Corporate Governance

Directors and the Board of Directors

The term of office of Directors is one year. With the objective of strengthening the management supervisory functions, three out of nine Company’s Directors are independent Outside Directors; moreover, the Chairperson of the Board of Directors is appointed from among Directors who is not involved in the execution of business. The Board of Directors holds a meeting, in principle, once a month. It makes decisions on important matters, such as management policy, and supervises the status of business execution by Directors and Executive Officers. In FY2024, 14 meetings of the Board of Directors were held.

Auditors and the Board of Auditors

Of four Auditors, three are Outside Auditors. Auditors not only attend important meetings such as Board of Directors’ meetings, Management Council meetings, etc., but also inspect important approval documents. They thus audit the status of Directors’ business execution, capitalizing on the knowledge of inside Auditors who are well versed in the wide range of businesses of the Company, as well as the expertise of Outside Auditors experience relating to financial and accounting affairs or with business management experience. In addition, as an organization under the direct control of the Board of Auditors, the Company has established the Auditors Staff Division. The Division staff who assist the Auditors in their duties are independent of the Directors. By establishing this structure, we strive to secure the effectiveness of audits.

Management Council

The Management Council meets once a month, in principle, to make decisions on important matters regarding business execution by Executive Officers, based on the management policy, etc., determined at meetings of the Board of Directors.

Composition of Each Committee

Note: ◎ Chairperson, 〇 Committee members

The Company selects candidates for its Board of Directors by comprehensively considering each member’s personality and other aptitudes, in order to form a Board of Directors with a good overall balance of knowledge, experience, and ability to effectively perform its roles and responsibilities. It should also ensure it maintains an appropriate size and diversity, including in terms of gender, internationality, professional experience, and age. To enhance our corporate value in the medium to long term in keeping with the basic philosophy described below, the Nomination and Compensation Committee held discussions on the skill items required for the Company’s Board of Directors, and decided on the following eight items: corporate management; compliance and risk management; understanding of diversity and sustainability; international business; R&D, production, and new business development; sales and marketing; human resource development and training; and finance and accounting. These skill items will be reviewed and revised, if necessary, in the light of the business environment and social circumstances.

As of the end of June ,2025 the current Board of Directors consists nine Directors with knowledge in line with these skill items (including three independent Outside Directors, two of whom are female) and four Auditors (three of whom is are independent Outside Auditors). Independent Outside Directors include members who have management experience at other companies.

“How to Address” the Diversity on the Board of Directors

In 2022, The Company identified our material issues (materiality). To address one of these issues, “Challenge-oriented and transparent management,” it has set out the following indicators for board diversity.

Process for Determining the Compensation Level and System

Compensation level and system appropriateness are verified by the Nomination and Compensation Committee, a majority of which comprises Outside Directors. The Company's basic policy regarding the determination of the compensation for Directors is deliberated on and determined by the Board of Directors.

Overview of types of compensation, etc.

The compensation for Directors consists of “basic compensation,” “bonuses,” and “stock-based compensation.”

Although the ratio of basic compensation, bonuses, and stock-based compensation to the total compensation for each Director has not been determined, the compensation level and system are regularly verified by the Nomination and Compensation Committee, the majority of whose members are Outside Directors, so that they can function as incentives to improve business performance.

Board of Directors

• Formulation and revision of the Medium-Term Management Plan and the Comprehensive Plan
• Policy on operating major businesses
• Matters regarding investment, financing
• Confirmation of the results of the effectiveness evaluation of the Board of Directors
• Matters on which to seek advice from the Nomination and Compensation Committee
• Approval of relevant documents of financial statements
• Matters regarding procedures for the general meeting of shareholders
• Resolutions on conflict-of-interest transactions, Directors’ liability insurance, etc., appointment and dismissal of important employees, and matters related to compensation for Directors based on the Companies Act

Nomination and Compensation Committee

• Policy on the composition of the Board of Directors
• Policy and criteria for the appointment and dismissal of Directors
• Compensation system and levels for Directors
• Succession planning and implementation measures

Sustainable Management Committee

• Basic Policy on Sustainability
• Response to TCFD Recommendations
• Human Capital Management Activities
• Human rights initiatives
• Checking of external disclosure documents related to sustainability

Risk Management Committee

• Basic Policy on Risk Management
• Identification of significant risks
• Monitoring of risk response status
• Evaluation results concerning internal controls related to financial reporting
• Measures to raise awareness of compliance
• Results of the use of whistleblowing contact points for consulting or reporting

The Company evaluates the effectiveness of the Board of Directors once a year. In FY2024, weit conducted an anonymous questionnaire survey of all Directors, including Outside Directors, and all Auditors, and evaluated the effectiveness of the Board of Directors based on the results.

FY2024 Questionnaire Survey on the Board of Directors

All Directors including Outside Directors (eight people) and all Auditors (four people)

Timing: March 2025

Method: Conducted anonymously using a third-party system to ensure objectivity

Content: Answer each question in the following major categories on a 5-point scale or in free text

1. Role, structure, and operation of the Board of Directors
2. Discussions at the Board of Directors meetings
3. Monitoring function of the Board of Directors
4. Performance of Directors
5. Training for Directors and Auditors
6. Dialogue with shareholders
7. Initiatives made by each Director
8. Operation of the Nomination and Compensation Committee

The results were reported to the Board of Directors’ meeting held in May 2025, and were discussed and analyzed based on the results of a 5-point evaluation and free text to evaluate the effectiveness of the Board of Directors.

Overview of Effectiveness Evaluation

The Board of Directors assessed those that certain improvements had been made regarding the issues identified through the effectiveness evaluation conducted in the previous fiscal year, which revealed areas with room for improvement in further enhancing the effectiveness of the Board and in strengthening the support provided by the Secretariat. Through the survey results, it was also evaluated that the effectiveness of the Board of Directors was generally ensured.

Future Issues

In order to further enhance the effectiveness of the Board of Directors, we recognize the need to enrich discussions on initiatives to sustainably increase corporate value in toward the future, such as promoting human resource strategies and implementing management measures that take into account capital costs and stock prices. We also recognize the need to further strengthen the support system provided by the Secretariat, including by providing more training for executives, and we will work earnestly to address these issues.