Corporate Governance

1. Board of Directors

In addition to the regular monthly meetings of the Board of Directors, extraordinary meetings of the Board of Directors are held as necessary. Meetings of the Board of Directors are conducted to make important management decisions, taking into account discussions from Executive Committee, and to supervise the execution of duties by each Director.

2. Board of Auditors

In addition to the regular monthly meetings of the Board of Auditors, extraordinary meetings of the Board of Auditors are held as necessary. In addition to attending meetings of the Board of Directors and other important company meetings, auditors conduct audits to monitor and oversee the execution of duties by the Representative Director and the management actions of the Directors based on the policies and responsibilities established by the Board of Auditors.

3. Nomination and Compensation Committee

To enhance the fairness, transparency, and objectivity of the procedures for determining the nomination and compensation of Directors, we have established a Nomination and Compensation Committee as an advisory body to the Board of Directors. This Committee is composed of a majority of independent outside Directors, with the chair also being an independent outside Director. The Nomination and Compensation Committee deliberates on matters referred by the Board of Directors and submits its findings to the Board.

4. Executive Committee

The Company holds Executive Committee once a week, with internal executives in attendance, in principle. Executive Committee are held to review business plans and performance, and to make decisions on important business matters, based on the management meeting regulations.

5. Internal Audits

Internal audits are conducted by (one) internal Auditor who is independent within the organization. The internal Auditor is directly appointed by the President and CEO. The internal Auditor conducts audits of various departments, including significant subsidiaries, based on internal audit regulations and internal audit plans. The results of internal audits are reported directly to the President and CEO, following which said results are communicated to the audited departments. Subsequently, we receive reports from the audited departments on the status of improvements related to any issues raised, allowing us to verify the situation.

6. Auditing Firm

The Company has entered into an audit contract with Deloitte Touche Tohmatsu Limited as its accounting auditor. Said auditing firm conducts accounting audits in accordance with the Companies Act and the Financial Instruments and Exchange Act. The names of the certified public accountants who executed the accounting audit of the Company are Yasuhiro Kawaguchi and Yusuke Kumei, both of whom are limited liability partners and the managing partners. In addition, seven certified public accountants and 11 other assistants were assigned to aid with the accounting audit. Further, we have advisory contracts with law firms and other outside experts to receive appropriate guidance on various aspects of management.

7. Committees Other than the Nomination and Compensation Committee

(1) Sustainability Committee

The Company has established a Sustainability Committee with the aim of enhancing corporate value by contributing to the sustainable development of society and the environment through our business activities. The Sustainability Committee analyzes the impact of sustainability issues on our business model and strategy, and discusses appropriate measures to address them.

(2) Risk Management Committee

The Company has established a Risk Management Committee aimed at ensuring smooth operations by developing a management system to prevent and respond to any risks that may occur. The Risk Management Committee examines risks and discusses countermeasures for each department.

Corporate Governance Structure

1. Systems necessary to ensure that the execution of duties by Directors complies with laws and regulations and the Articles of Incorporation

(Article 362, Paragraph 4, Item 6 of the Companies Act)

1. 1.

   The Board of Directors shall make decisions on important matters related to the execution of the Company's operations, based on the Board of Directors' regulations and the criteria for matters to be discussed, as well as in accordance with laws and regulations and the Articles of Incorporation.

2. 2.

   The President and CEO shall make decisions related to the execution of the Company's operations delegated by the Board of Directors based on laws and regulations, Articles of Incorporation, and rules, regulations, and procedures (hereafter, “internal regulations”), and shall carry out these duties in accordance with said decisions, resolutions and internal regulations.

3. 3.

   To supervise the execution of Directors' duties, Directors shall report the status of the Company's operations to the Board of Directors based on laws and regulations, and shall mutually monitor and supervise the execution of duties by other Directors.

4. 4.

   The execution of Directors' duties is subject to audit by auditors based on the regulations of the Board of Auditors and the auditing standards.

5. 5.

   The Company establishes "Principles for Action" that outline the standards and norms of behavior for Directors and employees based on our "Philosophy". Additionally, we set up a reporting and consultation channel for compliance related to the execution of Directors' duties, in accordance with the internal whistleblower protection regulations.

2. Systems regarding retention and management of information in relation to the execution of the duties of a Director

(Article 100, Paragraph 1, Item 1 of the Regulations for Enforcement of the Companies Act)

1. 1.

   The responsibility for the storage and management of information related to the execution of Directors' duties is assigned to the head of the Human Resources and General Affairs Department. The responsible departments for storage and management will be specified according to the content of the information in the document management regulations and the division of duties regulations.

2. 2.

   The responsible departments shall properly record information related to the execution of Directors' duties and, based on laws and regulations, document management regulations, and other internal rules, will store and manage it rigorously for the specified duration. Additionally, depending on the storage medium, said departments shall maintain said information in a secure and easily searchable state, and promptly respond to requests for inspection from Directors and Auditors.

3. Rules and other systems related to management of the risk of loss

(Article 100, Paragraph 1, Item 2 of the Regulations for Enforcement of the Companies Act)

1. 1.

   Risk management regulations shall be established as the foundation of its risk management system and, based on these regulations, the Company shall establish a Risk Management Committee that will recognize, identify, and manage individual risks, while also appointing a risk management officer and build a management framework.

2. 2.

   In the event of significant or urgent unforeseen circumstances, a task force led by the President and CEO shall be established, along with an emergency response committee that includes the Risk Management Committee and legal advisors, to ensure prompt action, prevent the escalation of damage, and minimize the impact.

4. Systems to ensure that the execution of the duties of a Director is performed efficiently

(Article 100, Paragraph 1, Item 3 of the Regulations for Enforcement of the Companies Act)

1. 1.

   Meetings of the Board of Directors shall be held monthly to make important management decisions, taking into account discussions from Executive Committee, and to supervise the execution of duties by each Director. Additionally, Executive Committee shall be held once a week, primarily attended by internal Directors, to review business plans and performance, and to make decisions on important business matters, based on the management meeting regulations.

2. 2.

   The authorities and responsibilities regarding the execution of duties shall be clearly defined in the division of duties regulations, authority regulations, and other internal rules, and shall be reviewed in a timely and appropriate manner.

3. 3.

   With respect to business management, an annual budget and business plan shall be developed, with monthly budget management conducted to achieve these goals. Additionally, key sales metrics shall be monitored on a daily and weekly basis for progress management.

5. Systems to ensure that the execution of the duties of an employee complies with laws and regulations and the Articles of Incorporation.

(Article 100, Paragraph 1, Item 4 of the Regulations for Enforcement of the Companies Act)

1. 1.

   Based on the "Principles for Action" that outline the standards and norms for Directors and employees, proper execution and supervision of duties shall be enforced through the organizational structure. In case of issues, strict disciplinary actions shall be taken in accordance with the employment regulations. In addition, to ensure thorough implementation, the Human Resources and General Affairs Department shall oversee compliance initiatives across the organization, and will conduct executive and employee training and education centered around said department.

2. 2.

   Internal auditors shall collaborate with the Human Resources and General Affairs Department to audit the status of compliance. Said activities shall be regularly reported to the President and CEO, and full-time auditors.

3. 3.

   To enable employees to directly report actions that may raise legal concerns, internal whistleblower protection regulations shall be implemented and applied.

6. Systems to ensure proper business activities in a business group comprised of the stock company and any parent company or subsidiary companies thereof

(Article 100, Paragraph 1, Item 5 of the Regulations for Enforcement of the Companies Act)

1. 1.

   Facilitate and properly manage the operations of each Group company in accordance with regulations for managing affiliated companies. In addition, the Company shall provide guidance and support to Group companies as necessary.

2. 2.

   The Company shall establish standards for certain important matters and risk information, and conduct management control of each Group company through a system of decision-making and reporting to the Company.

7. Matters related to employees requested to assist a company auditor of the company

(Article 100, Paragraph 3, Item 1 of the Regulations for Enforcement of the Companies Act)

If an auditor requests the assistance of employees to support their duties, the Company may appoint employees from within the organization to assist the auditor in the performance of his or her duties.

8. Matters concerning the independence of said employees in the preceding item from Directors

(Article 100, Paragraph 3, Item 2 of the Regulations for Enforcement of the Companies Act)

1. 1.

   Employees who receive orders necessary for audit activities from an auditor shall not be subject to directives from the Directors with respect to such orders.

2. 2.

   The appointment, transfer, and evaluation of such employees shall require the consent of a full-time auditor.

9. System for Directors and employees to report to company auditors and other systems for reporting to company auditors

(Article 100, Paragraph 3, Item 3 of the Regulations for Enforcement of the Companies Act)

1. 1.

   Auditors shall attend Board of Directors meetings and other important meetings, and will also review key decision documents and related materials.

2. 2.

   The President and CEO, along with the Directors responsible for business execution, shall report on the status of operations at important meetings such as Board of Directors meetings.

3. 3.

   Directors and employees must promptly report to the auditors any knowledge of significant violations of laws and regulations or the Articles of Incorporation, as well as any facts that may pose a substantial risk of harm to the company.

4. 4.

   Auditors may request reports from Directors and employees at any time, as necessary.

5. 5.

   Persons who report to the auditors shall not face any adverse treatment as a result of their report.

10. Other systems for ensuring that audits by the company auditor are performed effectively

(Article 100, Paragraph 3, Item 4 of the Regulations for Enforcement of the Companies Act)

1. 1.

   Regular opinion exchanges shall be established between auditors and the President and CEO.

2. 2.

   Auditors shall collaborate closely with internal auditors and, when necessary, request investigations from them. Additionally, auditors shall meet with accounting auditors regularly to exchange opinions and information, and may request reports from them as needed.

3. 3.

   In conducting audits, auditors may, at their own discretion, engage attorney or other outside experts, separate from the company's legal advisors, where necessary.

4. 4.

   Auditors may be reimbursed by the Company for expenses incurred in the execution of their duties.

11. System to ensure the appropriateness of financial reporting

The Company shall maintain and operate internal controls related to financial reporting on an ongoing basis. Additionally, internal auditors shall regularly evaluate the adequacy of internal controls and make corrections as needed.

12. Basic policy and status of its implementation for the elimination of antisocial forces

1. 1.

   The Company’s policy is to respond resolutely to any contact or unjust demands from anti-social forces that threaten social order and safety.

2. 2.

   The Human Resources and General Affairs Department shall oversee efforts to collect information in collaboration with external agencies (such as the relevant police department and legal advisors), and shall verify the attributes of business partners and the trading status of company shares, as far as possible, to prevent damage from unjust demands made by anti-social forces that may become business partners or shareholders. Further, the Company shall collaborate with external agencies to establish a system to appropriately respond to unjust demands from anti-social forces.

1. Basic Policy on Timely Disclosure

The Company is committed to providing timely, fair, and appropriate information to stakeholders, including shareholders and general investors. In addition to disclosing important information in accordance with timely disclosure regulations and other relevant laws and rules, we will actively communicate information deemed useful for investors.

2. Internal System for Timely Disclosure

The Company designates the head of the Finance and Accounting Department as the internal information management officer, with each department head serving as the internal information management officer. The Finance and Accounting Department functions as the central department for internal information management. The internal information management officer is committed to understanding and rigorously managing the information necessary for investors to make informed investment decisions. The contents of the disclosure will be made public through the Timely Disclosure Network (TDnet). After publication, the information will also be promptly made available on our Company website.

(1) Information on Decision-making Facts

Information on decision-making facts is deliberated at Executive Committee, and disclosure materials are prepared by the Finance and Accounting Department, which serves as the central department for internal information management, based on the instructions of the internal information management officer. Once a decision is made by the Board of Directors, the disclosure will be made based on the instructions of the internal information management officer.

(2) Information on Facts of Occurrence

Important facts that occur in each department are reported to the Executive Committee by the heads of each department, who serve as internal information management officers. Disclosure documents are prepared by the Finance and Accounting Department, which serves as the central department for internal information management, based on the instructions of the internal information management officer. Once approved by the Board of Directors, the information will be disclosed according to the internal information management officer's instructions. In the event that important facts that require prompt disclosure occur, the information will be disclosed based on the instructions of the internal information management officer after verification by the internal information management officer and approval by the President and CEO.

(3) Information on Financial Results

Disclosure documents related to financial results are prepared by the Finance and Accounting Department and reported at Executive Committee after verification by the internal information management officer. Once a decision is made by the Board of Directors, the disclosure will be made based on the instructions of the internal information management officer.

3. Audit of Internal Systems for Timely Disclosure

In order to prevent insider trading, the Company has established "Regulations for Prevention of Insider Trading" and makes every effort to ensure that all executives and employees are aware of these regulations. In addition, an internal Auditor, directly appointed by the President and CEO, conducts regular internal audits to assess the effectiveness of the timely disclosure system.

Flow of Procedures for Timely Disclosure