Corporate Governance

Basic Policy

Our company, under the mission of “Creating partnerships that change the world,” aims to enhance corporate value and contribute to the sustainable growth of society through transparent and fair business practices. To achieve this goal, we have introduced an executive officer system to strengthen our business execution functions and ensure agile operations, thereby clarifying the distinction between supervisory and execution roles. In addition, we have established a Nomination and Compensation Advisory Committee to strengthen the oversight and checks on management by outside directors.

Corporate governance system

Roles and composition of organizations

1) Board of Directors

The Company’s Board of Directors consists of a total of nine members: five directors, one of whom is an independent outside director, and four directors who are members of the Audit and Supervisory Committee (all of whom are independent outside directors and two of whom are women). In addition to the regular monthly meetings of the Board of Directors, extraordinary meetings of the Board are held as necessary to make decisions on the execution of the Company’s business and to supervise the execution of the duties of the directors in accordance with laws, regulations, the Articles of Incorporation, and the Board of Directors Regulations.

The five independent outside directors bring a wealth of expertise from diverse professional backgrounds, including three business owners, a certified public accountant, and an attorney. Their contributions offer valuable insights and oversight, aiding the board in managing the company effectively. In the fiscal year ended September 30, 2023, the Board of Directors held 14 meetings, with an average attendance rate of 97.6%.

2) Nomination and Compensation Advisory Committee

The Nomination and Compensation Advisory Committee has been established as a voluntary advisory body to the Board of Directors. Its primary purpose is to increase the fairness, transparency, and objectivity in the Board’s decision-making process, thereby enhancing our overall corporate governance. Comprising mainly independent outside directors, this committee focuses on issues concerning the nomination and compensation of directors. It works on these areas based on input from the Board and regularly reports its findings back to it. In the fiscal year ended September 30, 2023, the Nomination and Compensation Advisory Committee held four meetings.

3) Audit and Supervisory Committee

The Audit and Supervisory Committee consists of four directors, all of whom are outside directors. The Committee oversees corporate governance and its operation and audits the daily business activities including the execution of duties by the directors. The members of the committee bring diverse professional backgrounds to their roles: two members have management experience, one is a certified public accountant, and one is an attorney. Each member utilizes their unique expertise to audit the company from different perspectives.

The Committee convenes monthly and holds extraordinary meetings as necessary to formulate audit plans, review the progress of ongoing audits, discuss audit results, etc., and exchange information among directors who are members of the Audit and Supervisory Committee. In the fiscal year ended September 30, 2023, the Company was a company with an Audit & Supervisory Board prior to the transition to a company with an Audit and Supervisory Committee. The Audit & Supervisory Board met 13 times during the fiscal year ended September 30, 2023.

4) Executive Committee

The Executive Committee, which consists of full-time internal directors, meets as needed to report on the status of business execution and to discuss important issues, management matters, and future development strategy, etc. The Committee met 15 times during the fiscal year ended September 30, 2023.

5) Headquarters Sales Meeting

Directors, executive officers, and general managers of sales-related departments meet weekly at the Headquarters Sales Meeting to accelerate decision-making and improve the efficiency of business execution by discussing the progress of deals, the status of contract acquisition, and issues that arise on a daily basis.

6) Compliance Promotion Committee

The Company has established a Compliance Promotion Committee to raise awareness of compliance within the Company and promote compliance from a company-wide perspective. Chaired by a full-time director, this five-member Committee meets monthly to discuss and promote compliance initiatives.

7) Internal Audit Office

The Company has set up an Internal Audit Office that reports directly to the President. This office conducts audits focusing on compliance with laws, regulations, and internal rules, as well as on preventing misconduct and enhancing operational efficiency and management effectiveness. Audit findings are regularly shared with the President and the Audit and Supervisory Committee. Should any significant issues arise, the Internal Audit Office not only reports these issues to the President and the Committee but also follows up to ensure that appropriate corrective actions are implemented.

8) Accounting Auditor

The Company has entered into an audit agreement with KPMG AZSA LLC, which is the auditor of the Company.

Corporate governance report

Corporate Governance Report PDF

Executive compensation

Basic approach to determining compensation

The compensation system shall be rooted in the practice of the Company’s corporate philosophy.
The compensation system shall be designed to reflect the Company’s management policy and medium-term management plan, while motivating the enhancement of the Company’s value in the medium to long term by limiting short-term orientation.
The level and structure of compensation shall be effective in securing excellent human resources to whom the future of the Company should be entrusted. It shall also reflect the roles of each director and their responsibilities.
Procedures for determining compensation shall be transparent, fair, and objective to ensure accountability to all stakeholders, including shareholders, investors, and employees.

Compensation is determined by resolution of the Board of Directors, within the limit set at the General Meeting of Shareholders, after consultation with the Nomination and Compensation Advisory Committee, the majority of whose members are outside directors.

Detailed policies and procedures for determining compensation are disclosed in the annual securities report.

Compensation structure

In addition to their base salary, the Company offers performance-based compensation to its directors (excluding those who are members of the Audit and Supervisory Committee) to enhance their accountability for business outcomes.

Performance-based compensation for directors is based on the Company’s operating profit and the degree of achievement of the operating profit target for each fiscal year. This approach aims to facilitate business expansion and ensure the achievement of yearly profit goals. The amount of operating profit used in this calculation is that before deduction of performance-based compensation. Based on a formula for calculating the maximum amount of performance-based compensation, the specific amount each director receives is determined by resolution of the Board of Directors, taking into consideration each director’s contribution to the Company’s performance, the overall cap on director remuneration, and other relevant factors.

Maximum amount of performance-based compensation = operating profit x performance coefficient* + increase in operating profit from the previous fiscal year x 5%

*Performance coefficient

(1) If operating profit exceeds the initial plan: 1.5%

(2) If operating profit falls below 90% of the initial plan: 0%

(3) If operating profit is between 90% and 100% of the initial plan: 1.5% x (achievement rate - 90%) / (100% - 90%)

Note: The above operating profit is based on operating profit before deduction of performance-based compensation

Process for determining compensation

The base pay for each director is set by the Board of Directors, following recommendations from the Nomination and Compensation Advisory Committee. This voluntary committee, which serves in an advisory capacity to the Board, considers factors such as the director’s role, responsibilities, and workload when making its recommendations. Performance-based compensation is resolved by the Board of Directors, following recommendations by the Nomination and Compensation Advisory Committee.

Compensation paid

Compensation paid in FY2023/9

Category	Total amount of compensation, etc. (Thousand yen)	Total amount of compensation, etc. by type (Thousand yen)			Number of eligible officers
Category	Total amount of compensation, etc. (Thousand yen)	Base pay	Performance-based compensation	Non-monetary compensation, etc.	Number of eligible officers
Directors (excluding outside members)	208,000	162,000	46,000	—	4
Audit & Supervisory Board members (excluding outside members ）	—	—	—	—	—
Outside directors	10,800	10,800	—	—	2
Outside Audit & Supervisory Board members	18,000	18,000	—	—	3

Assessment of the Board’s effectiveness

In order to improve the function of the Board of Directors, the Company conducts an annual assessment of the effectiveness of the Board of Directors and strives to improve corporate governance. For the fiscal year ended September 30, 2023, we conducted a survey of all directors and Audit & Supervisory Board members in November 2023 through an external organization to analyze and evaluate the effectiveness of the Board of Directors.

Basic assessment process

STEP 1	STEP 2	STEP 3
Questionnaire for all board members	Compilation and analysis of questionnaire results by a third-party organization	Identification of issues to be addressed

Assessment results and efforts to address issues identified

FY2023/9

Evaluation items	Evaluation results	Efforts to address issues identified
Composition of the Board Operation of the Board Board discussions Functions of Board monitoring Support system for Directors and Audit & Supervisory Board members Training Dialogue with shareholders	The board of directors' effectiveness is ensured through open, vigorous, and constructive discussions and exchanges of opinions during meetings. Issued identified: Provision of board materials at the appropriate time to allow for advance consideration Improve feedback from investor interviews	Distribute materials one week in advance Offer feedback opportunities for investor interviews quarterly

Internal control system

The Company’s Board of Directors has adopted a basic policy on internal control systems, which the Company is actively developing and implementing. This policy will be periodically reviewed and adjusted as needed to adapt to changing circumstances. The outline of the basic policy is as follows:

1. Basic policy on internal control systems and status of development

The Company’s Board of Directors has adopted a basic policy on internal control systems, which the Company is actively developing and implementing. This basic policy will be periodically reviewed and adjusted as needed to adapt to environmental changes. The outline of the basic policy is as follows:

1) System for ensuring that the execution of duties by directors and employees complies with laws, regulations, and the Articles of Incorporation

The Company will instill corporate ethics to adhere to laws, regulations, and the Articles of Incorporation, while also meeting societal expectations. The Compliance Promotion Committee will take a central role in ensuring all employees understand and comply with these standards.
If a director identifies a serious violation of laws, regulations, or internal policies, they must immediately report it to the Board of Directors. If necessary, a Risk Management Committee will be established to address the issue. The Company will also collaborate with external experts to handle these violations effectively.
The Company will establish a whistleblowing system as a mechanism to prevent violations of laws, regulations, and the Articles of Incorporation.
The Internal Audit Office, reporting directly to the President, will conduct audits and report on the status of compliance to the President, the Audit and Supervisory Committee and the department in charge of compliance.
The Company will develop and disseminate policies on crucial issues such as combating anti-social forces and corruption, ensuring all employees are knowledgeable about these policies.

2) System for storage and management of information related to execution of directors’ duties

The Company will set up guidelines for the storage and management of documents to ensure that internal information is appropriately stored and managed.
Regarding information system security, the Company will formulate rules for the management and operation of its information systems and will ensure the secure management of electronic information in accordance with these rules.

3) Regulations and other systems for managing risk of loss

The Company will create and enforce risk management rules aimed at quickly identifying risks. Additionally, a system will be put in place to consolidate risk information to the President, ensuring a swift and effective organizational response.
The Company will also consult with law firms and other experts as needed and maintain strong relationships with them to address risks promptly and effectively.

4) System for ensuring efficient execution of duties by directors

The Company will implement a system that facilitates business operations based on clearly defined divisions of duties and authority in the internal rules to enhance the efficiency of business execution.

5) System to ensure the appropriateness of operations of the corporate group consisting of the Company and its subsidiaries

The Company will establish regulations for overseeing its subsidiaries. These rules will require subsidiaries to regularly report on their operational execution and business conditions.

6) System regarding directors and employees to assist the Audit and Supervisory Committee in its duties, matters regarding the independence of such directors and employees, and matters regarding the effectiveness of instructions given to such directors and employees.

The Company will, in consultation with the Audit and Supervisory Committee, appoint a director or employee to assist the Audit and Supervisory Committee in its duties.
Should an employee be designated to assist the Committee in its duties, the authority to direct, supervise and evaluate this employee’s performance within the scope of such duties shall be transferred to the Audit and Supervisory Committee.

7) System for directors (excluding directors who are members of the Audit and Supervisory Committee) and employees to report to the Audit and Supervisory Committee, and other systems related to reporting to the Audit and to Supervisory Committee

The Board of Directors shall convene monthly and directors (excluding directors who are members of the Audit and Supervisory Committee) shall report on important matters. In addition, directors (excluding directors who are members of the Audit and Supervisory Committee) and employees shall report on the status of execution of their duties, etc. from time to time upon request of the members of the Audit and Supervisory Committee selected by the Audit and Supervisory Committee. Furthermore, members of the Audit and Supervisory Committee shall hold regular meetings to exchange opinions with the President and receive detailed reports on business performance and other matters from the officer in charge of the Administration Department on a regular basis.
The contact point for the whistleblowing system shall be a third party outside the Company, and care should be taken to ensure that whistleblowers are not identified. All reports received through this system will be directed to the Audit and Supervisory Committee. Furthermore, the Committee may request explanations from the directors (excluding directors who are members of the Audit and Supervisory Committee) regarding reasons for any transfers, personnel evaluations, disciplinary actions, etc. related to the reporters.

8) Matters relating to expenses or liabilities incurred in the execution of duties by members of the Audit and Supervisory Committee (limited to those relating to the execution of duties by the Audit and Supervisory Committee)

The Audit and Supervisory Committee has the authority to request an annual budget from the Company for its operational needs. Should this budget prove insufficient for carrying out their duties effectively, the Committee may request additional funds. The Company is obliged to fulfill these requests unless there is a valid reason for denial, such as if the requested items are clearly not pertinent to the responsibilities of the Audit and Supervisory Committee members.

9) Other systems to ensure the effectiveness of audits by the Audit and Supervisory Committee

Directors (excluding those who are members of the Audit and Supervisory Committee) are expected to collaborate with the Audit and Supervisory Committee to foster and enhance the auditing environment within the Company.
The Audit and Supervisory Committee has the authority to request cooperation from the Administration Department and other relevant departments to assist in conducting audits as needed.