Corporate Governance

Overview of Corporate Governance

1. Basic policy on corporate governance
   Our corporate philosophy is “With an unwavering and enterprising spirit and an open corporate culture, we will supply the best solutions in a flexible and timely fashion, working to realize a process of “co-creation” by which we contribute both to the sustainable development of the international community and the happiness of employees.” We believe that Embodying this philosophy will meet the expectations of all stakeholders. To execute our basic policy, we have adopted the following guidelines: complying with laws and regulations with integrity, aiming for future development and creativity, making and executing decisions promptly and accurately, and catching the business trends and staying ahead of the curve. We will strengthen our corporate governance based on these guidelines.
2. Overview of the corporate governance system and reasons for adopting the system
   ＜The Board of Directors＞
   The Board of Directors consists of 7 Directors who are not members of the Audit and Supervisory Committee, including 2 Outside Directors, and 3 Directors who are also members of the Audit and Supervisory Committee, including 2 Outside Directors (as of the date of submission of this report). The Board of Directors makes decisions on important matters in Group management. It also audits and supervises business execution. The Board of Directors holds a regular monthly meeting, as well as extraordinary meetings for any urgent matters. The term of office of Directors who are not members of the Audit and Supervisory Committee is one year. The term of office of Directors who are also members of the Audit and Supervisory Committee is two years.
   
   ＜The Committee of Executive Officers＞
   The Company introduced an executive officer system in 2003. The committee consisted of 8 members (including 5 Directors) as of the time of preparing this report. The Committee of Executive Officers meets monthly to share information. Each Executive Officer strives to improve day-to-day operations in their area of responsibility.
   
   ＜The Audit and Supervisory Committee＞
   The Company has established an audit and supervisory committee to strengthen its functions to audit and supervise the Board of Director’s execution of its duties and to increase agility and speed in decision making by separating auditing and supervision from business execution. The committee consisted of three Directors (a full-time Director and two Outside Directors) as of the time of preparing this report. These Directors audit and supervise the legality and adequacy of the execution of duties of the Directors who are not members of the Audit and Supervisory Committee. The committee holds a regular monthly meeting, as well as extraordinary meetings as needed. Each member of the Audit and Supervisory Committee follows the policies set by the committee and requests Directors who are not members of the Audit and Supervisory Committee, among others, to provide reports and conduct investigations as needed. They audit and supervise management in cooperation with the Internal Audit Section and the accounting auditor.
   
   ＜Nomination and Compensation Committee＞
   We decided to establish an optional nomination/remuneration committee in May 2020 as an advisory panel for the Board of Directors for the purposes of enhancing the independence, objectivity, and accountability of the functions of the Board of Directors concerning the appointment and dismissal of the President & CEO director and Directors with specific titles and nomination of director nominees as well as remuneration of Directors (except members of the Audit and Supervisory Committee), etc. and enriching further the corporate governance system.
   The committee, which consists of three or more Directors appointed by the Board of Directors (a majority of them are Outside Directors), deliberates the matters concerning the nomination/remuneration of Directors and reports to the Board of Directors.

Chart of Corporate Governance Structure

Attendance at Board of Directors meetings in FY2022

Basic Policy for Internal Control System

The Group has built and operates an internal control system as described below. The Group will continue to review and improve the internal control system in response to revisions to laws and regulations and changes in the business environment.

Systems to Ensure the Proper Business Operation of the Group

(1)System to ensure that the directors and employees of the Company and its subsidiaries will execute their duties in compliance with laws and regulations and the Articles of Incorporation

1. The Company has established Sanyo Trading Group’s Code of Conduct Manual a code specifying how the officers and employees of the Company and its subsidiaries should act in accordance with the Group’s mission and in compliance with laws and regulations and the Articles of Incorporation. To ensure the effectiveness of the manual, the President appoints a Director responsible for compliance. In addition, the Company has established the Compliance Committee under its Compliance Regulations and has built a system where the committee supervises compliance companywide. The committee periodically reports the status of compliance to the Board of Directors.
   The Group has a system where the subsidiaries report their situation periodically to the Board of Directors and the divisions in charge and may report their situation regularly by participating in meetings of the Committee of Executive Officers or by other means under the Subsidiary Management Regulations and the Standards for Decision-Making Authority. Depending on the matters stipulated by related regulations, the Company secures compliance by making final decision at the headquarters’ Board of Directors.
2. The Internal Audit Section audits whether the business activities of the Company and its subsidiaries are efficient and comply with laws and regulations, internal regulations and trade practices, among other rules, and reports the audit results to the Board of Directors.
3. Regarding whistleblower hotlines for reporting acts that violate laws and regulations or social norms or acts at risk of violating them, the Company has the Compliance Committee internally and a third party (lawyer) externally. The Company has established internal regulations to prohibit the unfair treatment of informants and protect them.

(2)System for Storage and Management of Information on the Directors of the Company’s Execution of Their Duties

The Company has established a system where important documents and electromagnetic records, including Board of Directors’ meeting materials and the minutes of the Board of Directors meetings, are stored and managed and can be perused by the Directors and Auditors as needed under the Document Handling Rules and other internal regulations.

(3)Regulations and Systems Related to Management of Risks of Losses at the Company and Its Subsidiaries

The Company identifies a variety of risks caused by business execution using standards that are consistent as much as possible, and aims to have a comprehensive risk management while ensuring sound management and maximizing shareholder value.
Under the Risk Management Regulations, the Company clarifies its risk management system, specifying the divisions responsible for different types of risks and managing risks and managing risks exhaustively and comprehensively. The President appoints a Director responsible for risk management. The Company has the Risk Management Committee, which monitors various risks attributable to the Company’s operations and risks that the Company should avoid for business continuity, and promptly responds to changes. The committee regularly provides to the Board of Directors an overview of risk management, including countermeasures to be taken if risks to be avoided occur. The Company has established a system where it prepares for losses at its subsidiaries through interviews with the representatives of the subsidiaries, among others, as needed, under the Risk Management Regulations.

(4)Systems to Ensure That the Directors of the Company and Its Subsidiaries Will Execute Their Duties Efficiently

The Company has built a system where it sets management targets and formulates management plans for the Group and examines the plans, comparing them and progress towards their achievement.
For efficient execution of duties based on decisions made by the Board of Directors, the tasks are assigned to each Director and Executive Officer under internal regulations, including the Organization Rules, Administrative Authority Regulations, and Standards for Decision-Making Authority. The Company seeks to clarify the decision-making rules by reviewing the relevant regulations and developing the delegation of authority system. In addition, the Company seeks to expand the checks and balances system developing a system to ensure that the Directors perform their duties systematically, properly and efficiently. The Company has its subsidiaries formulate management plans in line with the Group’s management targets and compares the plans and progress towards their achievement.

(5)System to Ensure the Proper Business Operation of the Group Consisting of the Company and Its Subsidiaries

To ensure the proper business operation of the Group, the Company has defined a management mission shared by the Group companies and has formulated the Subsidiary Management Regulations, which specify basic rules for the Company and its subsidiaries cooperating for the Group’s prosperity and development of overall business operations, and the Standards for Decision-Making Authority Related to Management of Subsidiaries. The Company has appointed supervisors in charge of each subsidiary who supervise the subsidiaries’ business and receive reports from the subsidiaries about their operations as necessary.

(6)Systems to Ensure Effective Audits by the Audit and Supervisory Committee

1. Directors and employees who shall assist with the duties of the Audit and Supervisory Committee
   The Audit and Supervisory Committee has reported that it will not have any Directors or employees who shall assist the committee with its duties for some time to come.
2. Independence of Directors and employees who shall assist with the duties of the Audit and Supervisory Committee
   Refer to 1.
3. Systems for reporting to the Audit and Supervisory Committee
   The Group’s Directors and employees submit statutory documents, resolutions and reports at important meetings, and important documents about the Directors who are not members of the Audit and Supervisory Committee on the Directors’ execution of their duties to the Audit and Supervisory Committee and report matters that may have significant effects on the Company as necessary.
4. System to ensure that persons who reported to the Audit and Supervisory Committee will not be treated unfairly as a result
   The Group has established a whistleblowing system to prevent the unfair treatment of persons who give information to the Audit and Supervisory Committee and protect the informants.
5. Policy on advance payments and other expenses resulting from the Audit and Supervisory Committee members’ execution of their duties
   If members of the Audit and Supervisory Committee claim advance payments of expenses for their execution of duties, the Company prepays the expenses unless it decides the expenses are unnecessary for the execution of duties.
6. System to ensure effective audits by the Audit and Supervisory Committee
   The Audit and Supervisory Committee members participate in the meetings of the Board of Directors and the Committee of Executive Officers and other important meetings, and exchange opinions with the President & CEO, accounting auditor and Internal Audit Section as necessary.

(7)System Related to Antisocial Forces

1. Basic Policy for Exclusion of Antisocial Forces
   Article 3 of the Antisocial Forces Handling Regulations of the Company states: “We shall never make payments to antisocial forces or have relationships with them. The Company’s officers and employees shall not allow any unjustified involvement of antisocial forces and shall be determined to exclude them to adhere to social justice and win the trust of customers, the market, and society.”
2. Preparation for Excluding Antisocial Forces
   The Company has adopted the Sanyo Trading Group’s Code of Conduct Manual, Antisocial Forces Check Manual, among other regulations, and communicates its code of conduct for excluding antisocial forces to the entire Group to ensure full compliance.

Reason for the Appointment of Outside Directors and Outside Auditors

Implemetation of Measures for Shareholders and Other Stakeholders

1.Initiatives to revitalize the General Meeting of Shareholders and to facilitate the exercise of voting rights

2.IR activities

3.Initiatives related to respect for stakeholders

Compliance

We have established Sanyo Trading Group’s Code of Conduct Manual as a guideline for officers and employees to act in accordance with our corporate mission, and to comply with laws and Articles of Incorporation. To ensure the effectiveness of the manual, the President appoints a Director responsible for compliance. In addition, Sanyo Trading has established the Compliance Committee and has built a system where the committee supervises compliance companywide. The committee periodically reports the status of compliance to the Board of Directors.
We have established a system for the Group companies to regularly report on their situations through periodic reporting to the Head Office Board of Directors of and the responsible division, as well as attendance at executive meetings. The Internal Audit Section conducts audits on the business activities of our company and Group companies and reports the results to the Board of Directors.
Sanyo Trading has an internal whistleblower hotline　and a compliance consultation desk for reporting acts that violate laws and regulations or social norms, or acts at risk of said violations. In addition, as a compliance consultation desk, it has appointed third parties (lawyers) externally. Sanyo Trading has established internal regulations to prohibit the unfair treatment of whistleblowers and provide them with protection.

Risk Management

Sanyo Trading identifies a variety of risks caused by business execution using standards that are consistent as much as possible and aims to have a comprehensive risk management while ensuring sound management and maximizing shareholder value.
Specifically, we establish responsible departments according to types of risks in accordance with regulations, and we clarify the management structure by comprehensively managing the risks. The President appoints a Director responsible for risk management, and in addition, establishes the Risk Management Committee. The Committee monitors various risks attributable to Sanyo Trading’s operations and risks that it should avoid for business continuity, and promptly responds to changes along with regularly providing to the Board of Directors the status of comprehensive risk management, including countermeasures to be taken if risks occur.
We have established a system under which it prepares for losses at Group companies through interviews with such as the representatives of Group companies, as needed based on the regulations.