(Translation)

Kao Corporation

Corporate Governance

Last updated on August 12, 2021

Kao Corporation

Yoshihiro Hasebe, President and CEO

Contact: Legal, Legal & Compliance +81-3-3660-7111 TSE Code: 4452

www.kao.com/global/en/

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

1. Basic Views

Our targets for 2030 is to make Kao a company with a global presence, valuable to society. In order to become an essential company in a sustainable world, Kao Corporation (hereinafter referred to as the "the Company") is significantly shifting its direction to ESG (environmental, social, and governance) management. While aiming to become a high-profit global company, the Company is also working toward raising the level of social contribution by capturing changes in business environments surrounding the Company and changes in stakeholders' values. In order to gain trust from society, which is indispensable for these corporate activities and business activities, the Company is constantly strengthening its corporate governance in both systems and operations. The Company views accomplishing its corporate governance as one of its most important management issues and the Company's basic stance on measures related to corporate governance is to set up and operate a management structure and an internal control system, timely implement necessary measures and achieve accountability so that the Company can swiftly respond to changes, realize efficient management that is sound, fair, and highly transparent, and continuously enhance corporate value. The Company has been actively engaging in activities to listen to stakeholders' voices and based on input from stakeholders and social trends, it conducts reviews of its corporate governance and implements the necessary measures and improvements, as needed, in an appropriate manner.

[Reasons for Non-compliancewith the Principles of the Corporate Governance Code]

As used in these matters to be disclosed, the definitions of the following terms shall be as follows: "Management" means executive Directors and Executive Officers.

"Senior Management" means Executive Officers with titles.

The following information is based on the Japan's Corporate Governance Code revised in June 2021, which includes principles for companies listed on the Prime Market applicable after April 4, 2022.

Ensure Adequate Coordination with External Accounting Auditor and Outside Directors (Principle 3.2.2 (iii))

The Company expects Audit & Supervisory Board Members, including Outside Audit & Supervisory Board Members, to fulfill the role of coordination with the external Accounting Auditor as contact points on the Company's side, and the external Accounting Auditor's views, issues and other matters are shared with Directors, including the Outside Directors, through the Audit & Supervisory Board Members. In the course of such information sharing, if Directors judge it necessary, they ensure efficiency and adequate coordination by establishing opportunities for direct exchange of information with the external Accounting Auditor.

Regular Exchange of Information Solely among Independent Outside Directors (Principle 4.8.1)

To promote discussions from diverse perspectives, independent Outside Directors and Outside Audit & Supervisory Board Members hold meetings exclusively for independent outside members on their own initiative to exchange information and share awareness of issues related to the Company's management and the activities of the Board of Directors, development of future Senior Management, and other matters. Given the current situation of having good communications, ad hoc meetings among independent outside members are considered more appropriate for such communication than regular meetings scheduled by the Company. Also, a newly appointed member who attended the meeting expressed his view that he was reassured by the fact that outside

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members can make their proposals directly to the Company through frank exchanges of opinions undertaken at the meeting.

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

The information is based on the Japan's Corporate Governance revised in June 2021, which includes principles for companies listed on the Prime Market applicable after April 4, 2022. The disclosures based on this item are described in "Initiatives for each principle of the Corporate Governance Code" at the end of this report.

= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =

The following updates have been implemented.

  • 9 Explanations with Respect to Individual Nominations and Appointments of Directors, Audit & Supervisory Board Members and Senior Management (Principle 3.1(v), Principle 4.11.1)
  • 15 Initiatives on Sustainability, and Information on Investments in Human Capital and Intellectual Properties (Principle 3.1.3)
  • 16 Policy Concerning Measures and Organizational Structures to Promote Constructive Dialogue with Shareholders (Principle 5.1)
    = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =

2. Capital Structure

Foreign Shareholding Ratio: More than 30%

[Status of Major Shareholders] [Updated]

(As of June 30, 2021)

Name / Company Name

Number of

Percentage

Shares

(%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

61,586,200

12.97

Custody Bank of Japan, Ltd. (Trust Account)

32,422,500

6.83

SMBC Nikko Securities Inc.

13,813,200

2.91

STATE STREET BANK AND TRUST COMPANY 505223

12,914,357

2.72

Custody Bank of Japan, Ltd. (Trust Account 7)

11,788,600

2.48

THE BANK OF NEW YORK 134104

8,231,805

1.73

STATE STREET BANK WEST CLIENT - TREATY 505234

7,769,267

1.64

Custody Bank of Japan, Ltd. (Trust Account 5)

6,892,300

1.45

JAPAN SECURITIES FINANCE CO., LTD.

6,764,800

1.42

Nippon Life Insurance Company

6,691,215

1.41

Controlling Shareholders (except for Parent

None

Company)

Parent Company

None

Supplementary Information [Updated]

  • The number of shares in the list above may include the number of shares held in trusts or subject to share administration.
  • The ratio of shareholding for each shareholder above has been calculated based on the number of issued shares excluding treasury shares.

1. The amendment to the large shareholdings report filed by BlackRock Japan Co., Ltd. and seven other persons on March 22, 2017, which is open to the public, stating that they held shares of the Company as shown below as of March 15, 2017. However, these shareholdings were not included in the above list of major shareholders because the Company could not confirm the number of beneficial shares held as of June 30, 2020.

Name

Number of shares

Ratio of shareholding

(thousand shares)

(percentage)

BlackRock Japan Co., Ltd. and

30,938

6.25

seven other persons

2. The amendment to the large shareholdings report filed by Nomura Securities Co., Ltd. and two other persons on October 22, 2020,which is open to the public, stating that they held shares of the Company as shown below as of October 15, 2020. However, these shareholdings were not included in the above list of major shareholders because the Company could not confirm the number of beneficial shares held as of December 31, 2020.

2

Name

Number of shares

Ratio of shareholding

(thousand shares)

(percentage)

Nomura Securities Co., Ltd. and

27,708

5.75

two other persons

3. The amendment to the large shareholdings report filed by Mitsubishi UFJ Trust and Banking Corporation and three other persons on April 19, 2021, which is open to the public, stating that they held shares of the Company as shown below as of April 12, 2021. However, these shareholdings were not included in the above list of major shareholders because the Company could not confirm the number of beneficial shares held as of June 30, 2021.

Name

Number of shares

Ratio of shareholding

(thousand shares)

(percentage)

Mitsubishi UFJ Trust and

Banking Corporation and three

28,295

5.87

other persons

4. The amendment to the large shareholdings report filed by Sumitomo Mitsui Trust Bank, Limited and two other persons on June 21, 2021, which is open to the public, stating that they held shares of the Company as shown below as of June 15, 2021. However, these shareholdings were not included in the above list of major shareholders because the Company could not confirm the number of beneficial shares held as of June 30, 2021.

Name

Number of shares

Ratio of shareholding

(thousand shares)

(percentage)

Sumitomo Mitsui Trust Bank,

32,199

6.68

Limited and two other persons

Also, the amendment to the large

shareholdings report filed by Sumitomo Mitsui Trust Bank,

Limited and two other persons on July 21, 2021, which is open to the public, stating that they held shares of the Company as of July 15, 2021 increased to 32,610 thousand shares which is 6.87% to the total number of outstanding shares.

3. Corporate Attributes

Listed Stock Market and Market Section

Tokyo Stock Exchange, First Section

Fiscal Year-End

December 31

Type of Business

Chemicals

Number of Employees (consolidated) as of the End of

More than 1,000

the Previous Fiscal Year

Sales (consolidated) as of the End of the Previous

More than ¥1 trillion

Fiscal Year

Number of Consolidated Subsidiaries as of the End of

From 50 to less than 100

the Previous Fiscal Year

  1. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder
    None
  2. Other Special Circumstances which may have Material Impact on Corporate Governance
    None
  1. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management

1. Organizational Composition and Operation

Organization Form

Company with Audit & Supervisory Board

Members

Details of the information about Audit & Supervisory Board Members are reported on the Japan Audit & Supervisory Board Members Association's website. www.kansa.or.jp/support/el009_130711_2.pdf

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[Directors]

Maximum Number of Directors Stipulated in Articles

0

(Not stipulated)

of Incorporation

Term of Office Stipulated in Articles of Incorporation

1

year

Chairperson of the Board

Outside Director

Number of Directors

8

Number of Outside Directors

4

Number of Independent Directors

4

Outside Directors' Relationship with the Company (1)

Name

Attributes

Relationship with the Company (*)

A

B

c

d

e

f

g

h

i

j

k

Sonosuke Kadonaga

From another company

Osamu Shinobe

From another company

Chiaki Mukai

Others

Nobuhide Hayashi

From another company

*Categories for "Relationship with the Company"

*" " when the director presently falls or has recently fallen under the category;

"

" when the director fell under the category in the past;

*"

●" when a close relative of the director presently falls or has recently fallen under the category;

"▲" when a close relative of the director fell under the category in the past

  1. Executive of the Company or its subsidiaries
  2. Non-executivedirector or executive of a parent company of the Company
  3. Executive of a fellow subsidiary company of the Company
  4. A party whose major client or supplier is the Company or an executive thereof
  5. Major client or supplier of the listed company or an executive thereof
  6. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director
  7. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
  8. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only)
  9. Executive of a company, between which and the Company outside directors/Audit & Supervisory Board Members are mutually appointed (the director himself/herself only)
  10. Executive of a company or organization that receives a donation from the Company (the director himself/herself only)
  11. Others

Outside Directors' Relationship with the Company (2)

Name

Designation as

Supplementary Explanation of

Reasons of Appointment

Independent

the Relationship

Director

Sonosuke

None

(i) Mr. Kadonaga has expertise

Kadonaga

in relation to international

corporate management gleaned

from his considerable experience

at a foreign-affiliated consulting

company. In addition, as a

measure to enhance the

neutrality and independence of

the Board of Directors, Mr.

Kadonaga, as an Independent

Outside Director, has chaired the

meetings of the Board of

Directors since March 2014, and

has thereby contributed to

enabling active discussions at

such meetings without any

distinction between

Inside/Outside Directors. In view

of these facts, the Company

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expects him to supervise the

management of the Kao Group as

an Independent Outside Director.

(ii) The Company determined

that none of the requirements for

prior discussion as provided in

Section III. 5. (3) 2 of the

"Guidelines Concerning Listed

Company Compliance, etc." of

the TSE applies to him, and also

that he has the necessary

independence based on the

"Standards for Independence of

Outside Directors/Audit &

Supervisory Board Members of

Kao Corporation" established by

the Company in line with the

above guidelines.

Osamu Shinobe

Mr. Shinobe previously had

(i) He has considerable

executive authority at ALL

experience and expertise in

NIPPON AIRWAYS CO., LTD.,

relation to global corporate

but ceased to have such

management and risk

authority from April 2017. ALL

management, gleaned principally

NIPPON AIRWAYS CO., LTD.

from his time in the maintenance

provides public transportation

sections where safety and

services as an airline company,

security took top priority at an

and the Company engages in

airline company which actively

regular transactions with ALL

promotes passenger and cargo

NIPPON AIRWAYS CO., LTD.

businesses around the world, that

in terms of the directors, officers

enable appropriate responses to

and employees of the Company

changes in business

using its services as a means of

environment. He has been

transportation in making

actively presenting opinions and

business trips. However, the

proposals in deliberations of the

amounts involved in such

Board of Directors concerning

transactions account for less

material matters in the

than 0.1% of the ALL NIPPON

management of the Kao Group,

AIRWAYS CO., LTD.'s net sales

based on his considerable

and the Company's net sales for

experience and expertise. In

the latest fiscal year,

view of these facts, the Company

respectively. Also, although

expects him to supervise the

there are transactions related to

management of the Kao Group as

membership fees for training

an Independent Outside

programs organized by the

Director.ii) The Company

Company, the amounts

determined that none of the

involved in such transactions

requirements for prior discussion

account for less than 0.1% of the

as provided in Section III. 5. (3)

ALL NIPPON

2 of the "Guidelines Concerning

AIRWAYS CO., LTD.'s net sales

Listed Company Compliance,

and the Company's net sales for

etc." of the TSE applies to him,

the latest fiscal

and also that he has the

year, respectively.

necessary independence based on

the "Standards for Independence

of Outside Directors/Audit &

Supervisory Board Members of

Kao Corporation" established by

the Company in line with the

above guidelines.

Chiaki Mukai

Ms. Mukai previously had

She has an extensive and high

executive authority at Tokyo

level of expertise in the

University of Science, but

scientific field, gleaned through

ceased to have such authority

her experience as an astronaut

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Kao Corporation published this content on 12 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 August 2021 02:10:07 UTC.