Corporate Governance System

The Company conducts a diverse range of business globally. Accordingly, the Company has established a corporate audit governance model of a Company with auditors in which the Board of Directors consisting of Internal Directors and Outside Directors has been established in order to ensure rapid and efficient decision-making and appropriate supervisory functions in management. The Company has determined that this governance model is functioning effectively as set forth in items (a) and (b) below. Therefore, the Company will retain the current governance structure.

(a) Ensuring rapid and efficient decision-making

The Company ensures rapid and efficient decision-making by appointing Directors who serve concurrently as Executive Officers and are well-versed in the Company’s diverse business activities.

(b) Appropriate supervisory functions

The Company ensures appropriate supervisory functions by implementing various measures, including appointing Outside Directors that account for the majority of candidates for the Board of Directors; establishing the Audit & Supervisory Board Member’s Office; fostering collaboration among the Audit & Supervisory Board Members, the Audit Department and the Accounting Auditor; and carrying out advance briefings, on the same occasion, on matters referred to the Board of Directors for both Outside Directors and Outside Audit & Supervisory Board Members.

Board of Directors

The Board of Directors comprises 10 Directors (including six Outside Directors; nine males and one female. The percentage of female director on the Board is 10%), and makes decisions regarding management policy and other important matters and supervises the execution of duties by Directors.

To clearly segregate management and execution, the Chairman of the Board without representative rights and the authority for business execution, in principle, chairs the Board of Directors Meetings.

Moreover, the status of holding the Corporation’s organization and committee meetings in the FY ended March 31, 2023 is as follows: in the said FY, the Board of Directors met 16 times to make decisions regarding execution of duties by the Corporation and all members of the Board of Directors were present at all meetings during their terms of office, excluding Mr. Kikuchi, who was absent for 1 meeting. In FY2022, the Board of Directors mainly deliberated as below:

- Policy to enhance the corporate governance system (revision of criteria for submission to the Board of Directors, improvement of organizational capability in business investments, etc.)

- Investment and financing projects (establishment of a wholly-owned subsidiary through a corporate spinoff in ICT field, etc.)

- Financial results and other finance related matters (share repurchases, etc.), remuneration for Directors/Audit & Supervisory Board Members

- Evaluation of the effectiveness of the Board of Directors, internal control related matters, etc.)

The term of Board of Directors is one year to clarify management responsibility and flexibly build optimum management structure in response to changing management environment.

Audit & Supervisory Board

The Audit & Supervisory Board comprises five Audit & Supervisory Board Members (including three Outside Audit & Supervisory Board Members). The Company adopts a corporate audit governance system and each of Audit & Supervisory Board Members is responsible for overseeing Directors in the execution of their duties by attending important meetings, such as the Board of Directors Meetings, and by monitoring business activities and financial conditions in accordance with the auditing policies and plans set by the Audit & Supervisory Board.

The Audit & Supervisory Board Members and the Accounting Auditor are striving to grasp the audit status of each other through measures such as exchanging information at monthly meetings. The Company's Accounting Auditor for the FY2022 is Ernst & Young ShinNihon LLC. The Audit & Supervisory Board and the Audit Department, a department which performs internal audits, exchange opinions at monthly meetings and implement audit operations through close cooperation. In the FY2022, the Audit & Supervisory Board met 17 times, and all Audit & Supervisory Board Members were present at all meetings of the Audit & Supervisory Board during their terms of office, excluding Mr. Kikuchi, who was absent for 1 meeting.

The President holds meetings with the Audit & Supervisory Board Members on a regular basis, reports on execution of duties and exchange opinions. Other Directors, Group CEOs, the CDIO, Division COOs and Corporate Staff Group General Managers report their duty execution status to the Audit & Supervisory Board Members every year. Officers immediately report to the Audit & Supervisory Board Members when they discover that there is a concern that the Company will suffer significant damage.

Corporate Management Committee

The Corporate Management Committee is an advisory committee for the President and consists of three Representative Directors including the President, three Senior Managing Executive Officers, three Managing Executive Officers, and one Executive Officer. It deliberates management-related policies and company-wide important matters.

Committee of Chief Operating Officers

The members of the Committee of Chief Operating Officers are the President, alongside Executive Officers and Chief Operating Officers appointed by the President.
They discuss matters pertaining to budgeting, account settlement and financial planning as well as other issues related to the execution of business.

Committee of Executive Officers

The Committee of Executive Officers consists of 41 Executive Officers (three of whom also serve as Director) to communicate management policies issued by the President and other information and discuss matters that affect business execution such as financial performance and results of internal audits.

Nomination Committee

The memberships of the committee are composed so as to ensure independence, as Independent Outside Directors/Audit & Supervisory Board Members constitutes the majority of the members and the committee is chaired by an Independent Outside Director as well. The Nomination Committee mainly deliberates on proposals regarding the selection of candidates of Director and Audit & Supervisory Board Member, proposals regarding the selection of the President for the next term, and successor plans formulated and operated by the President (including plans related to necessary qualities and requirements, successor candidate groups, and training), and reports to the Board of Directors. In FY2022, six Committee meetings were held for deliberations regarding candidates of Director and Audit & Supervisory Board Member and succession plans etc., and all the Committee members attended all the meetings.

Committee’s Members: Inside Director 1, Outside Directors 2
Chairperson: Outside Director

Governance and Remuneration Committee

The memberships of the committee are composed so as to ensure independence, as Independent Outside Directors/Audit & Supervisory Board Members constitutes the majority of the members and the committee is chaired by an Independent Outside Director as well. The Governance and Remuneration Committee deliberates on the policy for determining remuneration for Directors and Executive Officers as well as appropriateness of the level of remuneration, and reports to the Board of Directors. Furthermore, it deliberates on important matters related to corporate governance and conducts assessments and reviews of the Board of Directors as a whole, including on its structure, operation, etc., and reports thereon to the Board of Directors. In FY2022, seven Committee meetings were held for deliberations regarding remuneration for Directors and Executive Officers, review of compensation plans, evaluation of the effectiveness of the Board of Directors, and disclosure of information on Directors/Audit & Supervisory Board Members. All Committee members attended all of the meetings.

Committee’s Members: Inside Directors 2, Outside Directors 1, Outside Audit & Supervisory Board Members 2
Chairperson: Outside Director

Overview of Corporate Governance Systems

Organization Form	Company with auditors
Chairperson of the Board	Chairperson
Number of Directors	10 (including 6 Outside Directors)
Number of Audit & Supervisory Board Members	5 (including 3 Outside Members of Audit & Supervisory Board)

Number of Times convened in FY2021 : Major Board and Committee Meetings

Board of Directors	16 times
Audit & Supervisory Board	17 times
Corporate Management Committee	31 times
Committee of Chief Operating Officers	3 times
Committee of Executive Officers	3 times

Committees

The Company has established various committees as an organization directly under the President for dealing with important matters related to business execution and internal control, etc.
Main committees and their roles are as follows:

Roles and Functions of Outside Directors and Outside Audit & Supervisory Board Members

Roles and Functions of Outside Directors

Outside directors offer opinions on business management drawn from their broad experience and high-level perspective, and give advice to better implement corporate governance.
Outside directors attend the meetings of the Board of Directors and the Committee of Executive Officers, making active contributions from the perspective of internal control. Prior to meetings, Outside Directors are provided with agendas and fully briefed on management issues and project execution status. Two of the Outside Directors are members of the Governance and Remuneration Committee (one is the chairman) and three are members of the Nomination Committee (one is the chairman).

*Please refer to [the Corporate Governance Report]for Reasons of Appointment.

Roles and Functions of Outside Audit & Supervisory Board Members

Outside Audit & Supervisory Board Members monitor the directors' execution of duties and draw upon their wealth of professional expertise to offer various recommendations and advice to enhance the Audit & Supervisory Board.
Outside Audit & Supervisory Board Members attend meetings of the Audit & Supervisory Board and also the Board of Directors and Committee of Executive Officers. In addition, the Outside Audit & Supervisory Board Members meet with the President on a regular basis, as well as with members of the Audit Department, Corporate Accounting Department, and outside auditors, for an exchange of opinions. They receive audit-related information from Full-time Audit & Supervisory Board Member, which they use in the execution of their auditing duties. Two of the Outside Audit & Supervisory Board Members are also members of the Governance and Remuneration Committee.

*Please refer to [the Corporate Governance Report]for Reasons of Appointment.

Executive Compensation

Amounts of executive compensation, details of policies regarding calculation methods used to decide compensation, and methods for making compensation decisions are as follows.

The maximum total remuneration shall be determined for all Directors by resolution at a General Meeting of Shareholders. The Governance and Remuneration Committee chaired by an Outside Director/Audit & Supervisory Board Member, with the majority of its members consisting of Outside Directors/Audit & Supervisory Board Members, deliberates on the policies for compensation decisions and the appropriateness of the compensation levels, and provides reports to the Board of Directors. The remuneration amount is determined by resolution of the Board of Directors.
Compensation for individual Audit & Supervisory Board Members is decided through deliberation by the Audit & Supervisory Board Members.
The remuneration of Directors other than Outside Directors (“Eligible Directors”) consists of basic remuneration, which is a fixed amount that is in accordance with the roles of the Eligible Directors, performance-linked remuneration, which is linked to consolidated business results in the previous fiscal year, additional pay and personal evaluation pay, and shares with restriction on transfer subject to market-capitalization-based exercisability conditions (“Performance Share Units”). Form of payment consists of cash, shares with restriction on transfer (“Restricted Stock”) and Performance Share Units.
Additional Pay consists of director bonuses and representative director bonuses, and personal evaluation pay consists of an organization performance evaluation and a qualitative evaluation. For the organization performance evaluation, the evaluation item is whether the consolidated net income target is achieved or not. The amount in which the organization performance evaluation is reflected is calculated by multiplying basic compensation by the ratio determined by the Board of Directors corresponding to the achievement/non achievement of the target. Qualitative evaluation takes into consideration business results in the fiscal year, medium- to long-term contributions (such as efforts and initiatives for new value creation toward the future) and other such measures. The amount in which qualitative evaluation is reflected is calculated by multiplying basic compensation by a ratio which has been determined by the Board of Directors to reflect the qualitative evaluation.
Concerning the individuals’ evaluation-based compensation, the President who is the chief executive officer is judged to be most suitable for conducting qualitative evaluation and the Board of Directors has given President & CEO Masumi Kakinoki the authority for the said evaluation (hereinafter referred to as the “qualitative evaluation by the President”). In order to ensure appropriate exercise of this authority, the ratio to reflect the qualitative evaluation by the President is within the range determined by the Board of Directors.
Beginning in FY2021, the Corporation has introduced Restricted Stock and Performance Share Units (the “Plan”) to Eligible Directors. The purpose of the Plan is to give Directors an incentive to work to sustainably enhance the corporate value of the Corporation in the medium to long term, thereby enhancing future market value, and promoting greater value sharing with shareholders.

1. Restricted Stock
20% of the base annual remuneration and performance-based compensation is granted as Restricted Stock to Eligible Directors with a certain no transfer period. An Eligible Director may not transfer, create security interest over, or otherwise dispose of the Corporation’s common shares which were allotted to them under the Allotment Agreement during the period from the day the shares were allotted to them under the Allotment Agreement until immediately after the time the Eligible Director resigns or retires from their position as Director, Executive Officer, or other officer or employee of the Corporation or the Corporation’s subsidiary that the Corporation’s Board of Directors designates. The purpose of the no transfer period is to promote greater value sharing with shareholders in the medium to long term.
2. Performance Share Units
Up to 1.5 times an amount equivalent to 10% of basic compensation is allotted as Performance Share Units on top of the basic compensation. Performance Share Units refers to the Corporation’s common shares that the Corporation will issue to Eligible Directors (or dispose of) in accordance with the achievement of targets linked to market value growth rate and other performance indicators predetermined by the Corporation’s Board of Directors.

Remuneration for Outside Directors and Audit & Supervisory Board Members, all of whom are independent from business operation, consists entirely of basic remuneration, and does not include performance-linked remuneration.

〈Reference: Correlation between the "sum of 50% of the consolidated net income and 50% of the core oprationg cash flow" and performance-based compensation〉

〈Reference: Composition of remuneration〉

The total of remuneration and other payments for Directors and Audit & Supervisory Board Members in the FY2021

Note 1. The amounts less than 1 million yen are rounded off.

Note 2. By resolution of the General Meeting of Shareholders, the maximum annual amount of remuneration for Directors has been set at “1,100 million yen (including 120 million yen for Outside Directors)” (by resolution of the 96th Ordinary General Meeting of Shareholders held on June 19, 2020, with 11 Directors related to the decision [including five Outside Directors]), the maximum monthly remuneration for Audit & Supervisory Board Members has been set at “12 million yen” (by resolution of the 88th Ordinary General Meeting of Shareholders held on June 22, 2012, with 5 Directors related to the decision)

Note 3. The Corporation introduced the Restricted Stock and Performance Share Unites in FY2021. The total amount of remuneration and other payments used for Restricted Stock and Performance Share Units will be within the above amount specified for remuneration and other payments for Directors, with the amount for Restricted Stock capped at a maximum of 180 million yen per year, and Performance Share Units capped at a maximum of 120 million yen per year.

Note 4. The Company abolished the retirement remuneration plan at the close of the 83rd Ordinary General Meeting of Shareholders held on June 22, 2007 and resolved on making a final payment of retirement remuneration accompanying the abolishment of the retirement remuneration plan. In accordance with the resolution, the Company decided to pay retirement remuneration to each Director who is eligible to receive the final payment either at the time of retirement as Director or at the time of retirement as Executive Officer, whichever is later, and to each Audit & Supervisory Board Member who is eligible to receive the final payment at the time of retirement as Audit & Supervisory Board Member. In the Current Business Year, retirement remuneration which paid to Directors/Audit & Supervisory Board Members who are eligible to receive a final payment in relation to the abolition of the Retirement Remuneration plan was 0.

Individuals to whom the total amount of compensation paid exceeded 100 million yen in the FY2021

（Millions of yen）

Evaluation of the effectiveness of the board of directors

Since FY2016, the Corporation held evaluations of the effectiveness regarding the Board of Directors annually and making efforts to improve it by striving to the specified issues which is the result of analyzing and evaluating.
The composition of the Board of the Directors had a majority (60%) of Independent Outside Directors with the aim of strengthening functions of supervision. In this context, evaluation of the effectiveness regarding the Board of Directors in FY2022 was held to make opportunity for the discussion on the Board of Directors as a whole regarding “Governance model which is suitable for the Corporation with regards to current situation and characteristic” in order to strengthen function of supervision and increase mid to long-term corporate value.

I. Evaluation framework and methodology

1. Evaluation target

The Board of Directors (including Governance and Remuneration Committee and Nomination Committee)

2. Evaluation process

With the context of the questionnaire responses and interviews by all members of the Board of Directors and Audit & Supervisory Board Members as a basis, the Governance and Remuneration Committee carried out evaluations and reviews regarding results of analyses, and the Board carried out deliberations.

3. Evaluation items

1. (1) Roles of the Board
2. (2) Structure of the Board
3. (3) Discussions at the Board
4. (4) Utilization of committees
5. (5) Accountability to stakeholders

4. Utilization of outside specialized organization

Utilizing an outside specialized organization, the Board carried out analysis and evaluation based on advanced document inspection as well as responses to questionnaires and interviews.

Ⅱ Overview of evaluations results

1. Overview

Through the process above, it has been confirmed that the Corporation’s Board of the Directors operates appropriately and that its effectiveness is secured.
Thanks in particular to the appropriate management of the proceedings by the chair, the following favorable evaluations were received.
- Elicitation of statements from directors, convergence of opinions, and follow-up on raised issues are managed in a timely and appropriate manner, while the Board is also operated soundly.
- Lively discussions are conducted among the directors, including the Outside Directors.
- Systems and processes for providing appropriate pre-explanations and post-reports on important issues are functioning sufficiently.

2. Handling issues in effectiveness evaluations pertaining to the Board of Directors in FY2021

(1) Enhancement of discussions at Board of Directors meetings regarding key material management issues, changes in external environment, and risks.
Utilizing opportunities other than routine meetings of the Board of Directors, the Directors discussed changes in the external environment, responding to the issues in energy security, international affairs, etc. Evaluations on these items have improved compared to results for FY2021, including evaluations in the results of questionnaires and interviews.
Furthermore, in order to strengthen the supervisory functions of the Board of Directors, it delegated authority to the Executive Officers, and agendas submitted to the Board have come to focus on more pressing management issues. As stated in “3” below, the Board will continue to implement further measures for improvement.

(2) Discussions regarding HR strategy and allocation of management resources to human capital
The Board of Directors supervised a progress review of the human resources strategy under the Mid-Term Management Strategy (“GC2024,”) and held discussions on the direction of such strategy, etc. separate to regular meetings of the Board. As stated in “3” below, the Board will continue to consider its supervisory functions for human capital during investigations into the ideal configurations for deliberations and monitoring on a Group-wide basis.

(3) Supporting the Outside Directors to further utilize their expertise
In addition to the current provision of sufficient education opportunities and information to Outside Directors, the Corporation improved the support for Outside Directors to allow them to fulfill their duties and responsibilities, such as the provision of opportunities to discuss and engage with executives.
These items have generally been highly evaluated, including in the results of questionnaires and interviews.

3. Handling issues in effectiveness evaluations pertaining to the Board of Directors in FY2022

(1) Deepen the discussions at the Board regarding the overall direction of the Board to strengthen its supervisory functions
The Corporation believes it is important to deepen discussions related to the overall direction of the Board of Directors and its supervisory functions based on the Group’s future vision and Mid-Term Management Strategy “GC2024” to institute improvements.
The Board will continue discussions to establish a “Governance model suitable for the Corporation based on current circumstances and characteristics,” including the facilitation of meetings separate to routine meetings of the Board.

(2) Considering the process of selecting the items discussed at the Board and supervisory functions related to the important issue of Marubeni Group management
The Corporation believes it is important to select the items discussed at meetings of the Board of Directors based on its supervisory functions, and that it is necessary to strengthen these functions from the perspective of the entire Marubeni Group regarding important themes in Group management, such as governance and the allocation of management resources to human capital, etc.
The items that will be discussed at the Board should be selected by reflecting on its intentions, including on opinions of the Outside Directors. The Board will endeavor to monitor themes from the point of view of Group management through reviews of the Mid-Term Management Strategy “GC2024,” etc.

Referring to the results of effectiveness evaluations regarding the Board of Directors, the Corporation will continue to work on maintaining and improving the effectiveness of the Board of Directors going forward and to pursue improvements in long-term corporate value.