Corporate Governance Report

Oji Holdings Corporation

Last Update: June 29, 2022

Oji Holdings Corporation

President: Hiroyuki Isono

Contact: +81-3-3563-1111

(Corporate Administration Dept.,

Corporate Governance Div.)

Securities Code: 3861

https://www.ojiholdings.co.jp/english/

The corporate governance of Oji Holdings Corporation (the "Company") is described below.

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

Other Basic Information

1. Basic Views

Drawing on the fundamental values and the behavior principles that the Oji Group (the "Group") has carried down as a company since its founding, the Group has formulated the Oji Group Corporate Code of Conduct by which the Group as a whole engages in corporate activities with an awareness of its responsibility as a corporate citizen and a strong sense of ethics. The Group will continue to strive toward enhancing its corporate governance, regarding it as one of the highest priority issues, by ensuring efficiency, soundness and transparency of the management, while building relationships of trust with its diverse stakeholders. In doing so, the Group aims to increase its corporate value and become a company that is trusted by society.

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

The Company complies with all the principles of the Corporate Governance Code revised in June 2021, including all principles for companies listed on the Prime Market applicable after April 4, 2022.

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

The Company has formulated the "Fundamental Policies on Corporate Governance" and posted it on its website.

The Fundamental Policies on Corporate Governance:

  • https://www.ojiholdings.co.jp/english/group/policy/governance.html>

[Principle 1.4] (Strategic Shareholdings)

The Group strategically holds shares that are expected to contribute to the sustainable growth of the Group and the improvement of corporate value over the medium- to long-term as part of its management strategy for the purpose of business alliances and strengthening and maintenance of long-term and stable relationships with business partners.

The Article 18 of the "Fundamental Policies on Corporate Governance" stipulates the following regarding strategic shareholdings.

Article 18. The Group, as part of its management strategies, shall strategically hold shares that are deemed to contribute to the sustainable growth of the Oji Group and the enhancement of its medium- to long-term corporate value, from the perspectives of business collaboration as well as strengthening and maintenance of long-term stable relationship with business partners.

2. The Group shall verify the appropriateness of strategic shareholdings at the Board of Directors every year, by concretely examining the purpose of holding the shares, as well as whether the benefits and risks associated with holding the shares are commensurate with the cost of capital. The Group, then, shall proceed

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with reducing strategic shareholdings by selling the shares for which there is insufficient rationale in a timely and appropriate manner.

3. The Group, taking into account the management policies of issuing companies involved in strategic shareholdings, shall comprehensively assess the impact of each proposal on the Group which include whether the proposal would contribute to enhancing the medium- to long-term corporate value of the issuing companies, or whether it would lead to harm shareholder value. The Group, then, shall exercise its voting rights, and engage in dialogue with issuing companies and other parties regarding the content of the proposal.

At the Board of Directors meeting held in December 2021, the appropriateness of strategic shareholdings as of the end of March 2021 was examined through the specific examinations for each share which determined whether the purpose of holding was appropriate and whether the benefits and risks associated with holding were commensurate with the cost of capital. The Company proceeds with reducing the strategic shareholding by appropriately selling the shares for which there is insufficient rationale.

[Principle 1.7] (Related Party Transactions)

The Article 19 of the "Fundamental Policies on Corporate Governance" stipulates the following regarding related party transactions.

Article 19. The Company shall make efforts so that dealings between Officers, major shareholders and other parties do not harm the mutual interests of the Company and its shareholders, and shall engage in the following initiatives.

  1. Directors and Corporate Officers, when engaging in dealings with the Company on behalf of themselves or third parties, shall follow the provisions of the Companies Act as well as the Group Regulations to obtain prior approval from and perform after-action reporting to the Board of Directors.
  2. The Company shall confirm the presence of dealings between the Group and its Directors, Corporate Officers, or their relatives to the second degree every year, and shall strive to grasp the dealings by these parties that involve conflicts of interest.
  3. Major dealings involving the Company and its major shareholders, subsidiaries, affiliates, and other related parties shall be reported to the Board of Directors.

[Supplementary Principle 2.4.1] (Ensuring Diversity)

Please refer to "III.3. Measures to Ensure Due Respect for Stakeholders - Others" of this Report.

[Principle 2.6] (Roles of Corporate Pension Funds as Asset Owners)

In order to enhance the expertise of operations and fulfill its role as an asset owner, the Company complements its expertise as well as knowledge by appointing individuals with expertise and knowledge in pension fund management as investment executors and employing operational consulting firms. In addition, the Company strives to improve qualifications of its personnel by participating in seminars held by the Pension Fund Association of Japan and other pension business managing financial institutions.

As for the operational aspect, the Asset Management Committee makes decisions on investment activities and monitors the investment status and financial condition as necessary, taking into account the interests of corporate pension beneficiaries.

[Principle 3.1] (Full Disclosure)

(i)Management philosophy, management strategies and business plans

The Group works to improve its corporate value over the medium- to long-term by actively going "Beyond the Boundaries", based on its management philosophy of "Creation of Innovative Value", "Contribution to the Future and the World", and "Harmony with Nature and Society".

Under the management philosophy, the Group will contribute to the realization of a truly enriched society by continuing to promote three ways of resource recycling, namely "forest recycling", "paper recycling", and "water recycling", throughout its value chain, and providing value to society through its business.

In addition, the Group recognizes that "safety, environment, and compliance," which is the basis of corporate survival, is the highest priority and most important issue for management. The Group will continue its effort to ensure that its management and employees all over the world fully understand the ideas of eradicating

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occupational accident risks, preventing environmental accidents, and complying with laws and regulations to fulfill its corporate social responsibility.

In May 2022, in order to achieve further growth, based on its management philosophy, the Group has defined the Purpose, or the ideal to which it aspires: "Grow and manage the sustainable forest, develop and deliver the products from renewable forest and Oji will bring this world a brighter future filled with hope". The forest grown and managed sustainably not only absorbs and fixes carbon dioxide, but also mitigates floods, cultivates water sources such as water purification and prevents natural disaster in addition to its contribution to biodiversity, healing and health enhancement of people. The products derived from wood utilizing forest resources are made of renewable materials and able to substitute for plastic, films and fuel derived from fossil resources. The Group will confront global warming and environmental issues, and bring this world a brighter future filled with hope by growing and managing the sustainable forest and by developing and delivering the products utilizing renewable forest resources.

Aiming to realize the Purpose, the Group has set long-term vision for FY2030: "Growth to Evolution" as the Group's basic policy, and "Initiatives for Environmental Issues -Sustainability-" "Initiatives for Profitability Improvement -Profitability-" and "Initiatives for Product Development -GreenInnovation-" as specific efforts to achieve the basic policy. As for "Initiatives for Environmental Issues -Sustainability-", the Group will enhance the value of its business by continuingly execute countermeasures against environmental issues, such as fuel conversion aiming to zero coal consumption, promotion of greenhouse gas reduction through increasing renewable energy use, and expansion of net CO2 absorption by forests through acquisition, expansion, and effective utilization of forest plantations. As for "Initiatives for Profitability Improvement -Profitability-", the Group will enhance the value by deepening the existing businesses through the further establishment of the optimal production system, and at the same time, expanding the businesses into highly-expected and new markets, which includes enhancement of overseas packaging business and sales expansion of eco-friendly products. As for "Initiatives for Product Development -GreenInnovation-", the Group will enhance the value by encouraging and developing eco-friendly materials and products, commercializing plastic alternatives, and introducing new wood-derived products to the market. Through these initiatives, the Group will achieve net sales of 2.5 trillion yen and the "Environmental Action Program 2030" formulated in September 2020, which includes reducing GHG emissions by 70% or more compared to FY2018, by FY2030, and contribute to society as a company that "grows and manages the sustainable forest, develops and delivers the products from renewable forest and will bring this world a brighter future filled with hope".

Based on this long-term vision for FY2030, the Group has compiled the strategies and targets for the next three years to realize the Purpose into a medium-term management plan. Under this new medium-term management plan which covers FY2022 to FY2024, the Group endeavors to maintain stable consolidated operating profit of 150 billion yen or more and consolidated profit attributable to owners of parent of 100 billion yen or more.

By providing various values to society through its business, the Group aims to contribute to the realization of a genuine enriched society and to be a corporate group that constantly stays ahead of the needs of the times, challenges innovation, and grows sustainably.

Please refer to the Company's disclosures on its website and materials for management briefings. Management philosophy, management strategies:

  • https://www.ojiholdings.co.jp/english/group/policy/philosophy.html> Management Plan: <https://investor.ojiholdings.co.jp/en/ir/library/plan.html>

Financial Results & Presentation:

  • https://investor.ojiholdings.co.jp/en/ir/library/result.html>
  1. Basic views and guidelines on corporate governance

For basic views, please refer to "I.1. Basic Views" of this Report.

For guidelines, please refer to the "Fundamental Policies on Corporate Governance".

  • https://www.ojiholdings.co.jp/english/group/policy/governance.html>
  1. Board policies and procedures in determining remuneration of senior management and Directors

The Company has designed its compensation programs with an emphasis on the roles performed by the Director compensation program such that the Board of Directors promotes sustainable growth and increasing medium- to long-term corporate value of the company and pursues enhanced profitability and capital efficiency. The specifics of the Director compensation program and determination policies are set forth in the

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Fundamental Policies on Corporate Governance (Article 13). Director compensation comprises base compensation, bonuses that reflect short-term performance, and stock-based compensation that reflects medium- to long-term improvement in corporate value. Determinations are made by the Board of Directors based on recommendations submitted by the Compensation Committee.

The Article 13 of the "Fundamental Policies on Corporate Governance" stipulates the following regarding Director compensation program and determination policies.

Article 13. Compensation for Directors shall comprise base compensation, compensation reflecting short-term performance, and stock-based compensation reflecting medium- to long-term improvement in corporate value, and the total amount shall be within the limit amount resolved at general meetings of shareholders. Compensation for Outside Directors shall comprise base compensation only.

  1. Compensation for Corporate Officers who do not concurrently serve as Directors shall comprise base compensation and compensation reflecting short-term performance.
  2. Compensation for Directors and Corporate Officers shall be decided by the Board of Directors based upon reports from the Compensation Committee.
  3. Compensation for Audit & Supervisory Board Members shall be decided through discussion among the Audit & Supervisory Board Members, within the limit amount resolved at general meetings of shareholders.

(iv) Board policies and procedures for appointment and dismissal of senior management as well as nomination of candidates of Directors and Audit & Supervisory Board Members

At the Company, the Fundamental Policies on Corporate Governance (Articles 5, 6, and 10) stipulate as a Director nomination policy that candidates be nominated for Director who possess excellent character and insight and who may contribute to the sustainable growth as well as the increase of medium- to long-term corporate value of the Group and that candidates be appointed for Audit & Supervisory Board Members who are capable of executing the duties of Audit & Supervisory Board Members, and who possess excellent character and insight as well as high level of specialization and extensive experience.

When nominating candidates for Directors, the Nomination Committee, an advisory body to the Board of Directors, deliberates and recommends to the Board of Directors. As for nomination of candidates for Audit

  • Supervisory Board Members, the Nomination Committee recommends to the Board Of Directors with the consent of the Audit & Supervisory Board, following consultation with the Nomination Committee. The Nomination Committee consists of three Independent Outside Directors, the Chairman, and the President, and the Board of Directors receives reporting from the Committee, deliberates and makes decisions.

The Article 5, the Article 6, and the Article 10 of the "Fundamental Policies on Corporate Governance" stipulate the following regarding nomination policy of Directors and Audit & Supervisory Board Members and roles of the Nomination Committee and the Compensation Committee.

(Policies for Director Nomination)

Article 5. The Board of Directors shall nominate candidates for Directors who possess excellent character and insight and who may contribute to the sustainable growth as well as the increase of medium- to long-term corporate value of the Group. However, any nomination shall be conducted following consultation with the Nomination Committee.

2. Individuals with high level of expertise and broad insight, who are capable of expressing opinions from a standpoint independent of the management and from viewpoints of various stakeholders, shall be selected as candidates for independent Outside Directors.

(Roles of the Nomination Committee and Compensation Committee)

Article 6. The Nomination Committee and the Compensation Committee shall be established as advisory bodies to the Board of Directors.

2. The Nomination Committee shall deliberate the following issues/matters and report to the Board of Directors.

1 Nomination policies for candidates for Directors and Audit & Supervisory Board Members, and selection policies for Corporate Officers

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2 Nomination of candidates for Directors and Audit & Supervisory Board Members, and selection of Corporate Officers

3 Dismissal of Directors, Audit & Supervisory Board Members and Corporate Officers who do not fulfill the nomination and selection policies

4 Succession planning for the President and Chief Executive Officer 5 Selection and dismissal of Advisors

3. The Compensation Committee shall deliberate the following issues/matters and report to the Board of Directors.

1 Evaluation of Directors and Corporate Officers

2 Compensation structure and standards of Directors and Corporate Officers 3 Analysis and evaluation of the effectiveness of the Board of Directors

4 Compensation structure and standards of Advisors

(Policies for Audit & Supervisory Board Member Nomination)

Article 10. The Board of Directors shall nominate candidates for Audit & Supervisory Board Members who are capable of executing the duties of Audit & Supervisory Board Members, and who possess excellent character and insight as well as high expertise and rich experience. However, any nomination shall be conducted with the consent of the Audit and Supervisory Board, following consultation with the Nomination Committee.

2. Individuals with considerable knowledge of finance and accounting shall be nominated as at least one of the Audit & Supervisory Board Members.

  1. Explanations with respect to individual appointment, dismissal and nomination of Directors and Audit &

Supervisory Board Members

The Company explains reasons for appointments of candidates of Directors and Audit & Supervisory Board Members in its referential material of a General Meeting of Shareholders. Please refer to the said material that is posted on the Company's website.

  • https://www.ojiholdings.co.jp/english/ir/stock/meeting.html>

Please refer to descriptions in "II.1. Organizational Composition and Operation - Directors, Audit & Supervisory Board Members" of this Report for reasons for appointments of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members.

[Supplementary Principle 3.1.3] (Sustainability Initiatives) (Sustainability Initiatives)

Please refer to "III.3. Measures to Ensure Due Respect for Stakeholders - Implementation of Environmental Activities, CSR Activities etc." of this Report.

(Investment in Human Resources)

Please refer to "III.3. Measures to Ensure Due Respect for Stakeholders - Others" of this Report.

(Investment in Intellectual Property)

The Group creates innovations by refining cutting-edge technologies based on a range of core technologies accumulated from paper manufacturing and forestation, which are the roots of its founding.

We are developing eco-friendly materials, such as wood-derived biomass plastic, cellulose nanofiber, etc. Moreover, we are working to develop biomass plastic films with the processing technology for polypropylene films, with the aim of moving away from petrochemical-derived plastic films. We are also developing pharmaceutical products from hemicellulose, which is one of the wood fiber components. Furthermore, by providing new solutions in the form of products and services that meet the need of the times such as the liquid packaging carton business, next-generation packaging solutions, and water treatment business, we are promoting a business structure that goes beyond our conventional boundaries and providing new value.

Through these efforts, we will contribute to a sustainable society, while strengthening the profitability of our domestic business and expanding our overseas business.

Promotion of Innovation by the Group is explained in detail on the Company's website and Integrated Report. Please refer to the following website.

The Company's website <https://www.ojiholdings.co.jp/english/r_d/>

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Oji Holdings Corporation published this content on 29 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 June 2022 06:16:30 UTC.