Joshin Denki : Corporate Governance

Corporate Governance

CORPORATE GOVERNANCE	Joshin Denki CO.，Ltd
	Last updated on: June 27, 2022
	Joshin Denki Co., Ltd.
	Ryuhei Kanatani, Representative Director, President and Executive Officer
	Contact: Management Planning Department ([phone]
	Securities Code: 8173

https://www.joshin.co.jp/joshintop/ir_en.asp

The status of the Company's corporate governance is as follows.

I. Basic concept of corporate governance, capital structure, corporate attributes and other basic information

1. Basic concept

The Company aims to strengthen its efforts in the home appliance retail business, which we have developed up over many years since our establishment, and to become a business management organization that can respond quickly and accurately to the rapidly changing business environment.

In order to accurately understand the actual situation in the field of sales and to make effective and efficient decisions, many of our directors are in charge of business execution. At the same time, with the aim of utilizing objective viewpoints different from those of people from within the company as well as to strengthen the management system and further improve transparency, outside directors and outside auditors have been appointed as independent officers. In this way, we intend to enhance our corporate governance while further strengthening the current system of directors and auditors.

In addition, we will strive to promptly and accurately disclose information to shareholders and investors from the perspective of management transparency.

[Reasons for not implementing individual principles of the Corporate Governance Code]

The information is based on the revised code as of June 2021.

[Supplementary Principle 2-4-(1) Ensuring diversity in appointing core personnel, etc.] 1. Ensuring diversity

We believe that the active participation of diverse human resources is the source of our organizational strength in curbing the risks posed by social changes, seizing new business opportunities, and leads to sustainable growth. We are actively recruiting a wide range of human resources throughout the year by increasing the ratio of female employees and hiring career professionals with immediate ability in various fields, as well as promoting them to management positions.

(1) Promotion of women to management positions

Women account for 36.8% of our group's total workforce (including non-regular employees) and 12.0% of full-time long- term employees. The percentage of female managers is only 3.2%, but we will increase the population of female employees by enhancing the recruitment of female employees (47.2% of new graduates hired in FY2022) and actively encouraging non-regular female employees to become full-timelong-term employees. In addition, we are planning to increase the ratio of female managers to 20% by FY2030 by promoting the creation of role models for appointment to executive positions and promotion to managerial positions.

	FY 2021	FY 2030	FY 2050
	Actual result	Planning	Planning
Ratio of female full-time employees	12.0%	30.0%	50.0%
Ratio of female employees(*)	36.8%	50.0%	50.0%
Ratio of female managers	3.2%	20.0%	50.0%
*Including non-regular employees

(2) Appointment of Non-Japanese Employees to Management Positions

We do not bind foreigners to their "nationality", but rather classify each person as "a human resource with rich overseas experience and a global perspective". Although we do not currently set a specific numerical target for the number of non- Japanese employees, we will continue to proactively hire non-Japanese employees and appoint them to executive positions in anticipation of a future increase in the number of international customers.

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

We believe that knowledge and experience in a variety of fields are necessary to create diverse value and solve social issues, and we plan to increase the ratio of mid-career hires by hiring about 50% of the planned hires for each fiscal year as immediately effective career hires.

Mid-career hires as a percentage of all	36.6%
employees
Mid-career hires as a percentage of all	25.5%
management positions

*Number of employees as of March 31, 2022

*The number of mid-career hires includes non-regular employees.

2. Human resources development policy and internal environment improvement policy to ensure diversity and the current situation

We believe that employee ownership leads to a sustainable growth by improving CS (creation of social value), and we are working to build a work environment in which diverse human resources can thrive and play an active role, and develop human resources, based on the four key phrases of "securing human resources in response to changes in the environment," "diversity and inclusion," "work-life balance," and "respect for human rights," as a prerequisite for enhanced employee engagement.

The following documents are posted on our website to provide information on our human resource development policy and internal environmental improvement policy.

○Integrated Report https://www.joshin.co.jp/quality/csr/pdf/2021/E_2021_JCSR.pdf

[Disclosure based on the principles of the Corporate Governance Code]

[Principle 1-4:Cross-Shareholdings]

The Company currently holds listed shares as policy from the perspective of enhancing the Company's corporate value over the medium to long term for the purpose of strengthening business relationships and promoting smooth business operations. Although the total market value of cross-shareholdings has been trending upward due to fluctuations in the market value of shares, the number of shares held has been gradually decreasing, and in principle, new shareholdings will not be held in the future.

Regarding the current shares that are strategically held by the Company, the Board of Directors conducts quarterly qualitative verification of the purpose of holding such shares, including the maintenance of smooth and good business relationships with business partners and the establishment of supply chains, as well as quantitative verification of the percentage of total assets, profits from business relationships, dividends, etc. As for shares that are deemed to have diluted the significance of our holdings, we proceed to dispose of them as appropriate through dialogue and negotiation with the companies concerned.

Furthermore, regarding the exercising of voting rights, the Company shall exercise such rights in light of the purpose of holding such shares and by comprehensively taking into consideration the governance structure and business performance of the issuing company.

[Principle 1-7: Transactions with related parties]

Regarding all transactions which may cause conflicts of interest, such as transactions between related parties, the Company has established Internal rules which require the Board of Directors to deliberate and pass resolutions on such transactions. In addition, the Company shall regularly confirm each year whether or not there are any transactions between the Company's officers and their close relatives (including companies in which such persons hold a majority of voting rights) and the Company. In addition, a whistle-blowing system has been established as a part of the system to monitor and ensure the appropriateness of business operations.

[Principle 2-6: Demonstrating our function as an asset owner of corporate pensions]

The Company appoints personnelwith experience and expertise in asset management, and who have been involved in asset management for many years at organizations entrusted with the management of corporate pension assets, as internal consultants.

In asset management, our basic policy is "sound and stable asset development for the employees", under which we avoid fixed investment in the traditional four asset classes, flexibly reconfigure our portfolio in response to changes in the

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management environment. In addition, as of fiscal 2019, we have been contributing to risk response premiums in preparation of a worsening management environment, and thereby minimizing the impact on the Company's financial position as much as possible.

In addition, verification of investment results is carried out by the Asset Management Committee on a quarterly basis to continuously improve operations, and reports on the stewardship activities of Institutions entrusted with asset management are requested as a monitoring system.

[Principle 3-1: Enhancement of Information Disclosure]

(i) Corporate philosophy, management strategies, and management plans

In October 2021, we formulated a new medium to long-term management strategy, and in the process, revised its corporate philosophy for the first time in 57 years. The new corporate philosophy and medium to long-term management strategies are published in the Integrated Report 2021. (The "2021 Integrated Report" is also available on our website (https://www.joshin.co.jp/joshintop/ir_en.asp)). The "JT-2023 Management Plan" medium-term management plan covering the three-year period from April 2020 to March 2023 is available on our website. (https://www.joshin.co.jp/joshintop/ir_en.asp)

(ii) Basic concept and Basic policy on Corporate Governance

As disclosed in the "Integrated Report" and the "Report on Corporate Governance," our basic concept on corporate governance is to strengthen its efforts in the home appliance retail business, which we have developed up over many years since our establishment, and establish a management control system that can respond quickly and accurately to the rapidly changing business environment, achieve sustainable growth, and improve medium to long term corporate value.

1. The total amount of directors' remuneration is set during the General Meeting of Shareholders, and monetary remuneration is set within the range of 240 million yen per year. The Nomination and Compensation Committee, which is chaired by the majority of independent outside directors, consults with the Board of Directors, deliberates on the allocation of compensation to individual directors based on the "Regulations on Compensation for Directors," and the Board of Directors shall decide based on its report. The criteria for remuneration for the directors are set as "Director and Managing Executive Officer" and the standard monthly remuneration shall be less than 200% of the maximum monthly salary under the employee salary system. Remuneration for Directors is determined based on the remuneration ratio and business performance of each Director. Remuneration ratio is set at 1.0 for "Directors and Executive Officers," 1.2 for "Directors and Managing Executive Officers," 1.4 for "Directors and Senior Managing Executive Officers," 1.7 for "Directors and Executive Vice President," 2.0 for "Director and President," and 1.7 for "Director and Chairman". The remuneration ratio for the CEO is separately set by adding 0.2 to this ratio. Of the total amount of remuneration for individual directors, 70% is set as fixed monetary remuneration, 10% as individual performance-linked remuneration (variable between 0% and 200%), and 20% as performance-linked stock remuneration (variable between 0% and 200%). The stock-based remuneration is determined by resolution at the General Meeting of Shareholders. The purpose of this system is to further clarify the linkage between business performance, stock value and directors' remuneration, and to increase awareness of the directors' contribution towards the improvement of business performance over the medium to long term, and to increase corporate value by sharing the benefits and risks of stock price fluctuations with the shareholders.

Remuneration for Outside Directors consists of fixed monetary compensation only and the amount is determined on an individual basis, taking into consideration factors such as societal standards, career of the Outside Director concerned, and knowledge and experience in specialized fields.

1. In the selection and dismissal of Directors, the Nomination and Compensation Committee, the majority of whose members are Independent Outside Directors, one of whom chairs the Committee, deliberates selection after consultation with the Board of Directors, and the Board of Directors makes candidate decisions based on its report. In its deliberations on the selection of candidates, the Nomination and Compensation Committee considers the overall balance of knowledge, experience, and capabilities of the Board of Directors and follows set guidelines concerning certain skills the Board of Directors considers optimal in light of the Company's fundamental thinking about the number of Directors and diversity. The basis for the selection of Director candidates should be whether the individual can contribute to the enhancement of the Company's corporate value over the medium to long term.

Auditors who can apply insights, based on their individual career backgrounds, to the Company's business operations and management, internal controls, and financial management, etc., are nominated with the consent of the Board of Auditors. When appointing Outside Directors and Outside Auditors, importance is placed on the wealth of experience and high level of insight such persons possess in their respective fields, and on the independence of such Directors and Auditors, and these functions are exhibited when serving on the Board of Directors and the Board of Auditors.

1. Explanation of individual appointments, dismissals and nominations in the event of the appointment or dismissal of senior management and the nomination of candidates for Directors and Auditors by the Board of Directors

Candidates for Directors and Auditors are disclosed in the reference documents included with the "Notice of Convocation of the General Meeting of Shareholders" along with a brief personal history, details of concurrent positions

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held by each candidate, and a skills matrix for the Board of Directors in line with the Company's management strategies. The Nomination and Compensation Committee, the majority of whose members are Independent Outside Directors, one of whom chairs the Committee, deliberates appointment and dismissal after consultation with the Board of Directors so that a fair and transparent process can be followed when appointing and dismissing Directors and the Board of Directors makes decisions based on its report. The Board of Directors decides on a proposal for appointment and dismissal based on the results of discussions at the meeting of Board of Auditors.

Supplementary Principle 3-1-(3) Initiatives for Sustainability, etc.

(1) Our approach to sustainability

For us, sustainability is about working toward linking our contributions to constructing a more sustainable society to our sustainable growth and increased corporate value. We will achieve this by creating two types of social value, "supporting and strengthening resilience in our aging society" and "achieving carbon neutrality in the home" based on our management philosophy of "connecting the futures of people and society with smiles."

In order to create these two types of social value, we have defined our management vision as "becoming a hub for the infrastructure of life through the power of home appliances and ICT" and have been working to achieve this vision. As important issues to be addressed, we have identified 7 materiality themes (high-priority issues) and 14 issues to be addressed, and we have formulated initiatives for the intermediate point of 2030 with a view to what kind of company we want to be 30 years from now, in 2050.

(2) Investment in human capital, intellectual property, etc.

In order to link the improvement of CS (creation of social value) through the advancement of employee engagement to sustainable growth, we are actively investing in the creation of an internal environment in which diverse human resources can thrive and develop human resources, and are working to build employee ownership with the four key phrases of "securing human resources in response to changes in the environment," "diversity and inclusion," "work-life balance," and "respect for human rights" as our themes. Furthermore, since our founding, we have constantly built up positive relationships with our customers by putting ourselves in their shoes when we think and act. Likewise, through repeated trial and error, we have accumulated real expertise in creating stores, while also crafting a corporate brand image through collaboration with sponsor companies. As well as renewing our corporate philosophy-"connecting the futures of people and society with smiles"-for the first time in 57 years, we established a new tagline-"People, towns, smiles. Joshin"-as a tool to further deepen understanding of our corporate brand image. All of the factors described above are incredibly important intellectual properties that are indispensable for our value creation process. Going forward, we will continue to actively invest to increase our expertise and improve our corporate brand image.

(3) Risks related to climate change and the impact of profit opportunities on the company's business activities and earnings

In addition to expressing support for the TCFD's recommendations, the Company sees the future transition to a decarbonized society as an "opportunity" and is working to create social value in the form of "achieving carbon neutrality in the home" by promoting the use of home appliances with high performance in energy creation, energy storage, and energy saving.

In addition, as a part of our efforts to reduce greenhouse gas emissions from our business activities, we are working to reduce the environmental impact by increasing the ratio of renewable energy sources, such as by installing solar power generation systems at our offices and switching to CO2-free power sources. In the future, we will continue to enhance the quality and quantity of disclosure based on TCFD or an equivalent framework.

The following documents are posted on our company website to disclose the details of our response policies for (1), (2) and (3).

○Integrated Report https://www.joshin.co.jp/joshintop/csr/2021/pdf/E_2021_JCSR.pdf

[Supplementary Principle 4-1(1) Scope of delegation to management]

As the highest decision-making body, the Board of Directors decides on important management matters such as medium to long-term management policies and business strategies aimed at creating social and corporate value, and also entrusts each Executive Director with high-level judgment and decision-making as the person in charge of the business execution area for which he or she is responsible.

By defining the scope of delegation in detail through the Board of Directors regulations, managing executive officer regulations, regulations for division of duties, and rules for decision-making, the Board of Directors shall establish an organizational structure which enables each director to work in close coordination and make high-level and flexible decisions.

The Board of Directors holds regular meetings at least once a month, as well as extraordinary meetings as necessary, and the Board of Executive Officers meets once a week, in principle, to supervise the execution of duties by the Directors and Executive Officers.

[Principle 4-9: Criteria to determine the degree of independence of independent outside directors and their qualifications] Criteria to determine independence at the Company is based on satisfying both the requirements for outside officers

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required by the Companies Act and the independence standards required by stock exchanges, and appropriate personnel who can contribute to the enhancement of corporate value and shareholder interests are registered with the stock exchanges as candidates for outside officers, with the approval of the General Meeting of Shareholders as independent officers.

Criteria to determine independence is disclosed in the "Report on Corporate Governance". Criteria to determine independence are deliberated by the "Nomination and Compensation Committee", in consultation with the Board of Directors as appropriate, and the Board of Directors decides the criteria based on the received report.

[Supplementary Principle 4-10-(1) Approach, Authority, and Role of the Independence of the Composition of Committees]

The Company has appointed a total of six independent outside officers, out of which four are Independent Outside Directors (two of whom are women) and two are Independent Outside Auditors, with the goal of ensuring management is transparent and objective.

(1) Nomination and Compensation Committee

The Company has established the Nomination and Compensation Committee, which consists of four independent outside directors and two representative directors.

The Nomination and Compensation Committee, the majority of whose members are Independent Outside Directors, one of whom chairs the Committee in order to ensure the committee's independence, deliberates on the selection and dismissal of Directors, succession planning, design of the compensation system, and the amount of individual compensation for Directors, and the Board of Directors makes decisions based on its report.

(2) Committee for Evaluation of the Effectiveness of the Board of Directors

The Company has established a Board of Directors Evaluation Committee consisting of four independent outside directors and four corporate auditors including two independent outside corporate auditors, and has established a system under which independent outside directors provide appropriate advice to the Board of Directors from various angles through the evaluation of the effectiveness of the Board of Directors.

[Supplementary Principle 4 -11-(1) Concept regarding the balance of knowledge, experience and skills, diversity and size of the Board of Directors as a whole]

Based on the belief that diversity of the Directors comprising the Board of Directors affects its effectiveness and significantly impacts sustainable growth and the enhancement of corporate value over the medium to long term, the Company's Board of Directors has deliberated on the balance and diversity of the composition of the Board of Directors, including the knowledge, experience and abilities of the Directors. As a result, the Company summarizes the optimal skills, etc., required by the Board of Directors in a "Skills Matrix" for Directors and Auditors and has published it in the Notice of Convocation since the 73rd Ordinary General Meeting of Shareholders held in June 2021, as a nomination proposal prerequisite for Directors and Auditors.

The Company considers the skills matrix to be a tool to ensure diversity in the Board of Directors by recruiting a wide range of personnel with strengths in specific fields, and uses it to visualize the process to determine any excess or deficiency in skills among the Directors and to balance such excess or deficiency by the selection and dismissal of internal and external Directors.

In the Notice of the 74th Ordinary General Meeting of Shareholders we explained the thinking behind how we utilize the skills matrix. Alongside this, we have considered the management strategies we formulated in fiscal 2021 and redefined the skillsets that the Board of Directors deems necessary, including knowledge, experience, and capabilities. Items have also been organized into skills needed for corporate management and skills and experience required to achieve our business strategies or materiality themes.

The relevant matrix is disclosed in section 19 of the "Notice of the 74th Ordinary General Meeting of Shareholders". (https://www.joshin.co.jp/joshintop/news_pdf/20210527171304.pdf)

[Supplementary Principle 4 -11-(2) Directors and corporate auditors holding concurrent positions at other listed companies]

When a proposal on candidates for Directors and Auditors in the General Meeting of Shareholders is submitted, the status of concurrently held positions are disclosed in the business reports and reference documents of the "Notice of Convocation of General Meeting of Shareholders". Some candidates may hold concurrent positions as outside officers of other listed companies, but this is not particularly considered to be an obstacle in their attendance at the meetings of the Board of Directors and the Board of Auditors of the Company, and the number of concurrent positions remains within a reasonable range.

[Supplementary Principle 4 -11-(3) Analysis and Evaluation of the Effectiveness of the Board of Directors as a Whole]

The Company continuously promotes efforts to improve the effectiveness of the Board of Directors, which plays a central role in the efforts of the Company to enhance its corporate value and shareholder profits over the medium to long term. For the fiscal year ending March 2022, an "Assessment Committee for Board of Directors", consisting of outside directors and auditors, was established to investigate the effectiveness of the Board of Directors, targeting all directors and auditors who are members of the Board of Directors. The Company conducted anonymous questionnaires and interviews with the directors, and the results were reported to the Board of Directors, along with the opinions of outside directors. The Board of Directors confirmed that the Board of Directors is functioning effectively based on the analysis of the survey results, and also identified constructive opinions and suggestions obtained in the course of the survey as issues which can contribute to the further improvement of the

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