Corporate Governance

(as of June 27, 2018)

Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in Management

2.Matters on Functions of Business Execution, Auditing, Oversight, Nomination, and Remuneration Decisions (Overview of Current Corporate Governance System)

(1)In an effort to enhance its corporate governance, the Company transitioned to a Company with an Audit & Supervisory Committee following a resolution made at its 38th Annual Shareholders’ Meeting held on June 22, 2018. The establishment of an Audit & Supervisory Committee comprising only outside director works to strengthen the Company’s auditing and supervisory functions over its management.
Moreover, in order to clarify the separation between management and execution, the Company will strengthen the monitoring functions of the Board of Directors by staffing it primarily with outside directors. Meanwhile, the Company has established an organization to increase the efficiency and speed of operational execution by dictating in its Articles of Incorporation that the Board of Directors can empower directors to make decisions regarding the execution of key operational matters while concentrating operational execution authority in its Representative Director.
The Company has 5 directors (excluding those who are members of the Audit & Supervisory Committee), 3 of which are outside directors, and 3 directors who are members of the Audit & Supervisory Committee, all of which are outside directors, with 1 being full time. The Company designates all of its outside directors as independent directors as defined by the Tokyo Stock Exchange. The term of office for directors (excluding directors who are members of the Audit & Supervisory Committee) is set at 1 year, while the term of office for members of the Audit & Supervisory Committee is set at 2 years.
As a general rule, meetings of the Board of Directors are convened once a month, and deliberations and exchanges of opinions between the individual directors brings greater vitality to the management of the Company while also serving to sufficiently enhance the checking and balancing function that directors play for one another.

(2)As a general rule, the Audit & Supervisory Committee meets once a month and provides organized auditing and supervisory functions by utilizing internal control systems based upon the Audit Plan.
The Company employs Ernst & Young ShinNihon LLC as its accounting auditor under the Companies Act and its accounting auditor under the Financial Instruments and Exchange Act, undergoes accounting audits as an independent third-party, and works to ensure that Ernst & Young ShinNihon LLC can execute its duties smoothly. The following certified public accountants are responsible for the current fiscal year.
・Names of responsible certified public accountants
Designated Limited Liability Partners, Business Execution Partners: Kenichi Shibata, Hiroyoshi Konnno
・Support team for accounting audit duties
13 certified public accountants; 21 junior certified public accountants
The Audit & Supervisory Committee and auditing firm meet at the timing of quarterly and full-year earnings (i.e., a total of 4 times per annum) to report and exchange views. In addition, they arrange forums for exchanging views as appropriate, and incorporate the results of such discussions into the performance of their auditing duties.
The Board of Directors, Internal Control Committee, and other relevant parties report as appropriate to the responsible parties in the internal control departments regarding such audits.
The Company has 6 outside directors. No special interests exist between the Company and its outside directors.
Reporting and exchanges of views regarding coordination between outside directors and the Internal Audit Department and auditing firm take place as appropriate at meetings of the Board of Directors, the Audit & Supervisory Committee, Internal Control Committee, and other relevant bodies.

(3)In order to ensure the objectivity and transparency of decisions made regarding executive remuneration and candidates for director positions, the Company has at its discretion established a Remuneration and Nomination Committee comprising outside directors and the President and Representative Director. This committee makes decisions regarding the Basic Policy on the Executive Officer Remuneration System, the individual remuneration amounts for directors (excluding Directors who are Audit & Supervisory Committee Members), and the Guidelines on the Nomination Criteria for Directors.

(4)Based on the stipulations of Article 427(1) of the Companies Act, the Company has entered into an agreement with its outside directors limiting liability for damages as defined under Article 423(1) of the same act.
Under the aforementioned agreement, liability for damages is capped at the higher of ¥10 million or the amount dictated by the relevant laws and regulations.

3.Reasons for Adoption of Current Corporate Governance System

In an effort to enhance its corporate governance, the Company transitioned to a Company with an Audit & Supervisory Committee following a resolution made at its 38th Annual Shareholders’ Meeting held on June 22, 2018. The establishment of an Audit & Supervisory Committee comprising only outside director works to strengthen the Company’s auditing and supervisory functions over its management.
Moreover, in order to clarify the separation between management and execution, the Company will strengthen the monitoring functions of the Board of Directors by staffing it primarily with outside directors. Meanwhile, the Company has established an organization to increase the efficiency and speed of operational execution by dictating in its Articles of Incorporation that the Board of Directors can empower directors to make decisions regarding the execution of key operational matters while concentrating operational execution authority in its Representative Director.

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