Sustainability

Sophisticate Corporate Governance

The RIKEN TECHNOS GROUP positions “Sophisticate corporate governance” as a key management issue. 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,” our management philosophy. At the same time, we will further advance dialogue with our shareholders and investors.

Indicators

Composition of Board of Directors

Indicators			Unit	FY2022	FY2023	FY2024
Director	Inside directors	Male	people	5	5	4
		Female	people	0	0	0
		Total	people	5	5	4
	Independent outside director	Male	people	3	3	2
		Female	people	1	1	1
		Total	people	4	4	3
	Altogether		people	9	9	7
Ratio of independent outside director			%	44.4	44.4	42.9
Ratio of female directors			%	11.1	11.1	14.3

Number of Major Meetings and Attendances

Indicators		Unit	FY2022	FY2023	FY2024
Board of directors meeting	Number of meetings held	times	16	16	17
Board of directors meeting	Average attendance ratio	%	100	100	100
Audit & supervisory committee	Number of meetings held	times	16	18	15
Audit & supervisory committee	Average attendance ratio	%	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 structure

Overview of Corporate Governance System

Name of Meeting	Number of Meetings Held (FY2024)	Details
Board of Directors	17	Members: 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, 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. [Major Matters Deliberated in FY2024] Governance and other matters of management supervision, formulation of next medium-term business plan, verification of the appropriateness of holding cross-shareholdings, repurchase and cancellation of own shares, progress, and review of succession plans, etc.
Management Committee	12	Members: All Executive Officers Observers: All Audit & Supervisory Committee Members The Management Committee comprises all executive officers. Outside Directors also attend the meetings from the perspective of management supervision and state their opinions, as necessary. Furthermore, 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 Observers: All Audit & Supervisory Committee Members 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	3	Members: All Executive Officers Observers: All Audit & Supervisory Committee Members 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	15	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, the Fulltime Audit & Supervisory Committee Member is appointed to carry out prompt information collection within the company and closely share information with Outside Directors.
Nomination Committee/ Compensation Committee	4 and 3 respectively	Members: President & CEO, Executive Vice President and four Independent Outside Directors) Both committees seek to substantiate discussions by including multiple Inside Directors as members in consideration of their skills, etc. At the same time, a majority of members of the committees are Independent Outside Directors to ensure transparency and objectivity in the process and content of nominations and compensation. In addition, their Chairpersons are selected by mutual voting between members, from among Independent Outside Directors. [Major Matters Deliberated in FY2024] Nomination Committee: Review of the executive officer system, matters related to the selection of candidates for directors and executive officers, confirmation of progress and reviews of succession plans Compensation Committee: Compensation system and individual compensation for directors(excluding directors who are Audit & Supervisory Committee members) and executive officers
Board of Outside Directors	3	Members: All Independent Outside Directors Independent Outside Directors take on the roles of providing 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 the Company 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 Board of Outside Directors is held for information exchange and awareness sharing among Outside Directors. *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 FY 2024

1. Sophisticate internal control and company-wide risk management

2. Relationships with shareholders and investors

3. Investment in human capital and intellectual property

4. Business portfolio strategies

Issues and initiatives for FY2024 (actual)

Issues for FY2024	Actual initiatives for FY2024
Enhancing the Effectiveness of Group Control	Risk cases and issues were shared at information-sharing meetings held for consolidated subsidiaries and at monthly meetings held with the presidents of consolidated subsidiaries. In addition, an interim report meeting was held on the medium-term management plan of each subsidiary for enhancing group control and group-wide risk management.
Enhancing dialogue with shareholders and investors	We disclosed TSE disclosure documents in English on the same day as those in Japanese. We also disclosed ROIC / WACC at the Financial and Management Results Briefings. In addition, we disclosed in the Corporate Governance report the status of feedback of opinions obtained through dialogue among shareholders and other stakeholders, thereby expanding disclosure to shareholders and investors.
Promoting human capital management	Concrete initiatives were promoted toward the implementation of human capital management through deliberation on the Riken Person development plan, the global human resource development program, and share-based compensation for employees, as well as through the conduct of employee awareness surveys.
Restructuring business portfolio	Cash allocation was reflected in the measures of the next three-year medium-term business plan, based on ROIC utilization, business portfolio, and SR / IR recommendations. The restructuring of the business portfolio, including a review of low-profit businesses, was also discussed. Briefings on profit structure, including ROIC, were also held for the Sales and Marketing Division and R&D Center.

Issues and initiatives for FY2025 (planned)

Issues for FY2025	Planned initiatives for FY2025
Enhancing dialogue with shareholders and investors	We will discuss how to disclose ROIC by business, materiality topics, KPIs, and the relationship between ROE and corporate value enhancement. In addition, we will continue to appropriately reflect opinions obtained through dialogue in our internal structure.
Promoting human capital management	We will discuss specific measures to improve employee engagement.
Restructuring business portfolio	We will continue to discuss growth scenarios, specific numerical targets, and implementation deadlines for businesses that we recognize as having challenges.

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 given to the opinions of the Compensation Committee, where more than half of the members are independent outside directors.

Composition of Director Compensation

The compensation of 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), bonuses as short-term performance-linked compensation (cash and stock benefits), and stock benefits as medium- to long-term performance-linked compensation. 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.

Policy for Reducing and Repaying the Amount of Compensation (malus and clawback provision)

If there is a material error in the financial statements or a material accounting irregularity, or if Directors (excluding Directors serving as Audit & Supervisory Committee Members) violate laws, regulations, or the Articles of Incorporation, etc., the Company shall be able to demand a reduction of the amount of compensation or the repayment of compensation paid.
The specific amount of the reduction or repayment demanded shall be determined by the Board of Directors after consulting with the Compensation Committee, with respect for the results of such reports.

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 FY2024

Director classification	Total amount ofcompensation, etc. (Thousands of yen)	Total amount by type of compensation, etc. (Thousands of yen)				Number of applicable directors
		Fixed compensation	Performance-linked compensation (Bonuses)		Fixed stock benefits
		Basic compensation	Cash	Stock benefits	Fixed stock benefits
Directors who are not Audit & Supervisory Committee members (excluding outside directors)	193,059	116,115	47,286	14,994	14,664	4
Directors who are Audit & Supervisory Committee members (excluding outside directors)	18,182	16,650	-	-	1,532	2
Outside directors (Audit & Supervisory Committee members)	33,415	30,600	-	-	2,815	4
Total	244,658	163,365	47,286	14,994	19,013	10

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 successor 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.

Consolidated Financial Statements