Sustainability

Sophisticate Corporate Governance

Among the materiality topics in management, the RIKEN TECHNOS GROUP positions “Sophisticate corporate governance” as a prerequisite for corporate activities. We will establish effective governance mechanisms across the Group and strive to ensure management transparency and fairness to achieve sustainable growth and improve corporate value over the medium- to-long term through the implementation of the “RIKEN TECHNOS WAY,” its management philosophy. At the same time, we will further advance dialogue with our shareholders and investors.

Indicators

Composition of Board of Directors

Indicators			Unit	FY2020	FY2021	FY2022
Director	Inside directors	Male	people	6	6	5
		Female	people	0	0	0
		Total	people	6	6	5
	Independent outside director	Male	people	3	3	3
		Female	people	0	0	1
		Total	people	3	3	4
	Altogether		people	9	9	9
Ratio of independent outside director			%	33.3	33.3	44.4
Ratio of female directors			%	0.0	0.0	11.1

Number of Major Meetings and Attendances

Indicators	Unit	FY2020	FY2021	FY2022
Number of board of directors meeting	times	16	17	16
Average attendance ratio of board of directors meetings	%	100	100	100
Number of audit & supervisory committees	times	15	14	16
Average attendance ratio of audit & supervisory committees	%	100	100	100

Corporate Governance Policy

RIKEN TECHNOS GROUP sets forth the basic policy for corporate governance, based on the purpose and spirit of the Corporate Governance Code. Detailed information is available on below PDF file.
RIKEN TECHNOS GROUP Corporate Governance Policy

Report on Corporate Governance

We submitted the report on Corporate Governance to Tokyo Stock Exchange. Detailed information is available on below PDF file.
Corporate Governance Report

Corporate governance structure

Overview of Corporate Governance System

Name of Meeting	Number of Meetings Held (FY2022)	Details
Board of Directors	16	Chairperson: President & CEO The Board of Directors comprises four directors (excluding directors who are Audit & Supervisory Committee members) and five directors who are Audit & Supervisory Committee members. To ensure management transparency and soundness, at least one third of the directors are independent outside directors. In addition, given the global business operations of the RIKEN TECHNOS GROUP, directors are appointed so that the Board of Directors has the appropriate scale and composition taking into consideration factors such as the Board’s overall balance in knowledge, experience, and capabilities; maintenance of diversity; and invigoration of deliberations.
Management Committee	12	Members: All executive officers The Management Committee comprises all executive officers. Directors who are not concurrently executive officers also attend the meetings from the perspective of management supervision and state their opinions as necessary. In addition, meetings are held ahead of Board of Directors meetings each month to deliberate beforehand issues being put forth to the Board of Directors as well as to deliberate and decide on the execution of important tasks for which authority has been delegated by the Board of Directors.
Sustainability Committee	7	Members: All executive officers Sustainability Committee comprises all executive officers who are members of the Management Committee, with outside directors participating as observers. Led by senior management, we have established an organizational structure that enables expedited management decision-making and implementation of measures. The Sustainability Committee identifies and reviews key issues (materiality topics) to be undertaken with priority by the RIKEN TECHNOS GROUP in the area of sustainability, approves the response policies and targets for the identified key issues, and oversees and evaluates the progress of activities. It also promotes company-wide sustainability-related education and activities to spread sustainability.
Risk & Compliance Committee	2	Members: All executive officers The Risk & Compliance Committee comprises all executive officers who are members of the Management Committee, with outside directors participating as observers. In principle, meetings are held once every six months, and the details of the committee’s activities are reported to the Board of Directors as appropriate. Besides listing, analyzing, and evaluating the Group’s overall risks, the committee understands critical risks, identifies risks to be handled with priority, and formulates countermeasures for those risks. In addition, the committee carries out comprehensive risk management for the Group as a whole, such as confirming the progress of risk countermeasures every six months, making revisions to them, and instructing the relevant departments to carry out improvements as necessary.
Audit & Supervisory Committee	16	Members: Five Audit & Supervisory Committee members (of which four are independent outside directors) More than half of the Audit & Supervisory Committee members are independent outside directors, and at least one member has considerable expertise related to finance and accounting. In addition, fulltime Audit & Supervisory Committee members are appointed to carry out prompt information collection within the company and closely share information with outside directors.
Nomination Committee	3	Members: President & CEO, Senior Managing Executive Officer, and five Audit & Supervisory Committee members (of which four are independent outside directors) More than half of the members of the Nomination Committee are independent outside directors, and the chairperson is selected from independent outside directors through election by the committee members. The Nomination Committee reports and recommends on matters such as those related to the appointment and dismissal of directors, executive officers, counselors, and advisors; those related to the independence standard for outside directors; those related to the formulation and operation of succession plans for the Chief Executive Officer, etc.; and those related to the creation and renewal of skill matrices for the Board of Directors.
Compensation Committee	3	Members: President & CEO, Senior Managing Executive Officer, and five Audit & Supervisory Committee members (of which four are independent outside directors) More than half of the members of the Compensation Committee are independent outside directors, and the chairperson is selected from independent outside directors through election by the committee members. The Compensation Committee reports and recommends on matters such as details of proposals regarding compensation and other payments (including share-based compensations) of directors being put forth to the General Meeting of Shareholders; compensation system (including share-based compensation systems) for directors (excluding directors who are Audit & Supervisory Committee members), executive officers, counselors, and advisors; details of compensation and other payments (including share-based compensations) of individuals; and matters related to the basic policy for compensation and other payments.
Board of Outside Directors	3	Members: All independent outside directors Independent outside directors take on the roles of providing active advice regarding management, supervision of management in general, and supervision regarding conflicts of interests as well as reflecting opinions of stakeholders at Board of Directors meetings. We appoint people who meet the independence standard for outside directors set by us as independent outside directors. At the same time, they must be able to take on the role of contributing toward our sustainable growth and improvements in medium- to long-term corporate value. In addition, the primary independent outside director is elected by and chosen from among the independent outside directors, and serves as a liaison with the company. At least once every half a year, the Outside Board of Directors comprising only outside directors is held for information exchange and awareness sharing between themselves. *The independence standard for outside directors is defined in the RIKEN TECHNOS GROUP Corporate Governance Policy.

Effectiveness Evaluation of Board of Directors

To improve the functions of our Board of Directors, we conduct evaluation and analysis of its effectiveness each year.

Key points of evaluation for FY2022

1. System regarding improvement of knowledge and expertise

2. Creation of more sophisticated internal controls and company-wide risk management

3. Relationships with shareholders and investors

4. Promotion of initiatives to address sustainability issues

Issues and initiatives for FY2022 (actual)

• Sophistication of corporate governance

We appointed a female director to ensure diversity in the Board of Directors, and increased the number of outside directors by one to enhance the supervisory function of the Board of Directors. In addition, the content of training for directors was fundamentally reviewed, and initiatives were implemented, including the Board of Directors meetings held at factories and laboratories and a revision of how to hold roundtable discussions of directors and executive officers.

• Strengthening Group controls

In order to strengthen the practical aspects of controls of consolidated subsidiaries, we enhanced communication within the Group by holding medium-term business plan briefings and semiannual regular briefings, and launching the global manufacturing meeting. We also took measures to maximize Group synergies, including the merger of consolidated subsidiaries.

• Initiatives to address sustainability issues and active disclosure

Regarding initiatives against climate change, we actively disclosed information, including disclosure through the Carbon Disclosure Project (CDP), in addition to disclosure based on the TCFD recommendations. In addition, the newly established Sustainability Committee led discussions on important issues relevant to the Company from a medium- to long-term perspective, identified materiality topics, and set KPIs.

Issues and initiatives for FY2023 (planned)

• Discussions will be deepened on the role of the newly established Regional Officer and the group governance/risk management systems to further improve effectiveness of Group controls. We will also strengthen controls by providing further guidance and education to management of consolidated subsidiaries.

• In order to promote constructive dialogue with shareholders and investors, we will proceed with discussions on measures to increase corporate value, and enhance disclosure of both financial and non-financial information. We will also increase opportunities for direct dialogue with shareholders and actively make efforts for investor relations (IR) and shareholder relations (SR).

• We will deepen discussions regarding sustainability issues centered on human capital and intellectual property, and strategically embody the materiality topics identified in FY2022 in business.

Compensation of Directors

Basic Policy

The compensation of directors (excluding directors who are Audit & Supervisory Committee members) serves as motivation for improving the performance of each fiscal year and improving the corporate value over the medium to long term. In addition, as a compensation system that allows value to be shared with shareholders, the appropriate level of compensation is set according to position and responsibility. To ensure objectivity and transparency when determining these levels, respect is shown to the opinions of the Compensation Committee, where more than half of the members are independent outside directors.

Composition of Director Compensation

Compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members) consists of executive compensation and supervisory compensation. Executive compensation consists of a fixed amount of basic compensation (cash) and bonuses as performance-linked compensation (cash and stock benefits). Supervisory compensation consists of a fixed amount of basic compensation (cash) and a fixed amount of stock benefits.
The compensation of directors who are Audit & Supervisory Committee members comprises only fixed compensation not linked to performance (basic compensation) and fixed allocation of shares.

Process for the Determination of Director Compensation

In deciding the amount of compensation for directors (excluding directors who are Audit & Supervisory Committee members), the Board of Director first consults the Compensation Committee where more than half of the members are independent outside directors. The decision is then made giving due respect to the reply from the committee.
The compensation of directors who are Audit & Supervisory Committee members is decided through deliberation by the directors who are Audit & Supervisory Committee members, within the amount established through resolution at the General Meeting of Shareholders.

Director Compensation System

Total Amount of Compensation, etc. for FY2022

Succession Plan

We formulate our succession plan to secure a pool of human resources for the group of management candidates. Taking into consideration our corporate philosophy, management policy, and other factors, so that the development of management candidates is carried out systematically with adequate time and resources, the Board of Directors and the Nomination Committee will continue to take the initiative to intervene in the plan’s implementation and carry out regular supervision.

Dialogue with Shareholders

To encourage constructive dialogue with our shareholders, the Group conducts various initiatives ―such as financial results briefings and individual meetings for institutional investors― under the oversight of the executive officer in charge of corporate planning. In FY2022, we conducted financial and management results briefings for institutional investors that were held by our management executives, including the president and relevant executive officers. We also held individual meetings with major shareholders in Japan. With matters such as the progress of the medium-term business plan as the key themes, the opinions obtained through dialogue were reported to the Management Committee and Board of Directors as necessary. In addition, we started conducting SR interviews with major shareholders (institutional investors) in FY2023.
We will appropriately and effectively reflect the knowledge obtained through the above initiatives in our corporate activities and strive to further improve our corporate value.

Strategic Holding of Shares

With regard to strategic holding of shares, the Board of Directors annually examines specifically whether the purpose of holding is appropriate, and otherwise whether the benefits and risks associated with holding are commensurate with the cost of capital, from a medium- to long-term perspective in order to improve corporate value globally. Our policy is to continue to hold those that we believe are contributing to the improvement of the Group’s medium- to long-term corporate value, but for those that we believe are inappropriate to hold, we will consider the disposal of all or part of our holdings, taking into consideration market trends and other factors, and reduce our holdings.
Verification for FY2022 was conducted in November. We verified whether the purpose of holding is appropriate for each stock, including treasury shares of consolidated subsidiaries. In addition, we also verified if the benefits and risks associated with holding are commensurate with the cost of capital, taking into consideration actual transactions and other factors. As a result, we have assessed that it is inappropriate to hold onto some of these stocks, and have decided to consider disposing them.

Consolidated Financial Statements