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About Square Enix Group

Corporate Governance

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(as of July 30, 2021)

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

1.Organizational Composition and Operation

Structure of Organization Company with Audit & Supervisory Committee.
Directors
Maximum Number of Directors Stipulated in Articles of Incorporation16
Term of Office Stipulated in Articles of Incorporation1 year
Chairperson of the BoardPresident
Number of Directors9
Election of Outside DirectorsElected
Number of Outside Directors8
Number of Independent Directors8
Outside Directors' Relationship with the Company (1)
Name Attribute Relationship with the Company*
a b c d e f g h i j k
Yukihiro Yamamura From Other Company
Yuji Nishiura From Other Company
Masato Ogawa From Other Company
Mitsuko Okamoto Academic
Abdullah Aldawood From Other Company
Ryoichi Kobayashi From Other Company
Tadao Toyoshima CPA
Hajime Shinji Attorney

* Categories for "Relationship with the Company":

"○" When the director currently falls or has recently fallen under the category

"△" When the director fell under the category in the past

"●" When a close relative of the director currently falls or has recently fallen under the category

"▲" When a close relative of the director fell under the category in the past

a. Executive of the Company or its subsidiaries

b. Non-executive director or executive of a parent company of the Company

c. Executive of a fellow subsidiary company of the Company

d. A party whose major client or supplier is the Company or an executive thereof

e. Major client or supplier of the Company or an executive thereof

f. Consultant, accountant, or legal professional who receives a large amount of monetary consideration or other property from the Company other than compensation as a director/auditor

g. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal entity)

h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only)

i. Executive of a company with which the Company engages in mutual appointment of outside directors/auditors (the director himself/herself only)

j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only)

k. Others

Outside Directors' Relationship with the Company (2)
Name Audit & Supervisory Committee Member Designation as Independent Director Supplementary Explanation of the Relationship Reasons for Appointment
Yukihiro Yamamura ――― He possesses abundant experience and broad-ranging insight as a corporate executive. The Company expects him to be capable of properly executing the duties of an Outside Director from the perspective of supervising and serving as a check on Directors' execution of their roles.
The Company has designated him an independent director since he has no risk of developing a conflict of interest with general shareholders.
Yuji Nishiura ――― He possesses abundant experience and broad-ranging insight as a corporate executive. The Company expects him to be capable of properly executing the duties of an Outside Director from the perspective of supervising and serving as a check on Directors' execution of their roles.
The Company has designated him an independent director since he has no risk of developing a conflict of interest with general shareholders.
Masato Ogawa ――― He possesses abundant experience and broad-ranging insight as a corporate executive. The Company expects him to be capable of properly executing the duties of an Outside Director from the perspective of supervising and serving as a check on Directors' execution of their roles.
The Company has designated him an independent director since he has no risk of developing a conflict of interest with general shareholders.
Mitsuko Okamoto ――― She possesses a wealth of experience and a wide range of knowledge and insight in the field of animation and other content. The Company expects her to be capable of properly executing the duties of an Outside Director by providing recommendations regarding our Group businesses broadly, as well as from the perspective of supervising and serving as a check on Directors' execution of their roles.
The Company has designated her an independent director since she has no risk of developing a conflict of interest with general shareholders.
Abdullah Aldawood ――― He possesses a track record as a national leader in the development of the field of entertainment in the Kingdom of Saudi Arabia, abundant experience in international financial institutions, and a wealth of experiences and broad-ranging insight in global corporate management. The Company expects him to be capable of properly executing the duties of an Outside Director by providing recommendations regarding our Group businesses broadly, as well as from the perspective of supervising and serving as a check on Directors' execution of their roles.
The Company has designated him an independent director since he has no risk of developing a conflict of interest with general shareholders.
Ryoichi Kobayashi ――― He possesses wealth of experience and breadth of insight in corporate management broadly. The Company expects him to be capable of properly executing the duties of an Outside Director who is an Audit & Supervisory Committee Member from the perspective of monitoring and auditing Directors' execution of their roles.
The Company has designated him an independent director since he has no risk of developing a conflict of interest with general shareholders.
Tadao Toyoshima ――― He is a Certified Public Accountant (CPA) and possesses extensive expertise in finance- and accounting-related matters. The Company expects him to be capable of properly executing the duties of an Outside Director who is an Audit & Supervisory Committee Member from the perspective of monitoring and auditing Directors' execution of their roles.
The Company has designated him an independent director since he has no risk of developing a conflict of interest with general shareholders.
Hajime Shinji ――― He possesses a wealth of experience and broad insight as exemplified by his status as a qualified attorney and the government positions he has held in the field of law. The Company expects him to be capable of properly executing the duties of an Outside Director who is an Audit & Supervisory Committee Member from the perspective of monitoring and auditing Directors' execution of their roles.
The Company has designated him an independent director since he has no risk of developing a conflict of interest with general shareholders.
Audit & Supervisory Committee
Committee's Composition and Type of Chairperson
Total Committee Members Full-time Members Directors Outside Directors Chairperson
Audit & Supervisory Committee 3 1 0 3 Outside Director
Directors and employees who support the execution of duties by the Audit & Supervisory Committee Assigned
Matters regarding the Independence of the Relevant Directors and Employees from the Executive Officers

The Company designates persons belonging to the Internal Audit Department as the employees that are to assist with the duties of the Audit & Supervisory Committee. In order to ensure the aforementioned employees' independence from directors involved in operational execution, the Company specifies that persons belonging to the Internal Audit Department are to follow only the instructions and orders of the Audit & Supervisory Committee when providing assistance with its duties, and that decisions on personnel matters concerning the head of the Internal Audit Department, including but not limited to the appointment, transfer, and disciplining thereof, shall require the consent of the Audit & Supervisory Committee.

Cooperation Among Audit & Supervisory Committee, Accounting Auditors, and Internal Audit Department

Coordination between Audit & Supervisory Committee and Accounting Auditors The Audit & Supervisory Committee and Accounting Auditors meet at the timing of quarterly and full-year results (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.
Coordination between Audit & Supervisory Committee, Accounting Auditors, and Internal Audit Department While sharing information with the Audit & Supervisory Committee and Accounting Auditors, the Internal Audit Department takes significance and risk into consideration as it regularly checks and studies/evaluates (i.e., performs internal evaluations on) the internal management structure and operational processes, including at Group companies. In addition, the Internal Audit Department regularly reports to the Audit & Supervisory Committee regarding operational audits, and, on an ongoing basis, incorporates the results of such discussions into the performance of its auditing duties.

Voluntary Committee
Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established
Committee Name, Composition, and Attributes of Chairperson
Committee Name All Committee Members Full-time Members Directors Outside Directors Outside Experts Other Chairperson
Committee Corresponding to Nomination Committee Remuneration and Nomination Committee 5 0 1 4 0 0 Director
Committee Corresponding to Remuneration Committee Remuneration and Nomination Committee 5 0 1 4 0 0 Director
Supplementary Explanation

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 the Representative Director and outside directors. This committee decides the individual amounts and the nature of remuneration for directors (excluding Directors who are Audit & Supervisory Committee Members) based on the Basic Policy on the Executive Remuneration System established by the Board of Directors, and also decides the Guidelines on the Nomination Criteria for Directors.

The members of the Remuneration and Nomination Committee are appointed by the Board of Directors as follows, and the committee is convened as needed.

  • ・Chairperson : Yosuke Matsuda (President and Representative Director)
  • ・Member: Yukihiro Yamamura (Outside Director)
  • ・Member: Yuji Nishiura (Outside Director)
  • ・Member: Masato Ogawa (Outside Director)
  • ・Member: Ryoichi Kobayashi (Outside Director, Standing Audit & Supervisory Committee Member)
Independent Directors
Number of Independent Directors 8
Matters Relating to Independent Directors

The Company designates as independent directors all outside directors that fulfill the independent director criteria.

Incentives
Incentive Policies for Directors Performance- linked remuneration, stock options, and others
Supplementary Explanation

Details are described in [Remuneration for Directors] in 1 (Organizational Composition and Operation) in II (Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in Management) of this Report.

Recipients of Stock Options Directors, Outside Directors, Employees, Subsidiaries' Directors and Subsidiaries' Employees
Supplementary Explanation

The number of persons granted stock acquisition rights and the number of shares granted as of May 31, 2021 are as follows.

-Compensation-type stock options (stock acquisition rights): the Company had granted 1,562 stock options (156,200 shares) to 6 directors (excluding Directors who are Audit & Supervisory Committee Members).

-Stock options (stock acquisition rights): the Company had granted 4,849 stock options (484,900 shares) to 23 persons.

In addition, since the compensation pool for compensation-type stock options (stock acquisition rights) was abolished following a resolution at the 41st Annual Shareholders' Meeting held on June 25, 2021, no compensation-type stock options (stock acquisition rights) will be issued from that date onward. Stock options that have already been granted as compensation-type stock options (stock acquisition rights) remain in effect.

Remuneration for Directors
Disclosure of Individual Directors' Remuneration Partial Disclosure
Supplementary Explanation

Director remuneration was as follows in the fiscal year ended March 31, 2021.

Total Fixed Performance-linked Stock Options
・6 Directors (excl. Audit & Supervisory Committee) ¥590mn ¥137mn ¥334mn ¥119mn
  (of which, 4 Outside Directors) (¥57mn) (¥45mn) (N/A) (¥12mn)
・4 Audit & Supervisory Committee Members ¥47mn ¥47mn N/A N/A
  (of which, 4 Outside Directors) (¥47mn) (¥47mn) (N/A) (N/A)

President and Representative Director Yosuke Matsuda was the only executive who received total consolidated remuneration of ¥100 million or more. His total remuneration was ¥517 million (fixed remuneration of ¥80 million, performance-linked remuneration of ¥334 million, and ¥103 million in compensation-type stock options).

Policy on Determining Remuneration Amounts and Calculation Methods Established
Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods

The Company's basic policy and determination process regarding its executive remuneration system is as described below.

In order to ensure the objectivity and transparency of the Executive Remuneration System, the Company has, at its discretion, established a Remuneration and Nomination Committee comprising the Representative Director and outside directors. This Board of Directors establishes the Basic Policy on the Executive Remuneration System based on consultation with this committee, and the committee decides the individual amounts and the nature of remuneration for directors (excluding Directors who are Audit & Supervisory Committee Members) in accordance with the Basic Policy on the Executive Remuneration System established by the Board of Directors, based on the authority granted to it by the Board of Directors.

・Basic Policy on the Executive Remuneration System

  • 1.Directors (excluding Directors who are Audit & Supervisory Committee Members):
    • ・Remuneration for Executive Directors shall comprise fixed remuneration (monetary), performance-linked remuneration (monetary), and restricted stock remuneration. The ratio shall be approximately 10:9 (base remuneration amount, which varies depending on performance):10.
    • ・Remuneration for Non-Executive Directors shall comprise fixed remuneration (monetary) and restricted stock remuneration. The ratio should be approximately 4:1.
    • ・Fixed remuneration (monetary) shall be determined based upon role, remuneration in past years, the company performance to date, the need to retain talented human resources, research by specialized third-party organizations, remuneration trends at comparable companies, and economic conditions. Fixed remuneration (monetary) shall be paid monthly.
    • ・In order to strive for growth that strikes a balance between scale and profitability, the amount of performance-linked remuneration (monetary) is calculated using consolidated net sales and consolidated operating income as metrics. Specifically, the amount of performance-linked remuneration is obtained by multiplying the basic remuneration amount (¥90 million) by a multiple (no greater than 400% and no less than 0%) that is pre-determined according to the degree of deviation from the base amount determined by the Remuneration and Nomination Committee, and then multiplying the result by a pre-determined coefficient (no greater than 1.5 and no less than 0.5) in accordance with the relative growth rate of our company in the peer group determined by the Remuneration and Nomination Committee. Performance-linked remuneration (monetary) shall be paid once a year after the business results for each fiscal year are determined.
    • ・The Company offers restricted stock remuneration in order to provide a long-term incentive for directors (excluding directors who are Audit & Supervisory Committee members) to work to achieve sustained growth and to enhance corporate value, as well as to encourage them to have an even greater sense of shared value with shareholders. Such a program is offered because it provides a sustained incentive to bolster the share price when it is down and because it serves as a replacement for the discontinued retirement allowance for directors. The Remuneration & Nomination Committee determines the remuneration value of the restricted stock, taking into account the balance with the monetary remuneration. The restricted stock is granted once annually during the second quarter.
  • 2.Directors who are Audit & Supervisory Committee Members:
    • In consideration of independence from management, only monetary remuneration shall be made.
    • -Fixed remuneration (monetary) shall be determined based upon role, remuneration in past years, the need to retain talented human resources, research by specialized third-party organizations, remuneration trends at comparable companies, and economic conditions. Fixed remuneration (monetary) shall be paid monthly.

・Director Remuneration Determination Process

  • 1.Individual amounts and the nature of remuneration for directors (excluding directors who are Audit & Supervisory Committee Members) shall be determined by the Remuneration and Nomination Committee based on the Basic Policy on the Executive Remuneration System established by the Board of Directors.
  • 2.Individual amounts and the nature of remuneration for directors who are Audit & Supervisory Committee Members shall be determined via discussions by the directors who are Audit & Supervisory Committee Members, with reference made to the basic policy determined by the Board of Directors.
  • 3.Individual amounts and the nature of remuneration shall be set within the confines of the remuneration allocation approved at the General Shareholders' Meeting and shall be determined based upon a comprehensive consideration of annual earnings and each director's performance in his/her role and contribution to corporate earnings, remuneration in past years, the need to retain talented human resources, research by specialized third-party organizations, remuneration trends at comparable companies, and economic conditions.
Supporting System for Outside Directors

The President and Representative Director makes reports as appropriate to the outside directors on key corporate matters and exchanges views with them. The President and Representative Director also arranges opportunities as appropriate for the outside directors to exchange information and views with the executive management. Business-line managers also at appropriate times make reports to and exchanges views with the outside directors.

The full-time Audit & Supervisory Committee Member makes reports as appropriate to the outside directors who are Audit & Supervisory Committee Members on key corporate matters and exchanges views with them.


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