オムロン（6645） – Corporate Governance Report

June 1, 2022 OMRON Corporation President and CEO : Yoshihito Yamada Contact: Board of Directors Office +81-3-6718-3410Stock Ticker No.: 6645 URL: https://www.omron.com/global/en/ Corporate Governance Report I. Basic Policies for Corporate Governance, Capital Structure, CorporateAttributes and other Basic Information1. Basic Policies1. Basic Stance for Corporate Governance and Objective of Establishing the CorporateGovernance Policies At the OMRON Corporation and its affiliated companies (hereinafter referred to as the “OMRON Group”), corporate governance is defined as the system of processes and practices based on the OMRON Principles and the OMRON Management Philosophy. The system is intended to ensure transparency and fairness in business and speed up management decisions and practices. This is done by connecting the entire process from oversight and supervision all the way to business execution in order to boost the OMRON Group’s competitive edge. OMRON’s corporate governance also involves building such a system and maintaining its proper function. The ultimate objective is to achieve sustainable enhancement of corporate value by earning the support of all stakeholders. In accordance with this basic stance, the OMRON Group has set forth the following corporate governance policies (hereinafter referred to as the“Policies”) as the foundation for the Group’s pursuit of continuous improvement of its corporate governance. ＜OMRON Principles＞ Our Mission To improve lives and contribute to a better society Our Values ・ Innovation Driven by Social NeedsBe a pioneer in creating inspired solutions for the future.・ Challenging OurselvesPursue new challenges with passion and courage.1・ Respect for All Act with integrity and encourage everyone’s potential. ＜Management Philosophy＞ We believe a business should create value for society through its key practices. We are committed to sustainably increasing our long-term value by putting Our Mission and Values into practice. ・We uphold a long-term vision in our business practices to create solutions to society’s ・ We operate as a truly global company through our fair and transparent management ・ We cultivate strong relationships with all of our stakeholders through responsible needs practices engagement 【Reasons for not implementing each principle of the Corporate Governance Code】 The Company implements all of the principles set forth in the Corporate Governance Code, and discloses the implementation status in the OMRON Corporate Governance Policies, etc. 【Disclosure based on each principle set forth in the Corporate Governance Code】 ・The Company implements all of the principles set forth in the Corporate Governance Code, and discloses the implementation status in the OMRON Corporate Governance Policies, etc. ・These Policies are available at the OMRON Group Website: URL: https://www.omron.com/global/en/about/corporate/governance/policy/ ・For details regarding the Company’s implementation of the principles stated in the Code, please refer to “Corporate Governance Code Implementation Status”. 22. Capital Structure Percentage of shares held by overseas investors More than 30% Major Shareholders: (Updated) Name The Master Trust Bank of Japan, Ltd. (trust account) Custody Bank of Japan, Ltd. (trust account ) The Bank of Kyoto, Ltd. MUFG Bank.Ltd SSBTC Client Omnibus Account Moxley and Co LLC State Street Bank and Trust Company 505223 Nippon Life Insurance Company State Street Bank West Client – Treaty 505234 Custody Bank of Japan, Ltd. (securities investment trust account) Controlling shareholders (except parent company) None None Parent company Number of Shares Held Percentage (%) 45,061,800 14,428,600 7,069,265 5,142,695 4,677,673 4,030,579 4,028,861 3,639,801 3,186,341 2,932,400 22.55 7.22 3.53 2.57 2.34 2.01 2.01 1.82 1.59 1.46 Supplemental Remarks (Updated) 1. The percentage of shares is calculated excluding treasury stock. 2. Although the Company holds 6,447 thousand shares of treasury stock (the ratio to a total of shares issued: 3.12%), it is excluded from the above list of major shareholders. 3. On April 1, 2019, Mitsubishi UFJ Financial Group, Inc. filed an amendment to the major shareholding status report, which is open to public, stating that its four group companies held 18,749 thousand shares of the Company (representing 8.76% of the total number of shares issued) as of March 25, 2019. However, the Company has not been able to confirm the number of shares substantially possessed by the four group companies, and therefore these shares are not included in major shareholders stated above. 4. On May 21, 2020, Sumitomo Mitsui Trust Bank, Limited filed an amendment to the major shareholding status report, which is open to public, stating that its two group companies held 14,731 thousand shares of the Company (representing 7.14% of the total number of shares issued) as of May 15, 2020. However, the Company has not been able to confirm the number of shares substantially possessed by the two group companies, and therefore these shares are not included in major shareholders stated above. 5. On July 20, 2020, Nomura Securities Co., Ltd. filed an amendment to the major shareholding status report, which is open to public, stating that its one group company held 16,272 thousand shares of the Company (representing 7.89% of the total number of shares issued) as of July 15, 2020. However, the Company has not been able to confirm the number of shares substantially possessed by the group company, and therefore these shares are not included in major shareholders stated above. 36. On March 22, 2022, BlackRock Japan Co., Ltd. filed an amendment to the major shareholding status report, which is open to public, stating that its 12 group companies held 16,217 thousand shares of the Company (representing 7.86% of the total number of shares issued) as of March 15, 2022. However, the Company has not been able to confirm the number of shares substantially possessed by the 12 group companies, and therefore these shares are not included in major shareholders stated above. 3. Corporate Attributes Stock exchange listings (Updated) Fiscal year end Industry （Consolidated）Number of Employees （Consolidated）Net Sales Number of consolidated subsidiaries Tokyo Stock Exchange (Prime Market) March 31 Electrical equipment More than 1,000 From ¥100 billion to less than ¥1 trillion From 100 to less than 300 4. Policies relating to measures for protecting minority shareholders when conducting transactions etc. with controlling shareholders None. 5. Other Special Items Exerting a Significant Impact on Corporate Governance None. 4II. Organizational Structure for Managerial Decision-Making, Execution, Supervision and other Corporate Governance Structure 1. Organizational Structure and Operational Management Type of Organization Company with Audit & Supervisory Board Members Board of Directors: Number of directors stipulated in Articles of Incorporation Directors’ term of office stipulated in Articles of Incorporation Chairperson of Board of Directors 10 1 year Number of directors Appointment of Outside Directors Number of Outside Directors Number of Outside Directors designated as Independent Director Relationship with the Company (1) Name Chairman of the Board (unless double as the President) 8 Yes 3 3 Mr. Eizo Kobayashi Mr. Takehiro Kamigama Ms. Izumi Kobayashi *Categories for relationship with the Company From another company From another company From another company Attribute Relationship with the Company* a b c d e f g h △ △ i j k *○” when the said individual presently falls or has recently fallen under each of the following categories; “△” when the said individual fell under each of the following categories in the past. *●” when a close relative of the said individual presently falls or has recently fallen under each of the following categories; “▲” when a close relative of the said individual fell under each of the following categories in the past. a. Executive of a listed company or its subsidiary b. Executive or non-executive director of the parent company of a listed company c. Executive of a fellow subsidiary company of a listed company d. The party who’s principal client or supplier is a listed company or executive thereof e. Principal client or supplier of a listed company or executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from a listed company besides compensation as an executive 5g. Principal shareholder of a listed company (executive of the said corporate shareholder if the principal shareholder is a legal entity) h. Executive of a client or supplier company of a listed company (which does not correspond to any of d, e, or f, above) (the said individual only) i. Executive of a company, between which and OMRON outside directors are mutually appointed (the said individual only) j. Executive of a company or organization that receives a donation from a listed company (the said individual only) k. Other 6 Relationship with the Company (2) (Updated) Independent director Supplemental information on corresponding items Name Mr. Eizo Kobayashi ○ Mr. Eizo Kobayashi meets the requirements of the Company’s own original ‘Independence Requirements for Outside Directors and Audit & Supervisory Board Members’. He is registered as an independent director to the Tokyo Stock Exchange, Inc. (For more details, please see the Independent Directors and Audit & Supervisory Board Members section below described) Mr. Eizo Kobayashi currently serves as Director Emeritus of ITOCHU Corporation. While the Group has a business relationship with the ITOCHU Group including sales of products, such transactions in fiscal 2021 accounted for less than 1% of the consolidated net sales of the Group and those of the ITOCHU Group; there is nothing questionable regarding the independence of Mr. Kobayashi, and there are no special interests between Mr. Kobayashi and the Company. ・ Director Emeritus of ITOCHU ・Outside Director of Japan Airlines Co., ・Outside Director of Japan Exchange Corporation Ltd. Group, Inc. ・Supervisory Committee Member of The Norinchukin Bank ・Outside Director of Nippon Venture Capital Co., Ltd. ○ Mr. Takehiro Kamigama Mr. Takehiro Kamigama meets the requirements of the Company’s own original ‘Independence Requirements for Outside Directors and Audit & Supervisory Board Members’. He is registered as an independent director to the Tokyo Stock Exchange, Inc. (For more details, please see the Independent Directors and Audit & Supervisory Board Members section below described) Although Mr. Takehiro Kamigama had formerly served as President & Representative Director Reason for selecting as outside director (and reason for appointing as independent director ) Having served in management positions at a global company, Mr. Eizo Kobayashi has experience in proactive business development in a wide range of fields along with superior insight into management and appropriately supervises the corporate management as an Outside Director. In addition, Mr. Kobayashi shares his experience and insight as a management expert, and actively comments as Chairman of the Personnel Advisory Committee, CEO Selection Advisory Committee and Corporate Governance Committee and as a member of the Compensation Advisory Committee to contribute to increasing transparency and fairness in the management of the Company. Based on these factors, the Company expects that he will be a suitable person for supervising management for sustained improvements in corporate value and therefore requests his reelection as an Outside Director. Personnel Advisory Committee confirm that he meets the Independence Requirements and serves for protecting general shareholders’ interests as an independent director. The Company has defined the Independence Requirements in Corporate Governance Committee. According to the Independence Requirements, independent directors are selected by Board of Directors after Personnel Advisory Committee headed by an outside director reply to inquiries from Board of Directors. Having served in management positions at a global company, Mr. Takehiro Kamigama has a considerable track record of management achievements and superior insight, and appropriately supervises corporate management as an Outside Director. In addition, Mr. Kamigama shares his experience and insight as management expert, and actively comments as Chairman of the Compensation Advisory Committee, Vice Chairman of the Corporate Governance Committee, 7 of TDK Corporation, he stepped down from the position in June of 2016. While the Group has a business relationship with the TDK Group including sales of products, such transactions in fiscal 2021 accounted for less than 1% of the consolidated net sales of the Group and those of the TDK Group; there is nothing questionable regarding the independence of Mr. Kamigama, and there are no special interests between Mr. Kamigama and the Company. ・Chief Consultant of Contemporary Amperex Technology Japan KK ・Outside Director of Yamaha Motor Co., Ltd. ・Outside Director of SoftBank Corp. ・Outside Director of the Board of KOKUYO Co., Ltd. and as a member of the Personnel Advisory Committee and CEO Selection Advisory Committee to contribute to increasing transparency and fairness in the management of the Company. Based on these factors, the Company expects that he will be a suitable person for supervising management for sustained improvements in corporate value and therefore requests his reelection as an Outside Director. Personnel Advisory Committee confirm that he meets the Independence Requirements and serves for protecting general shareholders’ interests as an independent director. The Company has defined the Independence Requirements in Corporate Governance Committee. According to the Independence Requirements, independent directors are selected by Board of Directors after Personnel Advisory Committee headed by an outside director reply to inquiries from Board of Directors. 8Ms. Izumi Kobayashi ○ Ms. Izumi Kobayashi meets the requirements of the Company’s own original ‘Independence Requirements for Outside Directors and Audit & Supervisory Board Members’. She is registered as an independent director to the Tokyo Stock Exchange, Inc. (For more details, please see the Independent Directors and Audit & Supervisory Board Members section below described) ・ Outside Director of ANA HOLDINGS ・External Director of Mitsui & Co., Ltd. ・Outside Director of Mizuho Financial INC. Group, Inc. Ms. Izumi Kobayashi has abundant experience and international insight cultivated through her tenure as a representative for private financial institutions and an international development financial institution. Furthermore, she has expertise in corporate governance, and appropriately supervises corporate management as an Outside Director. In addition, Ms. Kobayashi shares her experience and insight as management expert, and actively comments as a member of the Personnel Advisory Committee, CEO Selection Advisory Committee, Compensation Advisory Committee and Corporate Governance Committee to contribute to increasing transparency and fairness in the management of the Company. Based on these factors, the Company expects that she will be a suitable person for supervising management for sustained improvements in corporate value and therefore requests her reelection as an Outside Director. Personnel Advisory Committee confirm that she meets the Independence Requirements and serves for protecting general shareholders’ interests as an independent director. The Company has defined the Independence Requirements in Corporate Governance Committee. According to the Independence Requirements, independent directors are selected by Board of Directors after Personnel Advisory Committee headed by an outside director reply to inquiries from Board of Directors. Any optional committee equivalent to the Nomination Committee or Remuneration Committee Yes Establishment of optional advisory committees, committee composition, and attributes of the chairperson Committee Committee members Full-time members Optional committee equivalent to Nomination Committee Personnel Advisory Committee 5 – Optional committee equivalent to Remuneration Committee Compensation Advisory Committee 5 – 9Internal directors Outside directors Outside experts Others Chairperson 2 3 – – Outside director 2 3 – – Outside director Supplemental Remarks Note: Please refer to “5. Advisory Committees” of Section 4 of the OMRON Corporate Governance Policies. Audit & Supervisory Board Members: Audit & Supervisory Board Number of Audit & Supervisory Board Members stipulated in Articles of Incorporation Number of Audit & Supervisory Board Members Yes 5 4 Status of Cooperation between Audit & Supervisory Board members, the Accounting Auditor, and the Corporate Internal Auditing Division Note: Please refer to “3. Audit & Supervisory Board, (3) Relationship with External Auditors and the Internal Auditing Division ” of Section 4 of the OMRON Corporate Governance Policies. Appointment of Audit & Supervisory Board Members (Independent) Number of Audit & Supervisory Board (Independent) Number of Audit & Supervisory Board Members (Independent) designated as independent officers Yes 2 2 Relationship with the Company (1) Name Attribute Mr. Hideyo Uchiyama Certified Public Accountant Attorney at Law Relationship with the Company* a b c d e f g h i △ j k l m Mr. Tadashi Kunihiro * Categories for relationship with the Company *○” when the said individual presently falls or has recently fallen under each of the following categories; “△” when the said individual fell under each of the following categories in the past. *●” when a close relative of the said individual presently falls or has recently fallen under each of the following categories; “▲” when a close relative of the said individual fell under each of the following categories in the past. 10a. Executive of a listed company or its subsidiary b. Non-executive directors or accounting advisors of the listed company or its subsidiaries c. Executive or non-executive director of the parent company of a listed company d. Parent company of Audit & Supervisory Board Members of listed company e. Executive of a fellow subsidiary company of a listed company f. The party who’s principal client or supplier is a listed company or executive thereof g. Principal client or supplier of a listed company or executive thereof h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from a listed company besides compensation as an executive i. Principal shareholder of a listed company (executive of the said corporate shareholder if the principal shareholder is a legal entity) j. Executive of a client or supplier company of a listed company (which does not correspond to any of f, g, or h, above) (the said individual only) k. Executive of a company, between which and OMRON outside directors are mutually appointed (the said individual only) l. Executive of a company or organization that receives a donation from a listed company (the said individual only) m. Other Relationship with the Company (2) (Updated) Supplemental information on corresponding items Name Independent Audit & Supervisory Board Member ○ Reason for selecting as Audit & Supervisory Board Member(Independent) Mr. Hideyo Uchiyama meets the requirements of the Company’s own original ‘Independence Requirements for Outside Directors and Audit & Supervisory Board Members’. He is registered as an independent Audit & Supervisory Board Member to the Tokyo Stock Exchange, Inc. (For more details, please see the Independent Directors and Audit & Supervisory Board Members section described below). Although Mr. Hideyo Uchiyama had formerly served as CEO of KPMG Japan, he stepped down from the position in June of 2015. While the OMRON Group has a business relationship with KPMG, which includes outsourcing agreements, the transactions in fiscal 2021 accounted for less than 1% of the consolidated net sales of the Group and the total revenue of KPMG, respectively (also less than 1% of KPMG’s total revenue in Asia Pacific). Therefore, there is no Mr. Hideyo Uchiyama has years of working experience as a certified public accountant in an auditing firm and considerable knowledge regarding finance and accounting. Furthermore, as a top executive of an auditing firm and a corporate manager of a global consulting firm, he has abundant experience and superior insight. As an Independent Audit & Supervisory Board Member, he attends Board of Directors meetings and other important meetings, at which he proactively comments from the standpoint of audit on legality and adequacy, and he appropriately fulfills his role of auditing the performance of duties by Directors. In addition, Mr. Uchiyama actively comments as a member of Corporate Governance Committee to contribute to increasing transparency and fairness in the Company’s management. Based on these accomplishments and considerable amount of experience, the Company believes that he is a suitable person for an Audit & Supervisory Board Member and therefore selects him as an Independent Audit Mr. Hideyo Uchiyama 11Mr. Tadashi Kunihiro ○ reason to question the independence of Mr. Uchiyama. ・Executive Advisor of ASAHI Tax Corporation & Certified Public Accountant ・Outside Director of Sompo Holdings, Inc. ・Outside Director of Eisai Co., Ltd. Mr. Tadashi Kunihiro meets the requirements of the Company’s own original ‘Independence Requirements for Outside Directors and Audit & Supervisory Board Members’. He is registered as an independent Audit & Supervisory Board Member to the Tokyo Stock Exchange, Inc. (For more details, please see the Independent Directors and Audit & Supervisory Board Members section described below). ・Partner of T. Kunihiro & Co. Attorneys-at-Law ・Outside Director of Z Holdings Corporation ・Outside Director of Tokio Marine & Nichido Fire Insurance Co., Ltd. & Supervisory Board Member. Personnel Advisory Committee confirm that he meets the Independence Requirements and serves for protecting general shareholders’ interests as an independent Audit & Supervisory Board Member. The Company has defined the Independence Requirements in Corporate Governance Committee. According to this Independence Requirements, Mr. Uchiyama is qualified as independent Audit & Supervisory Board Member. Attorney Tadashi Kunihiro is principally specializing in corporate governance, compliance and Companies Act. He is an expert in corporate crisis management and has been appointed important positions including advisory roles in the Cabinet Office and the Consumer Affairs Agency. As an Independent Audit & Supervisory Board Member, he attends Board of Directors meetings and other important meetings, at which he proactively comments from the standpoint of audit on legality and adequacy, and he appropriately fulfills his role of auditing the performance of duties by Directors. In addition, Mr. Kunihiro actively comments as a member of Corporate Governance Committee to contribute to increasing transparency and fairness in the Company’s management. Based on these accomplishments and considerable amount of experience, the Company believes that he is a suitable person for an Audit & Supervisory Board Member and therefore selects him as an Independent Audit & Supervisory Board Member. Personnel Advisory Committee confirm that he meets the Independence Requirements and serves for protecting general shareholders’ interests as an independent Audit & Supervisory Board Member. The Company has defined the Independence Requirements in Corporate Governance Committee. According to this Independence Requirements, Mr. Kunihiro is qualified as an independent Audit & Supervisory Board Member. Independent Directors and Audit & Supervisory Board Members: Number of independent directors and Audit & Supervisory Board Members 5 12Matters relating to independent directors and Audit & Supervisory Board Members The Company’s Policy Regarding the Independence of Outside Directors and Audit & Supervisory Board Members (Independent) • In addition to the requirements of Japan’s Companies Act, the Company has formulated its own ‘Independence Requirements for Outside Directors and Audit & Supervisory Board Members’ (Note) and as we select all outside executives using these requirements as our standard, we judge them to be sufficiently independent, and register all of our outside executives as ‘independent directors and Audit & Supervisory Board Members.’ • When deciding on our ‘Independence Requirements for Outside Directors and Audit & Supervisory Board Members,’ we first consult with our Corporate Governance Committee (which is composed of outside executives) and confirm that these requirements are appropriate as independence criteria for outside executives before they are deliberated on and resolved by Board of Directors. Note: Independence Requirements for Outside Directors and Audit & Supervisory Board Members (revised December 25, 2014) To be considered for the position of outside executive, candidates themselves and/or the company/companies and/or organization/s they belong to must not: 1. Presently assume the role of director (excluding outside director), Audit & Supervisory Board Member (excluding outside Audit & Supervisory Board Member), executive officer and/or employee of the OMRON Group (Note), or have assumed any of these roles in the past. 2. Have been a principal shareholder* of the OMRON Group, or assumed the role of director, Audit & Supervisory Board Member, executive officer and/or employee of any legal entity that is a principal shareholder of the OMRON Group or any legal entity for which the OMRON Group is a principal shareholder, in any fiscal year of the past five years. * A “principal shareholder” means a company, etc. holding shares that provide 10% or more of total voting rights. 3. Be a director, Audit & Supervisory Board Member, executive officer and/or employee of any principal partner or supplier* of the OMRON Group. * A “principal partner or supplier” means a company whose payments to the OMRON Group or payments received from the OMRON Group in the current or any of the past three fiscal years represent 2% or more of the consolidated net sales of either the OMRON Group or the partner/supplier company (this also includes its parent company and important subsidiaries and affiliates). 4. Be a director, Audit & Supervisory Board Member, executive officer and/or employee of any company or organization that receives a large amount of donations* from the OMRON Group. 13* A “large amount of donations” means yearly donations in excess of ¥10 million or 2% of the consolidated net sales or total revenue of the recipient entity, whichever is larger, on average for the past three fiscal years. 5. Have directors, Audit & Supervisory Board Members, and/or executive officers who are mutually dispatched between the candidate’s company/organization and the OMRON Group. 6. Have assumed the role of representative, employee, partner or other staff member of an accounting auditor for the OMRON Group in any fiscal year of the past five years. 7. Be an attorney, certified public accountant, consultant or other agent who receives a large amount of monetary consideration* and/or other property from the OMRON Group, besides the compensation for directors and Audit & Supervisory Board Members. * A “large amount of monetary consideration” means a yearly consideration amounting to ¥10 million or more for individuals, and in the case of an organization, a yearly consideration that represents 2% or more of the consolidated net sales of the relevant organization, on average for the past three fiscal years. 8. Be a spouse, a relative within two degrees of kinship, a relative living together or a relative who shares living expenses with any of the following individuals: (1) A director, Audit & Supervisory Board Member, executive officer and/or core employee* of the OMRON Group. (2) An individual who assumed the role of director, Audit & Supervisory Board Member, executive officer and/or core employee of the OMRON Group in any fiscal year of the past five years. (3) An individual who is not qualified for outside directors and Audit & Supervisory Board Members in the above-mentioned items 2-7. * A “core employee” means an employee holding the position of senior general manager or higher. 9. Hold a position or condition that would bring the independence of the candidate into doubt when performing the duties of an outside director or Audit & Supervisory Board Member. Note: The above-mentioned “the OMRON Group” refers to OMRON Corporation and its subsidiaries and affiliates. Outside executives shall continue to comply with the above-mentioned independence requirements after they are appointed as outside directors or Audit & Supervisory Board Members. If they were assigned a major managerial position, their independence shall be verified according to the independence criteria herein at Personnel Advisory Committee. Incentives: 14Incentives Policies for Directors Introduced performance-linked compensation system and other Supplemental Remarks on This Item *Please refer to “Disclosure of decision-making policies relating to compensation amounts and calculation methods” Personnel eligible to receive stock options Supplemental Remarks on This Item Compensation of Directors: Diclosure of compensation of directors individual The compensation of some directors is disclosed individual Title Supplemental Remarks on This Item (Updated) Amount of Compensation for Directors and Audit & Supervisory Board Members for the 84th Fiscal Year (April 1, 2020-March 31, 2021) (JPY millions) Number (Persons) Base Salary Aggregate Compensation Short-term Performance- Linked Compensation (Bonuses) 299 [—] — [—] 299 [—] Medium-to-long-term, Performance- Linked Compensation (Stock Compensation) 245 [—] — [—] 245 [—] 892 [48] 98 [30] 990 [78] Directors [Outside Directors ] Audit & Supervisory Board Members [Audit & Supervisory Board Members (Independent) ] Total [Outside executives] 8 [3] 5 [2] 13 [5] 348 [48] 98 [30] 446 [78] Notes: 1. The amounts include compensation paid to one Audit & Supervisory Board Member who retired at the close of the 84th Ordinary General Meeting of Shareholders held on June 24, 2021. 2. The maximum limit of the aggregate compensation of Directors was set at JPY 35 million per month (by resolution of the 63rd Ordinary General Meeting of Shareholders held on June 27, 2000; the said resolution pertained to seven (7) Directors). The amounts of base salaries for each Director are determined by resolution of the Board of Directors based on discussions by and recommendations from the Compensation Advisory Committee. 3. The maximum limit of the aggregate compensation of Audit & Supervisory Board Members was set at JPY 11 million per month (by resolution of the 81st Ordinary General Meeting of Shareholders 15held on June 19, 2018; the said resolution pertained to four (4) Audit & Supervisory Board Members). The amount of base salary for Audit & Supervisory Board Members is determined by discussions among Audit & Supervisory Board Members. 4. The maximum limit of Directors’ bonuses was set at JPY 600 million per year (by resolution of the 81st Ordinary General Meeting of Shareholders held on June 19, 2018; the said resolution pertained to five (5) Directors). The amount of bonus for each Director is calculated based on the targets and actual results of operating income, net income, and ROIC for the 85th term (fiscal year ended March 31, 2022), and determined by resolution of the Board of Directors based on discussions by and recommendations from the Compensation Advisory Committee. Regarding each indicator’s actual results, please refer to Trends in Consolidated Results (available in Japanese only). 5. The 84th Ordinary General Meeting of Shareholders held on June 24, 2021 made a resolution to introduce stock compensation. Based on the resolution, the maximum limit of money to be contributed by the Company is JPY2.4 billion, and the maximum limit of the number of the Company’s shares to be granted and delivered as sales proceeds (“grant(ing), etc.”) is 600,000 shares during the four fiscal years from fiscal 2021 to fiscal 2024. The said resolution pertained to five (5) Directors. Regarding stock compensation, the Company shall award points to Directors calculated according to a prescribed formula, and the trust shall grant, etc. the Company’s shares corresponding to the points awarded during a certain period to the Directors. The final calculation of the number of points to be granted and the actual delivery will be carried out after the end of the target period from fiscal 2021 to fiscal 2024, but the expenses of stock compensation, as indicated above, are associated with the points granted during the fiscal year under review. The amount of stock compensation for each Director is calculated based on the financial targets evaluation (EPS, ROE) from fiscal 2021 to fiscal 2024, the sustainability evaluation (reduction of greenhouse gas emissions, score of Sustainable Engagement Index (SEI) in engagement survey and Dow Jones Sustainability Indices) targets and achievements, as well as the corporate value evaluation (relative TSR), and determined by resolution of the Board of Directors based on discussions by and recommendations from the Compensation Advisory Committee. 6. No Directors of the Company received any employee wages other than their compensation as Directors. * The above information is also contained in the convocation notice for the 85th Ordinary General Meeting of Shareholders and Business Report, and is also included on our website: https://www.omron.com/global/en/assets/file/ir/shareholder/convocation_notice_for_the_85th_ordinary_general_meeting_of_shareholders.pdf Are there decision-making policies relating to compensation amounts and calculation methods? Yes Disclosure of decision-making policies relating to compensation amounts and calculation methods Basic Principles of Compensation for Directors and Executive Officers 16 【Policy for Determining Compensation Amounts for Directors and Audit & Supervisory Board Members and Their Calculation Methods】 To increase objectivity and transparency with respect to compensation for Directors, the Company has a Compensation Advisory Committee chaired by an outside director, and the majority of its members consist of outside Directors. The Compensation Policy for Directors has been determined by a resolution of the Company’s Board of Directors, by reflecting the deliberations and recommendations of Compensation Advisory Committee. The amounts of compensation for individual Directors shall be determined by a resolution of Board of Directors, reflecting the deliberations and recommendations of Compensation Advisory Committee. These amounts shall be within the maximum limit of the sum of compensation amounts for all Directors set by a resolution at the General Meeting of Shareholders. The amounts of compensation for individual Audit & Supervisory Board Members shall be determined through discussions by Audit & Supervisory Board Members based on the Compensation Policy for Audit & Supervisory Board Members also determined by them. These amounts shall be within the maximum limit of the sum of compensation amounts for all Audit & Supervisory Board Members set by a resolution at the General Meeting of Shareholders. [Compensation Policy for Directors] 1) Basic policy ・The Company shall provide compensation sufficient to recruit as Directors exceptional people who are capable of putting the OMRON Principles into practice. ・The compensation structure shall be sufficient to motivate Directors to contribute to sustained enhancement of corporate value. ・The compensation structure shall maintain a high level of transparency, fairness, and rationality to ensure accountability to shareholders and other stakeholders. 2) Structure of compensation ・Compensation for Directors shall consist of a base salary, which is fixed compensation, and the Company’s performance-linked compensation, which varies depending on performance. ・Compensation for outside Directors shall consist of a base salary only, reflecting their roles and the need for maintaining independence. 3) Base salary ・ The amount of a base salary, paid monthly, shall be determined by taking into account the salary levels of other companies, as surveyed by a specialized outside organization. 4) Performance-linked compensation ・As short-term performance-linked compensation, the Company shall provide bonuses linked to yearly performance indicators, and to the degree of achievement of performance targets. Bonuses shall be paid as a lump sum after the conclusion of the fiscal year. 17 ・As medium- to long-term performance-linked compensation, the Company shall grant stock compensation linked to the degree of achievement of the goals of the medium-term management plan, and to the improvement in corporate value (value of stock). ・The performance-linked component of stock compensation shall be paid after the medium-term management plan concludes, while the non-performance-linked component shall be paid after the Director retires. ・The Company shall determine the target amounts for short-term performance-linked compensation and medium-to-long-term, performance-linked compensation based on the target pay mix specified according to each Director’s role and responsibility. 5) Compensation governance ・The compensation composition, compensation composition ratio, level of the base salary, as well as performance indicators and evaluation methods of performance-linked compensation shall be determined based on the deliberations and recommendations of the Compensation Advisory Committee. ・The Company shall determine the target amounts for short-term performance-linked compensation and medium-to-long-term, performance-linked compensation based on the target pay mix specified according to each Director’s role and responsibility. [Outline of Compensation for Directors] Please refer to the OMRON Group Website: https://www.omron.com/global/en/about/corporate/governance/compensation/ [Compensation Policy for Audit & Supervisory Board Members] 1) Basic policy ・The Company shall provide compensation sufficient to recruit exceptional people who are capable of performing the duties of Audit & Supervisory Board Members entrusted by shareholders. ・The compensation structure shall maintain a high level of transparency, fairness, and rationality to ensure accountability to shareholders and other stakeholders. 2) Compensation structure ・Compensation for Audit & Supervisory Board Members shall consist only of a base salary from the perspective of their roles and independence. 3) Base salary ・The amount of a base salary, paid monthly, shall be determined by taking into account the salary levels of other companies, as surveyed by a specialized outside organization. 4) Compensation governance ・The amount of compensation for each Audit & Supervisory Board Member shall be determined through discussions by Audit & Supervisory Board Members. 18Support System for Outside Directors and Audit & Supervisory Board Members (Independent): Note: Please refer to “6. Directors and Audit & Supervisory Board Members, (6) Support Structure” of Section 4 of the OMRON Corporate Governance Policies. 2. Items Related to Business Execution, Audits and Oversight, Nominations and Setting of Compensation, etc. (Overview of corporate governance framework) 1. The current corporate governance system Note: For details regarding the Company’s corporate governance system and initiatives intended to enhance corporate governance, please refer to the OMRON Corporate Governance Policies. Gender Composition of Directors, Audit & Supervisory Board Members and Executive Officers ・As of June 25, 2021, Board of Directors consists of eight members including one female Director. ・ The Company is considering an increase in diversity for the composition of Directors, Audit & Supervisory Board Members and Executive Officers in order to promote growth at the global level, enhance competitive strength, and respond to significant changes in the business environment. 2. Efforts toward Enhancing the Functions of Audit & Supervisory Board Audit & Supervisory Board System Please refer to “6. Systems to Ensure Effectiveness of Audit Performed by Audit & Supervisory Board Members” Regarding the Selection of Audit & Supervisory Board Members with Knowledge of Finance and Accounting ・ Mr. Hideyo Uchiyama, an Audit & Supervisory Board Member (Independent) , has years of working experience as a certified public accountant in an auditing firm and considerable knowledge regarding finance and accounting. Regarding the Selection of Audit & Supervisory Board Members (Independent) with a High Degree of Independence Please refer to the Relationship with the Company (2) section on page 10 and “Matters relating to independent officers” in the Independent Officers section for more information. 19 3. Limited liability agreements The Company has established a provision in its Articles of Incorporation regarding the limited liability agreements the Company enters into with its Outside Directors and Audit & Supervisory Board Members (Independent) with the approval of the shareholders, in order to ensure that these officers can adequately fulfill their duties and responsibilities. Accordingly, the Company has entered into limited liability agreements with Mr. Eizo Kobayashi, Mr. Takehiro Kamigama, Ms. Izumi Kobayashi, Mr. Hideyo Uchiyama, and Mr. Tadashi Kunihiro, under which each of these officers’ liability shall be limited to JPY 10 million or to the minimum amount of liability prescribed in Article 425-1 of the Companies Act, whichever is higher. 203. Reasons for OMRON’s Selection of its Current Corporate Governance System The Company has chosen to adopt the organizational structure of a “Company with Audit & Supervisory Board.” Board of Directors strives toward sustained improvements in the OMRON’s Group corporate value by exercising oversight functions over the overall management through the election of Directors, Audit & Supervisory Board Members and Executive Officers; the determination of compensation for Directors and Executive Officers; and making important operational decisions. Audit & Supervisory Board and the Audit Supervisory Board Members work to secure the integrity of the OMRON Group and the sustained improvement of corporate value by conducting audits on legality and appropriateness of Directors’ duties, and the fulfillment of Board of Directors’ oversight obligations. In addition, each Audit & Supervisory Board Member can exercise his/her authority on his/her own as a single-person organ in which the power of final decision-making is given to one person. This allows them to play a crucial role in strengthening internal controls. Furthermore, to enhance the oversight functions of Board of Directors, four voluntary advisory committees are attached to Board of Directors. CEO Selection Advisory Committee, Personnel Advisory Committee and Compensation Advisory Committee are chaired by an independent outside director, and the majority of each committee should be composed of independent outside director. The President & CEO does not belong to any of these committees. CEO Selection Advisory Committee, in particular, is dedicated to the deliberation and nomination of candidates for CEO, which is the top-priority matter in management oversight. In addition, Corporate Governance Committee, established for the purpose of enhancing corporate governance, is also chaired by an independent outside director, and exclusively comprises an independent outside director and Audit & Supervisory Board Members (Independent). Through these unique initiatives, the Company has established and adopted a system that enhances the transparency and objectivity of management’s decision-making process. By incorporating the best aspects of the corporate governance system of a so-called “Company with Committees (Nomination, etc.)” in this way, we have created the kind of hybrid corporate governance structure that we feel is most appropriate for OMRON as a Company with Audit & Supervisory Board. 21III. Status of Execution of Measures Concerning Shareholders and Other Interested Parties Supplemental Remarks 26 days or more before the date of the meeting. 1. Measures to Vitalize the General Shareholders’ Meeting and Facilitate the Exercise of Voting Rights (Updated) Early sending out of convocation notices for the general meeting of shareholders Avoidance of peak day when scheduling the general meeting of shareholders Electronic voting Three business days or more before the peak day. Participation in the Electronic Voting Platform system and other efforts to improve an environment in which institutional investors can exercise their voting rights Provision of convocation notice summaries written in English 2. IR-related Activities Preparation and publication of disclosure policy Regular information meetings for individual investors Regular information meetings for analysts and institutional investors Regular information meetings for overseas investors OMRON has adopted electronic voting via Internet since 2003, enabling shareholders voting through computers and smartphones. OMRON has participated in the system since 2006, and then started posting convocation notices both in Japanese and English on the websites of Tokyo Stock Exchange, ICJ and OMRON since 2013, prior to sending out the printed notice. The posting is made approximately one month prior to the date of the meeting. OMRON has been providing English version of the convocation notice (entire translation, for reference purpose) on the website of OMRON for long, and then the websites of Tokyo Stock Exchange and ICJ since 2013, approximately one month prior to the date of the meeting. Supplemental remarks Disclosure policy is posted on the IR section of OMRON’s website in Japanese and English. OMRON participates in information meetings planned by securities companies, and provides information on the website. OMRON holds an earnings announcement meeting every quarter and webcasts the meeting (except meetings held by telephone). The company regularly holds one-on-one dialogues with domestic institutional investors. OMRON webcasts an earnings announcement meeting with English captions every quarter (except meetings held by telephone). The company regularly holds one-on-one Explanation by representative ─ No Yes Yes 22Posting of IR materials on website Establishment of department and/or manager in charge of IR ─ ─ dialogues with overseas institutional investors. Also, OMRON participates several times a year in IR conference organized by securities companies for investors abroad, in Japan and overseas. OMRON posts quarterly results, annual integrated reports, and TSE-required timely disclosure documents both in English and Japanese. Department in charge: Global Investor & Brand Communications Headquarters Executive in charge: Tsutomu Igaki, Executive Officer and Senior General Manager 3. Measures for Respecting the Position of Stakeholders Rules for Respecting the Position of Stakeholders through Internal Regulations, etc. Supplemental Remarks “Management Philosophy” is defined as follows. This is an important philosophy when we practice “The OMRON Principles” through our business and our commitment to all stakeholders. “We believe a business should create value for society through its key practices. We are committed to sustainably increasing our long-term value by putting Our Mission and Values into practice.” ・We uphold a long-term vision in our business practices to Implementation of environmental activities, CSR activities, etc. create solutions to society’s needs ・We operate as a truly global company through our fair and transparent management practices ・We cultivate strong relationships with all of our stakeholders through responsible engagement < Environmental activities > ・Regarding our environmental activities, we have our Environmental Policy that “We will contribute to realizing sustainable societies, globally, by providing eco-friendly products and services that can contribute to the global environment and by efficient management of resources.” Specifically, the following 5 measures will be taken: 1.Provide eco-friendly products and services that can contribute to the global environment”, 2.Prevent Global Warming, 3.Use resources efficiently, 4.Co-existence with nature, 5.Implement environmental management. ・In July 2018, we set new environmental targets under OMRON Carbon Zero, aligned with Our Mission ‘ To Improve lives and contribute to a better society. ‘We also made a commitment to set greenhouse gas emissions reduction target based on scientific grounds for the SBTi (Science Based Targets Initiative). Under OMRON Carbon Zero, we aim to reduce 23Scope 1 and Scope 2 greenhouse gas emissions to zero by through adaptation of energy conservation and 2050 renewable energy practices. In addition, we are considering measures to reduce Scope 3 gas emissions. ・In February 2019, we declared our support for the Task Force on Climate-related Financial Disclosure (TCFD), pursuing group-wide initiatives using the TCFD framework. In fiscal 2019, we set out scenario analysis starting from the Social Solutions Business, which offers energy generation, energy storage, and energy conservation products and services to help customers maximize their energy efficiency. Then we disclosed analysis results on our integrated report and our website according to the TCFD framework. In fiscal 2021, we have been carrying out scenario analysis for other businesses, namely the Industrial Automation Business (IAB), the Electronic and Mechanical Components Business (EMC), and the Healthcare Business (HCB), and are scheduled to disclose analysis results in fiscal 2022. Please refer to the website for details on our disclosure: https://www.omron.com/global/en/assets/file/ir/irlib/ar21e/OMRON_Integrated_Report_2021_en_Environment.pdf https://sustainability.omron.com/en/environ/climate_change/response/ ・We aim for contributing to sustainable development of the society and raising corporate value through creating social values, guided in our mission by the OMRON Principles. To this end, we have developed sustainability initiative where we identified issues and set goals pursuant to our mid-term business plan. Specific CSR activities include reviewing the status of sustainability issues, monitoring the progress, and identifying problems to be solved by the Executive Council and/or the Sustainability Committee. Board of directors receives a report on progress, discuss critical issues and recommended action plan, and oversee these initiatives. ・Please refer to OMRON Sustainability Site below. https://sustainability.omron.com/en We have defined Sustainability Policy in order to fulfill the corporate social responsibility. We consider Sustainability Policy to reflect the same meaning and content as declared by our Management Philosophy based on the OMRON Principles. Namely, “We are committed to sustainably enhancing our long-term corporate value by putting the OMRON Principles into practice.” Under the Policy, it is clearly stated that “We cultivate strong relationships with all of our stakeholders through responsible engagement.” ・“Respect for All” is one of the Management Commitments in the OMRON Principles. As such, we strive to create a Formulation of policies on providing information to stakeholders Other 24workplace where diverse people with individual values and thoughts can fully put their capabilities to use and assume vital roles. ・In 2012, a dedicated organization was established to promote diversity in the workplace. ・For details about the status of promoting women in managerial roles, foreign nationals, and midcareer employees, please refer to the OMRON Group Website: https://sustainability.omron.com/en/rights/education/ With the belief that the health of individual employees is fundamental to our business, OMRON issued “OMRON Health Management Declaration” in 2017, according to which top managers are taking the lead in promoting health and productivity. All Group Companies in Japan establish an action agenda for “Exercise, Sleep, Mental Health, Diet, and Smoking” which are selected as five key factors as “Boost 5”, leading to the concentration of work and wellness of life, and programs to achieve each index have been implemented. Visualizing health conditions and the support of conducting seminars or having advice from industrial doctors or occupational health nurses are carried out, in order to facilitate the employees’ awareness and habituation. By continuously taking Boost 5 approaches throughout the year, with the aim of reducing future health risks, we develop mentally and physically tough talents, aiming to create a workplace with full of smile. We were recognized for these efforts and selected as brands of the Health & Productivity Stock Selection under The Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange for the third consecutive years (2019, 2020 and 2021). 25IV. Matters Related to the Internal Control System 1. Basic Approach and Development and Operation Status Related to the Internal Control Based on the Companies Act and the Ordinance for Enforcement of the Companies Act, the Company has set the Internal Control System of the Company and its subsidiaries (“the OMRON Group”) as follows: 1. System to Ensure that Execution of Duties by Directors and Employees of the OMRON Group Conforms to Laws and Regulations and the Articles of Incorporation (1) The OMRON Group Management Policies and the OMRON Group Rules have been established to ensure transparency, fairness and the global nature of management in the OMRON Group, as well as serve as the management base for conducting appropriate and timely decision-making. (2) The key theme of “socially responsible corporate management” is promoting corporate ethics and compliance whereby the Company complies with laws and regulations in carrying out business activities. In particular, the Company has devoted every effort to prevent anti-competitive activities such as cartel, bribery, and other significant risks from occurring. (3) The Company has familiarized its officers and employees with the OMRON Group Rules for Ethical Conduct as specific action guidelines for practicing “socially responsible corporate management” and enforces strict compliance. (4) The Company appoints an executive in charge of corporate ethics and compliance and establishes the Corporate Ethics & Risk Management Committee as an organization to promote corporate ethics and compliance. As specific activities, the President himself issues instructions on corporate ethics and compliance, providing opportunities to disseminate awareness. In addition, the Committee conducts regular training and education for officers and employees on anti-competitive activities such as cartel and bribery as well as on corporate ethics and compliance. (5) The Company has set up a whistleblower hotline both inside and outside the Company to receive reports of acts that are, or could potentially be, in violation of the OMRON Group Rules for Ethical Conduct, work rules or laws. In accordance with laws and internal company rules, the content of these reports is protected as confidential, and employees may not be given unfavorable treatment for making such reports. (6) With the aim of realizing highly transparent management, the Company positions information disclosure as an important task, and has established an Information Disclosure Executive Committee directly under the President to promote the disclosure. The Committee engages in activities to ensure the accuracy, timeliness and completeness of information disclosure across the OMRON Group, and proactively makes disclosure to the public according to the standard set out by the Group. 26(7) The Company has set up an internal auditing division directly under the President to conduct operational audits. (8) To ensure the propriety of the OMRON Group’s financial reporting, a system has been established that enables reports to be submitted appropriately in accordance with laws and regulations through measures such as monitoring by Internal Audit Divisions after each division conducts its own review of maintenance and operation of business processes. (9) The OMRON Group’s policy on exclusion of antisocial forces is defined in the OMRON Group Management Policies and the OMRON Group Rules for Ethical Conduct. 2. System for Storage and Management of Information Related to Execution of Directors’ (1) Under Board of Directors Rules, the minutes of Board of Directors meetings are recorded Duties and kept for 10 years. (2) Under the Management Rules, which state the basic policy and principles for Group management and decision making, decision reports are issued for decisions on significant issues. Decision reports, minutes of Executive Committee meetings, and other important documents showing the state of execution of duties are preserved and managed in accordance with laws and internal company rules. 3. Regulations and Other Systems Concerning Loss Risk Management of the OMRON Group (1) The Company will engage in risk management integrating all activities that entail risks on a global scale, to ensure the Company’s survival and to secure the achievement of corporate objectives while fulfilling its corporate social responsibility. (2) The Company will strive to avoid, mitigate and transfer risk of loss through collecting information on and conducting analysis of risks while taking countermeasures against them, in accordance with the OMRON Group Rules for Integrated Risk Management. (3) Significant risks for the OMRON Group shall be designated, and Group-wide response measures are across all internal companies shall be determined at Executive Committee meeting. (4) When a crisis occurs, the Company makes reports, transmits information, and assembles the necessary response teams in accordance with the procedures specified in the OMRON Group Rules for Integrated Risk Management. 4. Systems to Ensure Efficient Execution of Duties by Directors of the OMRON Group (1) The Company uses the Executive Officer system and keeps the number of Directors small to ensure substantive discussion and swift decision making at Board of Directors meetings. (2) In addition to Board of Directors, the Company has an Executive Committee, which discusses and decides on significant business execution issues within the scope of the President’s authority. 27(3) The Company uses an internal company system, and promotes faster decision making and efficient business operations by delegating substantial authority to the President of each internal company. (4) The OMRON Group performs its duties in accordance with the division of duties and scope of decision-making authority set forth based on a concept of proper control and prompt decision making as basic principles. (5) The OMRON Group establishes a medium-to-long-term management plan. In order to substantiate this management plan, it formulates a business plan in each fiscal year. 5. System to Report to the Company on Matters concerning Execution of Duties by Directors of Subsidiaries Information regarding operational results, financial status a