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Corporate Governance

Pigeon is committed to securing the trust of stakeholders including shareholders, customers, business partners, employees, and local communities and achieving sustained corporate growth. To this end, are constantly upgrading our corporate governance system aimed at achieving our business objectives.

Corporate Governance System

The Company has introduced a commissioned operating officer system with the aim of ensuring reciprocal collaboration between the governance (management decision-making and oversight) function and the business execution function, as well as to clarify the business execution responsibility of directors.

The Board of Directors has the authority to oversee the execution of duties by directors and executive officers. Chaired by the Chairman, Director of the Board, the Board meets to make decisions concerning laws and regulations, the Articles of Incorporation, and matters stipulated in the rules of the Board of Directors (important business execution strategies, such as management targets and strategies). The Board of Directors is strengthening the control/oversight function of business execution by obtaining robust opinions from its outside directors and corporate auditors. We now have three outside directors (including one woman): Mr. Takayuki Nitta (appointed in April 2015), Mr. Rehito Hatoyama (April 2016), and Ms. Eriko Okada (April 2018). The role of outside directors is to provide advice on the Company’s business strategies and increase the impartiality of decisionmaking and corporate governance. In addition to properly performing their duties as outside directors, Mr. Nitta and Mr. Hatoyama offer lots of advice based on their abundant experiences and high levels of knowledge. Ms. Okada gained investment banking and financial experience at banks and corporations, as well as advanced marketingrelated expertise obtained through research activities at university and graduate school, and we expect the Company’s management to benefit from such experience and expertise. We are also working to increase the diversity of top management. At present, we have 11 directors (including three outside directors, one of whom is female, and one foreign national), and four corporate auditors (including two outside corporate auditors).

To perform the management oversight function from an external perspective, the Audit & Supervisory Board has appointed two outside corporate auditors. Under the Companies Act, Audit & Supervisory Board members are given strong authority to audit and supervise the Company’s directors, including the right to attend Board of Directors’ meetings to voice their opinions and the authority to examine the Company’s business operations and financial status. Moreover, they are guaranteed terms of four years. The outside auditors are Mr. Shigeru Nishiyama, a graduate school professor and certified public accountant, and Mr. Shuji Idesawa, who is an attorney. Because both auditors are highly impartial and have specialist knowledge, their role extends beyond compliance to include raising corporate value. Based on their independent viewpoints and impartial perspectives, they not only exercise their legally accepted authority to audit the legal appropriateness of business, but also fulfill a monitoring function by advising on the suitability of business decisions.

Based on their independent viewpoints and impartial perspectives, the outside corporate auditors attend Board of Directors’ meetings and ask questions and provide opinions at face-to-face meetings with representative directors and other directors. Through these activities, they not only exercise their legally accepted authority to audit the legal appropriateness of business, but also fulfill a monitoring function by advising on the suitability of business decisions. According to audit policy and allotment of duties, Pigeon’s corporate auditors attend Board of Directors’ meetings and other important meetings, where they listen to directors, view important resolution documents, examine the current status of business and financial assets, and otherwise conduct meticulous supervision and oversight. The corporate auditors also meet regularly with the president to receive reports on important issues. With respect to information heard from within the Company, the president receives feedback from corporate auditors and exchanges opinions with them. In addition, we are conducting management-level development of future candidate executives. This includes selection of candidates once every six years and training them for a two-year period.

Corporate Governance Reports

Executive Remuneration

The maximum combined amount of remuneration that can be paid to directors is \500 million per year (excluding salaries for employees), and the maximum amount for corporate auditors is \100 million. Within those limits, we determine executive remuneration according to the following policies. Remuneration for directors consists of a basic performance-linked amount and a retirement allowance. The basic remuneration component is determined by the Company’s consolidated business results (net sales and operating income), as well as the degree to which targets have been achieved, in each fiscal year. The retirement allowance for directors is calculated based on the Company’s “Retirement Allowance Rules for Executives,” which explicitly indicates individual payment amounts for submission to the General Meeting of Shareholders. The retirement allowance system does not pertain to outside directors, whose remuneration is fixed for each individual. Remuneration for corporate auditors and outside corporate auditors is also fixed, in order to further strengthen their independence from management. The retirement allowance system for corporate auditors has been abolished, and there is no retirement allowance system for outside corporate auditors.

Internal Audits

To perform internal audits, the Company has established the Audit Office, staffed by six people. Based on annual plans, the Audit Office conducts regular internal audits of every department across the Pigeon Group, including domestic and overseas subsidiaries. The results of those audits are reported to the president, directors, and corporate auditors, and evaluations and continuous improvement proposals are carried out under the PDCA cycle. The Audit Office also conducts internal control audits related to financial reporting under Japan’s Financial Instruments and Exchange Act.

Commissioned Operating Officer System

In order to respond promptly and appropriately to changes in the business environment, achieve sustainable growth, and establish a solid management foundation, we strive to ensure that management decisions are made rationally and efficiently. In 2012, we introduced a commissioned operating officer system with the aim of ensuring reciprocal collaboration between the governance (management decision-making and oversight) function and the business execution function, as well as to clarify the business execution responsibility of directors.