Corporate Governance

Corporate Governance Report (June 26,2024)(911KB)

Basic approach to Corporate Governance
Diagram: System of Corporate Governance
Effectiveness of the Board of Directors
Status of Outside Officers
Internal Control System
Executive Compensation

Basic approach to Corporate Governance

With a view to improving the profitability and the capital efficiency of Nissui and its Group companies, as well as to promoting initiatives toward corporate social responsibility to encourage sustainable growth and the medium- to long-term enhancement of corporate value, the Board of Directors will demonstrate the major direction in corporate strategies and other matters and will place greater emphasis on supervising functions while retaining important decision-making functions.
The decision-making functions have been empowered to the Executive Officers (and Executive Committee) headed by the President & CEO, to speed up the decision-making process and to further separate supervising and execution.
Furthermore, in addition to the above management supervising by the Board of Directors, Nissui has adopted the governance structure of a company with an audit & supervisory board, based on its belief in the effectiveness of an audit system over management comprising four Audit & Supervisory Board Member including Outside Audit & Supervisory Board Member who are independent of management.

Diagram: System of Corporate Governance

Board of Directors, Directors

The Board of Directors Meeting is held at least once a month in principle to determine material matters and supervise management. In order to enhance the transparency of management and strengthen the function of management supervision, Directors act with a term of office of one year. Currently, the Board of Directors consists of ten Directors and includes four Outside Directors (of which two members are women), who are independent of the management team.

Nomination and Compensation Committee

As an advisory body to the Board of Directors, the Company has established the voluntary Nomination and Compensation Committee (established on June 27, 2018), consisting of four Outside Directors and one Representative Director and chaired by an Outside Director. The Nomination Committee deliberates on the selection and dismissal of candidates for Officers including President and succession planning, and the Compensation Committee deliberates on the determination policy of compensation, details of the compensation system, and compensation standard, among other matters, in order to recommend to the Board of Directors. The Board of Directors determines executive appointments and compensation based on the recommendation.

Management structure and Expected Areas of Expertise of Directors and Audit & Supervisory Board Member

Name	Positions and responsibilities	Corporate management	Finance and accounting	Marketing and sales	Production and technology	R&D	International perspective	Corporate governance	Risk management	Legal affairs and compliance	Sustainability
Shingo Hamada	Representative Director, President, Chief Executive Officer (CEO), Member of Nomination and Compensation Committee	○			○	○	○	○	○	○	○
Shinya Yamamoto	Director, Senior Managing Executive Officer, Chief Financial Officer (CFO)		○				○	○	○		○
Koji Umeda	Director, Senior Managing Executive Officer, Chief Operating Officer (COO)			○	○			○	○		○
Shinya Yamashita	Director, Managing Executive Officer					○	○				○
Masahide Asai	Director, Executive Officer	○		○			○	○	○
Teru Tanaka	Director, Executive Officer	○		○	○		○
Tokio Matsuo	Outside Director, Chairperson of Nomination and Compensation Committee	○			○			○	○	○	○
Atsumi Eguchi	Outside Director, Member of Nomination and Compensation Committee					○			○	○	○
Daisaku Abe	Outside Director, Member of Nomination and Compensation Committee	○	○					○	○	○	○
Keiko Tanaka	Outside Director, Member of Nomination and Compensation Committee						○	○	○	○	○
Hiroyuki Hamano	Standing Audit & Supervisory Board Member		○				○	○	○	○
Masahiro Yamamoto	Outside Audit & Supervisory Board Member		○					○	○	○
Tadashi Kanki	Outside Audit & Supervisory Board Member							○	○	○
Makiko Terahara	Outside Audit & Supervisory Board Member						○	○	○	○	○

Audit & Supervisory Board, Audit & Supervisory Board Member

Regarding the audit system, the Company has appointed persons with the expertise necessary for audit including insight into finance and accounting as well as a wealth of knowledge in a wide range of fields. The Audit & Supervisory Board consists of four Audit & Supervisory Board Members including three Outside Audit & Supervisory Board Members (of which one member is a woman) independent of the management team. Each Audit & Supervisory Board Member attends the Board of Directors Meetings to audit execution of duties of Directors, and also attends other important meetings including the Executive Committees as necessary.

Executive Committee, Executive Officer

Regarding business execution, the Company has adopted the executive officer system (introduced on June 25, 2009) for flexible and efficient business management. The Executive Committee consisting of Executive Officers appointed by the Board of Directors is held at least once a month in principle, and makes quick and appropriate decisions and information sharing on major business execution matters, based on sufficient deliberation from a multifaceted perspective, in order to promote the sustainable growth and the enhancement of the corporate value of the Company and the Company Group. The Executive Committee consists of 16 men including six Directors concurrently acting as Executive Officers.

Internal Audit Department

Based on annual planning, the internal auditing division under the direct control of President implements evaluation on internal control in order to ensure the reliability of internal audit and financial reporting of the Company Group, and reports results to Directors, Audit & Supervisory Board Members, and the managers of organizations under audit.
The internal auditing division reports the business audit results of Nissui and all its Group companies to the Audit & Supervisory Board Members, and in terms of internal control, discusses the evaluation procedure, scope, schedule, etc. with the external auditor of accounts when formulating the evaluation plan for the fiscal year and finalizes the evaluation policy. Furthermore, we ensure cooperation between the external auditor of accounts and the internal auditing division by closely exchanging information with the external auditor of accounts and taking appropriate corrections when any deficiencies or problems in control are found.

Auditor of Accounts

Regarding accounting audits, the Company has concluded an agreement with Ernst & Young ShinNihon LLC to conduct accounting audits based on the Companies Act and the Financial Instruments and Exchange Act.

Effectiveness of the Board of Directors

<Timeline for the evaluation of the effectiveness of the Board of Directors>

The Company evaluated the effectiveness of the Board of Directors ("evaluation of effectiveness") for FY2023 on all executives (nine Directors and four Audit & Supervisory Board Members) in accordance with the following timeline.

January 2024: Conducted a point-system (4 levels) questionnaire survey
February to March 2024: Upon summarizing the questionnaire results, the secretariat conducted interviews with newly appointed Directors and identified issues
April 2024: Discussions separate from the Board of Directors were facilitated by an Outside Director

<The content of the questionnaire and a summary of the results>

(1) The content of the questionnaire

To understand the whole situation of the Board of Directors, the questionnaire comprised a total of 29 questions in the following five major categories. Each major category also had a free-description field where the respondent could write down comments and observations.

i.Composition of the Board of Directors (Size, number of members, diversity, the ratio of Internal and Outside Directors, etc.)
ii.Operation of the Board of Directors and the support structure (Annual schedule, the content and volume of meeting materials, the leadership of the Chairperson, etc.)
iii.Agenda of the Board of Directors (Number of agenda items and the content of the agenda items, the relevance of the criteria for submitting proposals to the Board of Directors, etc.)
iv.Communication with third parties (The quality and the appropriateness of the content of disclosures to stakeholders, etc.)
v.Training of Internal and Outside Directors

(2) Summary of the results

[Overview]
A comparison of the major categories indicated that the average score of "v. Training" was the highest, while "iii. Agenda of the Board of Directors" was the lowest, as was the case in the previous fiscal year.
It is considered that providing opportunities for outside executives to deepen their understanding of the Company's business through study sessions targeting executives as well as visits to the plants and subsidiaries contributed to the positive evaluation of "v. Training." On the other hand, "iii. Agenda of the Board of Directors" has been an issue at the Company since the inception of the evaluation of effectiveness and despite the improvement measures taken every year and the recognition of a certain level of improvement, they have not resulted in a positive assessment. Although there were no dramatic changes from the previous year in terms of "i. Composition of the Board of Directors" and "iv. Communication with third parties," the evaluation of "iv. Communication with third parties" is gradually rising each year, as the IR activities take shape.

[Summary]
In the responses, the executives generally rated the current performance of the Board of Directors high in that active exchanges of opinions were conducted between internal and outside executives under the appropriate leadership of the Chairperson, and this tendency has not changed since the inception of the evaluation of effectiveness. The executives also appreciated the fact that corrective measures (setting the themes to be discussed by the Board of Directors, sharing the meeting materials and the details of the discussions of the Executive Committee, and improving and making the reporting items more substantial, etc.) were taken every time issues were identified through the evaluation of effectiveness. On the other hand, the responses indicate that there remain some issues for which sufficient improvement has not been achieved (decision-making and supervisory functions by Internal Directors from a companywide perspective, the delegation of authority to the Executive Committee, the volume and content of the meeting materials of the Board of Directors). Especially with regard to the management strategies of Internal Directors from companywide and medium- and long-term perspectives, which had always been perceived as an issue, the evaluation has declined due to the increasingly severe self-assessments by the Internal Directors. Furthermore, the timing of distributing meeting materials and the inadequate evaluation of investment projects were newly identified as issues.

<Issues identified by the secretariat>

Upon analyzing the questionnaire results, the secretariat identified the following items as issues.

i.The medium- and long-term management themes* have not been considered sufficiently.
*Growth strategy and business portfolio
*Human capitals strategies, succession planning, and others
ii.Improvement of materials for the Board of Directors meetings (details and timing of distribution)
iii.Arrangement of presented meeting agenda
iv.Enhancement of supervisory functions of Internal Directors (succession planning)
v.Composition of the Board of Directors
vi.Establishment of a system for pre-evaluation of investment projects

<Summary of the discussion and next actions>

The discussion was conducted as an open-ended discussion, separate from the Board of Directors meetings. This year's discussion was also facilitated by an outside executive. The items listed above in paragraph 3 were broadly divided into three categories: (v.), (ii., iii., and vi.), and (i. and iv.), touching upon the awareness of the issues and the various viewpoints of the discussion on the resolution of such issues.

(1)v. Composition of the Board of Directors
Regarding this issue, there was a common awareness among the executives and many expressed their expectations for the early promotion of female executives who started their careers at the Company, despite the presence of several female Outside Directors. Nevertheless, given the current situation of the Company, it would be difficult to immediately promote female employees to Directors. Therefore, to enable us to promote female employees who started their careers at the Company to Executive Officers in the not-too-distant future, we agreed that we should nurture and prepare such individuals through education and other means. Meanwhile, opinions were divided in terms of foreign nationals serving as Directors and while the Group is targeting an international net sales ratio of 50% by 2030, some expressed the opinion that decisions should be made upon examining the necessity of hiring foreign nationals and if it is necessary to hire foreign nationals as Directors, the Company should start by hiring them as Executive Officers.
(2)ii. Improvement of materials for the Board of Directors meetings, iii. Arrangement of presented meeting agenda, and vi. Establishment of a system for pre-evaluation of investment projects
These issues involve the operation of the Board of Directors meetings and outside executives pointed out that the materials were difficult to comprehend on their own, made requests to clarify the key points, and suggested holding preliminary explanation briefings prior to the Board of Directors meetings to ensure more energized discussions. Meanwhile, some recognized the efforts being made such as the attachment of summaries of discussions made at Executive Committee meetings, step-by-step discussions on important matters such as M&As, and efforts to explain matters related to medium- and long-term plans, and noted that the materials were easier to understand than before.
(3)i. Deepening the consideration of medium- and long-term management themes and iv. Enhancement of supervisory functions of Internal Directors
While these two issues have been weighing heavily on the Board of Directors, in terms of i., opinions were voiced to the effect that despite more time being spent on discussing medium- and long-term management themes they were not delving deep enough. They also noted that deliberations on the allocation of the business portfolio taking into account the market conditions of 2030 as well as improvements of the inhouse environment in preparation were necessary. To achieve them, the executives suggested that perhaps improvements could be made by identifying the points for review and where deliberations were insufficient by providing opportunities for informal discussions, at management retreats, for example. As for iv., some pointed out that as the Internal Directors represent their respective businesses, their opinions tend to be biased toward their businesses and that their supervisory functions as Directors were not being fully demonstrated from a companywide perspective. On the other hand, some pointed out that the presence of Directors who oversee the businesses is indispensable to deepen discussions on business matters, and as persons with business backgrounds can become CEO candidates, one possible solution for making them more aware of the companywide perspective and third-party assessments to enhance businesses and the supervisory functions would be through the development of human capitals, such as having employees experience work in multiple departments including Corporate Administration Group from an early stage and the use of related literature and handbooks.
Many opinions and requests were voiced in the free-description field in the questionnaire and discussions and accordingly, the Company was able to hold deep-dive discussions into each issue. The outside executives also shared examples of initiatives taken at other companies and based on these various input, we will deliberate and implement improvement measures to further enhance the quality of discussions.

Status of Outside Officers

Outside Directors

identity	Reason for Appointment
Tokio Matsuo	In addition to his many years of experience at a glass manufacturer, he has cultivated a wide range of insights as a representative director of a listed chemical manufacturer. He has appropriately supervised overall management by expressing frank opinions on sustainability initiatives from a medium--to long-term perspective. In addition to providing advice on further enhancing corporate value, we expect him to demonstrate leadership as the new chairman of the Nomination Committee and the Compensation Committee, and we continue to appoint him as an outside director.
Atsumi Eguchi	She was involved in R&D, public relations, and communications at major beverage and food manufacturers and has extensive knowledge and extensive experience. She has supervised a wide range of management issues, not only from corporate communication and diversity but also from the perspective of overall management. In anticipation of her contribution to further enhancing corporate value, the Company continues to appoint her as an outside director.
Daisaku Abe	For many years, he has been involved in various operations at financial institutions, such as IT, systems, and corporate planning. He also has insight into sustainability, such as serving as the chairman of the Human Rights Awareness Promotion Committee. In addition to having experience in overseeing overall corporate management as a financial institution manager, he has also served as an outside director of a listed company. The Company's Board of Directors expects him to use his various experiences to supervise management from a medium- to long-term, broad-picture perspective. The Company has appointed him as a new outside director.
Keiko Tanaka	In addition to having a wide range of insight through her involvement in public relations and marketing departments at an automobile manufacturer, she has experience playing an active role globally, including serving as Ambassador Extraordinary and Plenipotentiary to Uruguay. Since she has experience as an outside director at a listed company and as an external expert member of the Sustainability Committee, she has been newly appointed as an outside director with the expectation that she will provide advice from a global perspective on sustainability and diversity, which are the issues of the Company, and supervise overall management based on her various experiences.

The four outside directors all meet the independence requirements set by the Tokyo Stock Exchange and the "Independence Criteria of Outside Executives" set by the Company. There is no risk of conflicts of interest with general shareholders. The Company has determined that they are independent, designated them as independent directors according to the provisions of the Tokyo Stock Exchange, and notified the Exchange.
Outside directors exchange information and opinions as necessary in response to reports from the Internal Audit Department.

Outside Audit & Supervisory Board Member

identity	Reason for Appointment
Masahiro Yamamoto	As a certified public accountant, he has specialized knowledge of finance and accounting. He continues to be appointed as an Outside Audit and supervisory Board Member by making appropriate statements from an independent and objective standpoint, using his abundant experience and knowledge as an accounting expert.
Tadashi Kanki	In addition to his experience as a full-time Audit & Supervisory Board Member at a listed company, he has been appointed as an Outside Audit & Supervisory Board Member for his remarks urging substantial and appropriate supervision of overall management from an independent and objective standpoint from the perspective of a wide range of knowledge and experience in sales and corporate planning at financial institutions.
Makiko Terahara	In addition to being well-versed in corporate legal affairs as a lawyer, she also serves as an outside director of other listed companies. She knows how to judge the appropriateness of corporate activities in general. She also serves as an outside auditor of a listed company that operates a department store business and has insight into the retail industry. For the Company to promote sustainability and realize diversity in the future, we expect that her advice based on her experience and understanding will be practical, and we have appointed her as a new Outside Audit & Supervisory Board Member.

Since all three Outside Audit & Supervisory Board Members meet the requirements for Independent Directors stipulated by the Tokyo Stock Exchange and the "Independence Criteria of Outside Executives" set by the Company, the Company has determined they are independent and there is no risk of conflicts of interest with general shareholders. So, the Company designated them independent directors according to the Tokyo Stock Exchange provisions and notified the Exchange.
Outside Audit & Supervisory Board Members receive regular reports from the Accounting Auditor on audit plans and results, witness some of the auditor's audits, and cooperate. In addition, necessary information and opinions are exchanged with the Internal Audit Department. The Internal Audit Department reports the results of the Group's operational audits to the Audit and supervisory Board Members.

Independence_Criteria_of_Outside_Executives (104KB)

Attendance at Board Meetings by Outside Directors and Audit & Supervisory Board Members

Category	Name	Number of Board of Directors meetings attended	Number of Nomination and Compensation Committee meetings attended	Number of Audit & Supervisory Board meetings attended	Status of Key activities
Outside Directors	Mikito Nagai	19/20 meetings	(Nomination) 8/8 meetings (Compensation) 6/7 meetings	－	In addition to his experience at financial institutions, he has abundant experience as a corporate manager, such as having served as representative director of an operating company. At the Board of Directors meetings, etc., he makes appropriate management decisions and provides oversight, such as leading discussions on the effectiveness of the Board of Directors, as well as provides comments on the optimization of the business portfolio and on financial strategies from a management perspective. In addition, as Chairperson of Nomination Committee and Compensation Committee, he leads fair and transparent operation of the Committee meetings regarding succession planning, the composition of the Board of Directors, the election of Directors and Audit & Supervisory Board Members and matters concerning compensation, etc.
	Tokio Matsuo	20/20 meetings	(Nomination) 8/8 meetings (Compensation) 7/7 meetings	－	He has extensive experience and broad expertise as a corporate manager, including having served as representative director of an operating company. At the Board of Directors meetings, he provides advice regarding the Company's sustainability activities from medium- and long-term perspectives as well as makes management decisions and provides oversight appropriately from a broad-based perspective. In addition, he provides advice for improvement of the election of Directors and Audit & Supervisory Board Members and the compensation system at the Nomination Committee and Compensation Committee meetings, based on his management experience.
	Atsumi Eguchi	15/15 meetings	(Nomination) 6/6 meetings (Compensation) 3/3 meetings	－	She has broad knowledge and abundant experience, including having engaged in research & development and public relations/communications divisions at an operating company. She makes management decisions and provides oversight appropriately at the Board of Directors meetings from a multi-faceted perspective including corporate communication and diversity. In addition, she provides expert and specific advice on the election of Directors and Audit & Supervisory Board Members and the compensation system with consideration of recent trends and other companies' cases at the Nomination Committee and Compensation Committee meetings.
Outside Audit & Supervisory Board Members	Shino Hirose	20/20 meetings	－	16/16 meetings	She is well versed in corporate legal affairs and compliance issues as an attorney at law, and provides comments as necessary from an independent and objective standpoint and from the perspective of diversity to ensure adequacy and appropriateness of decision-making by the Board of Directors and the Audit & Supervisory Board based on her expertise and experience in legal issues.
	Masahiro Yamamoto	19/20 meetings	－	16/16 meetings	He has professional knowledge regarding finance and accounting as a certified public accountant. Leveraging his abundant experience and expertise as an accounting expert, he provides comments as necessary from an independent and objective standpoint.
	Tadashi Kanki	19/20 meetings	－	16/16 meetings	In addition to the experience as a Standing Audit & Supervisory Board Member at a listed company, he has broad knowledge and experience in sales and corporate planning at financial institutions. Leveraging this experience, he provides comments to encourage effective and appropriate supervision of overall management from an independent and objective standpoint.

* As of the end of March 2023

Internal Control System

Basic Policy for Internal Control System

Executive Compensation

Disclosure of Policy on Determining Compensation Amounts and Calculation Methods, etc.

A basic policy for the determination of executive compensation has been established, as per the following, in accordance with the Corporate Governance Code.

Basic Policy

1.The compensation system shall support the achievement of the Company's mission and vision.
2.The compensation system shall be designed to eliminate short-term bias and motivate the medium- to long-term improvement of corporate value.
3.The compensation system shall be effective in maintaining and securing outstanding talents.
4.The compensation system shall be designed in a transparent, fair and reasonable manner from the standpoint of accountability to stakeholders including the shareholders and employees, and shall ensure appropriate determination processes.
5.The compensation system shall be aligned to the roles and responsibilities entailed by each rank and to performance.

＜Method for the determination of compensation of Directors and Audit & Supervisory Board Members＞

The policy for determining compensation, etc. of individual Directors is determined by the voluntary Compensation Committee which is chaired by an Independent Outside Director and consists of three Outside Directors and two Representative Directors (Chairperson: Mikito Nagai), with the aim of ensuring compensation commensurate with the company's stage. Specifically, it is determined by the Board of Directors upon deliberation of (i) the basic policy for compensation; (ii) the compensation system; (iii) the compensation levels; and (iv) compensation item composition ratio; among other things, based on comparative verification against benchmark groups. The amount of each compensation to be paid shall be determined by the Compensation Committee delegated by the Board of Directors from the viewpoint of the objectivity and transparency of the operation of said system.
With respect to compensation, etc. of Audit & Supervisory Board Members, the amount of basic compensation (fixed compensation) shall be determined through discussions among the Audit & Supervisory Board Members, and shall be within the range of the total amount of compensation, etc. approved by the General Shareholders' Meeting in advance.

＜Compensation system, Calculation System, and Determination Process＞

Compensation of Directors (excluding Outside Directors) consists of three components, namely, "basic compensation," "performance-linked compensation," and "stock-based compensation." Outside Directors and Audit & Supervisory Board Members receive only basic compensation (fixed compensation). Until FY2022, the ratio between each compensation of Directors was roughly targeted at 65:30:5 when business performance targets are fully achieved. From FY2023, in order to raise awareness among Directors of improving business performance and increasing corporate value over the medium to long term, the design of the system has been changed to set the ratio to 55:25:20 when business performance targets such as consolidated ordinary profit, etc. and other KPIs of the Mid-Term Business Plan are fully achieved. Thus, the ratio of performance-linked variable compensation (performance-linked compensation and stock-based compensation) has been raised to approximately half of the total.
The retirement benefit system for Directors and Audit & Supervisory Board Members was abolished on the day of the 92nd Ordinary General Shareholders' Meeting held on June 27, 2007.

＜Directors' compensation system for Directors in FY2023＞

Type of compensation	Basic compensation	Variable compensation
Type of compensation	Basic compensation	Performance-linked compensation	Stock-based compensation
Contents	Fixed compensation in accordance with rank	Compensation in which the total amount of payment is determined based on the total amount of dividends or consolidated ordinary profit for the fiscal year, and allocated and paid in accordance with job rank by adding individual evaluations.	Compensation in which the total amount of payment is determined based on the achievement ratio of the Mid-Term Business Plan, and paid in the form of the Company's stock in accordance with job rank and individual evaluations.
Eligible for payment	Internal Directors / Outside Directors	Internal Directors only	Internal Directors only
Payment timing	Monthly	Twice a year	Lump-sum payment at a certain time after the end of the final fiscal year of the Mid-Term Business Plan period
Payment method	Cash	Cash	Stock and cash
Method for determining the amount of payment		Consolidated ordinary profit or the total amount of dividends, each multiplied by a certain percentage, whichever is smaller, is the basic amount of payment.	Corporate performance achievement rate is determined for the Mid-Term Business Plan period
Method for determining the amount of payment		The basic amount of payment is allocated in accordance with job rank and individual payment is determined in accordance with the achievement rates of business performance targets within the range of 80% to 120%.	Predetermined base points for each job rank is multiplied by a determined corporate performance achievement rate, which will be adjusted by individual achievement rates of financial and non-financial targets within the range of 80% to 120%.
Ratio (guidelines) *In the case that consolidated ordinary profit, which is a financial KPI of the Mid-Term Business Plan, reaches 35.0 billion yen	55%	25%	20%

Basic compensation

Basic compensation consists of three components, namely, representative consideration, supervisory consideration and executive consideration, and executive consideration is set according to the job rank.

Performance-linked compensation

Performance-linked compensation is paid to Executive Officers based on the idea that the compensation is distribution of added value generated in a single fiscal year.
This compensation uses "consolidated ordinary profit," which is a performance evaluation indicator, and "total amount of dividends" conscious of shareholders' perspectives as indicators. Consolidated ordinary profit or the total amount of dividends, each multiplied by a certain percentage, whichever is the smaller amount, is used as the basic amount of the compensation, which is then allocated and paid in accordance with the job rank based on individual evaluations. As the compensation composition ratio is set based on the timing when the Mid-Term Business Plan is achieved, if consolidated ordinary profit or total amount of dividends, which is conscious of shareholders' perspectives, is increased or decreased, the ratio of performance-linked compensation in total compensation is designed to be increased or decreased accordingly.
Evaluation for each individual was introduced in FY2021 with an aim to clarify the degree of contribution of each officer to the business performance for a single fiscal year. Certain business performance targets, including sustainability targets, have been selected as evaluation items, and achievement rates are evaluated against those items within the range between 80% and 120%. The basic amount of performance-linked compensation paid, the allocation rate by job rank, and evaluation for each individual shall be determined by the Board of Directors after deliberation by the Compensation Committee.

Stock-based compensation

Evaluation items and evaluation weight for stock-based compensation

The following evaluation items have been established for stock-based compensation, in conjunction with the commencement of the new Mid-Term Business Plan "Good Foods Recipe 1" in FY2022. Specifically, sustainability evaluation items, in addition to the current evaluation items such as achievement rate of consolidated ordinary profit, have been selected with the aim of optimizing the business portfolio, improving capital efficiency, and enhancing shareholder value.

Evaluation items for stock-based compensation
Items		Reasons for selection
Financial	Net sales Consolidated ordinary profit ROIC	Improvement of growth potential Improvement of profitability Improvement of capital efficiency
Sustainability	Achievement rate of the target for sustainability of marine resources Reduction in CO2 emissions at the Group's business sites Improvement of employee engagement scores Sales of health category products	Sustainable procurement Contribution to actions toward climate change Preserving the marine environment Active roles undertaken by diverse human capital Solutions to health issues

As detailed above, financial and non-financial (sustainability) items have been selected for evaluation of corporate performance, and their weightings have been set to 70:30. Financial targets are evaluated based on the percentage of achievement in accordance with actual results, while non-financial (sustainability) targets are evaluated within the range between 50% and 150%. The number of shares to be granted to individuals is determined by multiplying the predetermined base points for each job rank by corporate performance achievement rates, and then reflecting the individual evaluations. For individual evaluations, KPIs and sustainability items under the Mid-Term Business Plan are used, and the achievement rates are defined within the range between 80% and 120%. The corporate performance achievement rates and the individual evaluations shall be determined by the Board of Directors after deliberation by the Compensation Committee.

Total amount of compensation, etc. for Directors and Audit & Supervisory Board Members regarding the fiscal year under review

The policy regarding the determination of the details of compensation, etc. for each individual Director, was decided by the Board of Directors after deliberation by the Compensation Committee, which is chaired by an Independent Outside Director. The amount paid to each individual for the fiscal year under review was determined by said Committee, under delegation by the Board of Directors, based on said policy; therefore, the Board of Directors has determined that it is in line with said policy and appropriate.

Category of Officers	Total amount of compensation, etc. (in millions of yen)	Total amount by type of compensation, etc. (in millions of yen)			Number of Officers paid
Category of Officers	Total amount of compensation, etc. (in millions of yen)	Basic compensation	Performance-linked compensation	Stock-based compensation	Number of Officers paid
Directors (excluding Outside Directors)	359	216	83 (Note)	58	6 (Stock-based compensation: 6)
Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members)	26	26	-	-	1
Outside Directors	36	36	-	-	4
Outside Audit & Supervisory Board Members	38	38	-	-	3

Note: The performance-linked compensation of Directors includes the amount estimated to be paid in June 2024.

Deliberation Overview of Compensation Committee in FY2023

Deliberation overview
Revision of executive compensation system Evaluation for each individual for performance-linked compensation and stock-based compensation for FY2022 Amount to be paid to each individual of performance-linked compensation paid in June 2023 and December 2023 Additional purchases of trust compensation (BBT)