Corporate Governance

• Basic Philosophy
• Corporate Governance System
• Board of Directors’ Effectiveness Evaluation
• Board of Directors

Basic Philosophy

1. Based on a comprehensive governance structure that encompasses our business operations, business characteristics and other areas, and utilizing an appropriate Board of Corporate Auditors System, we shall establish a corporate governance framework capable of responding to risks brought about by changes in the legal system, economic globalization and other factors.
2. In striving to revitalize the Company’s Board of Directors through more complete management strategies and accelerating the decision-making process, we reduced the number of Directors in June 2003, and shortened appointments for Directors to one year to further clarify Director responsibilities and performance. Furthermore, we introduced an Executive Officer System to ensure the execution of business operations. Note that we elected Outside Directors in June 2015 to ensure management transparency and strengthen our oversight functions.
3. We have established the Nominating and Compensation Committee consisting of Outside Directors, Outside Corporate Auditors, and the Representative Director with the aim of further increasing transparency and objectivity of decision-making processes with respect to nomination of candidates for Directors and Corporate Auditors, as well as executive compensation structures and standards .
4. With regard to the Corporate Auditors System, in accordance with the auditing policies of the Board of Corporate Auditors, we shall undergo statutory audits and publish audit reports of quarterly financial results and other materials following independent internal audits, strengthening our Corporate Auditor functions.

Corporate Governance System

The Company is committed to ensuring management efficiency, integrity and transparency to serve the interests of our various stakeholders. Since realizing effective corporate governance throughout management is a critical topic in enhancing corporate value, we have formulated the following corporate governance framework.

(As of June 20, 2023)

Board of Directors

The Board of Directors consists of nine members, including three Outside Directors. Regular board meetings are held once a month to discuss all matters stipulated by law and important management issues, hear reports on the status of business execution and deliberate on sequential measures, as needed. Extraordinary board meetings are held as necessary to enable speedy decision-making.

Executive Officer Committee

The Executive Officer Committee is composed of 12 Executive Officers. Regular committee meetings are held once a month to discuss and report on business execution based on Board decisions and issues faced by each Executive Officer. Extraordinary committee meetings are held as necessary to expedite business execution.

Board of Corporate Auditors

The Board of Corporate Auditors consists of one full-time Corporate Auditor and two part-time Outside Corporate Auditors. To strengthen the auditing function, Corporate Auditors attend important meetings such as Board meetings and Executive Officer Committee meetings. They also conduct audits on the legality and appropriateness of operations at each business site and affiliated company and perform both statutory and voluntary audits.

Board of Directors’ Effectiveness Evaluation

At our company, we conduct an annual self-assessment for individual directors.
To identify areas for improvement and further enhance the effectiveness of the Board of Directors, we evaluated the board meetings held during the fiscal year 2022.
As part of this evaluation, a survey was conducted among all directors and auditors regarding the composition, operation, agenda, and supporting structure of the board. Based on the aggregated results, the Board of Directors analyzed and assessed its effectiveness.
The evaluation concluded that the board's effectiveness is largely ensured. For fiscal year 2023, we are proceeding with the evaluation using an external organization.
We will continue to make ongoing efforts to further improve the effectiveness of the Board of Directors.

Board of Directors

Reasons for Election

Directors

Position	Name	Reasons for election
Chairman, Representative Director	Masataka Ushio	Mr. Masataka Ushio has extensive knowledge in the financial and monetary fields, accumulated through decades of working at a major financial institution. After joining the Company, he has capitalized on that experience and knowledge, and has displayed excellent capabilities in the overall management of the Company. Since June 2013, as the President and Representative Director of the Company, he has led the Group with his outstanding leadership skills and strengthened the effectiveness of the decision-making and supervising functions of the Board of Directors. Since June 2023, as the Chairman and Representative Director of the Company, he has provided advice and support based on his extensive knowledge of the management of the entire Group. As his contribution is expected to achieve sustained growth of corporate value for the Group, he has been elected again as a Director.
President, Representative Director Chief Executive Officer	Takanobu Yazaki	Since joining the Company, for many years, Mr. Takanobu Yazaki has been actively involved in the operations of the Global Sales Department, including fulfilling overseas assignments. By capitalizing on that extensive experience and his perceptive insight, he has contributed to strengthening the effectiveness of the decision-making and supervising functions of the Board of Directors. Since June 2023, as the President and Representative Director of the Company, he has led the Group with his outstanding leadership skills. As his contribution is expected to achieve sustained growth of corporate value for the Group, he has been elected again as a Director.
Director, Senior Managing Officer	Tomohiro Mochizuki	Since joining the Company, for many years, Mr. Tomohiro Mochizuki has been actively involved in the operations of the Business Planning. In addition, since assuming the position of Director in June 2016, he has been in charge of staff departments related to Business Planning, Personnel Affairs, Legal, Purchasing, etc. In addition, from 2020 as Full-time Corporate Auditor of the Company, he has evolved corporate governance and strengthened auditing functions in order to realize sustainable growth and corporate value for the Group. By capitalizing on that extensive experience and his perceptive insight, his contribution is expected to strengthen the effectiveness of the decision-making and supervising functions of the Board of Directors, he has been elected again as a Director.
Director, Managing Executive Officer	Wataru Kobori	Since joining the Company, for many years, Mr. Wataru Kobori has been actively involved in the operations of the Technology Department including Research and Development Laboratory. By capitalizing on that extensive experience and his perceptive insight, he can contribute greatly to the Board of Directors. As his contribution is expected to strengthen the effectiveness of the decision-making and supervising functions of the Board of Directors, he has been elected again as a Director.
Director, Managing Executive Officer	Hiroyuki Toyama	Mr. Hiroyuki Toyama has extensive knowledge in the financial and monetary fields, accumulated through decades of working at a major financial institution. After joining the Company, he has been actively involved in the operations of the General Affairs Department, mainly in personnel affairs and corporate planning. By capitalizing on that extensive experience and his perceptive insight, he can contribute greatly to the Board of Directors. As his contribution is expected to strengthen the effectiveness of the decision-making and supervising functions of the Board of Directors, he has been elected again as a Director.
Managing Executive Officer	Masanori Morokawa	Since joining the Company, for many years, Mr. Masanori Morokawa has been actively involved in the operations of the Production Department. By capitalizing on that extensive experience and his perceptive insight, he can contribute greatly to the Board of Directors. As his contribution is expected to strengthen the effectiveness of the decision-making and supervising functions of the Board of Directors, he has been newly appointed as a Director.
Outside Director	Hiroki Nagaoka	By capitalizing on his extensive auditing experience and professional insight into finance and accounting, which he has accumulated over the years as a certified public accountant, Mr. Hiroki Nagaoka actively gives his opinions and suggestions at Board of Directors meetings of the Company. Furthermore, he actively comments as a member of the Nominating and Compensation Committee, thereby increasing the transparency and fairness of the election or dismissal of and compensation for officers. The Company has deemed that he is qualified to conduct the oversight of management as the Group aims to achieve sustained growth and the realization of corporate value. Therefore, he has been elected again as an Outside Director. Although he has not been directly involved in corporate management, for the reasons above, it is deemed that he is capable of appropriately carrying out the duties of an Outside Director.
Outside Director	Ryota Honjo	Mr. Ryota Honjo has extensive experience as a corporate executive and broad insight into overall corporate management in addition to international experience mainly in Asian markets. Also, he actively gives his opinions and suggestions at Board of Directors meetings of the Company. Furthermore, he actively comments as a member of the Nominating and Compensation Committee, thereby increasing the transparency and fairness of the election or dismissal of and compensation for officers. The Company has deemed that he is qualified to conduct the oversight of management as the Group aims to achieve sustained growth and the realization of corporate value. Therefore, he has been elected again as an Outside Director. For the reasons above, it is deemed that he is capable of appropriately carrying out the duties of an Outside Director.
Outside Director	Itsuko Fukuda	Ms. Itsuko Fukuda has extensive project management experience and insight as both a business executive and software engineer. She can contribute greatly to achieve the sustained growth and the realization of corporate value of the Group. As her contribution is expected to supervise the corporate management, she has been newly appointed as an Outside Director. If her appointment is approved, she is also expected to participate in increasing the transparency and fairness of the election or dismissal of and compensation for officers as a member of the Nominating and Compensation Committee.

Auditors

Position	Name	Reasons for election
Auditors	Takafumi Hirama	Since joining the Company, for many years, Mr. Takafumi Hirama has been actively involved in the operations of Production Department and Quality Assurance Department. He has profound understanding and extensive experience of production sites. As his contribution is expected to evolve corporate governance and strengthen audit functions as the Group aims to achieve the sustained growth and the realization of corporate value of the Group, he has been elected again as a Corporate Auditor.
Outside Auditor	Masato Denawa	Mr. Masato Denawa has utilized his professional knowledge and experience gained in the legal profession to audit the Directors execution of their duties from an objective and neutral viewpoint. He actively gives his opinions and suggestions at Board of Directors’ meetings of the Company. Furthermore, he actively comments as a member of the Nominating and Compensation Committee, thereby increasing the transparency and fairness of the election or dismissal of and compensation for officers. The Company has deemed that he is qualified to evolve corporate governance and strengthen audit functions to achieve sustained growth and the realization of corporate value. Therefore, he has been elected again as Corporate Auditor. Although he has not been directly involved in corporate management, for the reasons above, it is deemed that he is capable of appropriately carrying out the duties of a Corporate Auditor.
Outside Auditor	Takako Okada	By capitalizing on her extensive auditing experience and professional insight into finance and accounting, which Ms. Takako Okada has accumulated over the years as a certified public accountant, she audits the state of business execution by Directors from an objective and neutral perspective. Furthermore, she actively comments as a member of the Nominating and Compensation Committee, thereby increasing the transparency and fairness of the election or dismissal of and compensation for officers. The Company has deemed that she is qualified to evolve corporate governance and strengthen audit functions as the Group aims to achieve sustained growth and the realization of corporate value. Therefore, she been elected again as an Outside Corporate Auditor. Although she has not been directly involved in corporate management, for the reasons above, it is deemed that she is capable of appropriately carrying out the duties of an Outside Corporate Auditor.

Skills Matrix

	Position	Corporate management	Legal / Risk management	Finance / Accounting	Human resource management	Sales / Marketing	Technology / Production / Quality assurance / R&D	ITC	Overseas operation / International experience
Masataka Ushio	Chairman and Representative Director	●	●	●		●			●
Takanobu Yazaki	President and Representative Director	●	●	●		●			●
Tomohiro Mochizuki	Director	●	●	●					●
Wataru Kobori	Director					●	●
Hiroyuki Toyama	Director	●	●	●	●				●
Masanori Morokawa	Director	●					●
Hiroki Nagaoka	Independent Outside Director			●
Ryota Honjo	Independent Outside Director	●		●					●
Itsuko Fukuda	Independent Outside Director	●		●				●
Takafumi Hirama	Corporate Auditor		●	●			●
Masato Denawa	Independent Outside Corporate Auditor		●
Takako Okada	Independent Outside Corporate Auditor			●

Training Policy

As part of our training for directors and auditors, we offer an onboarding program for newly appointed members, which includes education on essential knowledge related to the company's business, finance, and organizational structure, as well as factory tours.
After their appointment, directors and auditors participate in internal training sessions, as well as study sessions led by external lecturers to enhance their management skills and deepen their knowledge of corporate governance. In addition, we provide opportunities for them to attend various external seminars tailored to the individual needs and expertise of each director and auditor. The company bears the cost of these training programs.

Executive Compensation

Basic Policy

The compensation of our directors is designed to function effectively as an incentive for the sustainable enhancement of corporate value, with a compensation structure aligned with shareholder interests. The basic policy for determining individual directors' compensation is to ensure that it is at an appropriate level based on their respective responsibilities. Specifically, the compensation for executive directors consists of base compensation (fixed: executive compensation + commission compensation, and variable: performance-based compensation), executive bonuses (short-term performance-linked compensation in cash), and performance-linked stock compensation (medium- to long-term performance-linked, non-cash compensation). For outside directors, who primarily serve a supervisory function, only base compensation is provided in consideration of their duties.

Procedures for Determining Compensation

At the Board of Directors meeting held on March 31, 2021, our company resolved on a policy for determining individual compensation for directors. Prior to this resolution, the proposed content was referred to the Nomination and Compensation Committee for consultation, and a report was received.
The Board of Directors also confirmed that the individual compensation for directors for the current fiscal year was determined in alignment with the policy resolved by the Board, and that the recommendations from the Nomination and Compensation Committee were duly respected. The Board concluded that the decisions were consistent with the established policy.

Total amount of remuneration for directors and corporate auditors

Classification of Officers	Total amount of remunerations (million yen)	Total amount by type (million yen)			Number of eligible directors and officers
		Basic remuneration	Performance-linked remuneration, etc.	Non-monetary remuneration, etc.
Directors (Outside Directors)	187 （18）	130 （18）	57 （―）	― （―）	9 （3）
Corporate Auditors (Outside Corporate Auditors)	28 （12）	28 （12）	― （―）	― （―）	4 （2）