Corporate GovernanceCorporate Governance

01Basic Concept

We consider corporate governance to be one of the most important management issues, as it is the framework that disciplines corporate activities in order to both maximize corporate value and ensure soundness. We believe that maximizing corporate value can be achieved by fulfilling our social mission through fair corporate activities and earning the trust and support of the community, and from this perspective, we are working to enhance corporate governance.

02Corporate Governance
Structure

The Company has adopted a company-with-audit-committee system to strengthen the supervisory function of the Board of Directors and to speed up and improve the efficiency of decision-making. The Board of Directors is composed of at least one-third outside directors to ensure fairness and transparency and to build a framework for revitalizing the Board of Directors and ensuring appropriate decision-making. Two of the three members of the Audit Committee are outside directors with independence from the Company, Director is appointed as a full-time Audit Committee member to enhance the ability to collect information from and collaborate with internal departments and to strengthen the auditing and supervisory functions of the committee.

1.Compliance and Risk Management Committee

• ・The Company is also working to foster a culture of compliance by, for example, examining new laws and regulations to be complied with as an organization that oversees overall compliance.
• ・Members: President and Representative Director (Compliance Officer)
  Executive directors, full-time audit committee members, general managers, outside experts (lawyers, accountants, tax accountants, academics, etc.)

2.Compliance and Risk Management Executive Committee

• ・The meeting is held at least once a month as an organization to disseminate compliance throughout the company, and specific actions are taken, such as confirming the status of compliance with various laws and regulations, sharing accident cases, making recommendations for risk mitigation, and providing guidance to each department.
• ・Members: President and Representative Director (Compliance Officer)

3.Legal & Compliance Team

• ・As the secretariat for 1. and 2., the Committee operates the Committee and provides compliance education and awareness to the Group's employees.
• ・The Company has established a consultation and reporting system as an internal contact point for whistleblowers, and while ensuring the confidentiality of whistleblowers and the absence of any prejudicial treatment, it will organize an investigation and response team to deal with the matter.

4.Internal Audit Office

• ・In conjunction with the Audit Committee, the Company audits the status of the development and operation of the Company's internal control system and provides guidance for improvement. The Company also audits the implementation status of 1. and 2. and monitors the Compliance and Risk Management Executive Committee and other committees to ensure that they function properly.

5.Sustainability Committee

• ・We will reflect sustainability issues in our management strategies and drive effective activities that contribute to sustainable growth through continuous deliberation and monitoring.
• ・Members: Representative Director (Chair of the Sustainability Committee)
  Executive Director, Full-time Audit & Supervisory Board Member, General Manager

6.Sustainability Executive Committee

• ・We will formulate policies and strategies to address sustainability issues, and promote effective activities that contribute to sustainable growth in cooperation with each business unit and subsidiary, such as making proposals from a sustainability perspective to 5.
• ・Members: General Manager, General Affairs Department, Corporate Planning Office, SS Life Design Division

03Percentage of Outside
Directors on the
Board of Directors

37.5%　Directors　8　
（including　3　outside directors）

Percentage of nonmale directors

25.0%（6 males, 2 females）

04Skills Matrix for
Directors
(including Directors
who are Audit
Committee Members)

The Company's Board of Directors is responsible for determining basic management policies from a variety of perspectives and supervising the execution of operations in each department. The directors who make up the Board of Directors each have different areas of expertise and aim to engage in lively discussions and make decisions accurately and promptly. In addition, more than 1/3 of the members are independent outside directors to ensure transparency and improve the function of the Board of Directors, and candidates are nominated after comprehensive consideration of the balance of knowledge, experience, and abilities of the Board of Directors as a whole.

Director Skill Matrix

• *The above information is intended to indicate the knowledge, experience, and abilities that are particularly expected of each director and does not necessarily represent all of the knowledge possessed by each director. The five highest-priority items expected of each director are marked with ●.

05Policy on Determining
the Details of
Individual Directors'
Remuneration, etc.

In accordance with this policy, the Company determines compensation for directors through a process that ensures fairness and transparency.

1.Basic Policy

The Company's basic policy is to link the remuneration of Directors to shareholders' profits so that the remuneration system will fully function as an incentive to continuously increase corporate value, and to set the remuneration of individual Directors at an appropriate level based on their respective responsibilities and business execution status. Specifically, the remuneration for executive directors shall consist of base remuneration as fixed remuneration, performance-linked remuneration (bonus), and non-monetary remuneration, etc., while outside directors who are responsible for supervisory functions shall be paid only base remuneration in consideration of their duties.

2.Policy regarding the determination of the amount of compensation, etc. for each individual for basic compensation (monetary compensation) (including policy regarding the determination of the timing or conditions of granting compensation, etc.)

The basic remuneration of the Company's directors shall be a monthly fixed remuneration, which shall be determined in accordance with their position, responsibilities, and years in office, taking into consideration the level of other companies in the industry, the Company's business performance, and employee salaries, while comprehensively taking into account the Company's performance.

3.Details of performance-linked remuneration, etc. and policy regarding determination of the amount or number of such remuneration (including policy regarding determination of the timing or conditions of granting such remuneration, etc.)

Performance-linked remuneration, etc. shall be cash remuneration reflecting performance indicators (KPI) to raise awareness of the need to improve performance for each fiscal year, and shall be paid as a bonus at a certain time each year in an amount calculated based on the degree of achievement against the target consolidated net income before taxes for each fiscal year. Target performance indicators and their values shall be set at the time the plan is formulated to be consistent with the medium-term management plan, and shall be reviewed from time to time based on the report of the Nomination and Compensation Advisory Committee in response to changes in the environment.

Non-monetary remuneration, etc. shall be in the form of restricted stock in order to strengthen the linkage between the remuneration structure and medium- to long-term improvement in corporate value. The Board of Directors shall determine the amount of compensation based on the total range of compensation resolved by the Board of Directors. In addition, 1/3 of the restricted stock compensation shall be linked to the medium-term management plan, and subject to the achievement of the consolidated ordinary income target for the final fiscal year, if the performance target is not achieved, all shares shall be acquired by the Company free of charge. The timing of the termination of the transfer restriction of the restricted stock compensation shall be at the time of retirement of the director.

4.Policy on determining the amount of monetary compensation, performance-linked compensation, etc., as a percentage of the amount of compensation, etc., paid to each individual director

The Nomination and Compensation Advisory Committee will consider the ratio of remuneration by type of executive director, based on the benchmark remuneration levels of companies of similar size and in related industries and business categories to the Company, with the weight of performance-linked remuneration increasing for the higher positions. The Board of Directors (the President and Representative Director, who is delegated by 5.) shall respect the report of the Nomination and Compensation Advisory Committee and determine the details of individual compensation for each director within the range of the compensation ratio by type as indicated in the said report. In the event that the medium-term management plan is achieved, the ratio of remuneration, etc. for directors shall be set so that monetary remuneration (base remuneration + performance-linked remuneration, etc.) will account for 70% and non-monetary remuneration, etc. will account for approximately 30%.

Compensation Composition by Position

Compensation system

5.Matters concerning decisions on the details of remuneration, etc. for individual directors

The amount of compensation for each individual director shall be delegated to the President and Representative Director based on a resolution of the Board of Directors, and the details of such delegation shall include the amount of base compensation for each director and the allocation of bonuses based on the performance of the business for which each director is responsible. The Board of Directors shall consult with the Nomination and Compensation Advisory Committee and obtain its report in order to ensure that such authority is properly exercised by the President and Representative Director, and the President and Representative Director who has been delegated the above authority shall make decisions in accordance with the content of such report. In addition, the number of shares of stock compensation to be allocated to each director shall be resolved by the Board of Directors based on the report of the Nomination and Compensation Advisory Committee.

• *The amount of remuneration, etc. for Directors (excluding Audit Committee members) is limited to 200 million yen per year (including 20 million yen for Outside Directors), and the amount of remuneration, etc. for Directors (Audit Committee members) is limited to 40 million yen per year, as resolved at the 40th Annual General Meeting of Shareholders held on November 25, 2015.

06Summary of contents
of directors' and
officers' liability
insurance policy,
etc.

The Company has concluded a directors' and officers' liability insurance policy with an insurance company as stipulated in Article 430-3, Paragraph 1 of the Companies Act. The insurance policy covers all directors of the Company and its subsidiaries (including directors who are members of the Audit and Supervisory Committee). The insured does not bear the premiums. Under the policy, claims for damages arising out of any act (including omission) of the insured in the course of his or her duties as a director, etc. of the Company will be paid by the insured. The policy covers damages such as compensation and dispute expenses incurred by the insured due to claims for damages arising out of acts (including omissions) committed by the insured in the course of his or her duties as a director or officer of the company. However, measures are taken to ensure that the appropriateness of the execution of duties by officers, etc. is not impaired by excluding coverage for criminal acts such as bribery, or for damages incurred by officers themselves who intentionally commit illegal acts.