IDEC : Corporate Governance Report

Corporate Governance

CORPORATE GOVERNANCE	IDEC CORPORATION
	Last update: December 1, 2021

IDEC CORPORATION

Representative Director Chairman and President: Toshiyuki Funaki

Contact: 06-6398-2550

Securities Code: 6652

https://jp.idec.com

The corporate governance of IDEC CORPORATION (hereinafter referred to as the Company) is described below.

I Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

We, at the Company, believe that ensuring the transparency and efficiency of management for our stakeholders, including our shareholders, is the foundation of our corporate governance. Therefore, we actively appoint outside officers, separate the management supervisory function and the execution function, and always place importance on the transparency and efficiency of management.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] Update

The information is based on the Code as revised in June 2021.

We respect the purpose of the Corporate Governance Code and are implementing all of its principles. We have also established and published the "IDEC Corporate Governance Policy," which sets forth our views and operational policies regarding corporate governance in the Company Group (hereinafter referred to as the Group). https://jp.idec.com/media/governancepolicy2021.pdf

[Disclosure Based on the Principles of the Corporate Governance Code] Update

The information is based on the Code as revised in June 2021.

[Principle 1.4 Cross-Shareholdings] 1. Shareholding policy

It is our policy to hold shares of other listed companies as cross-shareholdings, when we believe that such shareholdings will enhance the corporate value of the Company by utilizing each other's technologies, sales channels, and other comprehensive business promotion capabilities, improving the competitive advantage of both companies in the market, and achieving synergy.

In addition, every year the Board of Directors verifies for each individual issue of these shares whether the purpose of the holding is appropriate and whether it is worth the cost of capital, etc., and if the appropriateness of the holding is not recognized, the issue will be reduced. In addition, we will provide opportunities for dialogue with investors as necessary regarding the verification details.

2. Criteria for the exercise of voting rights

We exercise our voting rights by comprehensively judging whether the investee company has established an appropriate governance system, is making decisions that will lead to the enhancement of the company's corporate value over the medium to long term, and is contributing to the enhancement of our corporate value.

[Principle 1.7 Related Party Transactions]

We have established a monitoring system whereby we periodically confirm with our directors whether or not there have been any related party transactions, and when such transactions have occurred, the Board of Directors votes on them in accordance with the Company's Board of Directors Regulations, and the Supervisory Committee verifies the details of such transactions.

In addition, the Board of Directors appropriately oversees whether there are any transactions between the Company and its major shareholders and the details of such transactions.

[Supplementary Principle 2.4.1]

1. Ensuring diversity in the promotion for core human resources

The Group will strive to create a work environment that promotes diversity, to allow every employee to work on a level playing field regardless of gender, nationality, race, social status, family origin, religion, disability, etc., so that each and every employee with various personalities and values can fully demonstrate their abilities, based on the concept of "Management with respect for humanity."

(1) Appointment of women to management positions

We provide a variety of support and measures for the empowerment of women, including planning and implementing training programs for women who are expected or aspire to become managers. Our goal is to have at least 15 women managers in the Company by FY2023. There are nine women managers as of the date of submission of this report.

(2) Appointment of non-Japanese to management positions

In order to respond to globalization, we have been conducting multinational recruitment activities and appointing people to management positions regardless of nationality, and will continue personnel appointments in this direction. There are two non-Japanese executive officers in the Company as of the date of submission of this report.

(3) Appointment of mid-career hires to management positions

Based on the idea that the wisdom and ingenuity of people with diverse values will enhance the "added value" created by a company on a daily basis, we have continued to recruit mid-career hires (people with significant experience) and appointed them to management positions, and will continue personnel appointments in this direction. As of the date of submission of this report, more than half of the Company's executive officers have experience working for other companies.

2. Policies for human resource development and internal environment improvement aimed at ensuring diversity, and their implementation status

The "IDEC Group Code of Conduct" states in its "Human Rights & Working Environment" section that we "strive to create a work environment that respects the human rights of individual employees and promotes diversity, to allow every employee to work on a level playing field regardless of gender, nationality, race, social status, family origin, religion, disability, etc." Based on the Code of Conduct, we promote diversity in our executive structure and have set a target for the ratio of women managers, which has been announced publicly. To achieve this target, we are working to support the activities of women by strengthening recruitment activities and providing training for women who are expected or aspire to become managers.

In addition, the Group's human resource development policy is to "develop and utilize human resources who take on challenges on their own initiative." We are striving to develop human resources by clarifying the ideal image of human resources that we want, giving opportunities to those who are willing to take on challenges toward that goal, and giving support to them from the Company and their superiors. In order to cope with the new normal caused by the spread of the new coronavirus disease, we are promoting work style reforms through digitalization, and are working to secure and develop a diverse workforce irrespective of nationality or hiring methods by improving the internal environment through the promotion of flexible work styles made possible by the introduction of teleworking and global IT infrastructure.

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

With regard to the pension assets of the defined-benefit corporate pension plan, we receive regular reports from investment institutions on the investment status and investment policies, etc., and monitor them, taking into account the need to ensure the future payment of benefits to members, i.e., employees and beneficiaries, and the impact on the Company's financial position. In addition, we are making efforts to assign and train personnel with appropriate qualities to ensure that such monitoring can be carried out properly.

We have confirmed that our investment institutions accept Japan's Stewardship Code (Principles for Responsible Institutional Investors), and by entrusting the selection of individual financial instruments and the exercise of voting rights to these institutions, we ensure that there is no conflict of interest between the beneficiaries of the corporate pension plan and the Company.

[Principle 3.1 Full Disclosure]

1. We provide the following information on our website.

The Company actively disseminates information by posting the Top Message, Management Philosophy, Medium-Term Management Plan and the "IDEC Report."

(https://jp.idec.com/ja/aboutIDEC/ir)

1. We believe that ensuring the transparency and efficiency of management for our stakeholders, including our shareholders, is the foundation of our corporate governance. Therefore, we actively appoint outside officers, separate the management supervisory function and the execution function, and always place importance on the transparency and efficiency of management.
   As of the date of submission of this report, the Company has five directors (excluding directors who are members of the Supervisory Committee), including two outside directors, and there are four outside directors who are members of the Supervisory Committee.
2. For the policies and procedures for determining the remuneration of directors, please refer to [Director Remuneration] "Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods" under "1. Organizational Composition and Operation" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.
3. The Board of Directors decides on the appointment of senior management and nomination of candidates for directors in accordance with the following policy:
   Executive Director: A person who can contribute to the sustainable growth of the Company, taking into consideration his or her experience and achievements.
   Outside Director: A person who satisfies all of the criteria in the "Policy on Independence of Outside Executives," and has a high level of expertise or a wealth of experience and insight in management and business execution in order to further strengthen the "separation of execution and supervision". Director who is a member of the Supervisory Committee: A person who is capable of conducting audits from a neutral and objective perspective. Outside Director who is a member of the Supervisory Committee: A person who has expertise in corporate accounting, law, etc., in addition to meeting the criteria for "Director who is a member of the Supervisory Committee."

Based on the above policy, nominations of director candidates are proposed at the Board of Directors meeting after receiving the report of the Nomination Committee and then voted on by the Board of Directors, where independent outside directors constitute the majority, as a proposal to be submitted to the General Shareholder Meeting.

If we determine that any director does not meet the above policy, we will consider removing him/her from his/her position. In addition, in the event of violation of laws, regulations, or the Articles of Incorporation by a director, or in the event of any other circumstances that make it difficult for a director to properly execute his/her duties, the Board of Directors, where independent outside directors constitute the majority, will deliberate and vote on submitting a proposal for dismissal of the director to the General Shareholder Meeting after receiving a report from the Nomination Committee.

5. The reasons for the appointment and dismissal of individual directors of the Company are stated in the convocation notice of the General Shareholder Meeting. The convocation notice of the General Shareholder Meeting is disclosed on the Company's website.

[Supplementary Principle 3.1.3] 1. Efforts on sustainability

Based on "The IDEC Way," our new philosophy for becoming a truly global company, the IDEC Group has designated the IDEC Group Code of Conduct, the CSR Charter, and the Ten Principles of the UN Global Compact as important guidelines, and is working to achieve the "Sustainable Development Goals (SDGs)" by resolving social issues through our business activities.

Led by the CSR Committee established in 2018, we are promoting sustainable CSR activities by setting Environment (E), Social (S), Governance (G), and our strengths in Safety (Sa) and Quality (Q) as priority areas.

Based on our "Basic Policy on Sustainability," we are promoting various efforts to resolve global issues through our business activities towards realization of a sustainable society, e.g., pursuing "safety, health, and wellbeing" for all people inside and outside the Company by endorsing and registering with Vision Zero, which is promoted by ISSA (International Social Security Association), an affiliate of ILO, showing consideration to climate change and other global environmental issues by endorsing TCFD (Task Force on Climate-related Financial Disclosures), and envisioning future responses to risks and opportunities.

For further information on our efforts in each of these areas, please refer to the "IDEC Report" (https://jp.idec.com/idec-jp/ja/JPY/about-IDEC/ir/library/annual-reports).

2. Investment in human capital and intellectual property, etc.

• For information on investment in human capital (human rights and responsibility for employees), etc., please refer to our website as follows: https://jp.idec.com/idec-jp/ja/JPY/csr/hr
• As of the date of submission of this report, the Company holds 282 patents and 345 design rights. We recognize that intellectual property is an important corporate asset, make appropriate investments by filing applications and obtaining rights in order to secure advantages in our business and products, while respecting the intellectual property of other companies and working to prevent infringement.
  In the process of acquiring rights, we do not simply try to increase the number of rights, but conduct thorough examinations and follow full procedures with the intention of utilizing the rights. Regarding the maintenance of the rights we hold, we re-examine all rights every year to keep up with changes in products and to forestall other companies from gaining advantage, and reevaluate them as our property.

3. Impact of risks and opportunities related to climate change on the Company's business activities and earnings, etc.

In May 2021, we expressed our support for the TCFD recommendations, and our Environmental Management Committee has been working on the disclosure of climate-related information.

With regard to GHG (greenhouse gas) emissions, we are aiming to reduce our own emissions by 30% compared to FY2020 by FY2026.

[Supplementary Principle 4.1.1]

We have established the Board of Directors Regulations, the Management Committee Regulations, and Administrative Authority Regulations, which stipulate matters to be resolved by the Board of Directors, matters to be resolved by the Management Committee, and matters that can be decided according to each position. Based on these regulations, the Board of Directors decides management policies and important matters, and based on these policies and decisions, business execution is carried out by the directors in charge of business execution and executive officers.

[Principle 4.9 Independence Standards and Qualification for Independent Directors]

In order to ensure the transparency and soundness of management, we have established the "Policy on Independence of Outside Executives" as follows. All of the six outside directors as of the date of submission of this report meet the following requirements:

The Company proactively appoints outside directors who have a high level of expertise or a wealth of experience and insight in management and business execution. In addition, the Company considers an outside director to be independent if he/she falls under all of the following:

1. He/she is not an executive of the Company (including the Group companies, hereinafter the same).
2. He/she is not a party that has the Company as a major business partner or an executive of such a party.
3. He/she is not a major business partner of the Company or its executive.
4. He/she is not a consultant, accountant or legal professional (or a person belonging to an organization of the same kind including corporation and partnership) who receives a large amount of monetary consideration or other property from the Company besides compensation as an officer.
5. He/she does not receive donations or grants of more than a certain amount from the Company.
6. He/she is not a major shareholder of the Company or an executive of such a shareholder.
7. He/she did not fall under any of (1) through (6) above during the five years prior to his/her appointment as a director.
8. He/she is not the spouse or a relative within the second degree of relationship of a person who falls under any of (1) through (6) above.

[Supplementary Principle 4.10.1]

1. As of the date of submission of this report, the Board of Directors of the Company consists of nine members, of which three are inside directors and six are independent outside directors, so the majority of the Board of Directors are independent outside directors.
2. As an advisory body to the Board of Directors, the Company has established the Nomination Committee, the majority of which consists of independent outside directors. For more details, please refer to [Voluntary Establishment of Nomination/Remuneration Committee] "Supplementary explanation" under "1. Organizational Composition and Operation" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.
3. As of the date of submission of this report, the majority of the Board of Directors consists of independent outside directors, but we will promote the establishment of a Remuneration Committee in order to further strengthen the objectivity and independence regarding the remuneration system for directors. As discussed above, for the policies and procedures for determining the remuneration of directors, please refer to [Director Remuneration] "Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods" under "1. Organizational Composition and Operation" of "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" below.

[Supplementary Principle 4.11.1]

Since the Board of Directors of the Company supervises the execution of business and makes important policy decisions, we believe that it is desirable for the Board of Directors to consist of directors who have diverse and abundant experience, broad perspectives, and a high level of expertise. The knowledge, experience and skills of each director are disclosed as a skills matrix in the convocation notice of the General Shareholder Meeting (https://jp.idec.com/idec-jp/ja/JPY/about-IDEC/ir/stock/meeting), the "IDEC Report" (https://jp.idec.com/idec-jp/ja/JPY/about- IDEC/ir/library/annual- reports), etc. In addition, as of the date of submission of this report, one woman outside director and four directors with management experience at other companies have been appointed.

For the policy and procedures for the appointment of directors, please refer to the section 4 of [Principle 3.1 Full Disclosure] above.

[Supplementary Principle 4.11.2]

In case a director in charge of business execution concurrently serves as an officer of another company, the Board of Directors Regulations stipulate that the matter requires approval by the Board of Directors from the perspective of conflict of interest. In addition, if any director concurrently serves as an officer of another listed company, it is disclosed in the business report.

[Supplementary Principle 4.11.3] 1. Method of evaluation

The Board of Directors distributed a questionnaire on the effectiveness of the Board of Directors to all directors except the President, and received their responses. Based on these responses, the Board of Directors conducted an evaluation of the effectiveness of the Board of Directors as follows.

2. Results of evaluation of the effectiveness of the Board of Directors

As a result, we have confirmed that the current Board of Directors consists of personnel with expertise in various fields and that it is fulfilling its supervisory function over management, as opinions continue to be expressed actively, constructively and frankly, with outside directors accounting for the majority of the Board of Directors.

As for the continuing challenge of "fostering the next generation," the establishment of a voluntary Nomination Committee has proved to be a positive point, but some additional comments were made indicating that we should keep an eye on the future operation of the committee.

3. Future actions based on the evaluation results

While the evaluation results continue to be generally positive, the Board of Directors will continue to promote the following efforts in order to further ensure its effectiveness.

• The Board of Directors already consists of members with diverse backgrounds, but with an eye on further globalization, we will continue to examine the composition of the Board of Directors in terms of diverse nationalities.
• By utilizing the voluntary Nomination Committee established in FY2021, we will promote the selection of candidates for next-generation executives and their development plans, and strengthen our efforts to achieve sustainable growth for the further development of the Company.
• We will strengthen the transparency, efficiency, and monitoring capabilities of management by increasing opportunities for discussions involving outside directors regarding medium- to long-term management strategies.
• We will further enhance the details of feedback to the Board of Directors from briefing sessions and other communication with shareholders and investors, and strengthen dialogue with shareholders and investors in cooperation with outside directors as necessary.

[Supplementary Principle 4.14.2]

When newly appointed executive officers take office, we will provide explanations of legal obligations, responsibilities, etc., as necessary, and provide opportunities for outside executive officers to deepen their understanding of the Company's business. In addition, we will gather and provide various types of information necessary for directors to fulfill their roles and functions, including information on the business environment and systems, and promote participation in and holding training sessions using outside experts, etc. as necessary.

[Principle 5.1 Policy for Constructive Dialogue with Shareholders]

The Company is making efforts to establish a system to promote constructive dialogue with investors, including shareholders, based on the following policy.

• In order to contribute to sustainable growth and the enhancement of corporate value over the medium to long term, the Company will promote constructive dialogue with shareholders and investors and strive to build long-term relationships of trust while providing accurate information in a fair and timely manner.

• Dialogue with shareholders and investors is overseen by the executive officer in charge of corporate strategy planning, and the representative directors themselves provide explanations of the Company's management strategies, while related departments work together organically to disclose information in a fair and timely manner.

As means of dialogue, we will strive to enhance dialogue by implementing the following measures:

• Conducting individual meetings and company information sessions for shareholders and investors
• Holding open shareholders' meetings (positioning them as valuable opportunities for direct dialogue and avoiding peak days)
• Issuing the "IDEC Report" (in Japanese and English, also posted on our website) (https://jp.idec.com/idec-jp/ja/JPY/about-IDEC/ir/library)
• Releasing information on a regular basis (issuing shareholder newsletters as business reports, earnings briefing materials, and data books every quarter)

• Opinions and concerns raised through dialogue with shareholders and investors will be reported to the Management Committee and the Board of Directors as necessary.

• In order to prevent insider trading, we have established internal regulations to manage insider information, and we do not communicate insider information to shareholders and investors when we hold dialogues with them.

2. Capital Structure

	Foreign Shareholding Ratio		From 20% to less than 30%
[Status of Major Shareholders]
	Name / Company Name	Number of Shares	Percentage
	Owned	(%)
	Custody Bank of Japan, Ltd.			5,022,500	16.75
	JP MORGAN CHASE BANK			3,006,316	10.02
	The Master Trust Bank of Japan, Ltd.			2,575,900	8.59
	STATE STREET BANK AND TRUST COMPANY	1,122,926	3.74
	Funaki Kosan Ltd.			1,041,000	3.47
	THE BANK OF NEW YORK MELLON			817,979	2.73
	BBH FOR GLOBAL X ROBOTICS AND ARTIFICIAL INTELLIGENCE ETF	740,260	2.47
	Keijiro Fujita			652,620	2.18
	CLEARSTREAM BANKING S.A.			477,640	1.59
	Mizuho Bank, Ltd.			412,533	1.38
	Controlling Shareholder (except for			―――
	Parent Company)
	Parent Company			None

The percentage is calculated after deducting treasury stock (3,231 thousand shares).

3. Corporate Attributes

	Listed Stock Market and Market Section			Tokyo Stock Exchange
			First Section
	Fiscal Year-End			March
	Type of Business			Electric Appliances

	Number of Employees (consolidated) as of			More than 1000
	the End of the Previous Fiscal Year
	Sales (consolidated) as of the End of the			From 10 billion to less than 100 billion
	Previous Fiscal Year
	Number of Consolidated Subsidiaries as of			From 10 to less than 50
	the End of the Previous Fiscal Year

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder

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5. Other Special Circumstances which may have Material Impact on Corporate Governance

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