Evaluation of the Effectiveness of the Board of Directors

• Basic Concept
• Overview
• Status of Board Members
• Status of Audits
• Status of External Executives
• Evaluation of the Effectiveness of the Board of Directors
• Compensation System for Directors, Audit & Supervisory Board Members and Executive Officers

Since 2016, the Company has conducted an annual survey on the effectiveness of the Board of Directors targeting those participating in the Board of Directors (excluding the chairman).
Based on the results of the survey, we believe that the effectiveness of our Board of Directors has been ensured if the quantitative evaluation shows that the Board of Directors has been appropriately implemented. In addition, items that were pointed out or suggested in the qualitative evaluation and items that need to be strengthened in future corporate governance are identified as issues and items for improvement.
The following is a summary of our evaluation and analysis of the effectiveness of the Board of Directors for the fiscal year ended March 31, 2024 (107th fiscal year) based on the Corporate Governance Code (hereinafter the "CG Code") [Supplementary Principle 4-11 3] in our Corporate Governance Guidelines (hereinafter the "CG Guidelines").

Overview of Board of Directors Meeting Evaluation and Analysis Method

The following procedures were used for evaluation and analysis.

1. From January up through February 2024, a questionnaire comprising 23 item related to policies was distributed to participants in the Board of Directors to determine whether the Board of Directors is effectively fulfilling its role in accordance with the policies and other requirements of Section 4 (Responsibilities of the Board) of the CG Code as stated in the CG Guidelines, and responses were obtained from all eligible participants.
2. When necessary, the Representative Director (Chairman and President) exchanged views with each director and auditor in a wide-ranging set of interviews on their opinions.
3. The responses to the above questionnaire and the results of exchange of opinions were provided to the participants of the Nominating Committee, and after ensuring a period and opportunity for consideration by the participants, the Nominating Committee made a report to the Board of Directors after careful deliberation.
4. Upon receiving the Nominating Committee’s report, the Board of Directors confirmed the results of its own evaluation and analysis of the effectiveness of the Board of Directors based on an understanding and respect for the content of the report.

The results for FY2023 were as follows: 69.1% for the highest evaluation (appropriate) (67.0% in 2022), 28.3% for the next highest evaluation (appropriate with some issues) (29.1% in 2022), and 1.3% for the lowest evaluation (not appropriate with many issues) (2.6% in 2021).

Overview of Evaluation and Analysis Method for Effective of Board of Directors’ Meeting

(1) The Company’s Board of Directors is assessed to be effective on the following key findings.

1. Based on the Mandom Mission Framework, the Board of Directors has developed, revised as needed, and disclosed the Corporate Governance Policy and Corporate Governance Guidelines through constructive discussions in prior deliberations at the Executive Board and Management Council meetings.
2. The Board of Directors’ Meeting strives to cultivate an atmosphere that respects broadminded, open and constructive discussion and exchange of opinions, by having External Directors and External Audit & Supervisory Board Members make suggestions and voice their opinions, including raising issues, and encouraging each Director and Audit & Supervisory Board Member to make positive statements, and is able to operate in this manner.
3. Independent External Directors and External Audit & Supervisory Board Members (hereinafter, “independent outsiders”) shall hold a meeting, comprising solely of independent outsiders, for exchanging opinions on a regular basis (once a year), and communicate as appropriate amongst independent outsiders to exchange information and share awareness, based on an objective viewpoint.

(2) During the course of evaluating and analyzing the effectiveness of the Board of Directors’ Meeting, the following observations and recommendations were made, which our Board of Directors’ Meeting recognizes as issues that require addressing and will be working toward improving.

1. While an environment for broadminded, open and constructive discussion and exchange of opinions is in place, the Board of Directors’ Meeting can be expected to operate more functionally by reconsidering from a governance perspective the roles and positioning of important meetings such as the Management Council and the Executive Board spearheaded by the Board of Directors’ Meeting.
2. While there is a culture of accepting new businesses and challenging proposals, more in-depth discussions can be expected by leveraging this culture to instill an attitude of examining and suggesting various proposals, including new products and measures with a commitment to profitability and awareness of capital costs.

Example of specific comment

Items for Which Effectiveness Has Been Ensured

• Compared to last year, there was an increase in positive opinions and propositions from External Directors. It would be great if the Management Council can operate as a venue for more lively discussions in the future, instead of simply as a place for reporting. (Principle 4-12)
• Roundtable meetings between External Directors and Executive Officers are very effective for understanding the issues faced by each department and the Company. (Supplementary Principle 4-13)

Issues and Improvement Items

• There seems to be a need for reconsidering from a governance perspective the roles and positioning of important meetings such as the Management Council, Executive Board and Business Committee spearheaded by the Board of Directors’ Meeting. A system where the Corporate Division and other Functional Divisions take a proactive stance to participating in group management is urgently required. (Supplementary Principle 4-1(1))
• For important proposals such as important new products, new businesses, investment projects, and major contracts, including the results of studies that serve as the basis for management decisions, such as profitability, capital costs, and the concept of return on investment, in proposals would be desirable. (Principle 4-2)