Note: This English translation is for reference purposes only and is based on an original document submitted to the Tokyo Stock Exchange on June28, 2021, in Japanese. In the event of any discrepancy between the Japanese original and this English translation, the original shall prevail. Kureha Corporation assumes no responsibility for this translation or for any direct, indirect or other form of damages arising from the translation.

Corporate Governance Report

Last Update: June 28, 2021

KUREHA CORPORATION

Yutaka Kobayashi, President & Chief Executive Officer Contact: Kazushige Tsurutani, General Manager, Public & Investor Relations Department +81-3-3249-4651 Securities Code: 4023 https://www.kureha.co.jp/

The status of corporate governance of KUREHA CORPORATION (hereinafter referred to as the "Company," "Kureha," or "We") is described below.

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

Basic Information

1. Basic Views

Corporate philosophy and basic policy for corporate governance

Kureha upholds the following Corporate Philosophy, Corporate Mission, and Employee Code of Conduct as its identity (reason for existing). All executives and employees share these ideals, and constantly strive to achieve ambitious goals.

Corporate Philosophy

  • We treasure people and the natural environment.
  • We constantly evolve through innovation.
  • We contribute to society by developing beneficial products.

Corporate Mission

Kureha aims to be an "Excellent Company".

Employee Code of Conduct

We always act as global corporate citizens, recognizing our corporate social responsibilities. In relation to our clients:

We will act with sincerity and with customer satisfaction as our priority. In relation to our work:

We will consistently pursue progress and innovation.

We will consistently respond to change and act with a global perspective. In relation to our colleagues:

We will maintain mutual respect and exhibit teamwork.

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Kureha is committed to strengthening its internal control functions including practicing compliance and ensuring fair and highly transparent management. In addition, Kureha has adapted Corporate Governance Guidelines, which are separately established (URL: https://www.kureha.co.jp/en/ir/pdf/201906_CG_en.pdf) to further enhance the effectiveness of its corporate governance, through which Kureha pursues sustainable growth and improving the medium- and long-term growth of corporate value for the Kureha Group (Kureha and Group companies).

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

[Supplementary Principle 4.3.2 Appointment of the President & Chief Executive Officer]

The Nomination Advisory Committee deliberates on the appointment of the President & Chief Executive Officer, and the chairperson of the Board of Directors proposes to the Board of Directors the results of the review of the details.

[Supplementary Principle 4.3.3 Dismissal of the President & Chief Executive Officer]

The Nomination Advisory committee deliberates on the dismissal of the President & Chief Executive Officer, and the chairperson of the Board of Directors proposes to the Board of Directors the results of the review of the details.

[Principle 4.11 Preconditions for Ensuring the Effectiveness of the Board of Directors]

Kureha appoints individuals as Directors who can be expected to adequately fulfill the roles and duties of determining important management matters and supervising the business execution of the Group, taking into account diversity including gender and international experience while comprehensively considering the abilities and suitability of each individual.

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

[Principle 1.4 Policy concerning Cross-Shareholdings]

  1. Kureha holds shares of transaction partners when it is deemed beneficial in terms of its business transaction status to date with those companies and the enhancement of the Company's sustainable, medium- and long- term corporate value. The Board of Directors verifies the significance of cross-shareholdings by carefully examining whether the purpose of holding such shares of stock is appropriate and whether the benefits and risks from such cross-shareholdings are commensurate with Kureha's cost of capital. Kureha will gradually reduce the number of shares that are no longer significant for Kureha to hold based on a comprehensive consideration of factors such as dialogue with companies in business relationships, the impact on the market, and availability of effective use of funds. For FY2021, Kureha holds shares in 29 companies in business relationships and 8 financial institutions.
  2. The voting rights of cross-held shares are determined and exercised on the basis of a comprehensive judgement as to whether each proposal will not lead to any damage to the enhancement of the medium- and long-term corporate value and shareholder value of the relevant companies whose shares are held.

[Principle 1.7 Disclosure of Appropriate Procedure and Framework for Related Party Transactions]

The Board of Directors appropriately manages conflicts of interests that may occur between related parties such as Directors and major shareholders of the Company, and the Company.

[Principle 2.6 Roles of Corporate Pension Funds as an Asset Owner]

  1. With regard to the Company's defined-benefit corporate pension, Kureha is fully aware that the management of corporate pension funds impacts the Company's own financial standing in addition to the stable asset formation for employees, and has established the Retirement Pension Committee which consists of the General Manager of Finance & Accounting Division, General Manager of Administration Division, General Manager of Human Resources Department, General Manager of Accounting Department, and General Manager of Finance Department, which meets twice a year to monitor the management results.
  2. The asset manager of Kureha's corporate pension funds has already announced its acceptance of the Stewardship Code. Kureha regularly conducts monitoring of stewardship activities through the quarterly briefing session by the asset manager it entrusts.

[Principle 3.1 Full Disclosure]

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1. Company objectives (e.g., corporate philosophy), business strategies and business plans

For the Company's corporate philosophy, please refer to I-1 of this report. Kureha has drafted a medium-term management plan, the details of which are appropriately disclosed on the corporate website (https://www.kureha.co.jp/en/ir/policy/middle_plan.html).

2. Basic views and guidelines on corporate governance based on each of the principles of the Code

For the Company's basic views and guidelines on corporate governance, please refer to I-1 of this report and Corporate Governance Guidelines of the Company

(URL: https://www.kureha.co.jp/en/ir/policy/governance.html).

  • 3. Board policies and procedures in determining the remuneration of the senior management and Directors

  • When determining remuneration, etc. for Directors and Vice Presidents, the Board of Directors reflects corporate performance and medium- and long-term growth of corporate value, and also considers securing and retaining appropriate human resources, and sets the remuneration structure and level that are appropriate to the required roles and responsibilities.
  • Remuneration for Directors consists of 1) basic remuneration and 2) bonuses as performance-linked remuneration, as monetary remuneration, and 3) remuneration related to stock acquisition rights as stock options as non-monetary remuneration; provided, however, remuneration for Outside Directors is limited to basic remuneration, considering their roles.
  • Remuneration for Vice Presidents consists of 1) basic remuneration and 2) bonuses as performance-linked remuneration, as monetary remuneration, and 3) remuneration related to stock acquisition rights as stock options as non-monetary remuneration.
  • Changes to the remuneration system for Directors and Vice Presidents shall be decided by the Board of Directors based on comprehensive consideration of trends at other companies, and after deliberation by the Remuneration Advisory Committee, a non-mandatory advisory board to the Board of Directors.
    [Remuneration for Individual Directors]
  • Basic remuneration shall be monthly cash remuneration ("monthly remuneration") and shall be paid within the total amount resolved at the General Meeting of Shareholders. The amount for each individual shall be in accordance with the standard separately determined for each position.
  • Bonuses shall be cash remuneration that reflects performance indicators for the purpose of raising awareness of the improvement of business performance in each fiscal year, and the total amount calculated based on profit attributable to owners of parent for each fiscal year as a performance indicator shall be resolved at the General Meeting of Shareholders. The President & Chief Executive Officer shall be entrusted in accordance with the resolution of the Board of Directors to determine the amount for each individual Director based on his or her evaluation, which shall be paid at a certain time each year.
  • Remuneration related to stock acquisition rights as stock options shall be provided within the total amount resolved at the General Meeting of Shareholders, for the purpose of providing Directors with incentives for the sustainable improvement of corporate value and raising shareholder-focused management awareness. The amount for each individual shall be in accordance with the standard separately determined for each position and shall be provided at a certain time each year based on the resolution of the Board of Directors. The fair value of stock options is calculated based on reasonable grounds such as the Black-Scholes model and determined by the Board of Directors.
  • The President & Chief Executive Officer shall be entrusted to determine specific details of the amount of monthly remuneration for each individual in accordance with the resolution of the Board of Directors. The details of the entrusted authority shall be the determination of the standard for the amount for each director by position.
  • The President & Chief Executive Officer shall be entrusted to determine specific details of the amount of bonus for each individual in accordance with the resolution of the Board of Directors. The details of the entrusted authority shall be the determination of the amount for each Director based on the evaluation by the President & Chief Executive Officer.
  • The President & Chief Executive Officer shall be entrusted to determine specific details of the amount of the remuneration related to stock acquisition rights as stock options for each individual in accordance with the resolution of the Board of Directors. The details of the entrusted authority shall be the determination of the standard for the amount for each Director by position.
  • In order to ensure that the authority entrusted to the President & Chief Executive Officer regarding the remuneration for each class is properly exercised, the standard for the amount of monthly remuneration for each Director by position, the amount of bonus for each Director based on the evaluation, and the standard
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for the amount of the remuneration related to stock acquisition rights as stock options for each Director by position shall be determined after deliberation by the Remuneration Advisory Committee, a non-mandatory advisory board to the Board of Directors.

  • The amount of remuneration for Directors shall be revised based on comprehensive consideration of factors including the remuneration levels of other companies and the Company's business performance. The procedure for the revision shall be in accordance with the method of determining the amount of remuneration for each class.
    [Remuneration for Individual Vice Presidents]
  • The amount of remuneration for each Vice President by class shall be in accordance with the remuneration structure for Directors, and shall be determined by the President & Chief Executive Officer in accordance with the internal rules under the remuneration structure determined by the Board of Directors after deliberation by the Remuneration Advisory Committee. The determination by the President & Chief Executive Officer shall be made after deliberation by the Remuneration Advisory Committee.
  1. Board policies and procedures in the appointment/dismissal of the senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members
    [Appointment of Directors]
    The Board of Directors makes decisions on the appointment of Directors and Vice Presidents appropriately based on the evaluation of factors such as Company's business performance while ensuring transparency and fairness of the Company's decision-making. When appointing Directors, achieving a balance of knowledge, abilities, and experience as well as diversity for the Board of Directors as a whole is taken into account.
    Based on the above policy, the Nomination Advisory Committee, non-mandatory advisory board to the Board of Directors deliberates on the appointment of Directors and Vice Presidents, and the chairperson of the Board of Directors proposes to the Board of Directors the results of the review of the details for the resolution of the appointment.
    [Appointment of Audit & Supervisory Board Members]
    Audit & Supervisory Board Members must have a high ethical standard and possess the insights, abilities, and experience required as an Audit & Supervisory Board Member. At least one member must be a person with the appropriate knowledge related to finance and accounting.
    Prior consent of the Audit & Supervisory Board shall be obtained for candidates for Audit & Supervisory Board Members.
    [Appointment/Dismissal of President & Chief Executive Officer and Vice Presidents]
    The Nomination Advisory Committee deliberates on the appointment and dismissal of the President & Chief Executive Officer, and the chairperson of the Board of Directors proposes to the Board of Directors the results of the review of the details. The appointment of Vice Presidents is deliberated on by the Nomination Advisory Committee, non-mandatory advisory board to the Board of Directors, and decided by the resolution of the Board of Directors. Each Director proposes the dismissal of a Vice President to the Board of Directors if he or she finds that the Vice President executes business operations in a manner that departs from the reasons for the appointment of such Vice President.
  2. Explanations with respect to the individual appointments and nominations of the senior management, Directors, and Audit & Supervisory Board Members
    Past experience and reasons for selection for candidates for Directors and Audit & Supervisory Board Members are disclosed in the Notice of General Meeting of Shareholders.

[Supplementary Principle 4.1.1 Determination and Disclosure of the Scope of Matters Delegated to Management]

To speed up decision-making and business execution in management, matters other than those requiring a resolution by the Board of Directors are deliberated and executed by the Executive Committee, which consists mainly of Vice Presidents in accordance with the Authority Standard Rules.

[Principle 4.9 Standards for Determining Independence of Outside Executives]

The Board of Directors applies the standards of independence outlined by financial instruments exchanges to draft the "Standards for Determining Independence of Outside Executives" that focus on ensuring in practical terms the independence of individuals who will be Independent Outside Directors or Independent Outside

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Auditors, and discloses the standards in II-1[Independent Directors/Audit & Supervisory Board Members] in this report.

[Supplementary Principle 4.11.1 View on the Balance between Knowledge, etc. of the Board of Directors as a Whole and on Diversity and Board Size]

Based on the size and details of businesses of Kureha and Group companies, the Board of Directors consists of up to ten individuals, with two or more Independent Outside Directors appointed. When appointing Directors, achieving a balance of knowledge, abilities, and experience as well as diversity for the Board of Directors as a whole is taken into account.

[Supplementary Principle 4.11.2 Disclosure of the Status of Concurrent Positions of Outside Directors and Outside Audit & Supervisory Board Members Each Year]

The status of concurrent positions of Directors and Audit & Supervisory Board Members of the Company as outside executives at other listed companies, etc. is disclosed in the Notice of General Meeting of Shareholders.

[Supplementary Principle 4.11.3 Analysis and Evaluation of the Effectiveness of the Board of Directors as a Whole and Disclosure of the Results]

To improve the functions of the Board of Directors, Kureha shall conduct an annual analysis and evaluation of the effectiveness of the Board of Directors and disclose an overview of the results. In FY2020, Kureha conducted a questionnaire survey on the "Evaluation of the Effectiveness of the Board of Directors" for FY2020 in March 2021, targeting all eight Directors and Audit & Supervisory Board Members and made deliberations based on the aggregate results of the self-evaluation at the ordinary meeting of the Board of Directors held in April 2021. Specifically, evaluation was conducted on (1) structure of the Board of Directors,

  1. operation of the Board of Directors, and (3) agenda of the Board of Directors, (4) support system for Outside Directors, roles of Audit & Supervisory Board Members, expectations for Audit & Supervisory Board Members, and (5) relationship with stakeholders. As a result, Kureha confirmed that all items in the questionnaire were properly implemented and that the effectiveness of the Board of Directors as a whole was ensured. Although there are no specific issues to be addressed based on the results of evaluation and deliberations for FY2020, Kureha will continue to make improvements to further enhance the deliberations of the Board of Directors.

[Supplementary Principle 4.14.2 Disclosure of Training Policy for Directors and Audit & Supervisory Board Members]

Kureha provides opportunities for the training that are appropriate for individual Directors and Audit & Supervisory Board Members.

[Principle 5.1 Policy for Constructive Dialogue with Shareholders]

Based on the following policies, Kureha maintains constructive dialogue with shareholders in order to contribute to sustainable growth and improving medium- and long-term corporate value.

  1. Departments in charge and details of implementation
  • The Public & Investor Relations Department and the General Affairs Department are in charge of serving as liaisons and conduct dialogues with shareholders, etc. in an appropriate and timely manner by consulting with the President & Chief Executive Officer and relevant executives.
  • The Public & Investor Relations Department and the General Affairs Department work to develop organic partnerships by exchanging information and opinions with other internal departments on a regular basis.
  • To promote understanding about Kureha among shareholders, etc., Kureha conducts a wide range of proactive measures, including reporting the Company's business at the General Meeting of Shareholders, distributing materials to shareholders, etc., providing information on the corporate website, organizing briefings with institutional and individual investors, and conducting private meetings with domestic and foreign institutional investors.
  • Opinions and information obtained from shareholders, etc. are utilized for management reviews and directing the management of the Company.
  1. Information management standards
  • Parties involved in dialogue with shareholders ensure that undisclosed vital corporate information is strictly managed in accordance with the Information Disclosure Rules and the Insider Trading Management Regulations.
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Kureha Corporation published this content on 19 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 October 2021 05:31:09 UTC.