Basic Policy for Corporate Governance

Chapter 1 General Provisions

(Basic Ideas of Corporate Governance)

Article 1 (1) MITSUBISHI STEEL MFG. CO., LTD. ( "Company " hereinafter) shall recognize as an urgent matter the establishment of a corporate culture capable of responding to any changes in the business environment and set as a basic management policy sustainable and global development paths by fostering competitive businesses. Based on this policy, the Company shall set forth the Mitsubishi Steel Group Code of Conduct. All executives and employees shall abide by this Code of Conduct and work to maximize corporate value. The Company shall also further strengthen the functions of the Board of Directors and the Board of Corporate Auditors and work to enhance corporate competitiveness, secure prompt and reasonable decision-making, and achieve highly transparent and sound management.

  1. 2The Company shall strive to enrich corporate governance in line with the following basic ideas:
    1. 1respect for shareholder rights and equality;
    2. 2consideration for the interests of stakeholders, including shareholders, and appropriate joint efforts with stakeholders;
    3. 3disclosing corporate information in a timely and appropriate manner to secure transparency and engaging in constructive dialogue with shareholders and investors to help increase corporate value over the medium- and long-term; and
    4. 4providing opportunities for independent outside directors to share information and exchange opinions, thereby strengthening the Board of Directors' supervision of operations.
  2. 3This Basic Policy shall be considered second to applicable laws and regulations and the articles of incorporation but take precedence over the Company's rules, etc.
  3. 4The Company shall seek at all times to achieve ideal corporate governance and continuously strive to strengthen related efforts.

Chapter 2 Securing of Shareholder Rights and Equality

(Exercise of Rights by Shareholder)

Article 2 (1) The Company shall take appropriate action to secure shareholder rights substantially and seek to develop an environment that allows shareholders to appropriately exercise their rights. In addition, the Company shall secure substantial equality on behalf of its shareholders.

  1. 2The Company shall strive to ensure that shareholder rights, including voting rights at a shareholders meeting, are secured substantially. In addition, in securing equality, the Company shall take appropriate action while giving all due consideration to minority shareholders.
  2. 3The Company shall recognize that shareholders meetings are opportunities for constructive dialogue with shareholders and develop an appropriate environment for the exercise of rights at shareholders meetings from the perspective of the shareholders.
  3. 4If the Board of Directors recognizes the existence of a specific agenda submitted by the Company that was not rejected by vote at a shareholders meeting but associated with a significant number of dissenting votes, it shall review the reasons for the opposition and the cause of such notable dissent and duly consider the need for dialogue with shareholders and other actions.

(Shareholders Meeting)

Article 3 (1) The Company shall provide accurate information deemed to contribute to sound decision-making by shareholders at shareholders meetings, as needed.

  1. 2The Company shall strive to issue notices of annual shareholders meetings at the earliest possible date to allow shareholders sufficient time to consider the agendas for the shareholders meetings and appropriately exercise their right to vote. The Company shall also make public said notices on the websites of the Tokyo Stock Exchange and the Company before issuing them.
  2. 3The Company shall set forth dates of shareholders meetings to further the goal of providing accurate information, thereby enriching constructive dialogue with shareholders.
  3. 4The Company shall strive to develop an environment that allows all shareholders, including those unable to attend shareholders meetings, to appropriately exercise their right to vote. For example, the Company shall make public English translations of notices of shareholders meetings and implement a platform that allows electronic voting.
  4. 5If an institutional investor, etc. holding shares under the name of a trust bank, etc. wishes to exercise his or her right to vote, etc. at a shareholders meeting on behalf of the trust bank, etc., the Company shall determine a response thereto based on consultations with the trust bank and attorneys at law, etc.

(Basic Principles of Capital Policy)

Article 4 The Company shall set forth the Basic Principles of Capital Policy as follows at a Board of Directors meeting in light of the fact that trends in capital policy may significantly affect shareholder interests.

Basic Principles of Capital Policy

The Company shall duly prepare for risks while maintaining a strong financial basis and taking steps to enable growth investment for sustainable growth. The Company shall work to improve capital efficiency by strengthening management of cash flows and balance sheets and seek to return profits to shareholders by enhancing corporate value in the medium- and long- term.

(Basic Policy for Cross-holding of Shares and for Exercise of Voting Rights Associated with Cross-shareholdings)

Article 5 (1) The Company shall establish and disclose a Basic Policy for Cross-holding of Listed Shares and a Basic Policy for Exercise of Voting Rights Associated with Cross-shareholdings as follows at a Board of Directors meeting.

Basic Policy for Cross-holding of Listed Shares and Basic Policy for Exercise of Voting Rights Associated with Cross-shareholdings

For individual cross-held shares, the Board of Directors shall verify every year the economic rationality thereof, concretely examining the appropriateness of the purpose of holding those shares and whether the benefits and risks of holding them are commensurate with the cost of capital in order to determine the proprietary of reducing shares. Based on the results, the Company may hold cross-held shares for the purpose of strengthening ties with partner companies. Regarding the exercise of voting rights for cross-held shares, the Company shall fully examine on a case-by-case basis whether a specific agenda advances the corporate value of the relevant company and whether the agenda may damage the Company's corporate value and determine whether to approve the agenda on that basis.

  1. 2The Company shall verify the medium- and long-term economic rationality and future prospects for major cross-held shares every year at a Board of Directors meeting after considering returns on and risks associated with the shares. The Company shall also confirm the goals and rationality of the cross-holdings based on the results of verification.
  2. 3If a company that holds shares of the Company as cross-held shares (cross-holding shareholder) indicates its intention to sell such shares, the Company shall not engage in acts such as suggesting a reduction in business relationships to prevent such sale.
  3. 4The Company shall not engage in transactions with cross-holding shareholders that would harm the interests of the Company or the common interests of the shareholders, such as continuing transactions without fully verifying the economic rationality of the transactions.

(Protecting Shareholder Rights)

Article 6 (1) In introducing and putting into practice anti-takeover measures, the Company shall consider the need and reasons therefor and ensure appropriate measures. The Company shall also provide sufficient explanation to shareholders.

  1. 2If the Company's shares are put to tender offer, the Company shall clearly explain the Board of Directors' current stance thereto (including the nature of counter-proposals, if any) and take due care not to unjustly preclude shareholder rights to sell off their holdings in response to the tender offer.
  2. 3In implementing a capital policy (including capital increase and MBO) that changes or significantly dilutes control, the Company shall consider the need and reasons therefor so as to avoid unjustly harming existing shareholders and secure appropriate procedures. The Company shall also provide sufficient explanation to shareholders.

Chapter 3 Respect for Stakeholders

(Sustainability)

Article 7 (1) The Company shall establish a Basic Policy for Sustainability as follows.

Basic Policy for Sustainability

In recognition of the importance of establishing a corporate structure capable of adapting to any changes in the business environment, the Mitsubishi Steel Group has adopted sustained and global growth based on the development of competitive businesses as its fundamental management policy. We aim to be a more reliable business by fulfilling our social mission, and we will contribute to the realization of a sustainable society through dialogue with all stakeholders, including customers,suppliers, shareholders, employees, and local communities, based on our Corporate Philosophy, the Mitsubishi Steel Group Code of Conduct, and the Detailed Rules for Mitsubishi Steel Manufacturing Group Corporate Code of Conduct.
Environment
The Mitsubishi Steel Group will get actively involved in protecting the environment in all aspects of business activities with a heightened awareness that conservation of the global environment is one of the most crucial challenges facing mankind.
Society
The Mitsubishi Steel Group will respect human rights, character, individuality,and diversity, seeking to galvanize the company by fostering human resources as well as ensuring a safe and pleasant work environment.
Governance
In its global business activities, the Mitsubishi Steel Group will comply with the laws and regulations or code of ethics in society for transparent, fair, and equitable transactions under free competition, pursue optimal corporate governance at all times to maximize corporate value, and continually strive to enhance these efforts.

  1. 2The Board of Directors shall recognize that addressing issues related to sustainability, such as consideration for global environmental issues, including climate change, respect for human rights, consideration for the health and the work environment of employees, fair and appropriate transactions, and risk management for natural disasters, etc., is an important management issue that would not only reduce risks but also lead to profit opportunities, and shall actively and aggressively address these issues from the perspective of enhancing corporate value in the medium- to long- term.

(Appropriate Cooperation with Stakeholders)

Article 8 (1) The Company shall recognize that sustainable growth and the creation of medium- and long-term corporate value result from providing necessary resources and from the contributions of customers, communities, and other stakeholders, and work to achieve appropriate joint efforts. The Company shall also work to foster corporate culture and a climate that demonstrates respect for the rights and positions of stakeholders and sound business ethics.

  1. 2The Company shall engage in business under the Corporate Philosophy in light of its social responsibilities and in consideration of its stakeholders, thereby improving medium- and long-term corporate value.
  2. 3The Company shall separately establish the Mitsubishi Steel Group Code of Conduct at a Board of Directors meeting to ensure that the directors, corporate auditors, executive officers, and employees act at all times in an ethical manner. The Company shall review the status of the implementation of said Code of Conduct on a regular basis.

(Relationship to Stakeholders)

Article 9 (1) The Company shall seek to achieve diversity, including active hiring of women in the Company, based on the recognition that the existence of a diversity of perspectives and values reflecting different experiences, skills, and attributions in the Company offer a source of strength in securing the Company's sustainable growth.

  1. 2The Company shall present and disclose its approach to ensuring diversity in the promotion of core human resources, including the promotion of women, foreign nationals and mid-career employees to managerial positions, as well as its voluntary and measurable goals.
  2. 3In view of the importance of human resource strategies for improving corporate value in the medium- to long- term, the Company shall disclose its policies for human resources development and internal environmental improvement aimed at ensuring diversity, together with implementation status.
  3. 4The directors and corporate auditors of the Company shall recognize their own fiduciary responsibilities to shareholders and act in the interests of the Company and in the common interests of the shareholders while seeking to promote appropriate joint efforts with stakeholders.
  4. 5The Company shall strive to further strengthen the whistleblowing system to ensure that employees, etc. may report on illegal or inappropriate actions committed during the course of the Company's business activities and that the reported information and doubts are objectively verified and appropriately applied. The Board of Directors shall supervise the status of the operation of this system. Moreover, the Company shall establish an outside report reception desk independent of management personnel and clearly specify in the whistleblowing regulations that the identity of any person providing such information will remain secret and that such person will not be unfavorably treated as a result.

(Fulfillment of Functions of Corporate Pension)

Article 10 (1) The Company shall systematically nominate and assign appropriately qualified personnel as corporate pension fund managers and provide them with continuing educational opportunities to improve their credentials, so that they can enhance their expertise in corporate pension fund management and fulfill their expected functions as asset owners.

  1. 2Decisions on asset management shall be made by the Board of Representatives based on deliberations by the asset managers. The Asset Management Committee and the Board of Representatives shall be staffed by personnel with appropriate qualifications, and senior labor union leaders, etc. shall be assigned as representatives of the beneficiaries.
  2. 3The secretariat of the corporate pension fund shall be staffed by personnel with appropriate qualifications.

Chapter 4 Securing Transparency Based on Appropriate Information Disclosure and Dialogue with Shareholders and Investors

(Information Disclosure and Transparency)

Article 11 (1) The Company shall appropriately disclose financial and nonfinancial information, including information about business challenges, risks, and governance, based on laws and regulations. The Company shall also work proactively to provide information other than disclosures as required by laws and regulations.

  1. 2The Board of Directors shall work to ensure that the information disclosed and provided is accurate, easy-to-understand, and highly useful in light of the fact that such information serves as the basis for constructive dialogue with shareholders and investors.

(Enrichment of Information Disclosure)

Article 12 (1) The Company shall disclose and make public the following matters, etc., in addition to appropriate disclosure required by laws and regulations:

  1. 1the Corporate Philosophy and the management plan;
  2. 2the Basic Policy for Corporate Governance;
  3. 3policy and procedures for determining compensation for directors;
  4. 4Policy and procedures for nominating candidates for the positions of directors and corporate auditors, as well as nominating and dismissing representative directors; and
  5. 5Explanation for individual nomination in nominating candidates for the positions of directors and corporate auditors, as well as individual nomination and dismissal in nominating and dismissing representative directors.
  1. 2The information shall be disclosed in a manner that it is easy to understand and is of high added value to users.
  2. 3From the perspective of information disclosure to overseas investors, the Company shall strive to disclose and provide information in English within a reasonable scope.
  3. 4The Company shall appropriately disclose our sustainability initiatives in disclosing our management strategies. Further, information on investment, etc. in human capital and intellectual property shall be disclosed and provided in an easy-to-understand and concrete manner while being conscious of consistency with management strategies management issues.

(Response to Accounting Auditor)

Article 13 (1) The Company shall take appropriate action to ensure appropriate audits in light of the accounting auditor's duty to shareholders and investors.

  1. 2The Board of Corporate Auditors shall take the following actions to secure appropriate audits by the accounting auditor:
    1. 1formulating standards for the appropriate selection and evaluation of the accounting auditor; and
    2. 2confirming the independency and expertise of implementation of the accounting audit of the Company by the accounting auditor.
  2. 3The Board of Directors and the Board of Corporate Auditors shall take the following actions to secure appropriate audits by the accounting auditor:
    1. 1securing sufficient audit times for high-quality audits;
    2. 2securing access (interview, etc.) to the President by the accounting auditor;
    3. 3securing adequate joint efforts among the accounting auditor and corporate auditors, internal audit department, and outside directors; and
    4. 4establishing a system to respond in cases in which the accounting auditor detects fraud or other improprieties and requests appropriate action or points out flaws, problems, or other issues.

(Dialogue with Shareholders and Investors)

Article 14 (1) The Company shall engage in constructive dialogue with shareholders and investors for the purpose of contributing to sustainable growth and improvements in medium- and long-term corporate value.

  1. 2The directors shall listen to the interests and concerns of the shareholders and investors through the dialogue established in the preceding paragraph and work to obtain understanding of its management policies by explaining them explicitly and clearly. The directors shall also work to achieve a balanced understanding of stakeholder viewpoints and take appropriate action based on such understanding.
  2. 3The Board of Directors shall establish and make public the Basic Policy for Dialogue with Shareholders and Investors.
  3. 4The Company shall strive to grasp its own shareholder composition once a year or, as needed, twice a year.
  4. 5In formulating and announcing a medium-term management plan, etc., the Company shall strive to communicate clearly the basic policy on the business portfolio as determined by the Board of Directors and the status of the review of the business portfolio.

Chapter 5 Corporate Governance System

Section 1 Directors and Board of Directors

(Duties of the Board of Directors)

Article 15 The Board of Directors shall have the following duties in light of its responsibilities to shareholders, thereby promoting the Company's sustainable growth, improving medium- and long-term corporate value, and strengthening earning capacity and capital efficiency, etc.:

  1. 1providing broad-brush oversight, such as basic management policies;
  2. 2developing an environment that supports appropriate risk-taking by the President; and
  3. 3conducting highly effective supervision of the directors' execution of operations from an independent and objective perspective.

(Roles of the Board of Directors)

Article 16 (1) The Board of Directors shall engage in constructive discussions on medium-term management plans, etc. while seeking to establish the Company's basic management policies, etc. as among its major duties. The Board of Directors shall also make decisions on the execution of important operations in light of said policies.

  1. 2The Board of Directors shall suggest the delegation of some of the matters to be resolved at a shareholders meeting to the Board of Directors, in accordance with the provisions of laws and regulations, with the goal of securing the flexibility and expertise for management decisions.
  2. 3The Board of Directors shall appropriately delegate to the directors decision-making involving the execution of operations other than matters to be resolved at a Board of Directors meeting, in accordance with the provisions of laws and regulations and the Company's own rules, thereby appropriately exercising its management supervision functions.
  3. 4The Board of Directors shall make its best efforts to realize the medium-term management plan based on the recognition that said plan is among its commitments to shareholders. The Board of Directors shall also confirm and analyze the status of work to achieve its goals, explain such work to shareholders, and reflect the results of the analysis in next and subsequent plans.
  4. 5In view of the basic management policies, etc., the Board of Directors shall proactively engage in the formulation and operation of a succession plan for the Representative Director, President & CEO, and supervise the development of succession candidates in a planned manner over sufficient time and with sufficient resources.
  5. 6The Board of Directors shall consider the development of an environment that supports appropriate risk-taking as among its major duties and hold multifaceted and sufficient discussions on the directors' suggestions from an independent and objective perspective.
  6. 7The Board of Directors shall formulate a basic policy for sustainability from the viewpoint of improving corporate value in the medium- to long- term.
  7. 8The Board of Directors shall effectively supervise the allocation of management resources and the execution of business portfolio strategies to contribute to sustainable growth of the enterprise, in view of the importance of investment, etc. in human capital and intellectual property.
  8. 9The Board of Directors shall appropriately carry out the nomination and dismissal of directors, executive officers, division chiefs, and those above the level of general manager in light of performance evaluations, etc. in accordance with fair and highly transparent procedures.
  9. 10The Board of Directors shall consider the implementation of the highly effective supervision of directors from an independent and objective perspective as among its major duties and appropriately evaluate the performance, etc. of the directors and reflect the results of said evaluation in compensation for directors.
  10. 11The Board of Directors shall engage in supervision to ensure timely and accurate information disclosure.
  11. 12The Board of Directors shall appropriately develop and establish compliance, internal controls (including internal controls on financial reporting) for the entire Group, and enterprise risk management systems, and exercise supervision to confirm they are appropriately implemented while using the Internal Audit Office.
  12. 13The Board of Directors shall nominate personnel with appropriate experience and abilities as well as the required knowledge of finance, accounting and legal matters as candidates for the position of corporate auditor. In particular, one or more persons with sufficient knowledge of finance and accounting matters shall be nominated.
  13. 14In the case of a transaction involving a director (transaction between related parties), the Board of Directors shall implement monitoring (including approval of the transaction) in accordance with appropriate procedures to prevent the transaction from damaging the Company's interests or the common interests of the shareholders.
  14. 15The Board of Directors shall appropriately manage any conflicts of interest that may arise between the Company and directors.

(Composition of the Board of Directors)

Article 17 (1) After identifying skills, etc. required in light of management strategies, the Board of Directors shall be composed of individuals having appropriate knowledge, experience, and abilities necessary to effectively fulfill its roles and duties in a balanced manner. The Board of Directors shall strive to achieve both diversity and optimal size.

  1. 2The Board of Directors shall implement and disclose the ideas set forth in paragraph (1) as follows:
Balance, Diversity, and Size of Board of Directors

The Board of Directors is composed of members with various experience, knowledge and abilities, including international experience, and at the same time will maintain its size to the minimum necessary and structure needed to promptly and efficiently conduct decision-making, in order to achieve both optimal size and diversity. Further, we have outside directors nominated for a third or more of its membership to maintain fairness and transparency in deciding the execution of operations.

  1. 3The Board of Directors shall disclose a skills matrix that lists each Director's knowledge, experience and abilities, etc.

(Policy for nominating candidates for the positions of directors and corporate auditors, and nominating and dismissing representative directors)

Article 18 The Board of Directors shall establish a policy for nominating candidates for the positions of directors and corporate auditors, and nominating and dismissing representative directors as follows.

Policy for nominating candidates for the positions of directors and corporate auditors, and nominating and dismissing representative directors

In nominating candidates for the position of director or corporate auditor, the Board of Directors shall nominate personnel capable of contributing to sustainable and global development through the cultivation of competitive businesses who are also capable of making contributions to maximizing the Company's corporate value in the medium- and long-term, in accordance with the Company's management policy. Further, it shall receive a report from the Nomination and Compensation Committee in nominating candidates for the position of director or corporate auditor and nominating and dismissing representative directors.

(Operation of the Board of Directors)

Article 19 (1) A Board of Directors meeting shall be an opportunity for unrestricted and constructive discussion and exchange of opinions, including raising of problems by outside directors.

  1. 2The Board of Directors shall promote vital deliberations while securing the following handling of meetings:
    1. 1ensuring that materials for a Board of Directors meeting are in principle distributed before the meeting;
    2. 2providing materials other than those for a Board of Directors meeting at a meeting of the Outside Officer Council Meeting;
    3. 3determining the annual schedule of Board of Directors meetings and matters anticipated to be deliberated on;
    4. 4setting the number of items to be deliberated on and the frequency of Board of Directors meetings in an appropriate manner; and
    5. 5securing sufficient deliberation time.

(Evaluating the Effectiveness of the Board of Directors)

Article 20 (1) The Board of Directors shall promote improvements in its function through the analysis and evaluation of the effectiveness of the Board of Directors as a whole.

  1. 2The Board of Directors shall engage in the analysis and evaluation of the effectiveness of the Board of Directors as a whole every year in reference to each director's self-evaluation, etc. and disclose an overview of the results thereof.

(Independent Outside Directors)

Article 21 (1) The Company shall nominate independent outside directors assigned with roles and responsibilities that will contribute to the Company's sustainable growth and improve medium- and long-term corporate value for a third or more of the membership. Independent outside directors shall include personnel with management experience at other companies.

  1. 2The Board of Directors shall strive to select persons capable of contributing to candid, active, and constructive discussion at the Board of Directors meetings as candidates for the position of independent outside directors.
  2. 3The Company shall adopt independence standards that focus on ensuring the substantial independence of independent outside directors in light of the independence standards set by the Tokyo Stock Exchange.
  3. 4The independent outside directors shall be expected to fulfill the following roles and duties:
    1. 1giving advice on management policies and management improvements based on their own knowledge to further the goals of promoting the Company's sustainable growth and improving medium- and long-term corporate value;
    2. 2supervising management through important decision-making at the Board of Directors meetings;
    3. 3supervising conflicts of interest between the Company and directors, executive officers, major shareholders, etc.; and
    4. 4reflecting the opinions of stakeholders, including minor shareholders, at the Board of Directors meetings from a position independent of directors, executive officers, and major shareholders.

Section 2 Corporate Auditors and Board of Corporate Auditors

(Duties of Corporate Auditors and Board of Corporate Auditors)

Article 22 (1) In fulfilling roles and duties, such as audits of the directors' execution of duties, the nomination and dismissal of corporate auditors and accounting auditors, and the exercise of authority for audit fees, the corporate auditors and the Board of Corporate Auditors shall make appropriate determinations from an independent and objective perspective in light of their responsibilities to shareholders.

  1. 2The corporate auditors and the Board of Corporate Auditors shall actively and vigorously exercise their authority beyond operational audits and accounting audits and appropriately express their opinions to the directors at the Board of Directors meetings.
  2. 3The Board of Corporate Auditors shall enhance its effectiveness by combining the characteristics of the outside corporate auditors and full-time corporate auditors in an organic manner so that both can sufficiently fulfill their own roles and duties.
  3. 4The corporate auditors or the Board of Corporate Auditors shall secure joint efforts with the outside directors to strengthen the outside directors' ability to gather information.

Section 3 Outside Officer Council Meeting and Nomination and Compensation Committee

(Outside Officer Council Meeting and Nomination and Compensation Committee)

Article 23 (1) The Company shall establish an Outside Officer Council Meeting consisting of outside directors and outside corporate auditors as a body to work under the Board of Directors for the purpose of exchanging information and sharing recognition, etc. among the outside directors and outside corporate auditors, and hold meetings of the Outside Officer Council Meeting, as needed. The internal corporate auditors may also attend meetings of said Committee, as needed.

  1. 2The Company shall establish a Nomination and Compensation Committee as a body to work under the Board of Directors and hold meetings as necessary in order to strengthen the independence, objectivity and accountability of the functions of the Board of Directors with regards to the nomination, etc. of officers and the determination, etc. of officer remuneration. The Nomination and Compensation Committee shall be attended only by independent outside directors and the Chairman of the Board, and shall provide involvement and advice also from the perspective of diversity, such as gender and skills.
  2. 3The members of the Outside Officer Council Meeting shall freely discuss matters that contribute to the exchange of information and sharing of knowledge. The Nomination and Compensation Committee shall solicit explanations on original proposals on such matters as the nomination, etc. of officers and the determination, etc. of officer remuneration from the Representative Director, President & CEO, and deliberate on those matters.
  3. 4The outside directors shall promote joint efforts with the directors and the corporate auditors or the Board of Corporate Auditors through the actions of the Outside Officer Council Meeting.
  4. 5The Company shall devise methods for ensuring the accurate provision of necessary information through the Outside Officer Council Meeting and the Nomination and Compensation Committee.
  5. 6In nominating candidates for the positions of directors and corporate auditors at a Board of Directors meeting, the Company shall have the Representative Director, President & CEO prepare a personnel proposal in light of Article 17, paragraph (2) and Article 18 and obtain an approval by resolution of the Board of Directors after receiving a report from the Nomination and Compensation Committee, whose members are independent outside directors and the Chairman of the Board, in response to a request for advice from the Board of Directors. However, the consent of the Board of Corporate Auditors shall also be obtained for candidates for the position of corporate auditor.
  6. 7In nominating and dismissing representative directors, the Company shall obtain a resolution of the Board of Directors after receiving a report from the Nomination and Compensation Committee, whose members are independent outside directors and the Chairman of the Board, in response to a request for advice from the Board of Directors.
  7. 8In passing a resolution concerning the compensation of directors at a Board of Directors meeting, the Company shall have the Representative Director, President & CEO prepare a compensation proposal in light of Article 24 and obtain an approval by resolution of the Board of Directors after receiving a report from the Nomination and Compensation Committee, whose members are independent outside directors and the Chairman of the Board, in response to a request for advice from the Board of Directors.
  8. 9The Outside Officer Council Meeting and the Nomination and Compensation Committee shall have a secretariat, which will duly prepare and retain minutes.

Section 4 Compensation System

(Compensation for Directors, etc.)

Article 24 (1) Compensation, etc. for directors shall reflect the Company's performance and potential risks and incorporate incentives to contribute to sound entrepreneurship.

  1. 2Upon the advice of the Nomination and Compensation Committee, the Board of Directors shall set appropriate ratios of compensation that is linked to performance and ratios between cash compensation and share-based compensation, to design a compensation system.

Section 5 Support System for Directors and Corporate Auditors and Provision of Information, etc.

(Support System and Provision of Information)

Article 25 (1) The Company shall establish an Outside Officer Council Meeting for the outside directors and outside corporate auditors and allocate corporate auditor staff for the corporate auditors for the purpose of administrative support.

  1. 2The directors and corporate auditors shall proactively solicit information required for the effective fulfillment of their roles and duties and ask the Company to provide additional information, as needed.
  2. 3The directors, including outside directors, may ask the Company to provide additional information if they deem necessary for the Company's transparent, fair, prompt, and decisive decision-making. In addition, corporate auditors, including outside corporate auditors, shall appropriately carry out information acquisition efforts, including exercising their investigative authority under laws and regulations.
  3. 4The directors and corporate auditors may solicit advice from outside experts at the Company's expense if they deem necessary.
  4. 5The Board of Directors and the Board of Corporate Auditors shall determine whether the smooth and effective provision of information requested by the directors and corporate auditors has been achieved.
  5. 6In order to ensure the functioning of the Board of Directors and the Board of Corporate Auditors, the Company shall establish a mechanism for the internal audit division to report directly to the Board of Directors and the Board of Corporate Auditors in an appropriate manner, thereby ensuring cooperation between the internal audit division and directors and corporate auditors.

(Concurrent Service)

Article 26 The directors and corporate auditors, including outside directors and outside corporate auditors, shall divert the time and labor necessary to appropriately fulfill their roles and duties to the operations of the directors and the corporate auditors. If the director or the corporate auditor also serves as director of another listed company, the number of companies for which he/she serves as director shall in principle not exceed three, including the Company. The Company shall disclose the status of the concurrent service of a director or corporate auditor on an annual basis.

(Training for Directors and Corporate Auditors)

Article 27 (1) The directors and corporate auditors, including newly appointed directors and corporate auditors, shall deepen their understanding of roles and duties and seek to acquire all necessary knowledge and ensure the appropriate renewal thereof, etc.

  1. 2To support such efforts, the Company shall provide training opportunities appropriate for the individual directors and corporate auditors and provide support for associated expenses.
  2. 3The Board of Directors shall determine whether the Company is taking appropriate action as set forth in the preceding paragraph.
  3. 4Directors and corporate auditors, including outside directors and outside corporate auditors, shall be provided opportunities to acquire or renew necessary knowledge concerning the Company's business, finance, organization, etc. at the time of or after taking office for the purpose of fulfilling required roles and duties (including legal responsibilities).
  4. 5The Company shall establish and disclose a Basic Policy for Training of Directors and Corporate Auditors as follows:
Basic Policy for Training of Directors and Corporate Auditors

The Company shall establish a Basic Policy for Training of Directors and Corporate Auditors as follows to ensure that directors and corporate auditors can fulfill their responsibilities as commissioned by the shareholders and as required by law.

  1. 1When the director or the corporate auditor takes office, the Company shall provide him/her with an opportunity to sufficiently grasp the roles and duties required and provide him/her with general training opportunities concerning corporate management in light of his or her management duties related to improving corporate value.
  2. 2When the director or the corporate auditor, including the outside director and the outside corporate auditor, takes office, the Company shall provide him/her with opportunities to deepen his/her understanding of the Company group, including explanation of necessary knowledge concerning the business, finance, organization, etc. of the Company group and visits to its factories.
  3. 3After directors and corporate auditors take office, the Company shall continue to provide training opportunities appropriate for the individual directors and corporate auditors, such as lectures by outside experts, and provide support for associated expenses.
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