アコム（8572） – Corporate governance report

ACOM CO., LTD. CORPORATE GOVERNANCE Last updated on May 31, 2022 AACCOOMM CCOO..,, LLTTDD.. President & CEO: Masataka Kinoshita Contact: Corporate Planning Dept., Telephone: 03-5533-0621 Code Number: 8572 https://www.acom.co.jp/ The status of corporate governance of the Company is described below: I Basic Policies on Corporate Governance, and Capital Structure, Company Outline and Other General Information 11.. BBaassiicc PPoolliiccyy ((UUppddaatteedd)) The ACOM Group, guided by its lifelong “circle of trust” spirit, maintains an ongoing corporate commitment to respecting other people, putting the customer first, and conducting creative and innovative management. Based on this commitment, we are seeking to deepen mutual trust between our stakeholders and ourselves and thus progress in partnership with society. In order to meet the expectations of stakeholders and build stronger trust, we will strengthen corporate governance as a key management priority. To this end, we will take steps to enhance the soundness, transparency, and efficiency of our operations and achieve sustained increases in our shareholder value. We recognize that effective internal control systems are essential to creating an appropriate corporate governance framework. Based on this recognition, we are encouraging all members of our organization to join forces in building internal control systems and assuring their effectiveness, under the leadership of management. At the same time, we are constantly evaluating, verifying, and improving the effectiveness of internal control mechanisms already in place. [[RReeaassoonnss ffoorr NNoonn–ccoommpplliiaannccee wwiitthh tthhee PPrriinncciipplleess ooff tthhee CCoorrppoorraattee GGoovveerrnnaannccee CCooddee]] ((UUppddaatteedd)) [Supplementary Principle 4.2.1] ACOM has performance-linked compensation system based on single year performance in place for compensation for directors (excluding directors serving as members of Audit & Supervisory Committee). ACOM will continue reviewing medium- to long-term performance-linked compensation system with aim of making compensation for directors effective and sound incentive for sustainable growth of the Company. [Supplementary Principle 4.10.1] ACOM has Appointment and Remuneration Committee in place as optional committee in charge of appointment of and compensation for senior management and directors. The structure of appointment and remuneration committee is as follows: ⚫ The Number of Inside Directors and Independent Outside Directors.➢ Board of Directors: 7 inside directors and 2 independent outside directors➢ Appointment and Remuneration Committee: 4 inside directors and 2 independent outside directors⚫ The Number of Directors not Serving as Members of Audit & Supervisory Committee and Those Serving asMembers of Audit & Supervisory Committee.➢ Board of Directors: 6 directors who are not members of the committee and 3 directors who are members of➢ Appointment and Remuneration Committee: 3 directors who are not members of the committee and 3the committeedirectors who are members of the committee1 ACOM CO., LTD. CORPORATE GOVERNANCE Independent outside directors do not constitute the majority of Appointment and Remuneration Committee, however, the Company ensures their appropriate involvement and receives their suitable advice upon consideration of appointment and compensation. [Principle 4.11] In order to be able to effectively fulfill the roll and responsibility of the Board of Directors, ACOM has created a skill matrix for directors after identifying the skills that the directors should hold in particular. The Board of Directors of the Company consists of nine members, and as described in the skill matrix, the Company strives to ensure a good balance of knowledge, experience, abilities and age while ensuring diversity. There are no female directors or foreigner directors at the Company at this point. However, the Company is willing to nominate any individuals who meet criterion in appointment policy as candidate and who holds the skill that the directors should hold, regardless of one’s gender and nationality. [[DDiisscclloossuurree BBaasseedd oonn tthhee PPrriinncciipplleess ooff tthhee CCoorrppoorraattee GGoovveerrnnaannccee CCooddee]] ((UUppddaatteedd)) [Principle 1.4] [Principle 1.7] The Company currently does not have any strategic shareholdings and does not plan to do so in the future. Pursuant to relevant laws, it is provided in our regulations of board of directors that transactions with directors and material transactions with major shareholders require prior approval of the board of directors. [Supplementary Principle 2.4.1] Under the situation where competition between companies is intensifying and changes in needs are accelerating, in order to implement “creative and innovative management” that the Company advocates in its corporate philosophy, and to continue to meet the expectations from stakeholders, it is necessary to create a new value by fusing abilities, ideas and values from diverse human resources. With that in mind, ACOM is actively taking measures to secure diversity, including recruitment, promotion, and human resource development of female and mid-career employees. To ensure the diversity of core human resources, ACOM has set the following targets for the ratio of females and mid-career hires in managerial or higher positions. Category Percentage of Females in managerial positions Percentage of Mid-Career Hires in managerial positions* As of October 1, 2021 By March 31, 2024 Current 18.3% 5.8% Target 20.0% Increase from current level *For the purpose of this tabulation, mid-career hires are defined as “those who joined the company mid-career hires are defined as “those who joined the company mid-career and have been with the company for 10 years or less. In addition, the Company promotes employees to managerial position with an emphasis on their ability and personality regardless of their nationality. < Policies on Human Resource Development, Internal Environmental Development, and Implementation Status to Ensure Diversity> 2 ACOM CO., LTD. CORPORATE GOVERNANCE Through training for female and mid-career hires, as well as enlightenment activities related to diversity, ACOM aims to promote the understanding of diversity within the company and respect and make maximum use of the abilities, ideas, values, etc. of diverse human resources and develop human resources who can lead the organization in a unified and appropriate manner. ACOM will also create an internal environment that allows employees from various backgrounds to choose a Based on the above policy, ACOM is implementing the following human resource development and internal flexible work style that suits their lifestyle. environment development. Category Status Human Resource Development – Internal Environment Development Implemented leadership training for female, career design training for female, training for those returned to work after childcare leave, and training for mid-career hires when they join the company. – Teaching materials to learn about “diversity and human rights”, “LGBT”, “balancing work and long-term care”, etc. are posted on the company intranet and provided to employees. Paying salary when taking childcare leave. (up to 5 days) Able to select from 5 patterns of short working hours for childcare. – – – Granted paid special leave for fertility treatment (up to 5 days) – Able to take paid leave for the purpose of support for family nursing / – – – – – nursing care and childbirth / childcare. Implemented measures to acquire the Platinum Kurumin Mark (promotion of taking childcare leave and efforts to realize a smooth return to work). Stipulated in the regulations that words and actions that worsen the working environment such as suggestion of disadvantageous treatment and harassment regarding the use of systems and measures related to pregnancy, childbirth, childcare, etc. are prohibited. Paid leave is available on an hourly basis. Paid leave is granted at the time of joining the company (statuary is 6 months after joining the company). Introduced a course-based personnel system that allows the employee to select whether or not to be transferred. Introduced a telecommuting system. – – Established a consultation desk for employees with disabilities. [Principle 2.6] The Company has Corporate Pension Asset Management Committee in place to effectively manage corporate pension asset. The committee comprises of the director in charge of Human Resources Dept. and chief general managers of Human Resources Dept., Corporate Planning Dept., Finance Dept. and Treasury Dept. The members of the committee need to deepen their understandings on investment theory, asset management system, contents of asset for investment, etc. They also need to grasp asset management environment. Therefore, the Company provides necessary information from trustee management institutions to committee members in periodic manner. The committee discusses basic policy on corporate pension asset management, matters on investment and trustee management institutions. The Company further discusses these matters at management meeting where Audit & 3 ACOM CO., LTD. CORPORATE GOVERNANCE Supervisory Committee members attend and share their opinion. Therefore, the Company ensures appropriate management of corporate pension asset. [Principle 3.1] (i) Guiding Principles of the Company (Corporate Philosophy, etc.), Management Strategy and Management Plan (1) Guiding Principles of the Company (Corporate Philosophy, etc.) Please refer to “Corporate Philosophy” on our website. (https://www.acom.co.jp/corp/english/about-us/philosophy/) (2) Management Strategy and Management Plan Please refer to “Medium-term Management Plan” on our website. (https://www.acom.co.jp/corp/english/ir/management/medium-term_management_plan/) (ii) Basic approach and key policies on corporate governance Please refer to “I. 1. Basic Policy” of this report for our basic approach and key policies on corporate governance. (iii) Policies and procedures for determining compensations for senior management and directors Please refer to “II. 1. [Compensation for Directors]” of this report for our policies and procedures for determining compensation for senior management and directors. (iv) Policies and procedures for appointing and dismissing senior management, and nominating candidates for directors (1) Policies (A) Appointing Senior Management ⚫ The candidate owns rich experience, in-depth insight and high expertise of Company’s business which are necessary for conducting swift and pertinent business execution. ⚫ The candidate possesses great humanity such as wide trust from others, dignity and high moral. ⚫ The candidate is sound both in mind and body, and does not possess possible concern for business performance. ⚫ The candidate does not have any past record of violations of law and compliance (including harassment) which inflicted significant loss to the Company and any other entities the candidate has served. ⚫ The candidate is not affiliated with any anti-social forces. (B) Dismissing Senior Management ⚫ A senior management is dismissed when one no longer meets criterions under appointment policy. (C) Nominating Candidates for Directors (Excluding Those Serving as Members of Audit & Supervisory Committee) ⚫ The candidate owns rich experience, in-depth insight and high expertise which are necessary for efficient supervision on management. ⚫ The candidate possesses great humanity such as wide trust from others, dignity and high moral. ⚫ The candidate is sound both in mind and body, and does not possess possible concern for business performance. ⚫ The candidate does not have any past record of violations of law and compliance (including harassment) which inflicted significant loss to the Company and any other entities the candidate has served. ⚫ The candidate is not affiliated with any anti-social forces. (D) Nominating Candidates for Directors Serving as Members of Audit & Supervisory Committee 4 ACOM CO., LTD. CORPORATE GOVERNANCE ⚫ The candidate owns rich experience in management, laws, finance and accounting, combined with deep insight and high degree of expertise needed for achieving management transparency and improving objectivity. ⚫ The candidate possesses great humanity such as wide trust from others, dignity and high moral. ⚫ The candidate is sound both in mind and body, and does not possess possible concern for business performance. ⚫ The candidate does not have any past record of violations of law and compliance (including harassment) which inflicted significant loss to the Company and any other entities the candidate has served. ⚫ The candidate is not affiliated with any anti-social forces. (E) Nominating Candidates for Directors Appointed as Independent Directors ⚫ The candidate within (C) and (D) who is appointed as Independent Directors meets all requirements below and items set forth in “Independence Standards for Outside Directors.” * Please refer to “I. 1. Basic Policy [Disclosure Based on the Principles of the Corporate Governance Code] [Principle 4.9]” for “Independence Standards for Outside Directors.” ➢ The candidate is capable of offering advices on management policies and management improvements, by utilizing knowledge, from the viewpoint of increasing medium- to long-term corporate value by promoting sustainable growth of the Company. ➢ The candidate is capable of supervising management through appointment/dismissal of senior management and other significant decision makings at the Board of Directors. ➢ The candidate is capable of supervising conflict of interests between the Company, management, controlling shareholders, etc. ➢ The candidate is capable of reflecting opinions of stakeholders including minority shareholders at the Board of Directors, independent from the management and controlling shareholders, in a proper manner. (2) Procedures (A) Appointing and Dismissing Senior Management The board of directors resolves appointments based on policies above after examinations are conducted and proposals are made by appointment and remuneration committee. (B) Nominating Candidates for Directors (Excluding Those Serving as Members of Audit & Supervisory Committee) The board of directors resolves appointments based on policies above after examinations are conducted and proposals are made by appointment and remuneration committee. (C) Nominating Candidates for Directors Serving as Members of Audit & Supervisory Committee The board of directors resolves appointments based on policies above upon agreement by the Audit & Supervisory Committee after examinations are conducted and proposals are made by president. (v) Explanation on Appointment of Senior Management and Nomination of Individual Candidates for Directors Explanation on appointment of senior management and nomination of individual candidates for directors (excluding those serving as members of Audit & Supervisory Committee) and directors serving as members of Audit & Supervisory Committee is mentioned on our convocation notice for ordinary general meeting of shareholders which is available for inspection on our website. (https://www.acom.co.jp/corp/english/ir/stock/shareholders_meeting/) [Supplementary Principle 3.1.3] ACOM is implementing sustainability initiatives as follows: 5 ACOM CO., LTD. CORPORATE GOVERNANCE Category Details Consideration for global environment problems Respect for human rights As part of environment conservation activity, ACOM implement reduction of electricity consumption on ATM and illumination signboard, shift to paperless operations, and participation in local cleaning projects. ACOM conducts each activity under its philosophy “The Spirit of Human Dignity”. Consideration for employee health and working environment and fair and appropriate treatment ACOM has implement various initiatives related to creating workplace with open culture, promoting work-life balance, promoting health management, diversity, and welfare programs. Fair and proper transactions with business partners Crisis management for natural disaster, etc. Investment in human capital Investment in intellectual property [Supplementary Principle 4.1.1] Under ACOM’s code of conduct, it is listed “In our corporate activities, we respect the meaning of fair and free competition and follow fair market rules and appropriate commercial practices.” ACOM has established regulation and manual for crisis management, and developed a structure to ensure business continuity and prompt recovery of normal functions in the event of a crisis. ACOM has set up a Personnel Development Office, which is a specialized department for employee education, and implemented various training programs such as “on-the-job training (OJT),” “level-based training,” “selective training courses”. ACOM also has implemented self-development support such as “correspondence education”, “public qualification acquisition support”, “reading support”, and promotion of acquisition of “Chief of money lending operation” qualification. ACOM has implemented brand awareness activities to strengthen its brand power, AI-based data analysis to enhance credit and credit screening capabilities, and employee training and CS promotion activities to enhance customer service. The Company delegates decision-making on matters related to the execution of business operations other than matters to be resolved at the Board of Directors, to president and director. Moreover, the “Rules for the Board of Directors” of the Company provides the matters to be discussed at the Board based on laws and the article of incorporations. With regard to other business executions, the Board aims for expedite decision-makings and business execution, and clarification of roles of supervision and execution through following measures: appointing directors in office; providing division of duties, and roles and responsibilities on “Rules for Division of Duties within the Company”; and delegating business execution to executive officers. [Principle 4.9] The Company has set following “Independence Standards for Outside Directors” in order to focus on ensuring independence of Outside Independent Directors. “Independence Standards for Outside Directors” The Company appoints Independent Outside Directors who meet all requirement items 1 through 7 below. 1. Meet all requirements stipulated under Article 2, Paragraph 15 of the Companies Act; 2. Do not fall under any of items (1) through (3) below. (1) Major creditors of the Company1 or their executors of operations, and were executors of operations in the last three years; 6 ACOM CO., LTD. CORPORATE GOVERNANCE (2) Those for whom the Company is a major business partner2 or their executors of operations, and were executors of operations in the last three years: (3) Major business partners of the Company3 or their executors of operations, and were executors of operations in the three years; 3. Are not consultants, accountants or legal experts who receive, in terms of the average for the past three years, ¥10 million or more of monetary or other property benefits other than executive remunerations from the Company, nor belong to accounting or law firms where the Company is a major business partner4; 4. Are not Directors, officers or executive officers of the Company or its subsidiaries, nor spouses or relatives within the second degree of kinship of those whom the Company judges their independences are not ensured as provided in items 2 and 3; 5. Are not current major shareholders5 of the Company or their executors of operations; 6. Those who do not belong to auditing firms of the Company or its subsidiaries, nor were in charge of auditing operations of the Company or its subsidiaries as employees of said auditing firms. 7. Were not executors of operations at the parent company and/or fellow subsidiary of the Company in the last ten years. (Notes) 1. “Major creditors of the Company” refer to those the Company procures 3% or more of its consolidated amount of borrowings. more of their consolidated sales. consolidated operating revenue. or more of their consolidated sales. 2. “Those for whom the Company is a major business partner” refer to those the Company accounted for 2% or 3. “Major business partners of the Company” refer to those who accounted for 2% or more of the Company’s 4. “Accounting or law firms where the Company is a major business partner” refers to those the Company for 2% 5. “Major shareholders” refer to those who hold 10% or more of the Company’s total voting rights. * Transaction included in “Attributes of Directors” shall be omitted as within range of negligible standard when items above are fulfilled. [Supplementary Principle 4.11.1] The Board of Directors of the Company consists of nine members, two of whom are Independent Outside Directors, in order to expedite decision-makings and ensure effective mutual monitoring among directors. In order to ensure diverse perspectives in the Board, the Company appoints individuals with following qualifications as Directors: rich experience within the Company or from different companies; deep insight and high expertise. The Company have created a skill matrix of the Board of Directors as follows: Name Position Age ManagementCorporate and Planning Business Execution Management of Duties System and Digital Finance and Accounting Shigeyoshi Kinoshita Hiroshi Naruse Chairman 72 Deputy Chairman 62 ● ● ● ● ● 7 Director (outside) Law, Compliance, and, Risk Management ● ACOM CO., LTD. CORPORATE GOVERNANCE Masataka Kinoshita President & CEO 43 ● 59 ● Director 53 ● ● Tomomi Uchida Takashi Kiribuchi Masakazu Oosawa Masahide Ishikawa Kazuo Fukumoto Takuji Akiyama Senior Managing Director Senior Managing Director Director, Member of the Audit & Supervisory Committee Director, Member of the Audit & Supervisory Committee Director, Member of the Audit & Supervisory Committee 59 ● ● ● ● ● ● ● ● 63 63 ● ● ● ● ● ● ●Certified public accountant 65 ● ● ● ● * The above is a list of up to three major skills marked that each director possesses. It does not represent all the skills that each director possesses. * The age, shown above, is as of the 44th Ordinary General Meeting of Shareholders (June 23, 2021) [Supplementary Principle 4.11.2] Information on individual directors who have material concurrent post including other listed companies is mentioned on our convocation notice for ordinary general meeting of shareholders which is available for inspection on our website. (https://www.acom.co.jp/corp/english/ir/stock/shareholders_meeting/) [Supplementary Principle 4.11.3] The Company distributes surveys regarding the effectiveness of the Board to all directors every year. The Company conducts analysis and evaluation on effectiveness of the Board based on the results of surveys. The Company conducted abovementioned analysis and evaluation this fiscal year. Consequently, the Company confirmed that the Board fulfills each and all of its function in formulation of management strategies and targets, settling management challenges, supervision on risk managements and business executors. Thus, the Company concluded that its current Board functions properly and its effectiveness is ensured. Moreover, the Company assessed that it has made certain level of advancements on reorganization of the Board agenda and further sophistication of reference material used at the Board, which were issues recognized in previous fiscal year. The Company recognized that current issues to be addressed include: improvement of the visibility of meeting materials, which have been digitized since January 2022, and further invigoration of discussions at the Board to further improve effectiveness of the Board. While the company will operate the Board of Directors in manners as 8 ACOM CO., LTD. CORPORATE GOVERNANCE described below, the Company will sustain periodic analysis and evaluation on effectiveness of the Board and continue its efforts to ensure enhanced effectiveness of the Board. (1) The Board will decide material business management matters, such as management strategies and business plans, and also will determine basic policies for building corporate governance and internal control systems. The Board will monitor and supervise the execution of duties. (2) Material subjects will be exhaustively selected as agendas based on regulations for matters to be resolved at the Board, provided in rules of the Board of Directors. The Board will discuss such selected material in timely and appropriate manner. (3) The Company will distribute materials to be used at the Board prior to the meeting to make it efficient and vigorous. Prior explanations will be given when deemed necessary. (4) The Board will receive periodic reports on business managements, etc. and supervises business execution. [Supplementary Principle 4.14.2] The Company provides trainings to directors when deemed necessary upon their inaugurations. Even after their assumption of offices, the Company provides continuous training programs on diverse topics such as market trend of the Company’s business segment and global economic issues [Principle 5.1] (1) Development of Systems to Promote Constructive Dialogues with Shareholders In addition to the ordinary general meeting of shareholders, the director in charge of Finance Dept. presides over dialogues with shareholders. Public & Investor Relations Office collaborates with relevant departments and conducts interim and annual earnings release conferences, domestic conferences (4 times a year), overseas IR roadshow (twice a year) and individual IR meetings (from 200 to 300 meetings per year). Feedbacks given through these contacts with shareholders are reported to the Board of Directors. (2) Basic Policy on Measures to Promote Constructive Dialogues with Shareholders The Company strives for timely and appropriate dialogues with every shareholder to attain continuous growth and mid- to long-term enhancement in corporate value. With regard to information disclosure, we will endeavor to expand our disclosure proactively beyond the scope of disclosure required by laws and regulations to information deemed beneficial to facilitate understanding of the Company by shareholders. Upon disclosing such information, we will strive to disclose information in fair and prompt manner to both the domestic and the overseas shareholders through our website and processes designated by the Tokyo Stock Exchange. In certain cases, forward-looking statements may be included in the information that we disclose. In regard to such forward-looking statements, we will strive to fully explain our assumptions, uncertain factors, etc. in order to avoid giving a false impression to the market. In order to prevent divulgence of financial results information and ensure fairness of information disclosure, certain period prior to announcement of financial results shall be regarded as “Silent period” where we refrain from making any comments or answering inquiries regarding financial results. 22.. CCaappiittaall SSttrruuccttuurree Ratio of shareholding by foreign investors Less than 10% [[MMaajjoorr SShhaarreehhoollddeerrss]] Mitsubishi UFJ Financial Group, Inc. Name Number of Shares Held (shares) Shareholding Ratio to Total (%) 588,723,490 37.57 9 Name Number of Shares Held (shares) Shareholding Ratio to Total (%) 273,467,550 125,533,430 92,192,320 77,163,600 38,733,200 31,572,800 27,356,300 26,507,260 14,109,800 17.45 8.01 5.88 4.92 2.47 2.01 1.74 1.69 0.90 ACOM CO., LTD. CORPORATE GOVERNANCE Maruito Shokusan Co., Ltd. Maruito Co., Ltd. Foundation of Kinoshita Memorial Enterprise The Master Trust Bank of Japan, Ltd. (Trust Account) Maruito Shoten Co., Ltd. Mitsubishi UFJ Trust and Banking Corporation (Standing proxy: The Master Trust Bank of Japan, Ltd.) Custody Bank of Japan, Ltd. (Trust Account 4) Shigeyoshi Kinoshita Custody Bank of Japan, Ltd. (Trust Account) Controlling Shareholders (except for the Parent Company) –– Parent Company Supplementary Description –– Mitsubishi UFJ Financial Group, Inc. (MUFG) (Listed in Tokyo, Code Number: 8306) 33.. OOuuttlliinnee ooff tthhee CCoommppaannyy ((UUppddaatteedd)) Stock exchange and section Tokyo Stock Exchange, Standard Account settlement March Industry Other financial business Number of employees (consolidated basis) as of the latest fiscal year end Not less than 1,000 Operating revenue (consolidated basis) as of the latest fiscal year end Between 100 billion yen and less than 1 trillion yen Number of consolidated subsidiaries as of the latest fiscal year end Less than 10 44.. GGuuiiddeelliinneess ffoorr tthhee PPrrootteeccttiioonn ooff MMiinnoorriittyy SShhaarreehhoollddeerrss iinn TTrraannssaaccttiioonnss wwiitthh CCoonnttrroolllliinngg SShhaarreehhoollddeerrss Although ACOM engages in transactions with the parent company MUFG Group’s companies, which include borrowing funds and guaranteeing unsecured card loans, the fairness of these transactions is ensured because they are 10 ACOM CO., LTD. CORPORATE GOVERNANCE based on our code of conduct of adhering to fair market rules and proper commercial practices. And like transactions with unrelated companies, they are based on impartial judgments made in accordance with internal rules, etc. In addition, as a subordinate mechanism of the Board of Directors, ACOM has established “Conflict of Interest Advisory Committee” which is composed solely of independent persons. The Committee deliberates on material transactions, etc., where MUFG’s interest conflicts with minority shareholders’ from perspective of protecting the interests of minority shareholders, and makes recommendations to the Board of Directors, etc. 55.. OOtthheerr SSppeecciiaall CCiirrccuummssttaanncceess tthhaatt mmaayy SSiiggnniiffiiccaannttllyy AAffffeecctt CCoorrppoorraattee GGoovveerrnnaannccee Under a business and capital alliance with MUFG and its subsidiary, MUFG Bank, Ltd., ACOM serves as the core company for the MUFG Group’s consumer finance business. In addition, under a contract relating to corporate management, ACOM engages in consultations and makes reports to MUFG concerning important corporate matters. Nevertheless, while decisions on matters such as management policy and business strategy reflect the corporate management policy of the parent company, these decisions are based on ACOM’s own judgments, and as such a certain level of independence as a listed company is ensured. 11 ACOM CO., LTD. CORPORATE GOVERNANCE II Status of Other Corporate Governance Structure Including Corporate Management Organization Relating to Decision-Making, Execution and Monitoring for Managerial Purposes 11.. MMaatttteerrss CCoonncceerrnniinngg tthhee OOrrggaanniizzaattiioonnaall SSttrruuccttuurree aanndd OOppeerraattiioonn ooff tthhee OOrrggaanniizzaattiioonn Organizational form Company with Audit & Supervisory Committee [[DDiirreeccttoorrss]] Number of Directors in the Articles of Incorporation 15 Term of Directors in the Articles of Incorporation 1 year Chairman of the Board of Directors President Number of Directors Appointment of Outside Directors Applicable Number of Outside Directors Number of designated Independent Directors in Outside Directors Relationship with the Company (1) 9 2 2 Name Description Masahide Ishikawa From other company Takuji Akiyama Certified public accountant Relationship with the Company (*) a b c d e f g h ○ ○ i j k *: Key to “Relationship with the Company” *: “○” is used when the director in concern falls under the criteria “currently or recently,” whereas “△” is used when he/she fell under the criteria in “past.” *: “●” is used when a close relative of the director in concern fall under criteria “currently or recently,” whereas “▲” is used when such person fell under the criteria in “past.” a. Person who executes business of the Company or a subsidiary; b. Person who executes business or a non-executive director of a parent company; c. Person who executes business of a fellow subsidiary; d. Person/entity for which the Company is a major client or a person who executes business for such person/entity; e. Major client of the Company or a person who executes business for such client; f. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets in addition to director/auditor compensation from the Company; g. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who executes business of the corporation); h. Person who executes business for a client of the Company (excluding persons categorized as any of d, e, or f above) i. Person who executes business for another company holding cross-directorships/cross-auditorships with the Company; 12 ACOM CO., LTD. CORPORATE GOVERNANCE j. Person who executes business for an entity receiving contributions from the Company; k. Others. Relationship with the Company (2) Name Member of Audit & Supervisory Committee Independent Director Supplementary Description on the Conforming Item Masahide Ishikawa –– Takuji Akiyama –– 13 Reason for Appointment – Mr. Masahide Ishikawais an Outside Director as stipulated under Article 2, Paragraph 15 of the Company Law. insight. Therefore, – He has a wealth of knowledge and experience acquired in the finance industry over many years, and accomplishments as a corporate manager. He has also served as Vice Chairman of the Japan Investment Advisers Association twice, and thus the has wide-ranging Company believes that he can supervise and provide appropriate advice for the management of the Company from an external viewpoint based on his knowledge and experience. Upon his election, he is expected to play the role as an Outside Director advice on management policies and improvements to be standpoint of accelerating made sustainable growth towards striving enhancement of medium- to long-term corporate value based on his insight, and to supervise the management from an independent viewpoint through the appointment and dismissal of its members and other important decision-making at the Board of Directors meetings. to provide from a and – As he meets all requirements for “Independence Standards for Outside Directors” the Company has formulated, he has been designated as an independent director. – Mr. Takuji Akiyama is an Outside Director as stipulated under Article 2, Paragraph 15 of the Company Law. – He is expected to supervise and audit the management of the Company from a neutral and objective viewpoint based on his advanced expertise and abundant experience gained in finance and accounting audits through his career as a certified public accountant over many years. Although he has not been directly involved in corporate management other than as an outside company auditor, it is anticipated that he will perform his duties as an Outside Director appropriately for the aforementioned reasons. – Upon his election, he is expected to play the role as an Outside Director to provide advice on management policies and improvements to be standpoint of accelerating made sustainable growth towards striving enhancement of medium- to long-term corporate value based on his insight, and to supervise the management from an independent viewpoint through the appointment and dismissal of its members and other important decision-making at the Board of Directors meetings. from a and – As he meets all requirements for “Independence Standards for Outside Directors” the Company has formulated, he has been designated as an independent director. ACOM CO., LTD. CORPORATE GOVERNANCE [[AAuuddiitt && SSuuppeerrvviissoorryy CCoommmmiitttteeee]] Details on Members and Chairperson Total Number of Members Number of Full-time Member Number of Inside Directors Number of Outside Directors Chairperson Audit & Supervisory Committee 3 2 1 2 Outside Director Assignment of Directors and Employees to Support Duties of Audit & Supervisory Committee Applicable Matters on Independence of Directors and Employees from Directors in Charge of Business Execution The Company has established the Administration for Audit & Supervisory Committee to assist in the Audit & Supervisory Committee’s duties, and assign assistants for the Audit & Supervisory Committee. Employees to assist the Audit & Supervisory Committee will be exclusively in charge of work that assists the Audit & Supervisory Committee, and will not be subject to instructions and orders from the Directors (except for Directors serving as Members of Audit & Supervisory Committee) and other operational organizations. Assignment, transfer, evaluation and disciplinary action of such employees are decided after consultation with the Audit & Supervisory Committee. Collaboration among Audit & Supervisory Committee, Accounting Auditors and the Internal Audit Department (A) Collaboration between Audit & Supervisory Committee and Accounting Auditors Audit & Supervisory Committee confirms the accounting auditor’s auditing plan, and receive audit reports and the overview and results of the audit. In addition, the Company promotes collaboration between Audit & Supervisory Committee and accounting auditors by having opinion exchange meetings when necessary, as well as being present at audits. (B) Collaboration between Audit & Supervisory Committee and the Internal Audit Department Internal Audit Department ensures collaboration with Audit & Supervisory Committee through following two measures: prior consultation with the Committee on its auditing plan of Internal Audit Department; and reporting progress and results of audits, etc. [[OOppttiioonnaall CCoommmmiitttteeee]] Establishment of Any Optional Committees Equivalent to Appointment Committee or Remuneration Committee Applicable Details on Optional Committees: Members and Chairpersons Name of the Committee Total Number of Number of Full-time Number of Inside Number of Outside 14 ACOM CO., LTD. CORPORATE GOVERNANCE 6 6 0 0 0 0 0 0 Members Members Directors Directors Committee Equivalent to Appointment Committee Appointment and Remuneration Committee Committee Equivalent to Remuneration Committee Appointment and Remuneration Committee 4 4 2 2 Name of the Committee Chairperson Number of Outside Experts Number of Other Members Committee Equivalent to Appointment Committee Appointment and Remuneration Committee Committee Equivalent to Remuneration Committee Appointment and Remuneration Committee Inside Director Inside Director Supplementary Description [[IInnddeeppeennddeenntt DDiirreeccttoorr]] Appointment and Remuneration Committee is responsible for reviewing and making proposals on appointment and compensation for directors (excluding directors serving as members of Audit & Supervisory Committee). Number of Independent Directors 2 Other Matters Concerning Independent Directors ACOM designates all outside directors who meet requirements as independent directors. [[IInncceennttiivveess]] Status of implementation of incentive programs for Directors Performance-linked compensation system is in place. Supplementary Description to the Relevant Item For the purposes of elevation of morale of Directors and employees, enhancement of motivation for higher performance and future recruitment and securing of talented personnel, we concern with introducing incentive programs. Persons eligible to receive stock option Supplementary Description to the Relevant Item 15 ACOM CO., LTD. CORPORATE GOVERNANCE [[CCoommppeennssaattiioonn ffoorr DDiirreeccttoorrss]] Status of disclosure (Individual compensation for Directors) –– Supplementary Description to the Relevant Item Compensation for Directors (April 1, 2020, to March 31, 2021) Aggregate annual compensation for Directors: 245 million yen Amount of compensation or methods of policy decisions Applicable Individual compensation for Directors is not disclosed Disclosed Information Regarding Amount of Compensation or Methods of Policy Decisions The Board of Directors determined a policy concerning the decision on the details of individual compensation payable to Directors (excluding Directors serving as Audit & Supervisory Committee Members). In summary, compensation payable to Directors (excluding Directors serving as Audit & Supervisory Committee Members) is designed to sufficiently function as an incentive to aim for sustainable increase in corporate value by benchmarking the compensation levels of peer companies in related industries and segments with similar business scale. Compensation to each Director is to be payable in cash. Compensation to full-time Directors (excluding Directors serving as Audit & Supervisory Committee Members) consists of basic compensation and performance-linked compensation, while compensation to part-time Directors consists of basic compensation only. Basic compensation is fixed compensation to be paid once monthly, and performance-linked compensation is variable compensation to be paid once yearly according to business results. The Company determines the amount of basic compensation payable to Directors (excluding Directors serving as Audit & Supervisory Committee Members) at the Board of Directors after the Appointment and Remuneration Committee deliberates and proposes the respective amounts to be paid according to the position and other factors, in consideration of the compensation levels at other companies, the business results of the Company, the levels of employees’ salaries and other factors. The Company determines the amount of performance-linked compensation payable to Directors (excluding Directors serving as Audit & Supervisory Committee Members) at the Board of Directors after the Appointment and Remuneration Committee calculates the basic source of distribution using “Profit attributable to owners of parent” as an indicator, and deliberates and proposes the respective amounts to be paid according to the positions, individual evaluations and other factors. The target percentage of performance-linked compensation out of total compensation is approximately 20% (assuming a standard amount of performance-linked compensation). The reason for the selection of this indicator (“Profit attributable to owners of parent”) for performance-linked compensation payable to full-time Directors (excluding Directors serving as Audit & Supervisory Committee Members) was to establish an objective and transparent compensation system for full-time Directors (excluding Directors serving as Audit & Supervisory Committee Members) by firstly linking it to single-year performance, in light of the situation where dividends were not distributed continuously until the interim dividend for the fiscal year ended March 31, 2018. The amount of performance-linked compensation is decided by a method whereby the Appointment and Remuneration Committee first determines a range of profit, which becomes a standard for basic source of distribution, by taking into consideration special factors such as future increases in tax burden and extraordinary income or loss, and the Board 16 ACOM CO., LTD. CORPORATE GOVERNANCE of Directors determines a specific amount of performance-linked compensation by multiplying the basic source of distribution by a ratio corresponding to the ratio of distribution for each title and individual evaluation of Directors. While target figures for the indicator for performance-linked compensation have not been determined for the current fiscal year, the actual figure of the basic source of distribution amounted to 45 million yen, with the standard range of profit from 70,000 million yen to less than 80,000 million yen. Other details of the compensation payable to Directors are deliberated and proposed by the Appointment and Remuneration Committee and thereupon determined by the Board of Directors. The amount of compensation payable to Audit & Supervisory Committee Members is determined through consultation among Audit & Supervisory Committee Members in consideration of their duties and responsibilities. At the 40th Ordinary General Meeting of Shareholders held on June 22, 2017, it was resolved that compensation payable to Directors (excluding Directors serving as Audit & Supervisory Committee Members) per year shall be no more than 400 million yen (excluding the portion of employee’s salary payable to Directors who concurrently serve as employees). The number of Directors (excluding Directors serving as Audit & Supervisory Committee Members) as of the conclusion of the above Ordinary General Meeting of Shareholders was six. In addition, at the same Ordinary General Meeting of Shareholders, it was resolved that compensation payable to Directors serving as Audit & Supervisory Committee Members per year shall be no more than 100 million yen. The number of Directors serving as Audit & Supervisory Committee Members as of the conclusion of the above Ordinary General Meeting of Shareholders was four. The details of the individual compensation payable to each Director for the fiscal year under review were determined by the Board of Directors within the compensation limit approved by the general meeting of shareholders respecting the proposal from the Appointment and Remuneration Committee submitted upon deliberation based on the Director’s position, evaluation, and other factors. Therefore, the Company believes that the details are in line with the Policy. [[SSuuppppoorrttiinngg SSyysstteemm ffoorr OOuuttssiiddee DDiirreeccttoorrss]] day prior to the meetings in principle. When meetings of the Board of Directors are held, the Company distributes the materials for the meetings by one To support the Audit & Supervisory Committee’ duties, the Company established “the Administration for Audit & Supervisory Committee” and assigned persons to assist its duties. Employees to assist the Audit & Supervisory Committee will be exclusively in charge of work that assists the Audit & Supervisory Committee, and will not be subject to instructions and orders from the Directors (except for Directors serving as Members of Audit & Supervisory Committee) and other operational organizations. 22.. MMaatttteerrss CCoonncceerrnniinngg tthhee FFuunnccttiioonnss ooff EExxeeccuuttiioonn ooff DDuuttiieess,, AAuuddiitt aanndd MMoonniittoorriinngg,, AAppppooiinnttmmeenntt aanndd DDeetteerrmmiinnaattiioonn ooff CCoommppeennssaattiioonn,, eettcc.. ((OOuuttlliinnee ooff SSttaattuuss ooff SSyysstteemm ffoorr CCoorrppoorraattee GGoovveerrnnaannccee)) (1) Outline of current framework of management structure (A) Board of Directors The Board of Directors of the Company consists of nine members: President & CEO Masataka Kinoshita who chairs the Board, Directors Shigeyoshi Kinoshita, Hiroshi Naruse, Tomomi Uchida, Takashi Kiribuchi and Masakazu Oosawa, and Members of Audit & Supervisory Committee Masahide Ishikawa (Outside Director), Kazuo Fukumoto and Takuji Akiyama (Outside Director). The Board deliberates and decides important business management matters, such as management strategies and business planning, and basic policies for building corporate governance and internal control systems, while ensuring objective and rational judgment. Furthermore, the Board delegates decision-making on matters related to the execution of business operations other than matters to be resolved at the Board of 17 ACOM CO., LTD. CORPORATE GOVERNANCE Directors to President and Director, and monitors and supervises the execution of duties by thorough monitoring and other measures on delegated matters. It meets at least once every quarter, in principle, and more as deemed necessary. – Shigeyoshi Kinoshita: 12 out of 12 (100%) – Naruse Hiroshi: No data is available as he assumed his position on June 23, 2021. – Masataka Kinoshita: 12 out of 12 (100%) – Tomomi Uchida: 12 out of 12 (100%) – Takashi Kiribuchi: 8 out of 8 (100%) This is data after his assumption of position on June 23, 2020. – Masakazu Oosawa: No data is available as he assumed his position on June 23, 2021. – Masahide Ishikawa: 12 out of 12 (100%) – Kazuo Fukumoto: 12 out of 12 (100%) – Takuji Akiyama: No data is available as he assumed his position on June 23, 2021. (B) Audit & Supervisory Committee The Audit & Supervisory Committee consists of three members: Masahide Ishikawa (Outside Director) who chairs the committee, Kazuo Fukumoto and Takuji Akiyama (Outside Director). It meets regularly to receive reports concerning important audit-related matters, hold discussions, and pass resolutions. (C) Committees (a) Appointment and Remuneration Committee The Appointment and Remuneration Committee consists of six members: President & CEO Masataka Kinoshita who chairs the committee, Representative Directors Shigeyoshi Kinoshita and Hiroshi Naruse, and Members of Audit & Supervisory Committee Masahide Ishikawa (Outside Director), Kazuo Fukumoto and Takuji Akiyama (Outside Director). The Appointment and Remuneration Committee reviews and proposes the appointment of candidates and remuneration for Directors (excluding those serving as Audit & Supervisory Committee Members) for resolution at the Board of Directors Meeting. The Committee also checks management and the status of training for candidates for management and provides an overview of the same to the Board of Directors. The Appointment and Remuneration Committee meets three times a year, in principle, and more as deemed necessary. < Status of Attendance in the fiscal year ended March 2021> – Shigeyoshi Kinoshita: 3 out of 3 (100%) – Hiroshi Naruse: No data is available as he assumed his position on June 23, 2021. – Masataka Kinoshita: 3 out of 3 (100%) – Masahide Ishikawa: 3 out of 3 (100%) – Kazuo Fukumoto: 3 out of 3 (100%) – Takuji Akiyama: No data is available as he assumed his position on June 23, 2021. 18 ACOM CO., LTD. CORPORATE GOVERNANCE (b) Compliance Committee The Compliance Committee consists of seven members: an expert from outside the Company Tatsuzo Honma who chairs the committee, experts from outside the Company Tan Mitchell and Yasunari Takaura, Outside Director Masahide Ishikawa (Members of Audit & Supervisory Committee) and Representative Directors Shigeyoshi Kinoshita, Hiroshi Naruse and Masataka Kinoshita. The Committee discusses and, as necessary, makes recommendations to the Board of Directors about the following compliance-related matters. – Items relating to formulation, revision or abolishment of the ACOM Group Code of Ethics and Code of – Important items related to establishment and operation of compliance systems; – Items relating to formulation of basic plans; – Items relating to the correction of major violations, actions for improvement and recurrence prevention Conduct; measures; and – Important items related to other compliance issues. The Compliance Committee meets six times a year, in principle, and more as deemed necessary. (c) Financial Information Disclosure Committee The Financial Information Disclosure Committee consists of eleven members: an executive officer who concurrently serve as director in charge of Treasury Department Tomoo Shikanoya who chairs the committee, executive officers who concurrently serve as directors in charge of the relevant departments, Tomomi Uchida, Masatoshi Nabeoka, Takashi Kiribuchi, and chief general managers in charge of the relevant departments, Akifumi Kinoshita, Hiroko Shioiri, Masamitsu Iwamura, Kazuki Morishita, Masahiko Machida, Takashi Okamoto and Daishi Haraguchi. In the presence of Members of Audit & Supervisory Committee, the Committee deliberates in advance the items related to the improvement of the financial disclosure system and the financial information to be disclosed for resolution at the Board of Directors Meeting, in order for the disclosure of the financial information and internal control of financial reports to be made in accordance with the relevant laws in a timely and in an appropriate manner. The Financial Information Disclosure Committee meets at least once every quarter, in principle, and more as deemed necessary. (d) Corporate Risk Committee The Corporate Risk Committee consists of seven members: Deputy Chairman Hiroshi Naruse who chairs the committee, Representative Directors Shigeyoshi Kinoshita and Masataka Kinoshita, and Members of Audit & Supervisory Committee Masahide Ishikawa (Outside Director), Kazuo Fukumoto and Takuji Akiyama (Outside Director), and an executive officer who concurrently serve as director in charge of Corporate Risk Management Department Masatoshi Nabeoka. The Corporate Risk Committee discusses important items related to risk management and makes proposals and reports to the Board of Directors as deemed necessary. The Committee also monitors the status of risk management and other matters and reports the results to the Board of Directors. The Corporate Risk Committee meets at least once every quarter, in principle, and more as deemed necessary. (e) Conflict of Interest Advisory Committee *Established on December 23, 2021 The Conflict of Interest Advisory Committee consists of three independent persons, chaired by independent director (outside) Masahide Ishikawa, the independent director (outside) Takuji Akiyama, and lawyer from Nozomi Sogo Attorneys at Law, Hitoshi Shimbo. The Committee deliberates on 19 ACOM CO., LTD. CORPORATE GOVERNANCE material transactions, etc. where the controlling shareholders’ interest conflicts with minority shareholders’ from the perspective of protecting the interests of minority shareholders and makes recommendations to the Board of Directors, etc. The Conflict of Interest Advisory Committee meets, in principle, each time when there is a material transaction, etc. where controlling shareholder’s interest conflicts with the minority shareholders’ interest. (D) Executive Officers’ Meeting The Executive Officers’ Meeting consists of eleven members: President & CEO Masataka Kinoshita who chairs the committee, Representative Directors Shigeyoshi Kinoshita and Hiroshi Naruse, executive officers who serve concurrently as directors Tomomi Uchida, Takashi Kiribuchi, Masaru Kuroda, Michihito Onodera, Tomoo Shikanoya, Masashi Yoshiba, Yuji Kinoshita and Masatoshi Nabeoka.. In the presence of Members of Audit & Supervisory Committee, the Executive Officers’ Meeting discusses and makes decisions related to the execution of important business operations delegated by the Board of Directors to the President and Director, and deliberates management policies and management plans in advance for resolution at the Board of Directors Meeting in accordance with basic policies determined by the Board of Directors. The Executive Officers’ Meeting assembles three times a month, in principle, and more as deemed necessary. (A) Internal Audit (2) Status of Internal Audit and Audit by Audit & Supervisory Committee With an auditing staff of twenty people, the Internal Audit Department verifies, evaluates, and recommends ways to address problems pertaining to compliance status, including observance of relevant laws, internal control initiatives, and other activities of the Company’s business execution departments. In addition to ensuring conformity with various rules, the Department obtains an accurate understanding of the risks facing the Company. Based on this understanding, it conducts risk approach audits to evaluate the risk management stance of each relevant entity within the Company, and reports the results of such audits regularly to the Board of Directors and the Audit & Supervisory Committee. In addition, the Internal Audit Department conducts direct audits of subsidiaries in the ACOM Group and provides assistance to auditing staff of such subsidiaries, thus ensuring establishment of an effective Group auditing system. (B) Audit by Audit & Supervisory Committee (a) Organization, members, and procedures of the Audit & Supervisory Committee The Audit & Supervisory Committee consists of three Audit & Supervisory Committee Members, all of whom are selected as a Full-time Audit & Supervisory Committee Member. The Company has selected two Outside Audit & Supervisory Committee Members who have been registered as independent directors with the Tokyo Stock Exchange in accordance with its regulations. Furthermore, with a view to enhancing the effectiveness of audits, all Audit & Supervisory Committee Members have been selected as Selected Members of Audit & Supervisory Committee who are authorized to investigate pursuant to Article 399-3 of the Companies Act. A Member of Audit & Supervisory Committee Kazuo Fukumoto has abundant knowledge about financial and accounting affairs with his experience of having served as Chief General Manager of the corporate planning and administration and accounting departments and Executive Officer of the Company, as well as Director in charge of accounting department after his assumption of office as Director. 20 ACOM CO., LTD. CORPORATE GOVERNANCE (b) Status of Activities of the Audit & Supervisory Committee and Audit & Supervisory Committee Members Category Name Number of meetings held Number of meetings attended Full-time Member of Audit & Supervisory Committee (Outside) Full-time Member of Audit & Supervisory Committee Full-time Member of Audit & Supervisory Committee (Outside) Tatsuya Ito Kazuo Fukumoto Masahide Ishikawa 14 14 14 14 14 14 The Audit & Supervisory Committee attended the Board of Directors Meetings and other major meetings, received reports from Directors, employees, etc. on matters regarding their execution of duties, requested explanations as necessary, and expressed opinions, and also reviewed important approval documents and other materials and examined the Company’s business and financial situation at the head office and principal offices, in accordance with resolved auditing policies, audit plan, etc., and in cooperation with the Company’s Internal Audit Department and other departments. As for subsidiaries, the Audit & Supervisory Committee endeavored to communicate and share information with the directors and corporate auditors of subsidiaries and received reports on business from subsidiaries, as necessary. In addition, the Audit & Supervisory Committee monitored and verified whether the Accounting Auditor maintained its independent position and performed appropriate audits, received reports from the Accounting Auditor on the status of the execution of its duties and requested explanations, as necessary, and discussed key audit matters. Each Audit & Supervisory Committee Member conducted the above auditing activities based on the division of duties prescribed in the audit plan and reported results to the Audit & Supervisory Committee each time. The Audit & Supervisory Committee discussed matters set forth in the Companies Act, such as the approval of transactions involving conflict of interest and the reappointment of the Accounting Auditor, and performed audits while paying due attention to the establishment of an internal control system and the status of its operation. (3) Status of Accounting Audit (A) Name of the audit corporation Deloitte Touche Tohmatsu LLC (B) Period of continuous audit service to the Company 12 years (C) Names of Certified Public Accountants (CPAs) who audited the Company’s Accounts Designated employee, managing partner: Designated employee, managing partner: Kunikazu Awashima Kenji Ota (D) Breakdown of Team Auditing the Company’s Accounts CPAs: 7 persons Assistant certified public accountants, etc.: 10 persons 23 persons Other staff: (E) Breakdown of compensation for Auditors Amounts of compensation, etc. for Accounting Auditors of the Company: ・ Amount of compensation, etc. for the duties provided for in Article 2-1 of the Certified Public Accountants Act: 125 million yen 21 ACOM CO., LTD. CORPORATE GOVERNANCE Public Accountants Act: 1 million yen (4) Breakdown of Compensation for Directors ・ Amount of compensation, etc. for the duties other than those provided for in Article 2-1 of the Certified (A) Directors (excluding dir