As a pioneer in plastics, our Group brings “delight” to customers through the creation of new advanced functions from plastics and through the use of its products, with the goal of contributing to value creation for customers and various other stakeholders. For this reason it is important to earn the trust of society and be needed by society, and therefore, we are establishing efficient and effective structures for achieving management that are highly compatible with society and the environment and for addressing risks facing management, including rigorous compliance.

We have adopted a company with Corporate Auditors model and have appointed nine Directors (of which three are Outside Directors) and four Corporate Auditors (of which two are Outside Corporate Auditors) as of June 22, 2023. The Board of Directors is chaired by the President, Representative Director.

At the monthly Board of Directors meetings, Directors make decisions on important matters of business, receive reports on monthly business performance and progress updates from each Director, and listen to the opinions and reports from Corporate Auditors, with the chair of the meeting taking care to ensure sufficient discussion takes place. In the case of conflicts of interest involving any Director, potential conflicts of interest are required to be reported in advance to the Board of Directors to obtain its approval, with reports to be given on the propriety of this after the fact.

The Board of Corporate Auditors consists of two Standing Corporate Auditors and two Independent Outside Corporate Auditors. The Board of Corporate Auditors intends to maintain the current diverse composition of members with appropriate experience and abilities, including a knowledge of finance, accounting, and legal affairs, and to conduct fair, impartial, and efficient auditing activities going forward. Under the direction of Corporate Auditors, the activities of the Board of Corporate Auditors and individual Corporate Auditors shall be assisted by one auditor assistant who concurrently serves in the Internal Audit Department and has knowledge of internal audits works.

The Board of Corporate Auditors meeting is held monthly prior to the Board of Directors meeting and also on an ad hoc basis when necessary. In fiscal 2022, the Board of Corporate Auditors met 19 times for an average of 1 hour 13 minutes. The Board of Corporate Auditors reviewed the previous fiscal year’s audit activities to enhance the effectiveness of audits and discussed the assessment and verification of effectiveness among all Corporate Auditors.

The Board of Corporate Auditors deepens mutual cooperation with the Accounting Auditor, KPMG AZSA LLC, and makes efforts to ensure the reliability of accounting audits, by discussing and exchanging information with the Auditor on such matters as the Auditor’s annual audit plan, risk assessment, audit-related issues, and the progress of audits, and Standing Corporate Auditors’ participation in the on-site inspections of overseas subsidiaries by the Accounting Auditor and in the meeting for reviewing the result of on-site inspections of domestic business sites and subsidiaries conducted by the Auditor.

The Board of Corporate Auditors considers cooperating with Outside Directors to be key for further enhancing the effectiveness of the Board of Directors and the Board of Corporate Auditors’ audits. So all Corporate Auditors attend the Outside Officers’ Meetings noted below, and exchange opinions and share various management-related informationon with other participants.

The Standing Corporate Auditors, in addition to receiving reports, along with the President, on the individual internal audits, participate in internal audit reviews and attend on-site inspections . The Standing Corporate Auditors also provide advice to and exchange opinions with the Internal Audit Department, which conducts the internal audits, through meetings held quarterly, in principle, regarding each stage of the audit process, including the planning, the audit approach, reporting of results, and post-audit follow-ups, to ensure audit effectiveness. The Board of Corporate Auditors maintains a close cooperative relationship with the Internal Audit Department by having the Standing Corporate Auditors report the status of such exchanges to the Board of Corporate Auditors when appropriate and by holding annual meetings together with Outside Corporate Auditors to exchange information between the Internal Audit Department.

Based on the audit plan, each of the Corporate Auditors conducts the audit activities such as attendance at important meetings including Board of Directors meetings, attendance regular meetings (quarterly, in principle) with President and Representative Director. Each of Corporate Auditor also brings to the attention of the Board of Directors and operating departments any issues that it has discovered through these audit activities, and makes recommendations.

Among these activities, Standing Corporate Auditors, as full-time auditors in accordance with the allocation of their duties, receive circular memos regarding important matters for approval, as well as participate in important meetings such as the Risk Management Committee and the Compliance Committee. They also actively conduct on-site inspections of business sites and subsidiaries and attend similar inspections arranged by the Accounting Auditor and the Internal Auditing Departments. Standing Corporate Auditors hold meetings with the Corporate Auditors of subsidiaries and exchange updates on the implementation of audits in order to deepen cooperation with them.

We have introduced an Executive Officer structure in which Executive Officers appointed by the Board of Directors as the persons responsible for business execution execute business under the direction of the Company President based on the policies determined by the Board of Directors, and have appointed seventeen Executive Officers (including six who serve concurrently as Directors) as of June 22, 2023. Executive Officers’ Meetings are held once a month and attended by Directors, Executive Officers and Corporate Auditors to convey information on policies and important matters decided by the Board of Directors, to receive reports on business performance and the status of business execution from each Executive Officer, and to review important matters and share information.

As of June 22, 2023, all 27 of our officers, who are Directors, Corporate Auditors, and Executive Officers, included 23 men and 4 women, with a female board member ratio of 15%. All of our officers with the exception of one Corporate Auditor are 50 or older.

Outside Director Hiroyuki Abe has expertise, considerable experience and wide range of insight as a university professor. We expect him to provide appropriate opinions and valuable advice from an objective standpoint by using such knowledge. He has also served as a member of the Appointment and Remuneration Committee.

Outside Director Kazuo Matsuda has considerable experience and wide range of insight that he cultivated at a financial institution as well as business companies as a management executive. We expect him to provide appropriate opinions and valuable advice from an objective standpoint by using such knowledge. He has also served as a member of the Appointment and Remuneration Committee.

Outside Director Etsuko Nagashima has specialist viewpoint and wide range of insight relating to finance and accounting as a Certified Public Accountant. We expect her to provide appropriate opinions and valuable advice from an objective standpoint by using such knowledge. She has served as a member of the Appointment and Remuneration Committee.

Outside Corporate Auditor Kazuhiko Yamagishi utilizes his professional perspective as a lawyer and wide-ranging insight into management for auditing our Company.

Outside Corporate Auditor Noriko Kawate utilizes her professional perspective as a Certified Public Accountant and tax accountant and wide-ranging insight into finance, accounting and management for auditing our Company.

We have established the Criteria for Independence of Directors and Corporate Auditors through a resolution of the Board of Directors, and has determined that the aforementioned Outside Directors and Outside Corporate Auditors are independent pursuant to the said criteria. In addition, they have been submitted as independent officers as stipulated by the Tokyo Stock Exchange.

We also hold monthly Outside Officers’ Meetings consisting of Outside Directors, Outside Corporate Auditors, the Director Overseeing the Corporate General Affairs Division and the Corporate Finance & Planning Division, the Executive Officer in charge of the Corporate General Affairs Division, Standing Corporate Auditors, and members of the Corporate General Affairs Division and the Corporate Finance & Planning Division. At the meetings, we introduce information on our business results, the officer in charge of each segment will introduce its relevant business, and we provide advance explanations of items on the agenda for Board of Directors meetings, etc. The aim is to exchange information and share recognition of our strategies and management issues with Outside Directors and Outside Corporate Auditors.

In order to strengthen the independence, objectivity, and accountability of the Board of Directors’ functions with respect to the nomination and remuneration, etc. of Directors, the Company has voluntarily established the Nomination and Remuneration Committee consisting of a majority of Independent Outside Directors (Directors submitted as an Independent Officer to the Tokyo Stock Exchange). The Nomination and Remuneration Committee was reorganized on June 24, 2021 for reinforcing its functions from the Nomination and Remuneration Advisory Committee, which had previously reported to the Board of Directors on matters concerning the nomination of Directors and the determination of remuneration amounts. The Committee is chaired by President and Representative Director Kazuhiko Fujiwara, with the membership of Independent Outside Directors Hiroyuki Abe, Kazuo Matsuda and Etsuko Nagashima.

With regard to the nomination of Directors, the Nomination and Remuneration Committee discusses the election and dismissal of Directors or Representative Director, and the succession plan for the Representative Director and President and reports the results of that debate to the Board of Directors. With regard to Director remuneration, the Committee has authority to determine matters relating to Director remuneration, etc. (including they system and policy) based on delegation to the Committee by resolution of the Board of Directors.

The details matters in fiscal 2022 is that, with regard to the nomination of Directors, the election of candidates for Directors, the succession plan for the President, and election and nomination of senior management were discussed, and with regard to the renumeration of Directors the amounts of monthly remuneration and bonuses according to Directorship position were decided.

The Committee met a total of five times during fiscal 2022, and all members attended all committee meetings.

To provide an incentive to contribute to the sustained improvement of corporate value of the Company, the remuneration of Directors of the Company shall be based on a remuneration system that is linked to performance and shareholder value. Specifically, remunerations shall comprise “monthly remuneration,” which is fixed remuneration according to position, “bonuses,” which serve as short-term incentives to motivate the Directors to achieve the annual business plans, and “stock compensation,” medium- to long-term incentives to encourage the sharing of value with shareholders. However, the remuneration of Outside Directors shall comprise exclusively monthly remuneration. Monthly remuneration shall be a fixed cash payment each month throughout the term of office of the Director, and the amount to be paid to the individual Directors shall be determined according to position by comprehensively taking into account various factors including the management environment and economic conditions. The total amount to be paid for bonus shall be calculated by multiplying business profit by a certain percentage, and the amount to be paid to individual Directors shall be calculated by multiplying the total payment amount by a certain percentage according to the Director’s position and responsibilities.

Stock compensation shall comprise restricted stock compensation and restricted stock corresponding to the amount to be paid according to the Director’s position shall be allotted at a specific time each year after the conclusion of the ordinary general meeting of shareholders. The Transfer Restriction Period of the restricted stock shall be the period until the date of retirement from the post of Director or Executive Officer of the Company. The proportion of each type of remuneration to the total amount of individual remuneration, etc. to be paid to the Directors (excluding Outside Directors) of the Company shall be appropriately determined by taking into account various factors such as the position and responsibilities so that it functions as an incentive to contribute to the sustained improvement of corporate value of the Company.

A Nomination and Remuneration Committee shall be established and the authority to determine the amount of individual remuneration, etc., to Directors shall be delegated by resolution of the Board of Directors to the Nomination and Remuneration Committee.

Executive remuneration in fiscal 2022 comprised a total of ¥388 million (monthly base pay of ¥263 million and bonus of ¥125 million) for eight Directors (excluding Outside Directors), a total of ¥54 million (monthly base pay of ¥54 million) for two Corporate Auditors (excluding Outside Corporate Auditors), and a total of ¥58 million (monthly base pay of ¥58 million) for five Outside Officers. In addition to the above amount, 36 million yen was paid to one Director, who retired from its position of Director at the conclusion of the 131st Ordinary General Meeting of Shareholders held on June 23, 2022, as the payment of accrued retirement benefits associated with the abolishment of the retirement benefits system. Note that stock compensation will be paid from fiscal 2023.

The Company evaluates the effectiveness of the Board of Directors each year. The Company enhances the effectiveness of the Board of Directors by executing the PDCA cycle of conducting self-evaluations and aggregation of opinions based on a questionnaire survey of all members of the Board of Directors (Directors and Corporate Auditors), holding discussions and exchanges of opinions at meetings based on the analysis results of the survey, summarizing the evaluation results based on these discussions and setting the issues to be addressed, and at the Board of Directors implementing initiatives to resolve these issues. The results of the analysis and evaluation of the effectiveness of the Board of Directors for fiscal 2022 are summarized below.

Our Group has systems in place for ensuring appropriate operations in accordance with our Business Philosophy. In accordance with our Basic Policy on Internal Control Systems (partially amended by resolution of the Board of Directors meeting held on February 28, 2023, to further promote the system based on the sustainability management and initiatives to strengthen governance) drawn up by the Board of Directors, we periodically review the systems and promote various activities to enhance internal control.

With respect to internal control over financial reporting, based on our Basic Rules and Regulations for Internal Control over Financial Reporting, we endeavor to enhance systems for ensuring the reliability of our financial reporting, appropriately operate internal control systems in terms of implementation, assessment, reporting, and correction, and ensure appropriate and timely disclosure of corporate information. The Comprehensive Guidelines for Internal Control in Consolidated Subsidiaries covers the items that subsidiaries are required to address in establishing their internal control systems and in their subsequent ongoing implementation of control activities.

The internal control over our financial reporting as of March 31, 2023, was assessed and deemed to be effective by Internal Auditing Departments. In addition, as a result of the accounting auditor’s audit, it was confirmed that the internal control report presents fairly the result of assessments of internal control over financial reporting.

The Company’s policy is to operate the Board of Directors consisting of (i) the internal Directors to have the knowledge, experience, and ability to fulfill the responsibility of supervising the execution of business by management in an aim to achieve sustainable growth and enhance corporate value over the medium to long term, and (ii) the Outside Directors to voice opinions on corporate policies and business execution from an objective standpoint.

The correspondence between key knowledge, experiences and abilities, etc. which the Board of Directors requires and the respective Directors is described below.

The Board of Corporate Auditors intends to maintain the diverse composition of members with appropriate experience and abilities, including a knowledge of finance, accounting, and legal affairs, and to conduct fair, impartial, and efficient auditing activities going forward. The correspondence between key knowledge, experiences and abilities, etc. which the Board of Corporate Auditors requires and the respective Corporate Auditors are described below.

The Board of Corporate Auditors intends to maintain the diverse composition of members with appropriate experience and abilities, including a knowledge of finance, accounting, and legal affairs, and to conduct fair, impartial, and efficient auditing activities going forward. The correspondence between key knowledge, experiences and abilities, etc. which the Board of Corporate Auditors requires and the respective Corporate Auditors are described below.