Bridgestone : 2024 Report on the Corporate Governance Code (716KB)

On the Release of Bridgestone's

Corporate Governance Code Report

The Bridgestone Corporation, under the mission of "Serving Society with Superior Quality," has since 2020 defined a vision of "continuing to provide social value and customer value as a sustainable solutions company towards 2050," and has been managing our business in line with a Mid-Long Term Business Strategy formulated to realize this vision. As part of its efforts in working towards the achievement of this vision, the company is in the process of further enhancing its corporate governance.

This process of enhancement and reform has been implemented on an ongoing basis since the company was first established in order to respond to changing conditions and emerging issues, and to ensure that the quality of management and the transparency of decision making processes was constantly improved.

In recent years, with the ever-increasing geopolitical and natural disaster risks, changes in the business environment, including diversification of mobility and the acceleration of digitalization, have occurred with increasing frequency. In this business environment in 2022 we have:

• established the "Bridgestone E8 Commitment" to serve as the axis to drive management while earning the trust of future generations, and
• formulated the "2030 Long Term Strategic Aspiration" as a roadmap toward our 100th anniversary in 2031

and as a longer term framework for the detailed "Mid-Long Term Business Strategy".

Through these efforts, we will accelerate the transformation of management to realize our vision, and we have and will continue to work toward further improving our corporate governance as a fundamental of management.

We can contribute to the realization of a sustainable society that will in turn provide opportunities to enable the continuing development of our society, partners, customers, and our business. It is our intention to fully employ our governance structure in order to further strengthen internal controls, evolve into a sustainable solutions company to be able to proactively address the changing business environment,

and continue to implement the ever more effective and efficient planning and execution of our business activities.

Since our first report in 2016, Bridgestone has been using the Corporate Governance Code as a tool for evaluating our governance policies and systems and continuously communicating our approach and progress in their achievement to our stakeholders.

On behalf of everyone here at Bridgestone, I thank you for your ongoing support and understanding and look forward to hearing your response to this report and your evaluation of our efforts to date as we strive to create a company that we can all be proud of.

May 2024

Shuichi Ishibashi

Member of the Board

Global CEO and Representative Executive Officer

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2024 Report on the Corporate Governance Code

1. Changes in Corporate Governance and Our Governance Structure (As of May 2024)

An overview of the development and current structure of Bridgestone's corporate governance are shown diagrammatically here in (1) changes in the corporate governance and (2) corporate governance structure.

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2. About This Year's Report

This year's report (released in May 2024) outlines the status of enhancement and improvement efforts since the previous revisions announced by the Company in May

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2023. The key enhancements are listed as follows:

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3. Current Status of Our Enhancement and Improvement Efforts Reported in Accordance with Japan's Corporate Governance Code

Section 1: Securing the Rights and Equal Treatment of Shareholders

General Principle 1

Companies should take appropriate measures to fully secure shareholder rights and develop an environment in which shareholders can exercise their rights appropriately and effectively.

In addition, companies should secure effective equal treatment of shareholders.

Given their particular sensitivities, adequate consideration should be given to the issues and concerns of minority shareholders and foreign shareholders for the effective exercise of shareholder rights and effective equal treatment of shareholders.

The Company recognizes that it is essential for the sustainable development of the business to collaborate with various stakeholders and that our shareholders constitute our primary stakeholder. Based on this understanding, the Company strives to develop an environment wherein shareholders can adequately exercise their rights by providing them with a wide variety of information in a timely manner and in enhancing their means to exercise their rights.

Moreover, the Company endeavors to secure the rights of minority and foreign shareholders and thereby seeks to secure the substantive equality of the rights of all shareholders.

Principle 1.1 Securing the Rights of Shareholders

Companies should take appropriate measures to fully secure shareholder rights, including voting rights at the general shareholder meeting.

The Company endeavors to ensure the rights of shareholders by managing operations in order to ensure timely disclosure of not only statutory disclosure documents but also of other information in both Japanese and English, by conducting the Annual General Shareholders' Meeting in a manner such that the voting rights of all shareholders can be exercised effectively, and by ensuring adequate time and opportunity for dialogue between management and shareholders.

Supplementary Principle 1.1.1

When the board recognizes that a considerable number of votes have been cast against a proposal by the company and the proposal was approved, it should analyze the reasons behind opposing votes and why many shareholders opposed, and should consider the need for shareholder dialogue and other measures.

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Based upon the understanding that the Annual General Shareholders' Meeting is the Company's highest decision-making body, the Company takes the results of shareholders' execution of their voting rights as an important indication of their intent. The Board of Directors therefore formally analyses the reasons and causes for proposals where the total votes in opposition exceed 20%.

Supplementary Principle 1.1.2

When proposing to shareholders that certain powers of the shareholders' meeting be delegated to the board, companies should consider whether the board is adequately constituted to fulfill its corporate governance roles and responsibilities. If a company determines that the board is indeed adequately constituted, then it should recognize that such delegation may be desirable from the perspectives of agile decision-making and expertise in business judgment.

In order to further promote the separation between the executive and supervisory functions and further strengthen the supervisory role of the board, the Company has adopted the "Company with Nominating Committee, etc." model of corporate governance. Moreover, in addition to establishing the committees legally required under this model, the Company has established a Governance Committee comprised entirely of Independent External Directors, all of whom meet the Company's benchmark for independence (hereinafter referred to as"Independent Directors"). The Governance Committee serves as an advisory body to the Board of Directors with the objective of ensuring that the Company maintains the structures and processes needed to ensure appropriate levels of governance.

The Articles of Incorporation currently stipulate that the Board of Directors is responsible for decisions such as determining the level of interim dividend payouts. In the event of further such delegations of authority by the General Shareholders' Meeting to the Board of Directors, the Company will continue to enhance its structures and procedures of governance in order to discharge these responsibilities while ensuring the necessary levels of expertise in, and timeliness of, its decision making.

Supplementary Principle 1.1.3

Given the importance of shareholder rights, companies should ensure that the exercise of shareholder rights is not impeded. In particular, adequate consideration should be given to the special rights that are recognized for minority shareholders with respect to companies and their officers, including the right to seek an injunction against illegal activities or the right to file a shareholder lawsuit, since the exercise of these rights tend to be prone to issues and concerns.

The Company has established "Share Handling Regulations," which formally stipulate procedures for the exercising of the rights of minority shareholders and any other procedures regarding shares to ensure that shareholders are able to exercise their rights in full.

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Principle 1.2 Exercise of Shareholder Rights at General Shareholder Meetings

Companies should recognize that general shareholder meetings are an opportunity for constructive dialogue with shareholders, and should therefore take appropriate measures to ensure the exercise of shareholder rights at such meetings.

The Company designates Global CEO, the Representative Executive Officer, as the chairperson of the General Shareholders' Meeting from the perspective of continuously enriching the quality of dialogue with shareholders at the Meeting. In addition, the Company has and will continue to make every effort to take appropriate measures to ensure that shareholders are able to exercise their rights at the Meeting. These measures include providing information that contributes to appropriate decisions by shareholders for the Meeting, early disclosure of the materials for the Meeting, avoiding the "peak period" for holding the Meeting in Japan, providing an online voting platform, and providing information in English.

Supplementary Principle 1.2.1

Companies should provide accurate information to shareholders as necessary in order to facilitate appropriate decision-making at general shareholder meetings.

The Company has long endeavored to provide clear and relevant information in the General Shareholder's Meeting materials that contributes to shareholder decisions in light of shareholder requests. This includes providing information regarding transitions in dividends and earnings forecasts, attendance at board meetings and statutory committees for all candidates for board membership, "Guidelines for Determining the Independence of Board Members," "Nominating Policy for the candidates for appointment to the Board," and topics related to the Company's business strategy and its progress.

Supplementary Principle 1.2.2

While ensuring the accuracy of content, companies should strive to send convening notices for general shareholder meetings early enough to give shareholders sufficient time to consider the agenda. During the period between the board approval of convening the general shareholder meeting and sending the convening notice, information included in the convening notice should be disclosed by electronic means such as through TDnet¹ or on the company's website.

¹ TDnet: The Tokyo Stock Exchange operates a real-time internet service (Timely Disclosure network) which distributes the information provided by listed companies on a timely basis in accordance with its listing rules.

The Company strives to ensure adequate time for deliberation of the General Shareholders' Meeting agenda items by disclosing materials for the Meeting through

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its corporate website, etc. and sending statutory documents as early as possible and in advance of the deadline prescribed by the Companies Act in Japan.

Supplementary Principle 1.2.3

The determination of the date of the general shareholder meeting and any associated dates should be made in consideration of facilitating sufficient constructive dialogue with shareholders and ensuring the accuracy of information necessary for such dialogue.

The Company strives to promote the accessibility of the General Shareholders' Meeting by measures including avoiding the "peak period" for holding the Meeting in Japan.

Supplementary Principle 1.2.4

Bearing in mind the number of institutional and foreign shareholders, companies should take steps for the creation of an infrastructure allowing electronic voting, including the use of the Electronic Voting Platform, and the provision of English translations of the convening notices of general shareholder meeting. In particular, companies listed on the Prime Market should make the Electronic Voting Platform available, at least to institutional investors.

The Company regularly monitors the ratio of corporate share ownership by institutional investors and overseas investors. In order to better accommodate the needs of its many investors, the Company makes an Electronic Voting Platform available and provides statutory documents in English on its corporate website, along with a wide range of other material and data for investors in English.

Supplementary Principle 1.2.5

In order to prepare for cases where institutional investors who hold shares in street name express an interest in advance of the general shareholder meeting in attending the general shareholder meeting or exercising voting rights, companies should work with the trust bank (shintaku ginko) and/or custodial institutions to consider such possibility.

The Articles of Incorporation of the Company restricts the exercise of voting rights at Annual General Shareholders' Meetings to nominee shareholders or their proxies.

In consultation with the trust bank which manages the shareholders' registry as the agent of the Company, and taking into consideration both domestic and international implications, legal obligations, social trends and operational issues, the Company will continue to monitor the situation regarding the attendance of investors who are not registered on the shareholders' registry.

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Principle 1.3 Basic Strategy for Capital Policy

Because capital policy may have a significant effect on shareholder returns, companies should explain their basic strategy with respect to their capital policy.

The Company, in full recognition of the importance of the interests of shareholders, aims to strengthen the foundations of the business in order to promote future growth.

In regard to distributing profit to shareholders, the Company prioritizes the realization of sustainable growth and the enhancement of corporate value through strategic growth investments to strengthen earning power, focus on creating value and building its sustainable premium brand in accordance with the "Long Term Strategic Aspiration" as a roadmap toward 2030. This also contributes to maintaining an appropriate financial position and enhancing shareholder returns. In overall consideration of quarterly business performance, current financial position, mid-term profitability forecasts, investment plans and cash flow, the Company strives to meet shareholder expectations for returns by striving to increase the amount of dividends in a stable and continuous manner through sustainable enhancement of corporate value, with a consolidated payout ratio of 40%. In addition, the Company states, in its "Long Term Strategic Aspiration," that the Company is aiming to gradually raise the payout ratio to the level of 50% by 2030. The Company will comprehensively assess financial soundness and the enhancement of shareholder returns, and actively consider the acquisition of treasury stock while prioritizing sustainable growth and corporate value enhancement through strategic growth investments.

Principle 1.4 Cross-Shareholdings

When companies hold shares of other listed companies as cross-shareholdings², they should disclose their policy with respect to doing so, including their policies regarding the reduction of cross-shareholdings. In addition, the board should annually assess whether or not to hold each individual cross-shareholding, specifically examining whether the purpose is appropriate and whether the benefits and risks from each holding cover the company's cost of capital. The results of this assessment should be disclosed.

Companies should establish and disclose specific standards with respect to the voting rights as to their cross-shareholdings, and vote in accordance with the standards.

• Cross-shareholding:There are cases where listed companies hold the shares of other listed companies for reasons other than pure investment purposes, for example, to strengthen business relationships. Cross- shareholdings here include not only mutual shareholdings but also unilateral ones.

The Company maintains a policy whereby it will not hold shares in other companies other than those which are of strategic importance; that is, necessary to maintain or enhance business partnerships, or contribute to business profitability. The Company maintains a policy whereby it will not hold shares outside the scope of this definition. As

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part of this policy, the rationality of, and need to maintain, any such strategic holdings including stock brands, number of shares held, and the proportion of cross-shareholdings, and other related issues must be assessed by the Board of Directors on an annual basis. The executive officers comprehensively judge the rationality of holding shares in accordance with the policy, considering the quantitative evaluation results regarding the economic rationality considering the cost of capital for each individual shareholding. As a result of the verification, the Company is proceeding to reduce the number of shares it deems unreasonable to hold at the appropriate time.

In exercising its voting rights regarding cross-shareholdings, the Company will consider the content of proposals in terms of the investment strategy as approved by the Board in addition to their overall impact on enhancing profitability and sustainable business growth, corporate governance and shareholder return and then take proper action.

Supplementary Principle 1.4.1

When cross-shareholders (i.e., shareholders who hold a company's shares for the purpose of cross-shareholding) indicate their intention to sell their shares, companies should not hinder the sale of the cross-held shares by, for instance, implying a possible reduction of business transactions.

When a publicly traded company that cross-holds Bridgestone shares (as cross- shareholdings) indicates an intention to divest itself of any such cross-held shares, the Company in no way hinders such companies from taking such action.

Supplementary Principle 1.4.2

Companies should not engage in transactions with cross-shareholders which may harm the interests of the companies or the common interests of their shareholders by, for instance, continuing the transactions without carefully examining the underlying economic rationale.

The Company engages in no transactions that harm or impair the interests of companies that cross-hold shares of the Company (cross-shareholders), nor does it engage in any transactions that harm or impair the common interests of the shareholders.

Principle 1.5 Anti-Takeover Measures

Anti-takeover measures must not have any objective associated with entrenchment of the management or the board. With respect to the adoption or implementation of anti-takeover measures, the board should carefully examine their necessity and rationale in light of their fiduciary responsibility to shareholders, ensure appropriate procedures, and provide sufficient explanation to shareholders.

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The Company has no anti-takeover measures in place and currently has no plans to introduce any such measures. Shareholders will be fully informed in advance of the nature and reason for any such measures should they be deemed necessary in the future.

Supplementary Principle 1.5.1

In case of a tender offer, companies should clearly explain the position of the board, including any counteroffers, and should not take measures that would frustrate shareholder rights to sell their shares in response to the tender offer.

In any instance where the shares of the Company are made the target of a tender offer bid the Board of Directors will clearly convey its position on such bid to its shareholders and will not act in such a manner as to interfere improperly with any shareholder in the exercising of their rights to accept any such offer.

Principle 1.6 Capital Policy that May Harm Shareholder Interests

With respect to a company's capital policy that results in the change of control or in significant dilution, including share offerings and management buyouts, the board should, in order not to unfairly harm the existing shareholders' interests, carefully examine the necessity and rationale from the perspective of their fiduciary responsibility to shareholders, should ensure appropriate procedures, and provide sufficient explanation to shareholders.

After due consideration by the Board of Directors and in accordance with appropriate procedures, the Company will provide shareholders with explanations of the rationality and need for any changes in capital policies that would result either in changes of control or significant dilution.

Principle 1.7 Related Party Transactions

When a company engages in transactions with its directors or major shareholders (i.e., related party transactions), in order to ensure that such transactions do not harm the interests of the company or the common interests of its shareholders and prevent any concerns with respect to such harm, the board should establish appropriate procedures beforehand in proportion to the importance and characteristics of the transaction. In addition to their use by the board in approving and monitoring such transactions, these procedures should be disclosed.

In accordance with its Regulations of the Board of Directors, the Company requires that any transactions between Directors and Executive Officers and the Company or its subsidiaries, and any transactions with other corporations which may constitute a conflict of interest with the Company, must be authorized in advance and subsequently