Acom : Corporate governance report

ACOM CO., LTD.

CORPORATE GOVERNANCE

Last updated on May 31, 2022

ACOM CO., LTD.

President & CEO: Masataka Kinoshita

Contact: Corporate Planning Dept., Telephone: [phone] Code Number: 8572 https://www.acom.co.jp/

The status of corporate governance of the Company is described below:

1. Basic Policies on Corporate Governance, and Capital Structure, Company Outline and Other General Information

1. Basic Policy (Updated)

The ACOM Group, guided by its lifelong "circle of trust" spirit, maintains an ongoing corporate commitment to respecting other people, putting the customer first, and conducting creative and innovative management. Based on this commitment, we are seeking to deepen mutual trust between our stakeholders and ourselves and thus progress in partnership with society.

In order to meet the expectations of stakeholders and build stronger trust, we will strengthen corporate governance as a key management priority. To this end, we will take steps to enhance the soundness, transparency, and efficiency of our operations and achieve sustained increases in our shareholder value.

We recognize that effective internal control systems are essential to creating an appropriate corporate governance framework. Based on this recognition, we are encouraging all members of our organization to join forces in building internal control systems and assuring their effectiveness, under the leadership of management. At the same time, we are constantly evaluating, verifying, and improving the effectiveness of internal control mechanisms already in place.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] (Updated)[Supplementary Principle 4.2.1]

ACOM has performance-linked compensation system based on single year performance in place for compensation for directors (excluding directors serving as members of Audit & Supervisory Committee).

ACOM will continue reviewing medium- to long-termperformance-linked compensation system with aim of making compensation for directors effective and sound incentive for sustainable growth of the Company.

[Supplementary Principle 4.10.1]

ACOM has Appointment and Remuneration Committee in place as optional committee in charge of appointment of and compensation for senior management and directors. The structure of appointment and remuneration committee is as follows:

• The Number of Inside Directors and Independent Outside Directors.
• • Board of Directors: 7 inside directors and 2 independent outside directors
  • Appointment and Remuneration Committee: 4 inside directors and 2 independent outside directors
• The Number of Directors not Serving as Members of Audit & Supervisory Committee and Those Serving as Members of Audit & Supervisory Committee.
• • Board of Directors: 6 directors who are not members of the committee and 3 directors who are members of the committee
  • Appointment and Remuneration Committee: 3 directors who are not members of the committee and 3 directors who are members of the committee

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Independent outside directors do not constitute the majority of Appointment and Remuneration Committee, however, the Company ensures their appropriate involvement and receives their suitable advice upon consideration of appointment and compensation.

[Principle 4.11]

In order to be able to effectively fulfill the roll and responsibility of the Board of Directors, ACOM has created a skill matrix for directors after identifying the skills that the directors should hold in particular.

The Board of Directors of the Company consists of nine members, and as described in the skill matrix, the Company strives to ensure a good balance of knowledge, experience, abilities and age while ensuring diversity.

There are no female directors or foreigner directors at the Company at this point. However, the Company is willing to nominate any individuals who meet criterion in appointment policy as candidate and who holds the skill that the directors should hold, regardless of one's gender and nationality.

[Disclosure Based on the Principles of the Corporate Governance Code] (Updated)[Principle 1.4]

The Company currently does not have any strategic shareholdings and does not plan to do so in the future.

[Principle 1.7]

Pursuant to relevant laws, it is provided in our regulations of board of directors that transactions with directors and material transactions with major shareholders require prior approval of the board of directors.

[Supplementary Principle 2.4.1]

Under the situation where competition between companies is intensifying and changes in needs are accelerating, in order to implement "creative and innovative management" that the Company advocates in its corporate philosophy, and to continue to meet the expectations from stakeholders, it is necessary to create a new value by fusing abilities, ideas and values from diverse human resources.

With that in mind, ACOM is actively taking measures to secure diversity, including recruitment, promotion, and human resource development of female and mid-career employees.

To ensure the diversity of core human resources, ACOM has set the following targets for the ratio of females and mid-career hires in managerial or higher positions.

	Category			Current			Target
			As of October 1, 2021			By March 31, 2024
	Percentage of Females in managerial positions	18.3%		20.0%
	Percentage of Mid-Career Hires in managerial	5.8%			Increase from current level
	positions*

*For the purpose of this tabulation, mid-career hires are defined as "those who joined the company mid-career hires are defined as "those who joined the company mid-career and have been with the company for 10 years or less.

In addition, the Company promotes employees to managerial position with an emphasis on their ability and personality regardless of their nationality.

• Policies on Human Resource Development, Internal Environmental Development, and Implementation Status to Ensure Diversity>

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Through training for female and mid-career hires, as well as enlightenment activities related to diversity, ACOM aims to promote the understanding of diversity within the company and respect and make maximum use of the abilities, ideas, values, etc. of diverse human resources and develop human resources who can lead the organization in a unified and appropriate manner.

ACOM will also create an internal environment that allows employees from various backgrounds to choose a flexible work style that suits their lifestyle.

Based on the above policy, ACOM is implementing the following human resource development and internal environment development.

Category		Status
Human Resource Development	-	Implemented leadership training for female, career design training for
		female, training for those returned to work after childcare leave, and
		training for mid-career hires when they join the company.
	-	Teaching materials to learn about "diversity and human rights", "LGBT",
		"balancing work and long-term care", etc. are posted on the company
		intranet and provided to employees.
Internal Environment Development	-	Paying salary when taking childcare leave. (up to 5 days)
	-	Able to select from 5 patterns of short working hours for childcare.
	-	Granted paid special leave for fertility treatment (up to 5 days)
	-	Able to take paid leave for the purpose of support for family nursing /
		nursing care and childbirth / childcare.
	-	Implemented measures to acquire the Platinum Kurumin Mark
		(promotion of taking childcare leave and efforts to realize a smooth return
		to work).
	-	Stipulated in the regulations that words and actions that worsen the
		working environment such as suggestion of disadvantageous treatment
		and harassment regarding the use of systems and measures related to
		pregnancy, childbirth, childcare, etc. are prohibited.
	-	Paid leave is available on an hourly basis.
	-	Paid leave is granted at the time of joining the company (statuary is 6
		months after joining the company).
	-	Introduced a course-based personnel system that allows the employee to
		select whether or not to be transferred.
	-	Introduced a telecommuting system.
	-	Established a consultation desk for employees with disabilities.

[Principle 2.6]

The Company has Corporate Pension Asset Management Committee in place to effectively manage corporate pension asset. The committee comprises of the director in charge of Human Resources Dept. and chief general managers of Human Resources Dept., Corporate Planning Dept., Finance Dept. and Treasury Dept.

The members of the committee need to deepen their understandings on investment theory, asset management system, contents of asset for investment, etc. They also need to grasp asset management environment. Therefore, the Company provides necessary information from trustee management institutions to committee members in periodic manner.

The committee discusses basic policy on corporate pension asset management, matters on investment and trustee management institutions. The Company further discusses these matters at management meeting where Audit &

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Supervisory Committee members attend and share their opinion. Therefore, the Company ensures appropriate management of corporate pension asset.

[Principle 3.1]

1. Guiding Principles of the Company (Corporate Philosophy, etc.), Management Strategy and Management Plan

1. Guiding Principles of the Company (Corporate Philosophy, etc.) Please refer to "Corporate Philosophy" on our website. (https://www.acom.co.jp/corp/english/about-us/philosophy/)
2. Management Strategy and Management Plan

Please refer to "Medium-term Management Plan" on our website.

(https://www.acom.co.jp/corp/english/ir/management/medium-term_management_plan/)

1. Basic approach and key policies on corporate governance

Please refer to "I. 1. Basic Policy" of this report for our basic approach and key policies on corporate governance.

1. Policies and procedures for determining compensations for senior management and directors

Please refer to "II. 1. [Compensation for Directors]" of this report for our policies and procedures for determining compensation for senior management and directors.

1. Policies and procedures for appointing and dismissing senior management, and nominating candidates for directors

1. Policies

1. Appointing Senior Management
2. • The candidate owns rich experience, in-depth insight and high expertise of Company's business which are necessary for conducting swift and pertinent business execution.
   • The candidate possesses great humanity such as wide trust from others, dignity and high moral.
   • The candidate is sound both in mind and body, and does not possess possible concern for business performance.
   • The candidate does not have any past record of violations of law and compliance (including harassment) which inflicted significant loss to the Company and any other entities the candidate has served.
   • The candidate is not affiliated with any anti-social forces.
3. Dismissing Senior Management
4. • A senior management is dismissed when one no longer meets criterions under appointment policy.
5. Nominating Candidates for Directors (Excluding Those Serving as Members of Audit & Supervisory Committee)
6. • The candidate owns rich experience, in-depth insight and high expertise which are necessary for efficient supervision on management.
   • The candidate possesses great humanity such as wide trust from others, dignity and high moral.
   • The candidate is sound both in mind and body, and does not possess possible concern for business performance.
   • The candidate does not have any past record of violations of law and compliance (including harassment) which inflicted significant loss to the Company and any other entities the candidate has served.
   • The candidate is not affiliated with any anti-social forces.
7. Nominating Candidates for Directors Serving as Members of Audit & Supervisory Committee

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1. • The candidate owns rich experience in management, laws, finance and accounting, combined with deep insight and high degree of expertise needed for achieving management transparency and improving objectivity.
   • The candidate possesses great humanity such as wide trust from others, dignity and high moral.
   • The candidate is sound both in mind and body, and does not possess possible concern for business performance.
   • The candidate does not have any past record of violations of law and compliance (including harassment) which inflicted significant loss to the Company and any other entities the candidate has served.
   • The candidate is not affiliated with any anti-social forces.
2. Nominating Candidates for Directors Appointed as Independent Directors
3. • The candidate within (C) and (D) who is appointed as Independent Directors meets all requirements

below and items set forth in "Independence Standards for Outside Directors."

• Please refer to "I. 1. Basic Policy [Disclosure Based on the Principles of the Corporate Governance Code] [Principle 4.9]" for "Independence Standards for Outside Directors."

1. • The candidate is capable of offering advices on management policies and management improvements, by utilizing knowledge, from the viewpoint of increasing medium- to long-term corporate value by promoting sustainable growth of the Company.
   • The candidate is capable of supervising management through appointment/dismissal of senior management and other significant decision makings at the Board of Directors.
   • The candidate is capable of supervising conflict of interests between the Company, management, controlling shareholders, etc.
   • The candidate is capable of reflecting opinions of stakeholders including minority shareholders at the Board of Directors, independent from the management and controlling shareholders, in a proper manner.
2. Procedures

1. Appointing and Dismissing Senior Management

The board of directors resolves appointments based on policies above after examinations are conducted and proposals are made by appointment and remuneration committee.

1. Nominating Candidates for Directors (Excluding Those Serving as Members of Audit & Supervisory Committee)
   The board of directors resolves appointments based on policies above after examinations are conducted and proposals are made by appointment and remuneration committee.
2. Nominating Candidates for Directors Serving as Members of Audit & Supervisory Committee

The board of directors resolves appointments based on policies above upon agreement by the Audit & Supervisory Committee after examinations are conducted and proposals are made by president.

1. Explanation on Appointment of Senior Management and Nomination of Individual Candidates for Directors Explanation on appointment of senior management and nomination of individual candidates for directors

(excluding those serving as members of Audit & Supervisory Committee) and directors serving as members of Audit & Supervisory Committee is mentioned on our convocation notice for ordinary general meeting of shareholders which is available for inspection on our website.

(https://www.acom.co.jp/corp/english/ir/stock/shareholders_meeting/)

[Supplementary Principle 3.1.3]

ACOM is implementing sustainability initiatives as follows:

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