NISSIN FOODS GROUP

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Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Supervision in Management

1. Organizational Composition and Operation

Organization Form Company with an Audit & Supervisory Board

Directors

Maximum Number of Directors Stipulated in Articles of Incorporation 15
Term of Office Stipulated in Articles of Incorporation 1 year
Chairperson of the Board President
Number of Directors 8
Appointment of Outside Directors Appointed
Number of Outside Directors 5
Number of Independent Officers Designated from among Outside Directors 3

Outside Directors’ Relationship with the Company (1)

Name Attribute Relationship with the Company (※)
a b c d e f g h i j k
Ken Kobayashi From another company
Masahiro Okafuji From another company
Masato Mizuno From another company
Yukiko Nakagawa Academic
Eietsu Sakuraba Other
  • Categoriesfor “RelationshipwiththeCompany”
  • “◯” when the Director presently 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 presently falls or has recently fallen under the category; and “▲” when a close relative of the Director fell under the category in the past
  • aExecutive (a person who executes business; hereinafter, the same) of the Company or its subsidiary
  • bNon-executive director or executive of a parent company of the Company
  • cExecutive of a fellow subsidiary of the Company
  • dParty whose major business partner is the Company or an executive thereof
  • eMajor business partner of the Company or an executive thereof
  • fConsultant, accounting professional or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director
  • gMajor shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation)
  • hExecutive of a business partner of the Company (which does not correspond to any of d., e., or f.) (the Director himself / herself only)
  • iExecutive of a corporation to which outside officers are mutually appointed (the Director himself / herself only)
  • jExecutiveofacorporationthatreceivesadonationfromtheCompany(theDirectorhimself/herselfonly)
  • kOther

Outside Directors’ Relationship with the Company (2)

Name Designation as Independent Officer Supplementary Explanation of the Relationship Reasons for Appointment
Ken Kobayashi Ken Kobayashi concurrently serves as Chairman of the Board of Mitsubishi Corporation. The Company is engaged in transactions including sales of products and procurement of materials with Mitsubishi Corporation. Since joining Mitsubishi Corporation, Mr. Ken Kobayashi has serviced various positions including General Manager of Singapore Branch, Division COO of Plant Project Division, Division COO of Ship, Aerospace & Transportation Systems Division, Group CEO of Industrial Finance, Logistics & Development Group, and assumed the post of President and CEO from June 2010 to March 2016, and the current post of Chairman of the Board since April 2016, chairing the Board of Directors. Accordingly, he has superior knowledge based on his achievements as a management executive of a general trading company and extensive business experience at Mitsubishi Corporation. Due to the standpoints stated above, the Company expects him to fulfill the role of an overseer and supervisor of the execution of Directors’ duties and to form opinions and make judgments from an objective standpoint especially when making management decisions.
Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director.
Masahiro Okafuji Mr. Masahiro Okafuji concurrently serves as Chairman & Chief Executive Officer of ITOCHU Corporation. The Company is engaged in transactions including sales of products and procurement of materials with ITOCHU Corporation. Since joining ITOCHU Corporation, Mr. Masahiro Okafuji has served primarily in textile business, assuming posts of President of Textile Company, President of ITOCHU Corporation from April 2010 to March 2018, and the current post of Chairman & Chief Executive Officer since April 2018. Accordingly, he has superior knowledge based on his achievements as a management executive of a general trading company and abundant business experience at ITOCHU Corporation. Due to the standpoints stated above, the Company expects him to fulfill the role of an overseer and supervisor of the execution of Directors’ duties and to form opinions and make judgments from an objective standpoint especially when making management decisions.
Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director.
Masato Mizuno Although there are dealings between MIZUNO Corporation, at which he serves as Chairman and the Company, the amount of those dealings is less than 0.01% of the net sales of either party. Thus, the Company has determined that there is no risk of a conflict of interest with ordinary shareholders, and the Company intends to designate him as Independent Officer. Mr. Masato Mizuno has extensive experience and superior knowledge gained through serving as a management executive at MIZUNO Corporation for more than 30 years since joining this company. Due to the standpoints stated above, the Company expects him to form opinions and make judgments from an objective standpoint when making management decisions. In addition, in order to fulfill the role of an overseer and supervisor of the execution of Directors’ duties, he is expected to lead discussions and assertively state his opinions especially at meetings of the Management Advisory Committee, an advisory body to the Board of Directors of the Company, as Chairperson. Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director.
Although there are dealings between MIZUNO Corporation, at which he serves as Chairman and the Company, the amount of those dealings is less than 0.01% of the net sales of either party. Thus, the Company has determined that there is no risk of a conflict of interest with ordinary shareholders.
Yukiko Nakagawa No items to report. Dr. Yukiko Nakagawa has been holding teaching positions at educational institutions in Japan and overseas as a doctor of commercial science. In such ways and others, she has accumulated many years of business experience as an expert in international human resource management and organizational development as well as those of human resource development on a global scale, insight and knowledge as an academic.
Due to the standpoints stated above, although she has no experience of direct involvement in corporate management, the Company expects her to fulfill the role of an overseer and supervisor of the execution of Directors’ duties by carrying out roles of overseeing corporate management, providing advice and the like in an appropriate manner from an objective viewpoint based on her high level of expertise and knowledge, while retaining independence and fairness. In addition, she is expected to assertively state her opinions especially as a member of the Management Advisory Committee, an advisory body to the Board of Directors of the Company, and as an expert in international human resource management and organizational development as well as human resource development on a global scale.
There are no special dealings between the Group and Astena Holdings Co., Ltd. and Toho Zinc Co., Ltd., at which she serves as Outside Director.
Although there are dealings between Macromill, Inc., at which she serves as Outside Director and the Company, the amount of those dealings is less than 1% of the net sales of either party. Thus, the Company has determined that there is no risk of a conflict of interest with ordinary shareholders.
Eietsu Sakuraba No items to report. Mr. Eietsu Sakuraba served as Director-General of the Food Industry Bureau and in other senior roles in the Ministry of Agriculture, Forestry and Fisheries, and is also holding a teaching position at Faculty of Agriculture of Takasaki University of Health and Welfare, in the subject on the agricultural diversification, etc. He has extensive experience as mentioned above and superior knowledge as an expert of food safety, reliability and environmental issues in the area of food. Due to the standpoints stated above, although he has no experience of direct involvement in corporate management, the Company expects him to fulfill the role of an overseer and supervisor of the execution of Directors’ duties by carrying out roles of overseeing corporate management, providing advice and the like in an appropriate manner from an objective viewpoint based on his high level of expertise and knowledge, while retaining independence and fairness. In addition, he is expected to form opinions and make judgments from an objective standpoint especially when making management decisions.
Accordingly, the Company has determined that he is a necessary resource to increase the Group’s corporate value going forward, and the Company has appointed him as Outside Director. The Company has determined that there is no risk of a conflict of interest with ordinary shareholders.
Voluntary Establishment of Committee(s) Equivalent to Nominating Committee or Remuneration Committee Established

Committee’s Name, Composition, and Chairperson’s Attributes

Committee’s Name Total Committee Members Full-time Members Internal Directors Outside Directors Outside Experts Other Chairperson
Committee Equivalent to Nominating Committee Management Advisory Committee 5 0 2 3 0 0 Outside Director
Committee Equivalent to Remuneration Committee Management Advisory Committee 5 0 2 3 0 0 Outside Director
Committee Equivalent to Nominating Committee Committee Equivalent to Remuneration Committee
Committee’s Name Management Advisory Committee Management Advisory Committee
Total Committee Members 5 5
Full-time Members 0 0
Internal Directors 2 2
Outside Directors 3 3
Outside Experts 0 0
Other 0 0
Chairperson Outside Director Outside Director

Supplementary Explanation

[Purpose]
The “Management Advisory Committee,” which is chaired by an Independent Outside Director and the majority of which are Independent Outside Director, has been established since 2015 in order to strengthen the supervisory functions of the Board of Directors and at the same time ensure transparency and fairness in management.
[Duties]
The “Management Advisory Committee” meets three times a year in principle, as an advisory body to the Board of Directors, to deliberate the following matters, reports the result to the Board of Directors and thereby contributes to deliberation and resolution by the Board of Directors.
1. Selection and dismissal of members of the management team
The Committee deliberates policies and criteria for the selection or dismissal of members of the management team, including candidates for Director. In addition, the Committee deliberates and supervises a series of the procedures.
2. Remuneration of Directors
The Committee deliberates and supervises the policy for determining remuneration, etc. to individual Directors and the validity of the determination process from the viewpoint of transparency and fairness of management and the like.
3. Other items regarding corporate governance
In addition to the above, the Committee raises and deliberates agenda items necessary for further improving the governance system of the Company as appropriate. Specifically, the Committee considers the evaluation of management of the Board of Directors, company’s organizational structure, Chief Executive Officer (CEO) succession plan and other matters.
[Composition] (As of December 1, 2021)
The Committee consists of three Independent Outside Directors and two Internal Directors, and an Independent Outside Director is appointed as chairperson. In addition, three officers (one Director and two Independent Outside Audit & Supervisory Board Members) participate as observers with the aim of increasing the transparency of the deliberation process of the Management Advisory Committee and invigorating discussions. The Committee is held three times a year in principle. The office is established in the Company’s General Affairs Division.
Name Position at the Company
Committee member Koki Ando President & Representative Director, CEO
Committee member Noritaka Ando Executive Vice President & Representative Director, COO
Chairperson Masato Mizuno Outside Director/Independent Officer
Deputy Chairperson Yukiko Nakagawa Outside Director/Independent Officer
Committee member Eietsu Sakuraba Outside Director/Independent Officer
Observer Yukio Yokoyama Director, CSO, and Managing Executive Officer
Observer Naohiro Kamei Outside Audit & Supervisory Board Member/Independent Officer
Observer Chisugi Mukai Outside Audit & Supervisory Board Member/Independent Officer
[Activities]
The Committee met four times during the fiscal year ended March 31, 2021, and the attendance of the Committee members at the meetings is as follows.
(Attendance of Each Committee Member)
Name Attendance
Committee member Koki Ando 4/4 (100%)
Committee member Noritaka Ando 4/4 (100%)
Committee member Yukio Yokoyama 4/4 (100%)*1
Chairperson Masato Mizuno 4/4 (100%)
Deputy Chairperson Yukiko Nakagawa 4/4 (100%)
Committee member Eietsu Sakuraba 3/3 (100%)*2
Committee member Naohiro Kamei 4/4 (100%)*1
Committee member Chisugi Mukai 4/4 (100%)*1
  • *1From December 1, 2021, their position at the Management Advisory Committee has been changed from “committee member” to “observer.”
  • *2The attendance of Mr. Eietsu Sakuraba is subjected to the Management Advisory Committee held on or after his appointment as Director as of June 25, 2020.

Audit & Supervisory Board Member

Establishment of Audit & Supervisory Board Established
Maximum Number of Audit & Supervisory Board Member Stipulated in Articles of Incorporation 4
Number of Audit & Supervisory Board Member 3

Cooperation among Audit & Supervisory Board Member, Financial Auditor and Internal Audit Department

In order for the Company to ensure a tripartite audit, Internal Auditing Office, which is under the direct control of President & Representative Director, CEO, is engaged in internal audits, in addition to audits conducted by Audit & Supervisory Board Members and Financial Auditor. The three parties hold meetings once every two months in principle with the aim of improving efficiency of the audit and exchange opinions over observation of the audit and relevant information.

Appointment of Outside Audit & Supervisory Board Member Appointed
Number of Outside Audit & Supervisory Board Member 2
Number of Independent Officers Designated from among Outside Audit & Supervisory Board Member 2

Outside Audit & Supervisory Board Member’s Relationship with the Company (1)

Name Attribute Relationship with the Company (※)
a b c d e f g h i j k l m
Naohiro Kamei From another company
Chisugi Mukai Lawyer
  • Categoriesfor“RelationshipwiththeCompany”
  • “○” when the Audit & Supervisory Board Member presently falls or has recently fallen under the category; “△” when the Audit & Supervisory Board Member fell under the category in the past;
  • “●” when a close relative of the Audit & Supervisory Board Member presently falls or has recently fallen under the category; and “▲” when a close relative of the Audit & Supervisory Board Member fell under the category in the past
  • aExecutive (a person who executes business; hereinafter, the same) of the Company or its subsidiary
  • bNon-executive director or accounting advisor of the Company or its subsidiary
  • cNon-executive director or executive of a parent company of the Company
  • dAudit & Supervisory Board Member of a parent company of the Company
  • eExecutive of a fellow subsidiary of the Company
  • fParty whose major business partner is the Company or an executive thereof
  • gMajor business partner of the Company or an executive thereof
  • hConsultant, accounting professional or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an Audit & Supervisory Board Member
  • iMajor shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation)
  • jExecutive of a business partner of the Company (which does not correspond to any of f., g., or h.) (the Audit & Supervisory Board Member himself / herself only)
  • kExecutive of a corporation to which outside officers are mutually appointed (the Audit & Supervisory Board Member himself / herself only)
  • lExecutive of a corporation that receives a donation from the Company (the Audit & Supervisory Board Member himself / herself only)
  • mOther

Outside Audit & Supervisory Board Member’s Relationship with the Company (2)

Name Designation as Independent Officer Supplementary Explanation of the Relationship Reasons for Appointment
Naohiro Kamei No items to report. Mr. Naohiro Kamei has many years of experience in serving in the financial industry through positions in The Fuji Bank Limited (current Mizuho Bank, Ltd.) and Mizuho Securities Co., Ltd., and also is well-versed in corporate management from his previous and current posts such as President & Representative Director of Mizuho Capital Partners Co., Ltd., Director of Cobalt Investments Co., Ltd. and Outside Corporate Auditor of KYORIN Holdings, Inc. Accordingly, the Company has determined that his insight as a professional in finance and accounting as well as extensive experience as management executive can be leveraged in the Group’s auditing, and the Company has appointed him as Outside Audit & Supervisory Board Member.
In view that there is no transaction between KYORIN Holdings, Inc., at which he has served as Outside Corporate Auditor, and the Group, and that it has been eleven years since he retired from Mizuho Securities Co., Ltd. that the Group has transactions with, the Company has determined that there should be no potential conflict of interest with general shareholders.
Chisugi Mukai No items to report. The Company has appointed Mr. Chisugi Mukai as Outside Audit & Supervisory Board Member to receive his guidance and advice from a professional point of view as a lawyer. Although he has no experience of direct involvement in corporate management, he is well-versed in corporate legal affairs as a lawyer and possesses ample knowledge for governing corporate management gained from his experience as auditor at other corporations. Therefore, the Company has determined that he will carry out his duties in an appropriate manner. The Company has determined that requirements for independence, including that he is not from a major shareholder or major business partner, are satisfied and that there is no risk of a conflict of interest with ordinary shareholders.

Independent Officers

Number of Independent Officers 3

Matters relating to Independent Officers

Incentives

Implementation of Measures to Provide Incentives to Directors Performance-Based Pay, Stock Options

Supplementary Explanation

For details, please refer to II.1【Director Remuneration】「Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof」

Recipients of Stock Options Internal Directors / Employees / Subsidiaries’ directors / Other

Supplementary Explanation

Recipients of stock options are the Company’s Directors (excluding Outside Directors), Executive Officers, some of the employees, and some of directors of the Company’s subsidiaries.

Director Remuneration

Disclosure of Individual Directors’ Remuneration Selected Directors

Supplementary Explanation

The total amounts by type of remuneration for each classification of Directors, Audit & Supervisory Board Members, and Outside Directors and Outside Audit & Supervisory Board Members are reported in annual securities report.

Policy for Determining Remuneration Amounts or Calculation Methods Thereof Established

Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof

(1) Details and decision-making procedure of policy on determining the amount of remuneration, etc. for Directors and Audit & Supervisory Board Members and calculation method thereof

The Company provides policy on determining the amount of remuneration, etc. for Directors and Audit & Supervisory Board Members and calculation method thereof.

Remuneration for Directors consists of the “basic remuneration” paid according to position and role importance of the Directors as well as corporate performance and individual performance and the “remuneration-type stock options” for the purpose of increasing motivation and incentives toward the contribution to sustained improvement of business performance and enhancement of corporate value over the medium to long term.

However, in view of the nature of the duties, the remuneration for Outside Directors is not linked to business performance and consists only of “basic remuneration” paid according to the position.

Furthermore, although remuneration for Audit & Supervisory Board Members is determined through discussions with the Audit & Supervisory Board Member within the scope of the total amount resolved by the General Meeting of Shareholders, in view of the nature of auditing service, remuneration for Audit & Supervisory Board Members is not linked to business performance and consists only of “basic remuneration” paid according to the position.

The Company has formulated the “Director Remuneration Guidelines,” the policy on determining the remuneration, etc. for each Director that prescribes the composition of remuneration, etc., the level of remuneration for each position and role, business performance indicators and the method of reflecting such performance indicators in the remuneration, etc., and the method of granting stock options. All of such contents are deliberated on by the “Management Advisory Committee” that serves as advisory bodies to the Board of Directors and is comprised of a majority of Independent Officers. With the consent of the Management Advisory Committee and the subsequent resolution by the Board of Directors, President & Representative Director, CEO, Koki Ando determines the amount of remuneration for each Director in accordance with the Director Remuneration Guidelines. (Please refer to (2) below for details regarding the delegation of the determination of the amount of remuneration for each individual Director to the President & Representative Director.)

For the fiscal year under review, President & Representative Director, CEO, Koki Ando has determined the contents of the remunerations, etc. for each Director in accordance with the Director Remuneration Guidelines formulated as the policy on determining the remuneration, etc. for each Director, and accordingly, the Board of Directors considers that the contents of the remuneration, etc. for each Director is aligned with the policy on determining the remuneration, etc.

Remuneration for Directors of the Company is provided for the purpose of heightening the motivation and morale of those Directors in fulfilling their roles, achieving short-term business performance and making contributions to continuous improvement of corporate value over the medium term. In order to have an appropriate remuneration composite to fulfill such purposes, the percentages of the “basic remuneration” and the “remuneration-type stock options” to the total amount are designed to be approximately 60 to 80% for the former and approximately 20 to 40% for the latter, depending on the position and the fluctuations in the stock price.

The monthly provision of “basic remuneration” consists of the fixed portion based on the position and the role of the Director and the performance-linked portion that is linked to the company’s business performance and the degree of individual performance during the fiscal year under review. The performance-linked portion is designed to vary within the range of up to 20% of the base amount relative to the actual results of the “consolidated performance indicators” and “individual performance evaluation indicators” of the Company, or within the range of up to 40% both indicators combined, and will be reflected in the performance-linked portion of the “basic remuneration” for the following fiscal year.

For Outside Directors and Audit & Supervisory Board Members, only the fixed portion of the “basic remuneration” is paid.

From the perspective of facilitating the understanding about the presentation of the Company’s earnings performance, the consolidated business performance indicators mainly factor in the degree of achievement towards the plans of “revenue” representing the earning power of the core business of all companies under the Company and “profit attributable to owner of parent” signifying the ultimate responsibility to shareholders, and the year-on-year variance thereof.

To evaluate individual performance, the Company clarifies the individual responsibility and performance and evaluates the degree of accomplishment towards the plans and year-on-year variance of the business performance of the Company based on a belief that the individual performance accomplished through business execution is tied to the business performance of the Company. For the fiscal year under review, indicators including business performance of all companies, respective business divisions in charge, and respective operating companies in charge are the benchmark to evaluate individual performance. The percentage weights of these indicators used in the evaluation differs, depending on the rank of each individual.

The Company provides part of the remuneration as stock options for shares so that heightened motivation and morale to contribute to sustained improvement of business performance and enhancement of corporate value over the medium to long term will result in promotion of shareholders’ interest of the Company. Regarding the calculation method, the number of stock acquisition rights granted shall be calculated by multiplying a certain amount of the previous year’s basic remuneration by each rank’s coefficient and dividing this derived amount by a share price calculated. The share price is calculated using the Black-Scholes formula based on the average share price from February to April, the year before the grant date.

The calculation period is based on a one-year term of office of Directors, and rights are granted after the one-year term of office.

The maximum amount of remuneration for Directors and Audit & Supervisory Board Members (basic remuneration) that was adopted by resolution of the General Meeting of Shareholders (not including employee equivalent salaries paid to Director who is also an employee) is not more than ¥700 million per year (of which ¥100 million or less for Outside Director; adopted by resolution of the 68th Ordinary General Meeting of Shareholders held on June 28, 2016) for Director, and not more than ¥60 million per year for Audit & Supervisory Board Member (adopted by resolution of the 47th Ordinary General Meeting of Shareholders held on June 29, 1995). At the conclusion of this Ordinary General Meeting of Shareholders, the number of Directors is eight (including five Outside Directors) and the number of Audit & Supervisory Board Members is four.

The maximum amount of remuneration-type stock options for Director (excluding Outside Director) by resolution of the General Meeting of Shareholders is not exceeding ¥500 million per year (by resolution of the 60th Ordinary General Meeting of Shareholders held on June 27, 2008). As of the conclusion of this Ordinary General Meeting of Shareholders, the number of Directors is 13 (excluding two Outside Directors.)

(2) Organization and procedures for determining remuneration, etc. for Directors in the fiscal year under review

A resolution was passed at a meeting of the Board of Directors to delegate the determination of the specific contents of the basic remuneration for each Director for the fiscal year ended March 31, 2021 under review to President & Representative Director, CEO, Koki Ando. The authority is delegated to determine the contents of the basic remuneration for each Director in accordance with the Director Remuneration Guidelines, within the limit of the remuneration for Directors (basic remuneration) that is adopted by the resolution of the General Meeting of Shareholders. The Company judges that it is best to delegate individual Directors’ evaluation to be performed by the Representative Director from the viewpoint of the degree of contribution to businesses and business performance of the Company across the board.

The Board of Directors has resolved that the Management Advisory Committee shall deliberate on the contents of the Director Remuneration Guidelines to ensure that this delegated authority is properly exercised, and President & Representative Director shall determine the contents of the basic remuneration for each Director in accordance with the Director Remuneration Guidelines approved by the Management Advisory Committee.

Supporting System for Outside Directors and / or Audit & Supervisory Board Member

The Company believes it is important to build an environment where it is made easier for Outside Directors and Outside Audit & Supervisory Board Members to conduct their activities to supervise the management team highly effectively from an objective standpoint.
Accordingly, the Company delivers documents containing agenda items in advance and provides opportunities of giving explanations as necessary prior to the holding of any Board of Directors meeting with the aim of promoting understanding of the items and invigorating the discussion by the Board of Directors. The Company provides newly appointed Directors and Audit & Supervisory Board Members with opportunities to receive training by persons responsible for each area concerning the industry trend surrounding the Company, the status of each business of the Group and future strategies to promote their understanding of the Company’s business. In addition, the Company provides periodic seminars and training for Directors and Audit & Supervisory Board Members as appropriate with the aim of ensuring solid deliberation by the Board of Directors. On top of the foregoing, the “Liaison Committee of Independent Outside Directors and Audit & Supervisory Board Members,” a meeting of Independent Outside Directors and Audit & Supervisory Board Members, is held on an as-needed basis to promote information sharing and smooth cooperation between them.
While we do not place staff dedicated to assisting the operations of Outside Directors, staff of the General Affairs Division that serves as the office for the Board of Directors and employees of other relevant divisions perform supporting duties for information sharing among Directors including distribution of materials in advance and sending meeting results to ensure smooth execution of Outside Directors’ duties. In addition, for Outside Audit & Supervisory Board Members, several dedicated staff members for Audit & Supervisory Board Members (Full-time) perform supporting duties to ensure smooth execution of Outside Audit & Supervisory Board Members.

Status of Persons Who Have Retired from a Position Such as President & Representative Director

Name Title/Position Responsibilities Working Form and Conditions (Full-time/Part-time, Paid/Unpaid, etc.) Date of Retirement from Position Such as President Term of Office
- - - - - -

Advisory or Any Other Position in the Company : 0

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

The Company has eight Directors (of which, five are Outside Directors) and they attend “regular meetings of the Board of Directors” that are held on a regular basis and “extraordinary meetings of the Board of Directors” held on an as-needed basis to deliberate and resolve matters to be resolved by the Board of Directors as stipulated in the laws and regulations, the Articles of Incorporation and various other regulations. Also, the Directors monitor other Directors’ execution of their duties upon receiving reports on the status of execution of duties by Directors. Besides meetings of the Board of Directors, the Directors also attend meetings of the Management Committee (consisting of Directors (excluding Outside Directors), Executive Officers with special titles and Audit & Supervisory Board Members (Full-time)) that are regularly held, to take part in decision-making and monitoring other Directors on execution of their duties.
The Company has three Audit & Supervisory Board Members (of which, two are Outside Audit & Supervisory Board Members). Each Audit & Supervisory Board Member attends important meetings including the meetings of the Board of Directors in compliance with the Audit Standards of Audit & Supervisory Board Members predefined by the Audit & Supervisory Board, and in accordance mainly with the audit policy and audit plans for the fiscal year under review. Each member also collects information from Directors and Executive Officers regarding the status of execution of their duties through interviews, inspects important approval/decision documents, and performs on-site inspections at the head office and other principal business locations. They also perform audits by monitoring or verifying the status of the internal control systems with regard to which the Board of Directors made a resolution.
With regard to nomination of candidates for Directors and Audit & Supervisory Board Members, and decisions on remunerations, etc., following deliberations and verifications over the appropriateness by the Management Advisory Committee, they are deliberated and determined by the Board of Directors for Directors, while for the Audit & Supervisory Board Members, the decision on nomination is subject to consent of the Audit & Supervisory Board and the decision on their remunerations is also delegated to the Audit & Supervisory Board.
Pursuant to the approval from the shareholders at the 61st Ordinary General Meeting of Shareholders held on June 26, 2009, the Company appointed Deloitte Touche Tohmatsu (Converted to a limited liability company and changed its name to Deloitte Touche Tohmatsu LLC on July 1, 2009) as Financial Auditor with an audit contract signed, and has commissioned it to perform audits in accordance with the Companies Act and Financial Instruments and Exchange Act.

3. Reasons for Adoption of Current Corporate Governance System

The Company has adopted the structure of a company with an Audit & Supervisory Board instead of a company with committees or a company with an audit and supervisory committee, thereby appointing Outside Directors and Outside Audit & Supervisory Board Members who monitor execution of the Company’s business operation from an independent and fair standpoint, and ensuring transparency of the business management under the executive officers system introduced to build a mechanism allowing prompt execution of business operations.
With the aim of strengthening governance, based on a resolution at the 68th Ordinary General Meeting of Shareholders held on June 28, 2016, we have reduced the number of Internal Directors by six, to three, and increased the number of Outside Directors by one, to five. By making Outside Directors the majority, the Company is further strengthening supervisory functions and promoting swifter decision-making.

Corporate Governance

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