We have set “Toward a sustainable society through expanding the potential of plastics” as the purpose of our Group with the goal of contributing to value creation for customers and various other stakeholders. For this reason it is important to earn the trust of society and be needed by society, and therefore, we are establishing efficient and effective structures for achieving management that are highly compatible with society and the environment and for addressing risks facing management, including rigorous compliance.

We have adopted a company with Corporate Auditors model and have appointed nine Directors (of which three are Outside Directors) and four Corporate Auditors (of which two are Outside Corporate Auditors) as of June 25, 2024. The Board of Directors is chaired by the President, Representative Director.

At the monthly Board of Directors meetings, Directors make decisions on important matters of business, receive reports on monthly business performance and progress updates from each Director, and listen to the opinions and reports from Corporate Auditors, with the chair of the meeting taking care to ensure sufficient discussion takes place. The chair also holds hearings on the opinions of and reports from Corporate Auditors to ensure that thorough discussions are carried out. In the case of conflicts of interest involving any Director, potential conflicts of interest are required to be reported in advance to the Board of Directors to obtain its approval, with reports to be given on the propriety of this after the fact.

In fiscal 2023, 13 meetings were held to resolve matters related to important business executions based on the laws and regulations, articles of incorporation, and rules and regulations of the Board of Directors. It also reported on the performance and overall status of each business segment and reported on discussions by the Sustainability Promotion Committee and other in-house committees as well as reported on and discussed matters related to sustainability promotion related to ESG; risks faced by the Company, their countermeasures, and other risk management; initiatives related to DE&I, analysis of employee engagement survey results, and other human capital initiatives; and improvement of the effectiveness based on the results of the Board of Directors effectiveness evaluation. In addition, several discussions focusing on the formulation of the new Medium-term Business Plan, which started in fiscal 2024, were conducted. The Board also resolved to establish new important material Issues to achieve the vision stipulated in the Medium-term Business Plan: “We aim to be a “company providing dreams for the future” through creating value with our customers.”

The Board of Corporate Auditors consists of two Standing Corporate Auditors and two part-time independent Outside Auditors, and has a diverse composition of individuals with appropriate experience and capabilities, including knowledge of finance, accounting, and legal matters, to provide fair, impartial and efficient auditing activities. In addition, under the direction and orders of the Corporate Auditors, one staff member (attached to the Corporate Auditors), who serves concurrently in the Auditing Office and has expertise in internal auditing, assists the Board of Corporate Auditors and each Corporate Auditor in their activities. The Board of Corporate Auditors resolves, discusses, reports, and determines important items related to auditing based on the laws and regulations, articles of incorporation, and rules and regulations of the Board of Corporate Auditors. The Board of Corporate Auditors meeting is held monthly prior to the Board of Directors meeting and also on an ad hoc basis when necessary. In fiscal 2023, the Board of Corporate Auditors met 19 times for an average of 1 hour 21 minutes.

The Board of Corporate Auditors’ basic policy is to respond flexibly to changes in the environment and conduct audits in a fair, unbiased and transparent manner in order to achieve sound and sustainable growth, create medium- to long-term corporate value, and contribute to the establishment of a high-quality corporate governance system that can meet the trust of society. In addition, it reviewed the previous fiscal year’s audit activities to enhance the effectiveness of audits and discussed the assessment and verification of effectiveness among all Corporate Auditors. As a result of the evaluation and analysis in the previous fiscal year, we confirmed the effectiveness of on-site surveys for each business activity and decided to focus on conducting on-site inspections in fiscal 2023 as we did in fiscal 2022. Furthermore, we formulated an audit plant for the current fiscal year focusing on “confirmation of the status of the Group’s governance and risk management,” “confirmation of the maintenance and operation of the Group’s internal control system,” and “confirmation of the status of the Group’s compliance with laws, article of incorporation, regulations, etc.” as important matters that support the sustainability activities that the Group sets as important material issues. Its overview was reported at the Board of Directors meeting held on June 22, 2023, and audit activities were conducted with the support of the Board of Directors. The Board of Corporate Auditors also engages in the following activities:

Each Auditor attends important internal conferences including Board of Directors meetings, holds regular meetings with the President and Representative Director of the Company (on a quarterly basis, in principle), and performs other activities according to the Auditing Plan. Items noted during these auditing activities are to be raised as issues or recommendations to the Board of Directors and the Executive Officers’ Meeting as necessary. As part of the above, Standing Corporate Auditors actively create an auditing environment and collect information in the Company, approve important drafts, and receive materials for management meetings to fulfill their role as standing auditors. They also actively participate in Risk Management Committee meetings, Compliance Committee meetings, and other important meetings as well as attend on-site inspections of business sites and subsidiaries selected through the risk approach, accounting audits by the accounting auditor, and internal audits by the Internal Audit Department. In fiscal 2023, in response to the increase of sustainability activities of the Company, Standing Corporate Auditors newly participated in the Sustainability Promotion Committee and actively proposed materialities and the formulation of a human rights policy. In addition to the activities of the Board of Corporate Auditors, Outside Corporate Auditors participate in important meetings such as Executive Officers’ Meetings, business liaison meetings, and budget meetings in addition to the Board of Directors meetings. They also participate in inspections of business sites and subsidiaries as much as possible to make proposals based on their expertise.

We have introduced an Executive Officer structure in which Executive Officers appointed by the Board of Directors as the persons responsible for business execution execute business under the direction of the Company President based on the policies determined by the Board of Directors, and have appointed seventeen Executive Officers (including six who serve concurrently as Directors) as of June 25, 2024.

Executive Officers’ Meetings are held once a month and attended by Directors, Executive Officers and Corporate Auditors to convey information on policies and important matters decided by the Board of Directors, to receive reports on business performance and the status of business execution from each Executive Officer, and to review important matters and share information.

With the Executive Officer Structure, the resolution of important operations and execution of operations were separated to increase the effectiveness of the Board of Directors in auditing operational execution, increasing the speed of operational execution and clarifying responsibility. Corporate Auditors oversee the Directors' execution of their roles and audit the Board of Directors to fulfill its role appropriately. As described above, Directors, Corporate Auditors, and Executive Officers fulfill their respective responsibility and roles to govern the Company in a way shareholders and stakeholders can trust.

As of June 25, 2024, all 24 of our officers, who are Directors, Corporate Auditors, and Executive Officers, included 20 men and 4 women, with a female board member ratio of around 17%. All of our officers with the exception of one Corporate Auditor are 50 or older.

Outside Director Kazuo Matsuda has considerable experience and wide range of insight that he cultivated at a financial institution as well as business companies as a management executive, and we anticipate that he will bring these abilities to bear in providing germane opinions and valuable advice from an objective standpoint. He also serves as a member of the Appointment and Remuneration Advisory Committee.

Outside Director Etsuko Nagashima has an expert viewpoint as a certified public accountant and wide-ranging views related to financial matters and accounting, and we anticipate that she will bring these abilities to bear in providing germane opinions and valuable advice from an objective standpoint. She also serves as a member of the Appointment and Remuneration Advisory Committee.

Outside Director Hiroyuki Wakabayashi has considerable experience and a broad insights that he cultivated as a person in charge of manufacturing at a major manufacturer as well as a management executive in charge of technology in general and IT digital, and we anticipate that he will bring these abilities to bear in providing germane opinions and valuable advice from an objective standpoint. He also serves as a member of the Appointment and Remuneration Advisory Committee.

Outside Corporate Auditor Kazuhiko Yamagishi utilizes his professional perspective as a lawyer and wide-ranging insight into management for auditing our Company.

Outside Corporate Auditor Noriko Kawate utilizes her professional perspective as a Certified Public Accountant and tax accountant and wide-ranging insight into finance, accounting and management for auditing our Company.

We have established the Criteria for Independence of Directors and Corporate Auditors through a resolution of the Board of Directors, and has determined that the aforementioned Outside Directors and Outside Corporate Auditors are independent pursuant to said criteria. In addition, notification of them as independent officers has been submitted as stipulated by the Tokyo Stock Exchange.

We also hold monthly Outside Officers' Meetings consisting of Outside Directors, Outside Corporate Auditors, the Director Overseeing the Corporate General Affairs Division and the Corporate Finance & Planning Division, the Executive Officer in charge of the Corporate General Affairs Division, Standing Corporate Auditors, and members of the Corporate General Affairs Division and the Corporate Finance & Planning Division. At the Outside Officers' Meeting, account settlement overview reports on our Group are shared, introductions to businesses are provided from the Corporate Officers in charge of each segment, and advance explanations of agenda items for meetings of the Board of Directors are provided. This is done in an effort to share information and awareness concerning the Group between Outside Directors and Outside Corporate Auditors.

In order to strengthen the independence, objectivity, and accountability of the Board of Directors’ functions concerning the nomination and remuneration, etc. of Directors, the Company has voluntarily established the Appointment and Remuneration Advisory Committee consisting of a majority of Independent Outside Directors (Directors submitted as an Independent Officer to the Tokyo Stock Exchange). The Appointment and Remuneration Advisory Committee was reorganized on June 24, 2021, to reinforce its functions from the Nomination and Remuneration Advisory Committee, which had previously reported to the Board of Directors on matters concerning the nomination of Directors and the determination of remuneration amounts. As of June 25, 2024, the Committee is chaired by President and Representative Director Kazuhiko Fujiwara, with the membership of Independent Outside Directors Kazuo Matsuda, Etsuko Nagashima, and Hiroyuki Wakabayashi.

This Committee holds deliberations regarding Directorship appointments, including assignments to and dismissals from Directorships, elections and dismissals of Representative Directors, as well as plans for successors of the President and Representative Director. It then reports its findings to the Board of Directors based on the results of these deliberations. The committee is delegated based on findings of the Board of Directors to perform decision-making regarding items (including systems and policy) concerning remuneration for Directors.

In fiscal 2023, with regard to the nomination of Directors, the selection of candidates for Directors and setting the skill matrix based on a new director system were discussed as noted above. With regard to the remuneration of Directors, the amounts of individual monthly remuneration for each director and bonuses according to Directorship position were decided. The Committee met a total of four times during fiscal 2023, and all members attended all committee meetings.

To provide an incentive to contribute to the sustained improvement of corporate value of the Company, the remuneration of Directors of the Company shall be based on a remuneration system that is linked to performance and shareholder value. Specifically, remunerations shall comprise “monthly remuneration,” which is fixed remuneration according to position, “bonuses,” which serve as short-term incentives to motivate the Directors to achieve the annual business plans, and “stock compensation,” medium- to long-term incentives to encourage the sharing of value with shareholders.

However, the remuneration of Outside Directors shall comprise exclusively monthly base pay.

Monthly remuneration shall be a fixed cash payment each month throughout the term of office of the Director, and the amount to be paid to the individual Directors shall be determined according to position by comprehensively taking into account various factors including the management environment and economic conditions. The net amount to be paid for bonuses is calculated by multiplying a fixed multiplier against business profit, and the amount paid to each individual is calculated by multiplying a fixed multiplier determined according to the factors like the person's title or their duties. Stock compensation shall comprise restricted stock compensation and restricted stock corresponding to the amount to be paid according to the Director’s position. The transfer restriction period of the restricted stock shall be the period until the date of retirement from the post of Director or Executive Officer of the Company.

The proportion of each type of remuneration to the total amount of individual remuneration, etc. to be paid to the Directors (excluding Outside Directors) of the Company shall be appropriately determined by taking into account various factors such as the position and responsibilities so that it functions as an incentive to contribute to the sustained improvement of corporate value of the Company.

The total amount of bonuses paid to Directors in fiscal 2023 was determined by the Board of Directors and the amounts of individual monthly remuneration, bonuses, and stock compensation for each Director were determined by the Appointment and Remuneration Advisory Committee, which was entrusted based on a resolution at the Board of Directors meeting.

The remuneration of Corporate Auditors consists of base pay (monthly pay). The net amount and the amounts paid to each individual are determined by consultations with the Corporate Auditors within the total amount of remuneration approved by the Shareholders' Meeting.

Remuneration for Executive Officers in fiscal 2023 comprised a total of ¥426 million (monthly base pay of ¥235 million, bonus of ¥162 million, and stock compensation of ¥28 million) for seven Directors (excluding Outside Directors), a total of ¥55 million (monthly base pay of ¥55 million) for three Corporate Auditors (excluding Outside Corporate Auditors), and a total of ¥58 million (monthly base pay of ¥58 million) for five Outside Officers.

The Company evaluates the effectiveness of the Board of Directors each year. The Company enhances the effectiveness of the Board of Directors by executing the PDCA cycle of conducting self-evaluations and aggregation of opinions based on a questionnaire survey of all members of the Board of Directors (Directors and Corporate Auditors), holding discussions and exchanges of opinions at meetings based on the analysis results of the survey, summarizing the evaluation results based on these discussions and setting the issues to be addressed, and at the Board of Directors implementing initiatives to resolve these issues. The results of the analysis and evaluation of the effectiveness of the Board of Directors for fiscal 2022 are summarized below.

We have systems in place for ensuring appropriate operations in accordance with our Business Philosophy. In accordance with our Basic Policy on Internal Control Systems (partially amended by resolution of the Board of Directors meeting held on February 28, 2023 to further promote the system based on the sustainability management and initiatives to strengthen governance) drawn up by the Board of Directors, we periodically review the systems and promote various activities to enhance internal control.

With respect to internal control over financial reporting, based on our Basic Rules and Regulations for Internal Control over Financial Reporting, we endeavor to enhance systems for ensuring the reliability of our financial reporting, appropriately operate internal control systems in terms of implementation, assessment, reporting, and correction, and ensure appropriate and timely disclosure of corporate information. The Comprehensive Guidelines for Internal Control in Consolidated Subsidiaries covers the items that subsidiaries are required to address in establishing their internal control systems and in their subsequent ongoing implementation of control activities.

The internal control over our financial reporting as of March 31, 2024 was assessed and deemed to be effective by Internal Auditing Departments. In addition, as a result of the accounting auditor's audit, it was confirmed that the internal control report presents fairly the result of assessments of internal control over financial reporting.

Our Board of Directors is structured to include Inside Directors who have the knowledge, experience, and ability to fulfill their responsibilities to ensure the sustainable growth of the Company and increase its corporate value over the medium to long term, and to supervise management’s execution of operations. The Board also includes Outside Directors, who can be expected to express their opinions on company policies and business execution based on their objective viewpoints. The following table sets forth the critical knowledge, experience, and abilities required by the Board of Directors and their relationship to each Director.

The Board of Corporate Auditors intends to maintain the diverse composition of members with appropriate experience and abilities, including a knowledge of finance, accounting, and legal affairs, and to conduct fair, impartial, and efficient auditing activities going forward. The correspondence between key knowledge, experiences and abilities, etc. which the Board of Corporate Auditors requires and the respective Corporate Auditors are described below.