual holdings, and the criteria for exercising voting rights for cross-shareholdings. In its list of proposals for the Board of Directors, the Company defines significant related party transactions as matters to be resolved by the Board of Directors, and also defines transactions of directors that qualify as competing and/or conflict of interest transactions as matters to be resolved by and reported to the Board of Directors. The Company monitors such transactions, and discloses details of significant related party transactions in the notes to non-consolidated financial statements, etc. In addition, we also conduct a quarterly survey and monitor related party transactions with regard to directors. The Skylark Group regards human resources as one of its most important business management resources, and engages in diversity management. Details of specific initiatives are listed below. ・The Company’s website: https://www.skylark.co.jp/company_e/csr/diversity.html The Company does not operate either fund-type or contract-type defined benefit pensions or employees’ welfare pension funds, and has adopted a defined contribution pension plan. Accordingly, although reserve funds are managed by the employees themselves, the Company does educate employees with regard to asset management under the defined contribution pension plan, given the fact that it impacts employee asset formation. 1. Corporate philosophy and business plans, etc. Based on its Corporate Philosophy of “Creating Richness with Value to Society”, the Company has established a strategic vision for 2025: “Establishing a solid business foundation, being the best restaurant in each community through a continuous challenge of all employees, and achieving sustainable business growth—All for the Smiles of our Customers.” In order to achieve this strategic vision, the Company has formulated the following management plan, with the aim of achieving growth by making maximum use of its robust business platform. [FY2022 Management Policy] The Company’s business environment is uncertain. In addition to the fact that it is largely affected by the COVID-19 pandemic, there is also the decrease in the size of the labor force due to the issues of low birthrate and population aging, increases in raw material costs and energy costs, and unclear domestic and overseas political and economic conditions. At the same time, many new demands are emerging, such as increased opportunities for delivery and take-out due to changes in consumer lifestyles caused by the COVID-19 pandemic, growing demand for specialty stores, and motivation to use family restaurants as a place for enjoying alcoholic beverages. In order to respond quickly to such changes in the market, the Company will strengthen its 2 コーポレートガバナンス CORPORATE GOVERNANCE management base and promote the maximum utilization of business resources, looking ahead to the post-COVID-19 era. In addition, we will continue to provide corporate value and further contribute to society through “food services” that cover all aspects of customers’ daily lives, with a core focus on dining out and also including ready to eat and home-cooked meals.. (1) Driving Digital Transformation (DX) (2) Strengthening ESG Initiatives (3) Fundamental Review and Revision of Group-wide Costs, Investment and Productivity (4) Provision of Products and Services Demanded During the COVID-19 Pandemic (5) Strengthening Delivery and Takeout Services (6) Reorganizing Store Portfolio / and Conversion of Brands by Utilizing Strengths as a Multi-(7) Remodeling Stores in response to New Dining Out Needs and Making Maximum Effective Use of the Business Resources of Existing Stores (8) Enhancing Organizational Structure and QSC to Improve Operational Quality of Brand Group Restaurants (9) Thorough Measures to Prevent the Spread of Infection Among Customers and Employees (10) FY2022 Financial Targets ・Revenue: 336.0 billion yen (up 27.0% year on year) ・Operating profit: 10.0 billion yen (down 45.1% year on year) ・Net income: 4.0 billion yen (down 54.2% year on year) 2. Basic views and policies on corporate governance Details of basic views and policies on corporate governance are listed in section I. 1 of this report. 3. Matters regarding remuneration for executive management personnel and directors (1) Policy regarding determination of remuneration The Company’s policy for remuneration and other compensations for directors is designed to contribute to the continuous improvement of operating results/corporate value and the sharing of value with shareholders. Remuneration for directors (excluding outside directors) of the Company consists of fixed basic remuneration and performance-linked remuneration that varies depending on company performance. Performance-linked remuneration consists of year-end bonuses based on consolidated business results for each business year, and remuneration in which the amount paid is linked to the stock price for a certain period (hereinafter referred to as “phantom stock”). From the standpoint of ensuring independence, remuneration for outside directors and auditors is not linked to company performance, and only basic remuneration is paid. Details regarding remuneration for officers are listed in our securities report. https://ir.skylark.co.jp/library/yuho.html (Japanese text only) (2) Decision process for determining remuneration The Board of Directors determines the amounts of remuneration and other compensation for directors and methods for calculating such remuneration, etc. based on proposals from the Remuneration Committee, which is an advisory organization of the said Board. From its independent and objective standpoint, the Remuneration Committee decides on individual proposals for basic remuneration based on individual performance and capabilities, within the remuneration amount limits resolved at the General Meeting of Shareholders and pursuant to the remuneration regulations and remuneration system for board members. The Committee also appropriately deliberates on remuneration, etc., for directors, such as by deciding on individual proposals for year-end bonuses considering the Group’s operating results. The Remuneration Committee is chaired by the Chairman, President & CEO, with membership consisting of the chairperson and at least two other members appointed by resolution of the Board of Directors. Currently, membership consists of the chairperson and two independent outside directors, engaging in independent and objective discussions. 3 コーポレートガバナンス CORPORATE GOVERNANCE 4. Matters regarding appointment and dismissal of executive management and nomination of (1) Policy on appointment and dismissal of executive management and nomination of candidates for directors and auditors candidates for directors and auditors To respond to the rapidly changing restaurant market, we nominate candidates for directors and auditors with diverse knowledge, experience and skills, regardless of whether they are from inside or outside the Company. For internal director candidates, we nominate those who can contribute to society through the restaurant business and demonstrate leadership to continuously improve corporate value, based on consideration of the balance between their knowledge and experience / performance in areas such as overall family restaurant management, financial strategy, and marketing strategy. For outside director candidates, we nominate those who have extensive experience in various companies and organizations, including those in the restaurant industry. For auditor candidates, we nominate people who can properly audit directors’ execution of duties based on their knowledge of corporate management and their knowledge and experience in areas such as accounting, finance, law, and risk management. (2) Procedures for the appointment and dismissal of executive management and nomination of director and auditor candidates When nominating director and auditor candidates, the Nomination Committee deliberates and makes proposals to the Board of Directors from the standpoint of maximizing the corporate value of the Skylark Group. The Nomination Committee is chaired by the Chairman, President & CEO, with membership consisting of the chairperson and at least two other members appointed by resolution of the Board of Directors. Currently, membership consists of the chairperson and two independent outside directors, engaging in independent and objective discussions. 5. Explanations regarding individual appointments and dismissals of executive management and nominations of director and auditor candidates For reasons regarding the appointment of directors and auditors, please refer to the “Reasons for Appointment of Directors and Auditors” appendix of this report. (1) Sustainability Initiatives The Company recognizes that its business activities are related closely to the Sustainable Development Goals (SDGs). In December 2020 the Company established a Sustainability Committee to enhance its ESG initiatives, such as by implementing measures in line with global goals set by the United Nations, and bolstered its organizational structure to drive the fulfillment of responsibilities to help create a sustainable society. Moving forward, the Company will continue to fulfill its responsibilities with regard to global environmental conservation and contributing to the development of a sustainable society through products, services and business activities, from procurement and production to restaurant management. Details of specific sustainability-related initiatives are listed below. ・Integrated Report (Online Version): https://www.skylark.co.jp/company_e/i_report/2020/esg.html ・Integrated Report (PDF Version): https://ssl4.eir-parts.net/doc/3197/ir_material_for_fiscal_ym11/105457/00.pdf#page=48 (2) Investment in Human Capital and Intellectual Property, etc. In terms of human capital, the Group is working to create workplaces where diverse human resources can work actively, and to improve work-life balance and support the health of its employees. Details of specific human capital-related initiatives are listed below. 4 コーポレートガバナンス CORPORATE GOVERNANCE – The Company’s website: For Employees “https://www.skylark.co.jp/company_e/csr/” – This report [Disclosure Based on the Principles of the Corporate Governance Code / Supplementary Principle 2-4-1] With regard to intellectual property, the Group regards trademarks relating to logos and menus for restaurants operated by the Group as extremely important for brand image and marketing, and seeks to appropriately manage and operate trademarks in specialized departments within the Group. Details of the Group’s brand portfolio are listed below. ・Integrated Report: https://ssl4.eir-parts.net/doc/3197/ir_material_for_fiscal_ym11/105457/00.pdf#page=45 The Company has clearly stipulated matters to be submitted for discussion by the Board of Directors in the Board of Directors Regulations and the list of proposals for the Board of Directors, established by the Board itself. In addition to matters provided for by law and in the Company’s articles of incorporation, this also includes matters relating to basic management policy, formulation of medium- to long-term business plans, and other important matters in business management. 1. Outside directors must not qualify under any of the following (1) Executive persons of the Company or its subsidiaries (2) Persons for whom the Company is a major transaction partner (when transactions with the Company account for more than 1% of the transaction partner’s consolidated net sales); and/or executive persons thereof (3) Major transaction partners of the Company (when transactions with the person account for more than 1% of the Company’s consolidated net sales, or when products and services provided by the person are indispensable to the Company’s business activities); and/or executive persons thereof (4) Executive persons of the main financial institutions from which the Company borrows funds (5) Consultants, certified public accountants or legal specialists who obtain large amounts of cash or other property, other than officers’ remuneration, from the Company (in cases in which persons obtaining the properties are corporate bodies, associations or other organizations, persons who belong to said organizations) (6) Major shareholders of the Company (shareholders who either directly or indirectly own 10% or more of the voting rights of all of the Company’s shareholders); and/or executive persons thereof (7) Executive persons of the Company’s parent company, and directors or auditors of the Company’s parent company who are not executive persons (8) Executive persons of any of the Company’s fellow subsidiaries (9) Persons who have qualified under Item (4) above in the past, persons who have qualified under Item (1) above at some time during the past 10 years, and/or persons who have qualified under Items (2), (3) and (5) through (8) above at some time recently (during the past year) (10) Close relatives of persons who qualify under any of Items (1) through (9) above (excluding non-important persons) 2. Even if a person falls under any one of the items in 1. above, the person may still be nominated as a candidate for independent outside director of the Company if that person is deemed to be suitable as an independent outside director of the Company in light of his or her personality, insights, and ability, etc. In such cases, the Company shall explain to external parties regarding the reasons why the person is considered to be suitable as an 5 コーポレートガバナンス CORPORATE GOVERNANCE independent outside director of the Company. Additionally, even when a person does not formally qualify under any of the items in 1. above, he or she cannot be nominated as a candidate for an independent outside director if he or she is considered to substantially qualify under any of those items. To supplement the functions of its Board of Directors, the Group has established voluntary committees called the Nomination Committee and Remuneration Committee, and has established a system for conducting fair deliberations from an independent and objective standpoint, by establishing independent outside directors appointed by resolutions of the Board of Directors as key members. The committees’ philosophies, authority and roles, etc., regarding independence are described in Section II.1. Organizational Composition and Operation, in the supplementary explanation on State of Establishment of Voluntary Committees, Membership and Attributes of Chairperson. The Company’s Board of Directors currently consists of six directors, three of whom are outside directors. This membership structure was decided in consideration of diversity and a balance between the knowledge, experience and skills of the Board of Directors as a whole, based on a pre-disclosed skills matrix, as necessary for the continuous growth and medium- to long-term improvement of the corporate value of the Skylark Group. Our leading independent outside director also have business management experience at other companies. The number of directors of the Company is limited to a maximum of ten. The status of concurrent positions held by directors and auditors are listed in the Company’s business reports, General Meeting of Shareholders reference materials, and securities reports. https://ir.skylark.co.jp/stock/meeting.html (Japanese text only) The Company evaluated the effectiveness of the Board of Directors to enhance its functions, in recognition of the fact that it should be a forum for effective and strategic discussion for the sustainable growth of the Group and enhancement of its corporate value. The outline of evaluations conducted, and evaluation results obtained in FY2021 are as follows. 1. Evaluations conducted (1) Persons assessed All directors (6) and all auditors (4) (2) Evaluation method Self-assessment questionnaire The validity of the questionnaire-based self-evaluation method and the outline of the questionnaire content and evaluation process are deliberated and judged by the Nomination Committee and the Board of Directors prior to implementation. Questionnaires are sent to each officer, and the secretariat collects and summarizes the results. (3) Assessment process i. ii. Based on a questionnaire prepared by the Company (26 questions on 7 items), individual officer’s evaluations are conducted by each director and auditor anonymously ranking each question using a four-stage scoring system, and listing points which can be positively evaluated, points recognized as issues, and other opinions in a free-response field given for each item. The opinions of directors and auditors are confirmed as necessary based on the 6 コーポレートガバナンス CORPORATE GOVERNANCE iii. evaluation results from i. The evaluation results from i. and results of confirmation from ii. are summarized, and reported to the Board of Directors for consideration along with the evaluation scores for each question, opinions listed in the free-response fields, and issues to be addressed in the next fiscal year and beyond. (4) Assessment period November 2021 (5) Period covered The evaluation covered meetings of the Board of Directors, voluntary Nomination and Remuneration Committees, Independent Officer Liaison Committee, and activities for officers outside the Board of Directors, which were held between October 2020 and November 2021. (6) Evaluation items 1. Roles and functions of the Board of Directors, 2. Scale and composition of the Board of Directors, 3. Operation of the Board of Directors, 4. Coordination with auditing institutions, etc., 5. Relationship with outside directors, etc., 6. Relationship with shareholders and investors, etc., 7. Evaluation of initiatives implemented 2. Overview of evaluation results and future initiatives (1) Regarding the roles and functions of the Board of Directors, it was found that discussions based on the Company’s corporate philosophy and risks under the impact of the COVID-19 pandemic, and discussions regarding the nomination and remuneration of officers were being conducted appropriately. (2) The scale of the Board of Directors was found to be appropriate. Since the entire Board of Directors and individual officers possess the essential skills, experience and knowledge to perform their roles and responsibilities, the ratio of executive directors to outside directors was also found to be appropriate. (3) It was found that the operation of the Board of Directors in terms of management of meetings was conducted appropriately to enable open and energetic discussions. At the same time, the opinion was also raised that there remains an issue with regard to early delivery of meeting materials. Moving forward, the Board will continue to enhance its sharing of information regarding important matters for discussion before meetings, while at the same time working to improve with regard to early delivery of meeting materials. In addition to matters for discussion by the Board of Directors, the Company will also endeavor to enhance the provision of information, such as by reporting to the Board on policies of high importance each time they arise. (4) Cooperation between the Board of Directors and auditing organizations and outside directors was evaluated as sufficient in terms of the Company’s internal control system and supervision of its operational status. At the same time, the opinion was raised that there are few opportunities for exchange of opinions and coordination with outside directors, outside auditors and internal auditing departments. For this reason, opportunities were created for the Board of Directors to receive reports from internal auditing departments and exchange opinions. We will continue to create opportunities for such coordination. (5) With regard to relationships with shareholders and investors, it was found that frameworks are in place for encouraging constructive dialogues with shareholders, and that they are being operated effectively. (6) With regard to evaluations of various initiatives implemented after the previous questionnaire, the opinion was raised that these initiatives can be positively evaluated for the most part. 7 コーポレートガバナンス CORPORATE GOVERNANCE (7) The evaluation of the leading independent outside director was as follows. The Board of Directors is comprised of a diverse range of human resources on an appropriate scale. The Board holds lively discussions on a variety of management issues, and operational transparency is high. The Nomination and Remuneration Committees—which are advisory bodies to the Board of Directors—also exchange opinions frankly based on objective information. I believe that the Board of Directors is functioning properly as a supervisory body, and that there is no problem with its effectiveness. The Company will continue working to further improve the effectiveness of the Board of Directors by tackling the issues recognized through the evaluation process, as outlined above. The Company conducts necessary training and provides information for directors and auditors to appropriately carry out their roles and responsibilities. As one aspect of this scheme, the Company conducts expert-run lectures and training sessions for directors and auditors at least once a year on legal and corporate governance and sustainability issues. For independent outside directors and auditors, the Company provides necessary information on the Company’s business issues via opportunities such as Independent Officer Liaison Committee meetings. 1. The Chairman, President & CEO of the Company presides over all aspects of dialogues with shareholders, and responds both internally and externally, including the implementation of matters listed under Items 2 through 5 below. 2. The Company has established an IR department within its Finance Division to work as the primary focus on dialogues with shareholders. The department assists dialogues with shareholders while coordinating organically with related departments such as the general affairs and public relations offices. 3. The Company holds individual meetings with shareholders and institutional investors as needed, and holds regular results briefings to explain business results. In additional to individual meetings for institutional investors in North America, Europe and Asia, the Company seeks to maintain continuous dialogues by participating in conferences and other events. 4. The opinions and concerns of shareholders ascertained through dialogues are summarized by the IR department, reported to the Board of Directors and Group Executive Officers’ Meeting as appropriate to help the Company seek to increase its corporate value by discussing and making improvements based on this information. 5. The Company discloses information in a fair, timely and appropriate manner based on its Group Regulations on Disclosure Control and its Group Detailed Regulations on Information Disclosure which are internal regulations. The Company also manages insider information during dialogues with shareholders while not communicating important unreleased facts. Please also check the Company’s disclosure policy, which is available for public viewing on its website. https://ir.skylark.co.jp/english/disclaimer.html 2. Capital Structure Foreign Shareholding Ratio Below 10% 8 Name / Company Name Share ownership (shares) Ratio (%) The Master Trust Bank of Japan, Ltd. (Trust 24,876,200 10.93 4,024,600 3,416,600 3,333,300 1,583,300 1,288,200 943,900 934,800 906,400 843,280 1.77 1.50 1.47 0.70 0.57 0.41 0.41 0.40 0.37 コーポレートガバナンス CORPORATE GOVERNANCE [Major Shareholders] account) Custody Bank of Japan, Ltd. (Trust account) Asahi Breweries, Ltd. Kirin Brewery Company, Limited Suntory Liquors Ltd. STATE STREET BANK WEST CLIENT-TREATY 505234 BCSL CLIENT RE BBPLC NYBR Custody Bank of Japan, Ltd. (Trust account 7) Custody Bank of Japan, Ltd. (Trust account 4) STATE STREET BANK AND TRUST COMPANY 505103 Name of Controlling Shareholder Parent Company Stock Exchange on which Parent Company is － － － Listed － Supplementary Explanation 3. Corporate Attributes Net Sales (Consolidated) as of the End of the ¥100 billion or more but less than ¥1 trillion Listed Stock Market and Market Section Tokyo Stock Exchange First Section Fiscal Year End Business Category December Retail Number of Employees (Consolidated) as of 1,000 or more the End of the Previous Fiscal Year Previous Fiscal Year Number of Consolidated Subsidiaries as of Less than 10 the End of the Previous Fiscal Year 9 コーポレートガバナンス CORPORATE GOVERNANCE 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder 5. Other Special Circumstances which may have Material Impact on Corporate Governance II. Business Management Organization and Other Corporate Governance Systems Regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organization Form Company with Board of Auditors － － [Directors] Maximum Number of Directors Stipulated in Up to 10 Articles of Incorporation Term of Office Stipulated in Articles of 1 year Chairperson of the Board President Incorporation Number of Directors Appointment of Outside Directors Appointed by election Number of Outside Directors Number of Outside Directors Designated as Independent Directors Relationship with the Company (1) Name Attributes Relationship with the Company (*1) Atsushi Nishijo From another Fumio Tahara From another company company Attorney Ayako Sano a b c d e f g h i j k *1 Categories for “Relationship with the Company” a. Executive of the Company or its subsidiary b. Executive or non-executive director 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 6 3 3 10 コーポレートガバナンス CORPORATE GOVERNANCE i. j. e. Major client or supplier of the Company, or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other assets from the Company besides compensation as a director g. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal entity) h. Executive of a client or supplier of the Company (which does not correspond to any of d, e, or f) (the director him or herself only) Executive of a company or organization to which outside directors / auditors of the Company are mutually appointed (the director him or herself only) Executive of a company or organization that receives donations from the Company (the director him or herself only) k. Others Name Atsushi Nishijo Relationship with the Company (2) Designation as Independent Director ○ － Supplementary Explanation of the Relationship Reasons of Appointment supervision The Company believes that he will leverage his experience at trading companies and deep insight as a corporate manager for the and Company’s management, provide objective and far-sighted advice and that contribute to the benefit of the stakeholders of the whole Group. The Company therefore appointed him as an Outside Director. is a director of Brother He Industries, Ltd., but the company has no transaction with them. Since he meets the standards for independent director determined and by the independence standards established by the Tokyo Stock Exchange, the Company has judged there is no risk of conflicts of interest with general shareholders the Company Inc., the involved Although he has never been in corporate directly management, Company believes he will leverage on his abundant experience and deep insight the Ministry of Agriculture, Forestry and Fisheries industry associations for the Company’s provide management, from working at and and Fumio Tahara ○ － 11 the with involved she will the Company objective and far-sighted advice and supervision. The Company therefore appointed him as an Outside Director. Since he meets the standards for independent director determined the by and independence standards established by the Tokyo Stock Exchange, Inc., the Company has judged there is no risk of conflicts of general interest shareholders. Although she has never been in corporate directly Company management, leverage believes experience securities company, broad knowledge as a lawyer and experience in tax affairs the Company’s for management, and provide objective and far-sighted advice and supervision. The Company therefore appointed her as an Outside Director. Since she meets the standards for independent director determined and by the independence standards established by the Tokyo Stock Exchange, Inc., the Company has judged there is no risk of conflicts of general interest shareholders. the Company with in a コーポレートガバナンス CORPORATE GOVERNANCE Ayako Sano ○ － [Voluntary committees] Establishment of Voluntary Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established State of Establishment of Voluntary Committees, Membership and Attributes of Chairperson Voluntary Committee Corresponding to Nomination Committee Committee name Full-time members (people) Inside Directors (people) Outside Directors (people) Nomination Committee Internal Experts (people) Others (people) Chairperson (Chairperson) All committee members (people) ３ ０ １ ２ ０ ０ Inside Directors Voluntary Committee Corresponding to Remuneration Committee 12 コーポレートガバナンス CORPORATE GOVERNANCE Committee name Full-time members (people) All committee members (people) Remuneration Committee Inside Directors (people) Outside Directors (people) Internal Experts (people) Others (people) Chairperson (Chairperson) ３ ０ １ ２ ０ ０ Inside Directors Supplementary Explanation The “Nomination Committee “deliberates on matters relating to proposals to be submitted to the Board of Directors concerning the appointment or dismissal of directors and auditors of the Company, while the “Remuneration Committee” deliberates on proposals regarding remuneration for directors to be submitted to the Board of Directors and remuneration for auditors to be submitted to the Board of Auditors. Both committees are chaired by the Chairman, President & CEO and two other members, who are independent outside directors appointed by a resolution of the Board of Directors. The Company has established this committee structure to enable fair deliberation from an independent and objective standpoint. [Auditors] Establishment of Board of Auditors Maximum Number of Auditors Stipulated in Articles of Incorporation Number of Auditors 4 Established Up to 5 Cooperation among Auditors, Accounting Auditors and Internal Audit Departments Auditors receive reports on the management and operation of regulations, and whistleblowing reports from the General Affairs Group, which assumes the Company’s internal control function, via the Group Risk and Compliance Committee. Moreover, auditors hold monthly meetings with the Audit Group (the Company’s internal audit organization) to check the content of audits and exchange opinions. Auditors are also briefed by accounting auditors on audit plans, hold quarterly meetings to exchange opinions and information, and ensure the necessary organizational structure to audit efficiently and effectively. Appointment of Outside Auditors Number of Outside Auditors Number of Outside Auditors Designated as Independent Auditors Appointed by election 3 3 Relationship with the Company (1) Name Attributes Tatsuya Aoyagi public Relationship with the Company (*1) f g h c d e j k i l m a b Toshiko Sawada Reiko Okuhara *1 Categories for “Relationship with the Company” a. Executive of the Company or its subsidiary b. Non-executive director or accounting advisor of the Company or its subsidiaries c. Executive or non-executive director or executive of a parent company of the Company Certified accountant Others Attorney 13 コーポレートガバナンス CORPORATE GOVERNANCE j. l. d. Auditor 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 h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other assets from the Company besides compensation as an auditor i. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal entity) Executive of a client or supplier of the Company (which does not correspond to any off, g, or h) (the auditor him or herself only) k. Executive of a company or organization to which outside directors / auditors of the Company are mutually appointed (the auditor him or herself only) Executive of a company or organization that receives donations from the Company (the auditor him or herself only) m. Others Name Relationship with the Company (2) Designation as Independent Director ○ － Supplementary Explanation of the Relationship Tatsuya Aoyagi Toshiko Sawada ○ － Reasons of Appointment has and in EC extensive The Company has appointed him as an Outside Auditor to leverage his extensive experience as a certified public accountant and certified tax accountant and his knowledge of accounting and finance, and has determined that he will appropriately audit the Company’s management. practical She experience at the Ministry of Economy, Trade and Industry (METI), including experience with consumer protection policy, and a wealth of experience and Internet insights transactions as an expert committee member for METI, the Consumer Affairs Agency and other government agencies, as well as various industry associations. Although she does not have experience of direct involvement in the corporate management, Company believes that she will extensive practical leverage her experience and insights as mentioned above to manage risks and audit the Company’s management from a customer perspective. Given her career experience at the Ministry of the Treasury (now the Ministry of Finance) and her extensive knowledge as a lawyer, she has been Reiko Okuhara ○ － 14 コーポレートガバナンス CORPORATE GOVERNANCE appointed as an outside auditor based on the judgment that she will be able to appropriately audit the Company’s management by leveraging her extensive practical experience and knowledge in corporate legal affairs and risk management, despite her lack of actual experience in corporate management. Since she meets the criteria for independence from the Company and the independence standards set by the Tokyo Stock Exchange, etc., she is designated as an Independent Officer, based on the judgment that there is no risk of a conflict of interest with general shareholders. [Independent Directors / Auditors] Number of Independent Directors / Auditors 6 Matters Relating to Independent Directors / Auditors The Company’s basic concepts for the election of independent directors / auditors are that the Company can expect objective and appropriate management supervisory functions grounded in expert knowledge, and that no conflict of interest with general shareholders is likely to arise. [Incentives] State of Implementation of Incentive Policies for Directors Supplementary Explanation Performance-based remuneration, and others The Company grants performance-linked bonuses and phantom stock to some directors. [Director Remuneration] Disclosure status Supplementary Explanation Information regarding remuneration for some directors has been disclosed on an individual basis. The amounts of remunerations have been disclosed in the Business Report and Securities Report, and have also been posted on the Company’s website. Please refer to the following URL. Furthermore, in the Securities Report, remunerations for some directors have been individually disclosed pursuant to the Cabinet Office Ordinance on Disclosure of Corporate Information, etc. https://ir.skylark.co.jp/stock/meeting.html (Japanese text only) https://ir.skylark.co.jp/library/yuho.html (Japanese text only) Policies on Determining Remuneration Amounts and Calculation Methods Established Disclosure of Policies on Determining Remuneration Amounts and Calculation Methods The Company’s policy for remuneration and other compensations for directors is designed to contribute to the continuous improvement of operating results and corporate value and the sharing of value with shareholders. Remuneration for directors (excluding outside directors) of the Company consists of fixed basic remuneration and performance-linked remuneration that varies depending on company performance. Performance-linked remuneration consists of year-end bonuses based on consolidated business results for each business year, and phantom stock. From the standpoint of ensuring independence, remuneration for outside directors and auditors 15 コーポレートガバナンス CORPORATE GOVERNANCE is not linked to company performance, and only basic remuneration is paid. [Supporting System for Outside Directors and/or Outside Auditors] Support for outside directors and outside auditors is mainly provided by the General Affairs Group of the Company, which submits report materials and provides prior explanations on proposals to be presented for discussion by the Board of Directors, etc. In addition, to revitalize discussions at Board of Directors meetings, the Group holds Independent Officer Liaison Committee meetings with membership consisting of outside directors and outside auditors, for exchanging information based on independent and objective positions, and providing information from the Company. 2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System) 1. Business execution function The Board of Directors of the Company consists of six directors (including three outside directors). As the top-most decision-making organ for the management and business execution of the Company, meetings of the Board of Directors are held at least once a month in principle, with extraordinary meetings held as needed. In addition to directors, auditors are also required to attend meetings of the Board of Directors. The Board of Directors of the Company is chaired by Makoto Tani, Chairman, President & CEO, with membership consisting of Minoru Kanaya, Toshiaki Ookawara and 3 outside directors: Atsushi Nishijo, Fumio Tahara and Ayako Sano. In order to implement the planning and execution of company-wide management policies and strategies promptly and flexibly, the Company has established the Group Executive Officers’ Meeting, with membership consisting of the Chairman, President & CEO and all executive officers, which is held every week in principle. The Group Executive Officers’ Meeting makes sufficient reports, consideration, and deliberation with respect to important matters relating to the whole Group, based on the aforementioned purpose for its establishment. The meeting is chaired by the Chairman, President & CEO Makoto Tani, with membership consisting of Minoru Kanaya, Toshiaki Ookawara, and all executive officers. Furthermore, the Group committees (Personnel & System Committee and Policy & Investments Committee) with membership decided by the Group Executive Officers’ Meeting meet once a month to report, consider, and deliberate on personnel systems, policies and other important matters relating to the Group as a whole. 2. Auditing function (auditing by auditors, and other audits, etc.) The Board of Auditors, which is composed of four auditors, three of whom are independent outside auditors, meets once a month in principle to supervise and provide a check on management and business execution. Based on auditing policies, plans and standards determined by the Board of Auditors, auditors attend Board of Directors meetings and other important meetings. At the same time, they ascertain the state of the Company by examining business conditions and other methods to audit and ensure that business activities are being conducted in accordance with laws, internal regulations and other rules. Auditors also cooperate with the Audit Group and accounting auditors to ensure an efficient and effective auditing system. Membership of the Board of Auditors consists of full-time auditor Makoto Suzuki and outside auditors Tatsuya Aoyagi, Toshiko Sawada and Reiko Okuhara. The Audit Group, which is the Company’s internal audit organization, has been established as a division under the direct control of the Chairman, President & CEO to ensure its organizational independence. Based on internal rules and annual plans, it conducts operating audits of the head office, factories and restaurants to identify problem areas, suggest improvements and recommend rectification, among other activities. Accounting audits are conducted by Deloitte Touche Tohmatsu LLC, which was selected at 16 コーポレートガバナンス CORPORATE GOVERNANCE the General Meeting of Shareholders. 3. Content of contracts with directors and auditors for limitation of liability Pursuant to Article 427 Paragraph 1 of the Companies Act and the provisions of the Articles of Incorporation of the Company, the Company forms agreements with directors (excluding those who are executive directors, etc.) and auditors for limiting the liability for damages stipulated in Article 423 Paragraph 1 of said Act. The limitation on the amount of liability for damages under such agreements corresponds to the liability amount stipulated in Article 425 Paragraph of the Act. Furthermore, the said limitation of liability is recognized only in cases where such directors (excluding those who are executive directors, etc.) and auditors are without knowledge and are not grossly negligent in performing their duties which are the cause of such liability. 4. Other committees and systems The Group Risk and Compliance Committee, which is composed of the Chairman, President & CEO and all executive officers, meets at least once a year to deliberate on important matters related to the Group’s compliance and to determine basic policies. After such determination by the Group Risk and Compliance Committee, the Group Compliance Committee, which consists of compliance officers selected from each Group company, meets as needed. It confirms and reports on matters including the status of compliance promotion at each affiliated company, measures to prevent violations, and investigations and improvement actions in the event of a violation actually occurring. The Group Risk and Compliance Committee is chaired by Chairman, President & CEO Makoto Tani, with membership consisting of Minoru Kanaya, Toshiaki Ookawara, and all executive officers. In addition, the Group has established the Skylark Group Internal Reporting System (contact for whistleblowing), a contact point to a specialized external company for the early detection, correction and prevention of recurrence of violations of laws, internal regulations or other rules. It receives internal reports (whistleblowing) from all officers and employees of the Group in Japan, and is operated in accordance with internal regulations. In addition, the Company holds meetings of a Group Sustainability Committee consisting of the Chairman, President & CEO and all executive officers as needed to formulate policies relating to the Group’s sustainability, identify and regularly review key material issues, determine environmental and social policies and strategies, and report to the Board of Directors on activities to drive sustainability. *Reference material “Diagram 1” 3. Reasons for Adoption of Current Corporate Governance System The Company has chosen its current corporate governance structure to divorce business execution from supervision, strengthen mutual check-and-balance, and be checked by external experts such as outside directors and outside auditors, in order to pursue economic performance and efficiency while promoting highly transparent and sound management with thorough compliance, and to fulfill social responsibilities as a business enterprise by realizing fair and lawful business operation. In order to prevent occurrences of business risks and discover problems earlier and improve upon them, the Company has chosen an auditing structure to enable regular auditing from each standpoint, while maintaining close coordination between auditors, accounting auditors, and the Audit Group. III. Implementation of Measures for Shareholders and Other Stakeholders 1. Initiatives to Revitalize the General Meeting of Shareholders and Facilitate the Exercise of Voting Rights Early Notification Convocation notices are posted early on TDnet, the voting right exercising Supplementary Explanations 17 platform and the Company’s website prior to delivery to shareholders, to enable sufficient deliberation of proposals for discussion at the General Meeting of Shareholders by shareholders. The Company’s business year ends in December. The regular Annual General Meeting of Shareholders is held in March every year, and is therefore not considered to be a peak period. The Company has introduced systems for shareholders to exercise their voting rights via the Internet (including devices such as smartphones). The Company has participated in electronic voting platforms since the 5th Annual General Meeting of Shareholders (held on March 30, 2016). コーポレートガバナンス CORPORATE GOVERNANCE of General Meeting of Shareholders Scheduling Annual General Meetings Avoiding Peak Days Exercising of Voting Rights by Electronic / Electromagnetic Methods Participation in Electronic Voting and Platforms Initiatives Other the to Enhance Environment for Institutional Investors Exercise Voting Rights Providing Convocation Notice (Summary) in English to Their 2. IR Activities The Company prepares English versions of convocation notices and reference documents (in a narrow sense) and discloses them on TDnet, the electronic platform for exercising voting rights, and the Company’s website. Supplementary Explanations Whether there has been an explanation by the representative him or herself and of Preparation Publication Disclosure Policy Regular Briefings for Analysts and Institutional Investors Regular Briefings for Overseas Investors of IR on Posting Materials Website Establishment of Department(s) and/or Personnel in Charge of IR The Company has prepared and published its disclosure policy. Briefing sessions for analysts and institutional investors are held on a regular basis (after the end of each quarter). Yes The Company explains its corporate profile, financial highlights and growth strategies, etc., to investors in the USA, Europe and Asia through online meetings (after the end of each quarter), and by participating in conferences held by securities firms. The Company has established a dedicated IR site on its website, through which it discloses information about the Company to investors. The Finance Division conducts activities aimed at shareholders and investors. Yes 18 コーポレートガバナンス CORPORATE GOVERNANCE 3. Initiatives to Ensure Due Respect for Stakeholders of Stipulation Internal Rules for the Respecting Position of Stakeholders Implementation of Environmental Activities and CSR Activities, etc. Supplementary Explanations The Company has established the Skylark Group Charter of Corporate Behavior, which stipulates provisions for ensuring respect for the position of stakeholders. The Company actively engages in environmental conservation activities and CSR activities based on its corporate philosophy of “Creating Richness with Value to Society” and the spirit of the Skylark Group Charter of Corporate Behavior. With regard to environmental conservation activities, the Company adheres to the ISO14001 standard and engages in other initiatives to reduce environmental impact. With regard to CSR activities, the Company engages in ongoing charity fundraising drives and support activities through external bodies, among other activities aiming to contribute to the day-to-day prosperity of people not only in Japan but around the globe. In the Skylark Group Charter of Corporate Behavior, the Company stipulates communicating not only with shareholders but also with society on a wider scale, disclosing corporate information actively and fairly. In accordance with these policies, the Company has established the Group Regulations on Disclosure Control. Formulation of Policies, etc., on the Provision of Information to Stakeholders IV. Matters Relating to the Internal Control System 1. Basic Views on Internal Control System and the Progress of System Development The Company’s basic policies on internal control systems are as follows. 1. System to ensure that the execution of duties by directors and employees conforms to laws, regulations, and the Company’s articles of incorporation (1) The Skylark Group Charter of Corporate Behavior based on the Company’s corporate philosophy has been established by resolution of the Board of Directors as a guideline to be observed by all officers and employees, and has been thoroughly disseminated throughout the company as a standard for individual behavior. (2) The Company has established a Board of Auditors. Under the audit policy determined by the Board of Auditors, each auditor audits the execution of duties by directors through such means as attendance at meetings of the Board of Directors, and investigations into the state of the execution of duties. (3) In order to strengthen the Group’s compliance system, the Company has established the Skylark Group Internal Reporting System for whistleblowing. In accordance with the Detailed Rules for Skylark Group Internal Reporting System Operation, the Company receives whistleblowing reports from all officers and employees of the Group through a dedicated telephone number and website, etc., and endeavors to ensure early detection, correction and prevention of recurrence of violations of laws, internal regulations and other rules. 2. System to store and manage information relating to the execution of duties by directors (1) Information related to the execution of duties by directors is appropriately stored and managed based on the Board of Directors Regulations and the Group Documentation Management Regulations. (2) Documents necessary for the execution of duties by directors, including the minutes of General Meetings of Shareholders, minutes of meetings of the Board of Directors, and approval / decision-making documents concerning important matters for the operation of business are stored and managed in an easily searchable manner, so that directors and auditors may always access such documents. 19 コーポレートガバナンス CORPORATE GOVERNANCE (3) Confidential information is appropriately managed based on the Group Information Security and System Management Regulations. (4) Personal information is strictly managed based on laws and regulations and the Detailed Rules for Personal Information Management. 3. Regulations and other systems for managing the risk of loss (1) The outline of risks to be addressed is determined pursuant to the Group Risk Management Regulations, and various risks are addressed through a series of processes while comprehensively developing individual rules, manuals, etc. (2) The greatest risk for the restaurant industry is food-related accidents. In order to prevent such accidents from occurring, the Group endeavors to ensure safety by establishing regulations for purchasing management and providing suppliers with guidance on food safety and hygiene management. In addition, the Company has established the Quality Control Group as a division responsible for hygiene management, checking food safety at restaurants / stores and factories, and providing employees with guidance on hygiene management, etc. (3) With respect to risks of confidential information leaks, etc., pursuant to the Group Information Security and System Management Regulations, the Company has established the Information Security Committee, and takes measures such as managing information-related equipment / devices and documents thoroughly, and providing officers and employees with education on information security. (4) With respect to other risks, each responsible department develops individual regulations, guidelines and manuals, and conducts training, etc., while the Group Risk and Compliance Committee keeps a cross-organizational watch on the state of risks and takes appropriate measures on a company / group-wide basis. (5) The Group Risk and Compliance Committee, which is composed of the Chairman, President & CEO and all executive officers, meets at least once a year to deliberate on important matters related to the Group’s compliance and to determine basic policies. 4. System to ensure the efficient execution of duties by directors (1) Flexible decision-making and execution of duties is ensured while avoiding administrative overlaps by clearly and appropriately determining decision-making authority of officers and employees, and areas of operations in which each department should be involved, etc., in the Decision-Making Authority Regulations and Job Authority Standards. (2) The Company has a Board of Directors consisting of a small number of members, which makes prompt management judgments through regular meetings of the Board of Directors held every month, and extraordinary meetings of the Board of Directors held as needed. 5. System to ensure the reliability of financial reporting (1) Internal control over financial reporting is evaluated, maintained and improved based on the Financial Instruments and Exchange Act and other applicable domestic and foreign laws and regulations. (2) Each division and affiliated company of the Company shall endeavor to ensure the appropriateness of financial reports upon the execution of its business operations through checks by segregation of duties and daily monitoring, etc. 6. System to ensure the adequacy of operations within the Skylark Group (1) The Company requests for each Group company to execute its duties in a sound manner, pursuant to the Skylark Group Charter of Corporate Behavior. (2) The Company manages affiliated companies pursuant to regulations such as the Group Rules for Management of Affiliated Companies, and requires each affiliated company to submit regular reports and materials with regard to its business conditions. In 20 コーポレートガバナンス CORPORATE GOVERNANCE addition, while dispatching directors and auditors to important affiliated companies and supervising their business operations to ensure their appropriateness, the Company makes efforts to gain an understanding of management issues at affiliated companies. (3) In order to control the risk of loss at affiliated companies, the Group Risk and Compliance Committee ascertains and identifies risks throughout the entire Group, requests each a