Corporate Governance｜SEPTENI HOLDINGS CO., LTD.

Documents Related to Corporate Governance

Basic Approach to Corporate Governance

The corporate governance of the Company and the company group comprising its subsidiaries (hereinafter called the “Group”) is based on the development and operation of a system to ensure that actions are based on the company’s corporate philosophy and decisions are made in a transparent, fair, and efficient manner, and compliance with laws and regulations and appropriate supervision (monitoring) of corporate performance are carried out under the mission of "To inspire the world with entrepreneurship".

Corporate Philosophy

The Outline of Corporate Governance Structure

The Group is managed under a holding company structure in which the Company is a holding company and its group companies are operating companies. By separating the function of administering its overall business from executing its individual businesses, the Group has been working to facilitate the delegation of authority and strengthen the Company’s function of monitoring the Group’s businesses.
The Board of Directors shall consist of a majority, at the minimum, of highly independent Outside Directors. The Board currently consists of 8 Directors, five of whom are Outside Directors. It determines matters prescribed by laws and regulations and the Articles of Incorporation and matters concerning the execution of important business and oversees the execution of business. Furthermore, as part of strengthening of its corporate governance system, the Company introduced an executive officer system in January 2017. Under this system, the authority for making decisions and executing business operation is delegated to Executive Officers (hereinafter, “Group Executive Officers”) to the extent permitted by relevant laws and regulations, in order for the Board of Directors to mainly focus on the oversight (monitoring) of the Group Executive Officers who are responsible for the execution of business (monitoring model- oriented).
The Group Executive Officers are responsible for the execution of business of the Company, that of the business companies in its group or that across several business companies. The Board of Directors appoints Group Executive Officers in charge of respective areas of business operation, and the Group President and Chief Executive Officer who concurrently serves as Representative Director oversees the execution of business operations by the Group Executive Officers.
Moreover, matters to be resolved by meetings of the Board of Directors, those regarding which authority is to be delegated to the Group Executive Officers and those to be reported by the Group Executive Officers to the Company’s Board of Directors are clearly stipulated in the regulations of the Board of Directors.
In addition to the above, Group Management Meeting has been established, as a system regarding decision-making on the execution of business, with the functions of supporting decision-making by the Group President and Chief Executive Officer and of considering important managerial matters of the group. The Company has also established a Group Risk Management Committee that supervises risk management of the group, a Sustainability Committee that promotes sustainability activities to enhance the corporate value and a Financial Results and Disclosures Committee that reviews and evaluates financial results information, information for timely disclosure, among other things. In doing so, the Company has put in place a system that clarifies authority and responsibilities and enables prompt and appropriate decision-making.
On the other hand, Nomination and Remuneration Advisory Committee, the majority of which consists of Outside Directors, has been established as an optional committee of the Board of Directors to handle personnel matters regarding the group’s management team (appointment, removal etc. of Directors of the Company, Group Executive Officers and others), in order to ensure the independence, objectivity and accountability of the deliberation process. In addition, meetings attended only by the Outside Directors (Executive Session) are held once a month in principle, thereby securing a place for information exchange and shared awareness from objective standpoints. Outside Auditors, external accounting auditors and other independent outside persons may attend such meetings, thereby providing a place for promoting cooperation among independent outside persons.
The Company has adopted a company auditor system. Under the system, there are currently four Company Auditors including three highly independent Outside Auditors. Each Company Auditor audits the execution of business by the Directors, in accordance with the auditing policy, audit plans and so forth determined by the Board of Company Auditors.

Corporate Governance System

Progress of Governance Reforms

Main Initiatives

Number of Outside Directors

Fiscal Year Ended September 2015

Systematization of governance for greater effectiveness

Increased to two
(including a female director)

Fiscal Year Ended September 2016

Introduction of effectiveness evaluation to enhance the functioning of the Board of Directors
Establishment of the Financial Results and Disclosures Committee and the CSR Committee
Abolition of anti-takeover measures
Establishment of Group Risk Management Committee

Fiscal Year Ended September 2017

Introduction of performance-linked stock compensation system for officers
Seperation of execution and monitoring through the introduction of an entrustment-type executive system

Outside directors become
the majority of
the Board of Directors

Fiscal Year Ended September 2018

Fiscal Year Ended September 2019

Governance Highlights

(Fiscal year ended December 2023)

Number of Directors (Outside Directors Included in Total): 7(5)

Number of Board of Directors' Meeting Held: 19

Average Attendance Rates at Borad of Directors' Meetings Directors: 100%

Auditors: 99%

Number of Auditors (Outside Auditors Included in Total): 5(3)

Number of Borad of Auditors' Meetings Held: 17

Average Auditor Attendance Rate at Board of Auditors' Meetings: 98%

Note:Above figures include two auditors who retired during the fiscal year.

Evaluation of the Effectiveness of the Board of Directors

With the aim of enhancing the function of the Board of Directors, the Company conducts analysis, evaluation and follow-up examinations of issues on the effectiveness of the Board of Directors once a year in principle. The Company also conducts large-scale and detailed surveys by external third-party institutions once every 3 years. With an external third-party survey conducted in the fiscal year ended September 30, 2022, the Company confirmed that the Board of Directors completed the transition to a monitoring board type, enabling advanced and lively discussions. In addition, in terms of operation, practical measures such as devising the agenda of the Board of Directors, providing materials in advance, creating opportunities for discussions through camps, and strengthening cooperation among outside directors through executive sessions had already been sufficiently carried out, and that effectiveness has been confirmed. On the other hand, it was also confirmed that with the substantial reform of the Board of Directors, a common awareness of issues has emerged,such as how to think of the innovation board, which lies ahead of the monitoring board, how to realize the “co-creation of value between supervision and execution,” and how to think of the succession of the Board of Directors.
In response to this, in the fiscal year ended December 2023, the transition to the innovation board was discussed at the Board of Directors and the officer camp on an ongoing basis, and as part of measures to co-create value between supervision and execution, the Company revised organizational and divisional structures and regulations. Also, in response to some advice by the Nomination and Remuneration Advisory Committee, which has been discussing succession plans to realize sustainable growth, the Company resolved to reform its management structure. By building and promoting a new collective leadership system,the Company aims to further increase its corporate value, and will continue initiatives to enhance the effectiveness of the Board of Directors.

Officer Compensation Plan

In September 2017, the Group introduced a new compensation plan (a board incentive plan (BIP) trust) to more clearly define the relationship between the remuneration of the Company’s directors (excluding outside directors and non-residents of Japan) and executive officers (excluding non-residents of Japan; collectively, “Directors, etc.”) and the Group’s business results in the medium-to-long term as well as the Company’s shareholder value, while creating a sound incentive to enhance business results and corporate value in the mediumto-long term. As a result, remuneration for directors of the Company consists of monthly compensation and stock compensation, and remuneration for outside directors who are independent from business execution consists of monthly compensation only.

BIP Trust

This is a performance-linked stock compensation plan that aims to establish a clearer relationship between remuneration for Directors, etc. and the value of the Group’s stock. The Company's shares are purchased from the market as officer compensation, kept in a trust account and delivered in accordance with the recipient’s position and degree of achievement of the performance targets in the Midterm Business Policies.

Director and Auditor Remuneration

Fiscal year ended December 2023 (units：thousand yen)

Category	Number of payees	Total amount of officers’ remunerations, etc.	Total amount of remunerations, etc. by type
			Basic remuneration	Performance-linked remuneration, etc.
			Basic remuneration	Non-monetary remuneration, etc.
Director (of which Outside Director)	6 (5)	261,066 (¥90,000)	254,670 (¥90,000)	6,396 (¥–)
Company Auditor (of which Outside Company Auditor)	3 (3)	30,000 (¥30,000)	30,000 (¥30,000)	- (¥–)

Category	Number of payees	Total amount of officers’ remunerations, etc.	Total amount of remunerations, etc. by type
Basic remuneration	Performance-linked remuneration, etc.
Non-monetary remuneration, etc.
Director (of which Outside Director)	6 (5)	261,066 (¥90,000)	254,670 (¥90,000)	6,396 (¥– thousand)
Company Auditor (of which Outside Company Auditor)	3 (3)	30,000 (¥30,000 )	30,000 (¥30,000)	- (¥–)

Notes:

The number of payees does not include one director who serves without remuneration, one company auditor who served without remuneration and retired at the conclusion of the 32nd Ordinary General Meeting of Shareholders held on December 21, 2022, and one company auditor who served without remuneration and resigned on July 31, 2023.
The Company is introducing a performance-linked share-based remuneration system using the officers remuneration BIP (Board Incentive Plan) trust scheme for directors of the Company (excluding outside directors and those who are non-residents of Japan).
The performance indicator associated with performance-linked remuneration, etc. is consolidated Non-GAAP operating profit. As the reason for selecting this indicator, the Company has deemed that this is an appropriate indicator for evaluating the achievement of improvements to the medium- to long-term corporate value. In calculating performance-linked remuneration, basic points are allotted in a set period during each business year according to the role of each director and the level of achievement, etc. of performance targets during the covered trust period of the officers remuneration BIP trust. After the conclusion of the covered period, additional points allotted to persons covered by the system on the last day of the final business year of the covered period are cumulatively added to the cumulative value of basic points (“Cumulative Points”).
A number of the Company’s shares equal to the number of Cumulative Points is delivered or paid to persons covered by the system as share-based remuneration. Furthermore, 50% of the shares corresponding to the points in question (share of less than one unit rounded down) will be delivered as shares, and from the standpoint of securing funds to pay taxes, the remainder will be converted into cash, and cash corresponding to the amount converted to cash will be paid.
At the 23rd Ordinary General Meeting of Shareholders held on December 20, 2013, the amount of cash remuneration for directors was set at up to ¥600 million annually (not including the portion of employee salaries paid to directors concurrently serving as employees). The number of directors as of the conclusion of this ordinary general meeting of shareholders is eight.
Furthermore, in a separate framework from cash remuneration, at the 26th Ordinary General Meeting of Shareholders held on December 20, 2016, the amount of trust funds provided to the trust as funds for the acquisition of the Company’ shares associated with the points allotted to directors (excluding outside directors and non-residents of Japan) as performance-linked share-based payments (officers remuneration BIP trust) was set at a maximum of ¥700 million, and the total points at a maximum of 2,800,000 points (corresponding to 2,800,000 shares) for three business years. The number of directors as of the conclusion of this ordinary general meeting of shareholders (excluding outside directors and non-residents of Japan) is six.At the 32nd Ordinary General Meeting of Shareholders held on December 21, 2022, resolutions were passed to extend the trust period until May 31, 2026, and in conjunction with the change in the Company’s fiscal year-end, to continue with the plan under a new version in which some details were revised. The number of directors as of the conclusion of this ordinary general meeting of shareholders (excluding outside directors and non-residents of Japan) is two.
The amount of cash remuneration for company auditors was set at a maximum of ¥50 million annually at the 9th Ordinary General Meeting of Shareholders held on December 14, 1999. The number of company auditors as of the conclusion of this ordinary general meeting of shareholders is one.
The board of directors has delegated the decisions on the amounts of individual director remuneration to Koki Sato, Representative Director, Group President and Chief Executive Officer. The reason for the delegation is that the board of directors deemed that the Representative Director, Group President and Chief Executive Officer is best suited to conduct evaluations of the division for which each director is responsible while considering the Company’s overall performance, etc. Furthermore, in deciding the details to be delegated, the board of directors reports on performance evaluations including the approach to evaluating independent outside directors and their personal evaluation to confirm the validity of remuneration levels, and decides remuneration levels while referencing the opinions of independent outside directors.

Reasons for Appointment of Outside Directors

The reasons are described on the Our Executives page.

Our Executives