Basic Approach

Basic Policy on Corporate Governance

Basic Policy on Corporate Governance

Established on December 18, 2015
Revised on December 26, 2018
Revised on December 23, 2021

Preamble

The Company has established this Basic Policy by resolution of the Board of Directors to achieve optimal corporate governance. The policy is intend to ensure the Company’s sustainable growth, enhance its long-term corporate value, and enable shareholders to hold the Company’s shares confidently for the long term. Any revisions to this Basic Policy will be made by resolution of the Board of Directors and will be disclosed in a timely and appropriate manner.

Chapter 1. General Provisions

Basic Stance on Corporate Governance

Article 1

The Company shall consistently pursue optimal corporate governance and continuously work towards its enhancement.

2. From the perspective of achieving sustainable growth and enhancing long-term corporate value, the Company believes that the core of corporate governance lies in ensuring transparency and fairness in decision-making, maximizing the effective use of management resources, and enhancing corporate vitality through swift and decisive decision-making. The Company is committed to strengthening its corporate governance based on the following fundamental principles.
   1. The Company shall respect shareholders’ rights and ensure fairness among them.
   2. The Company shall consider the interests of stakeholders, including shareholders, and appropriately collaborate with them.
   3. The Company shall disclose corporate information appropriately and ensure transparency.
   4. The Company shall establish a framework leveraging independent outside directors to enhance the supervisory function of the Board of Directors over the performance of business operations.
   5. The Company shall engage in constructive dialogue with shareholders who have investment policies aligned with shareholders’ medium- to long-term interests.

Chapter 2. Ensuring Shareholders’ Rights and Equality

Shareholders’ Meeting

Article 2

The Company recognizes that the shareholders’ meeting is an important forum for constructive dialogue with shareholders and aims to hold an open meeting from the perspective of shareholders. To ensure that shareholders have sufficient time to review the agenda and exercise their voting rights appropriately, the Company shall send the notice of the ordinary general meeting of shareholders at least three weeks before the meeting date and disclose the notice on the Company’s website prior to mailing.

Ensuring Shareholders’ Equality

Article 3

The Company shall treat all shareholders equally in accordance with their respective holdings and shall provide timely and appropriate information disclosure to prevent any information disparity among shareholders.

Basic Policy on Strategic Shareholdings and Exercise of Voting Rights for Strategic Shareholdings

Article 4

The Company may hold shares of business partners as strategic shareholdings for the purpose of strengthening business relationships, rather than for investment purposes. Investment decisions will be made by comprehensively considering the benefits gained from strengthening business relationships, investment amount, and others. The Board of Directors shall conduct an annual review of each individual strategic shareholding, considering factors such as the significance of the holding, transaction history, and the economic rationale (including cost of capital), and make a comprehensive review on the continuation of the holdings and the number of shares held.

2. With respect to the exercise of voting rights for strategic shareholdings, the Company shall carefully examine the content of the agenda and exercise its voting rights appropriately based on whether the agenda contributes to the enhancement of corporate governance or the improvement of shareholder value. The Company shall not vote in favor of any proposals that may harm the business relationship with the Company or shareholder value.

Basic Policy on Transactions with Related Parties

Article 5

The Company shall strive to prevent related parties of the Company, including its officers, from abusing their positions to engage in transactions that are detrimental to the interests of the Company and its shareholders. The Company shall require approval from the Board of Directors for any significant or non-routine transactions with officers, major shareholders, and others.

Chapter 3. Consideration of Stakeholder Interests

Code of Conduct

Article 6

To ensure that directors, executive officers, employees, and others act ethically at all times, the Company shall separately establish and disclose a CSR Charter and a Corporate Code of Conduct, determined by the Board of Directors. Additionally, the Company shall regularly review compliance with these guidelines.

Relationship with Stakeholders

Article 7

The Board of Directors shall consider the interests of not only the Company’s shareholders but also its employees, customers, business partners, creditors, local communities, and other stakeholders to enhance the Company’s long-term corporate value.

Sustainability

Article 8

From the perspective of enhancing the Company’s medium- to long-term corporate value, the Board of Directors regards resolving environmental issues, social challenges, and corporate governance issues as key management priorities. Guided by the corporate philosophy of Creativity, the Company, as a technology trading company, shall contribute to a prosperous future and the realization of a sustainable society, taking the supply chain also into account.

Diverse Human Resources

Article 9

To adapt to the rapidly changing business environment and sustain growth, the Company prioritizes the diversity of core talent and strives for continuous improvement through education, training, and recruitment efforts.

2. The Company’s policy is to foster autonomous personnel with diverse capabilities to ensure the diversity in human resources, and to create an environment that enables individuals to choose from a variety of work styles suited to their personal circumstances.

Business Portfolio

Article 10

The Board of Directors shall conduct an annual review of business segments and product categories and optimize the business portfolio by reassessing the allocation of management resources across businesses.

Capital Policy

Article 11

The Company aims to enhance corporate value and shareholder value through sustainable growth by balancing the reinforcement of financial foundation and achievement of high profitability.

2. The Company’s basic policy on shareholder returns is to maintain a balance between future business investments and strengthening its equity capital.

Whistleblowing

Article 12

The Company shall establish a system for the proper handling of internal reports from employees and others regarding organizational or personal violations of laws and regulations, as well as inquiries regarding whether certain actions constitute violations. The system will enable early detection and correction of misconduct, thus reinforcing compliance management.

2. The Company shall establish an external whistleblowing contact point (hotline) through a third-party organization to strengthen the trust in the reporting process and promote internal whistleblowing.

Chapter 4. Ensuring Appropriate Information Disclosure and Transparency

Information Disclosure Policy

Article 13

The Board of Directors, in accordance with the Companies Act and other relevant laws and regulations, shall determine the Company’s policies regarding risk management, internal control systems, legal compliance, and other related matters for the Company and its group, and disclose them in a timely and appropriate manner.

2. The Board of Directors shall, in compliance with the Companies Act, the Financial Instruments and Exchange Act, and other relevant laws and regulations, as well as Tokyo Stock Exchange regulations, provide prompt information disclosure based on transparency, fairness, and continuity. Furthermore, even in cases where disclosure is not required under laws, regulations, or timely disclosure rules, the Company shall actively and fairly disclose information deemed important or useful for shareholders and investors to have them understand the Company. However, personal information, customer information, and information that would infringe upon the rights of stakeholders shall not be disclosed.

Management Plan

Article 14

The Board of Directors shall formulate and disclose a medium-term management plan with a period of three years, which includes target values for matters such as net sales, ordinary income, net income, and capital efficiency, as well as the strategies to achieve these goals. The progress of the plan shall be regularly monitored, and any revisions shall be disclosed in a timely and appropriate manner.

Chapter 5. Responsibilities of the Board of Directors, Etc.

Organizational Structure

Article 15

As a company with an Audit & Supervisory Board, the Company shall establish both a Board of Directors and an Audit & Supervisory Board as statutory decision-making bodies, and adopt an executive officer system to separate executive and supervisory functions.

Roles of Board of Directors

Article 16

The Board of Directors, acting on behalf of shareholders, shall strive to implement efficient and effective corporate governance to enhance medium- to long-term corporate value and increase the interests of all shareholders. Through this, the Board of Directors assumes responsibility for ensuring the Company’s sustainable growth and improving its social value and corporate value.

2. To fulfill the responsibility set forth in the preceding paragraph, the Board of Directors shall exercise its supervisory function over the overall management, ensuring fairness and transparency in management, in accordance with its fiduciary and accountability obligation to shareholders. Additionally, the Board of Directors shall assess significant risks faced by the Company, formulate response measures, and make the best possible decisions on behalf of the Company including decisions on key business operations.

Executive Officer System

Article 17

The executive officers shall, based on the decisions of the Board of Directors and under the direction and supervision of the President (Chief Executive Officer), carry out the company operations delegated to them following the Executive Officer Regulations and the Regulations of Authorities.

2. The executive officers may exercise their authority as the responsible persons for company operations within the scope necessary to carry out their delegated duties. However, if requested by the Board of Directors, Representative Director, directors, or Audit & Supervisory Board members, the executive officers must promptly conduct investigations, reports, or provide explanations regarding the performance of duties.

Roles of Independent Outside Directors

Article 18

Independent outside directors, in line with their independent status, shall perform their supervisory role over business operations, advisory function, and overseeing conflicts of interest, while also reflecting the views of stakeholders in discussions of the Board of Directors.

2. In considering particularly important matters such as the nomination and compensation of officers, the Company shall strive to enhance the supervisory function of the Board of Directors over business operations by obtaining appropriate involvement and advice from independent outside directors.

Chairperson of the Board of Directors

Article 19

The Chairperson of the Board of Directors shall enhance the quality of discussions within the Board of Directors through open and constructive dialogue, ensuring that the Board of Directors operates effectively and efficiently. In fulfilling this responsibility, the Chairperson of the Board of Directors must ensure that sufficient time is allocated for all proposals, particularly those related to strategic matters, and that all directors receive appropriate information in a timely manner.

Roles of Audit & Supervisory Board Members and the Audit & Supervisory Board

Article 20

The Audit & Supervisory Board members and the Audit & Supervisory Board shall make appropriate judgments from an independent and objective standpoint, bearing in mind their fiduciary responsibility to shareholders. They shall fulfill their roles and responsibilities which include the audit of the performance of directors’ duties, the appointment and dismissal of Audit & Supervisory Board members and the external financial auditor, and the exercise of their authority related to audit fees.

In addition, to fully fulfill their roles and responsibilities, including business and financial audits, the Audit & Supervisory Board members and the Audit & Supervisory Board shall exercise their authority actively and proactively, providing appropriate opinions in the Board of Directors and other relevant forums.

Qualifications and Appointment/Dismissal Procedures for Officers

Article 21

The Company’s officers must possess excellent character, insight, abilities, and extensive experience, along with a strong sense of ethics.

2. In selecting officer candidates, the Company shall consider the overall balance of the Board of Directors, taking into account diversity in attributes such as departments of origin, areas of expertise, age, and other factors. Additionally, the number of officers of the Company shall be determined within the Articles of Incorporation, in accordance with the size of the Company’s business.
3. Outside officer candidates must satisfy the following conditions to exercise their supervisory roles effectively.
   1. The candidate must have high expertise and extensive experience in one of the following areas: corporate management, financial accounting, law, crisis management, global management, or the business areas of the Company group;
   2. The candidate must possess the ability to oversee and understand the entirety of the Company’s management, recognize essential issues and risks, as well as effectively interview the management, provide opinions, and persuade the management when necessary; and
   3. The candidate must be considered independent from the Company group’s management, based on the attached independence criteria.
4. New officer candidates shall be selected in accordance with the provisions of this article, and candidates for new Audit & Supervisory Board members shall be decided by the Board of Directors after obtaining the consent of the Audit & Supervisory Board.
5. An incumbent officer may be dismissed by a resolution of the shareholders meeting if the Board of Directors determines that the officer meets any of the following items. For Audit & Supervisory Board members, approval from the Audit & Supervisory Board is required before the matter is submitted to the shareholders meeting.
   1. When an officer commits an act that is suspected of fraudulent, improper, or breach of trust; and/or
   2. When the Board of Directors, based on this article, judges an individual unfit to be an officer.
6. The provisions of Paragraphs 1 and 2 shall apply mutatis mutandis to the procedures for the appointment of executive officers by the Board of Directors.

Responsibilities of Officers

Article 22

The officers of the Company must collect sufficient information to perform their duties and actively express their opinions, ensuring thorough discussions.

2. The officers of the Company shall demonstrate their expected capabilities and dedicate sufficient time for the Company to fulfill their duties as officers.
3. When taking office, the officers of the Company must understand the relevant laws and regulations, the Company’s Articles of Incorporation, the Board of Director’s rules, and other internal regulations of the Company, and fully comprehend their responsibilities.

Officer Training and Development

Article 23

Newly appointed officers of the Company shall, as necessary, participate in external training programs after taking office, and receive briefings from the President (Chief Executive Officer) or an officer designated by the President on the management strategy, financial status, and other important matters of the Company.

2. The officers of the Company must always actively gather information and continuously improve their knowledge on matters such as the Company’s financial status, legal compliance, corporate governance, and other relevant issues to fulfill their roles.
3. The Company shall, as necessary, offer or arrange training opportunities tailored to each officer and provide financial support for such training, with updates on these matters to be reported to the Board of Directors as appropriate.

Setting of Board of Director’s Agenda and Related Matters

Article 24

The Chairperson of the Board of Directors of the Company shall, sufficiently in advance of each Board meeting, set the agenda for the meeting and notify each director accordingly.

2. To ensure thorough discussions at each meeting of the Board of Directors, the materials related to the agenda items for the Board must be distributed or explained to each officer in advance of the meeting, except in cases involving particularly confidential matters.

Access to Internal Information by Independent Outside Directors and Audit & Supervisory Members

Article 25

The Company’s independent outside directors and Audit & Supervisory members may request explanations, reports, or the submission of internal documents from internal directors, executive officers, and employees, whenever they consider it necessary or appropriate.

Compensation, Etc. for Officers

Article 26

Compensation, etc. for officers must be appropriate, fair, and balanced, and must align with shareholder interests. It must also be designed to motivate officers to maximize the Company’s corporate value.

2. Under the Company’s Executive Compensation Regulations, the base amounts for fixed compensation and executive bonuses will be determined taking business performance into account. The executive compensation amount for each fiscal year will be determined within the limits of the total compensation approved by the shareholders’ meeting, with individual compensation for each director decided by the Board of Directors and individual compensation for each Audit & Supervisory member determined through discussions by the Audit & Supervisory Board. A portion of the fixed compensation will be allocated to a stock accumulation investment plan to promote the acquisition of the Company’s own shares.
3. In addition to the fixed compensation and executive bonuses prescribed in the preceding paragraph, the Company shall provide performance-linked compensation to directors (excluding outside directors) within the compensation limits resolved by the shareholders’ meeting, based on the achievement of profit and capital efficiency targets during the medium-term management plan period.
4. The proportion of each type of compensation outlined in the previous two paragraphs shall refer to the following as a guideline: the ratio of fixed compensation to performance-linked compensation will be 7:3 (based on 100% target achievement), and the proportion of stock-based compensation will be 15%.

Nomination and Compensation Committee

Article 27

The Company shall establish a Nomination and Compensation Committee as an advisory committee to the Board of Directors to enhance corporate governance by strengthening the fairness, transparency, and objectivity of procedures related to the nomination and compensation of officers.

2. The Nomination and Compensation Committee will be composed of at least three directors selected by the Board of Directors with a majority of members consisting of outside directors.
3. The Nomination and Compensation Committee, upon receiving consultation from the Board of Directors, shall examine and advise on policies, procedures, and draft proposals concerning the following matters.
   1. Nomination of the Representative Director, directors, and Audit & Supervisory Board members (including appointment, dismissal, and succession planning);
   2. Nomination of executive officers (including appointment and dismissal);
   3. Compensation of directors; and
   4. Other matters deemed necessary by the Board of Directors.
4. The Board of Directors shall make decisions on the matters outlined in each item of the preceding paragraph with due consideration to the recommendations of the Nomination and Compensation Committee.

Chapter 6. Dialogue with Shareholders

Policy on Dialogue with Shareholders

Article 28

The Board of Directors shall designate a director responsible for Investor Relations (IR) to oversee constructive dialogue with shareholders. The director in charge of IR shall supervise various departments involved in IR activities and ensure ongoing interdepartmental collaboration. Furthermore, the director shall report key IR activities to the Board of Directors and share relevant information with directors and Audit & Supervisory Board members as necessary.

2. The Company shall actively engage with investors through phone interviews, small group meetings, and other means. Additionally, the Company shall hold semi-annual earnings briefings for analysts, institutional investors, and the media, where the President (Chief Executive Officer) and the director in charge of IR provide explanations.
3. The Company shall actively publish corporate information, including financial data, on its website to enhance investors’ understanding of the Company’s management strategy and businesses.
4. The Company shall conduct regular shareholder visits to facilitate dialogue with the persons in charge of exercising voting rights within the institutional investors.
5. The Company shall collect information on substantial shareholders as needed and strive to gain a comprehensive understanding of its shareholder structure.
6. The Company shall ensure strict management of insider information by limiting dialogue with investors, including earnings briefings and small group meetings, to general matters related to the Company’s sustainable growth and medium- to long-term corporate value enhancement, as well as publicly disclosed information.

Independence Criteria for Independent Outside Directors/Audit & Supervisory Board Members

Independent outside directors/Audit & Supervisory Board members will be individuals who do not meet the criteria A to F outlined below.

1. Major business partners of the Company or its subsidiaries (i.e., business partners that have a transactional relationship that can influence decision-making to a degree similar to the Company’s parent companies, subsidiaries, or affiliated companies; hereinafter the same), as well as executive directors, executive officers, or employees (hereinafter referred to as Executive Personnel) of such business partners.
2. Major business partners of the Company or its subsidiaries, or the Executive Personnel thereof.
3. Consultants, accounting or legal professionals who have received significant amounts of money or other assets from the Company or its subsidiaries (either 100 million yen per year on average over the last three years, or 30% of the average annual total expenses), excluding officer compensation (if the recipient is an organization such as a corporation or partnership, individuals affiliated with such entity).
4. Individuals who have fallen under any of the following (A) through (D) during the past three years.
   1. Individuals noted in A, B, or C;
   2. Executive Personnel or a director who is not an Executive Personnel of the Company’s parent company;
   3. Audit & Supervisory Board members of the Company’s parent company (only in the case of independent outside Audit & Supervisory Board members); or
   4. Executive Personnel of companies that share the same parent company as the Company.
5. Close relatives of those listed in (A) through (H) below (excluding those who are not considered significant).
   1. Individuals noted in A to the preceding D;
   2. The Company’s accounting advisor (if the accounting advisor is a corporation, including the employee who should perform the duties of the corporation; hereinafter the same) (only in the case of independent outside Audit & Supervisory Board members);
   3. Executive Personnel of the Company’s subsidiary;
   4. Directors who are not Executive Personnel or financial advisors of the Company’s subsidiary (only in the case of independent outside Audit & Supervisory Board members);
   5. Executive Personnel or directors who are not Executive Personnel of the Company’s parent company;
   6. Audit & Supervisory Board Members of the Company’s parent company (only in the case of independent outside Audit & Supervisory Board members);
   7. Executive Personnel of companies that share the same parent company as the Company; or
   8. Individuals who have been categorized under the preceding items (B) through (D) or who have been Executive Personnel at the Company (including non-executive directors in the case of independent outside Audit & Supervisory Board members) during the last three years.
6. Individuals who, for reasons other than those outlined in items A through the preceding E, may consistently face substantial conflicts of interest with the Company’s general shareholders.