Renesas Electronics : Corporate Governance Report

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Corporate Governance Report

Renesas Electronics Corporation

Last Update:

January 24, 2022

Renesas Electronics Corporation

Hidetoshi Shibata

Representative Director,

	President and CEO
Contact:	CEO Office

TEL: [phone]

Securities Code: 6723 https://www.renesas.com/

The corporate governance of Renesas Electronics Corporation (hereinafter "Renesas" or the "Company") is described below.

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

1. Basic Views

Based on the following Corporate Governance Policy, the Renesas Group strives to be a company that is trusted by society by maintaining sound relationship with any and all stakeholders including local communities, customers and business partners in order to fulfill our social responsibility as a company

【Corporate Governance Policy】

Based on our "Purpose", "To Make Our Lives Easier", we are committed to build a sustainable future where technology helps make our lives easier by developing a safer, healthier, greener, and smarter world to provide intelligence to our four focus growth segments: Automotive, Industrial, Infrastructure, and IoT. To achieve our Purpose, we aim to respond flexibly to changes, solve issues, and continue to create value in a sustainable way based on the "Renesas Culture", a guideline of conduct for all of our activities, behavior and decision-making, which consists of five elements. Based on Renesas Culture, we aim for continuous growth and enhancement of corporate value over the med- to long-term. In addition, we aim to co-exist and co-prosper with every stakeholder in order to create long-term sustainable value as a responsible global company. In order to achieve this, we must thrive in the rapidly-changing, competitive global semiconductor marketplace, and continue to satisfy the expectations of all of our stakeholders and to grow with profit expansions. We will continue to solidify our business foundation as a global semiconductor company by honing technological advancement as well as supplying excellent semiconductor products and optimized solutions through elaborate marketing and sales activities. We recognize the importance to build a corporate governance structure and system that enables transparent, fair, quick and resolute decision-making. We will remain committed to enhance our corporate governance structure and system through various measures such as communication and cooperation with our stakeholders including shareholders, appropriate information disclosure, ensuring appropriate delegation of authority and highly effective oversight functions.

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Corporate Governance Report

Renesas Electronics Corporation

【Our Purpose】

To Make Our Lives Easier

At Renesas we continuously strive to drive innovation with a comprehensive portfolio of microcontrollers, analog and power devices. Our mission is to develop a safer, healthier, greener, and smarter world by providing intelligence to our four focus growth segments: Automotive, Industrial, Infrastructure, and IoT that are all vital to our daily lives, meaning our products and solutions are embedded everywhere.

【Renesas Culture】

Transparent

The leadership team's strategy and policy, the company's current situation, as well as the issues and thoughts of each business organization should be well understood among employees. This is also tightly connected to the "Agile" and "Entrepreneurial" elements described below, and we believe it is fundamental for the success of every individual and organization.

Agile

In order to respond to changes in a timely manner, it is necessary to identify the likely outcomes and implications as quickly as possible, make decisions quickly, and rapidly take or correct actions. We must recognize situations, make decisions and act at a high velocity. When a follow-up regarding a task is made from inside and outside the company, employees should understand they are not being "Agile".

Global

Not only the markets that we operate in, but also our customers and our competitors are global, and in order to thrive in this global environment, it is essential for us to have a global perspective ourselves. It is true we need better language skills, but there are many other simple steps we can take to facilitate communication, such as organizing discussion agenda, issues, alternative solutions in advance. In particular, numbers are useful as words. Whenever possible, use numbers to communicate, and try to share information more smoothly.

Innovative

In order for Renesas to provide "Innovative" technologies and products and continue to create sustainable social value, it is essential to practice "Innovative" way of conducting business and of thinking. Each and every one of our employees should embody "Innovation" using their imagination and creativity to contribute to the realization of a richer society.

Entrepreneurial

Individual employees should act professionally, voluntarily, and independently as if they are "running their own business" and are responsible for the results they deliver. Based on our strategies and policies as a company, we aim to develop employees who can think freely and create new value, without being constrained by existing concepts.

【Reasons for Non-compliance with the Principles of the Corporate Governance Code】 Updated

【Principle 4-9:Independence Standards and Qualification for Independent Directors】

The Company currently applies the Independence Standard established by the Tokyo Stock Exchange. The Company will consider establishing its original Independence Standards, taking various items into account such as future business environment and shareholders structure.

【Supplementary Principle 4-11-3:Analysis on the Efficiency of the Board of Directors】

The Company did not conduct the survey on the efficiency of the Company's Board of Directors in FY2021, but the Company has implemented the various measures to improve the efficiency of the Board of Directors based on the discussion made by Board of Director meeting, voluntary nomination/compensation committee meeting and cooperation with administration office of each meeting body. The Company will make efforts to improve the efficiency of Board of Directors through various measures such as the periodic evaluation on the efficiency of Board of Directors, its analysis and implementation of improvement actions taking the PDCA cycles into account.

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Corporate Governance Report

Renesas Electronics Corporation

【Disclosure Based on the Principles of the Corporate Governance Code】

【Principle 1.4: Policies for Cross-Shareholdings,voting rights exercise standard of Cross-Shareholdings】

The Company regards investment shares which the Company owns for the purpose other than pure investment as the Strategic Shareholdings (so-called"Cross-Shareholdings" in the Corporate Governance Code). The Company has a policy for the Strategic Shareholdings, under which the Company periodically confirms the significance and benefit to keep other company's share including strategic shareholdings, and, if the Company finds it does not have enough significance or benefit to do so, the Company will sell such share at the appropriate time flame. The Company does not own such shares as of the date of this report.

【Principle 1-7.Overview of the procedures which secures the appropriateness of related party transactions】 Please refer to Article 8 of our Corporate Governance Guidelines: <https://www.renesas.com/document/gdl/corporate-governance-guidelines>

【Supplementary Principle 2-4-1: Policy to ensure diversity, policy for human resources development and internal environment development to secure diversity, voluntary and measurable goals regarding diversity and their status】 Please refer to "Employee Growth and Engagement" in our web site "Sustainability at Renesas" https://www.renesas.com/about/company/sustainability/engagement

【Principle 2-6:Roles of Corporate Pension Funds as Asset Owners】

The Company has established the Renesas Corporate Pension Fund to operate the defined benefit plan, which manages the reserve fund by providing the investment trustee institution with the basic investment policy established by the Pension Fund.

Because the management of the Pension Fund may impact stable asset formation for employees and the financial standing of the Company, the Pension Fund strives for proper and efficient management and regular monitoring, utilizing the knowledge of the external experts and consultants including actuaries whom the Pension Fund concludes advisory contracts.

For the proper management of the Pension Fund, the Company implements various measures from both of human resources and operation perspectives such as: appointment of the appropriate person with experience and abilities from the Company as an executive officer of the Pension Fund who is in charge of the fund management; and the attendance of the executive of the Accounting & Control Division at the Asset Management Committee hosted by the Pension Fund.

In addition, to prevent possible conflicts of interest between the beneficiaries of the Pension Fund and the Company, the Pension Fund entrusts the investment trustees with the decision to select investees and exercise voting rights on investees.

【Principle 3-1 (i) Business principles, business strategies and business plans】 Please refer to Article 1.1. "Basic view" of this report for our business principles.

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Corporate Governance Report

Renesas Electronics Corporation

【Principle 3-1 (ii) Basic views and guidelines on corporate governance based on each principles of the principles of the Code】

Please refer to Article 1.1. "Basic View" of this report.

【Principle 3-1 (iii) Board policies and procedures in determining the compensation of the executive management and directors】

Please refer to "Director Compensation" session in Article 2.1 "Organizational Composition and Operation" of this report for the compensation of Directors.

【Principle 3-1 (iv) Board policies and procedures in the appointment/dismissal of the senior management and the nomination of directors and corporate auditors (kansayaku) candidates】

Please refer to Articles 15 and 17 of our Corporate Governance Guidelines: <https://www.renesas.com/document/gdl/corporate-governance-guidelines>

【Principle 3-1 (v) Explanations with respect to the individual appointments/dismissals and nominations】

For the reason to appointment to each director, please refer to Proposal No1. "Election of six directors" in the reference document of "NOTICE OF THE 19TH ORDINARY GENERAL MEETING OF SHAREHOLDERS" (Translation) which is posted on our website:

<https://www.renesas.com/document/rep/notice-19th-ordinary-general-meeting-shareholders-0>

For the reason to appoint each Corporate Auditor, please refer to Proposal No2. "Election of two corporate auditors" in the reference document of "NOTICE OF THE 19TH ORDINARY GENERAL MEETING OF SHAREHOLDERS" (Translation) which is posted on our website and "Outside Corporate Auditor's (Kansayaku's) Relationship with the Company (2)" in Corporate Auditor (Kansayaku) session of "Article 2.1 Organizational Composition and Operation" of this report.

【Supplementary principle 3-1-3.Disclosure of sustainability and TCFD initiatives】

In April 2021, Renesas has signed up to support the Task Force on Climate-related Financial Disclosure (TCFD) and joined the Japan-based TCFD Consortium. By supporting such initiatives, we will commit to transparent information disclosure that focuses on analyzing the risks and opportunities brought by climate change. Following the proposal by TCFD, we will proactively disclose information to stakeholders from the four perspectives of "Governance", "Strategy", "Risk Management" and "Indicators and Targets", as well as to establish a business strategy that further considers climate change and make business decisions that will reduce risks and maximizes opportunities brought by climate change. For more information on the Group's environmental initiatives and other sustainability efforts, visit: https://www.renesas.com/about/company/sustainability

【Supplementary principle 4-1-1.The scope and content of the matters delegated to the management】 Please refer to Articles 17 and 18 of our Corporate Governance Guidelines: <https://www.renesas.com/document/gdl/corporate-governance-guidelines>

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Corporate Governance Report

Renesas Electronics Corporation

The items which require the resolution of Board of Directors other than those specified in our Articles ofIncorporation and applicable laws and regulations are as follows:

• Fundamental management policy (mid-term management plan, annual operating plan, basic policy on management of subsidiaries, etc.)
• Matters related to HR and organization (appointment of Executive Officers and assignment their responsibilities, revision of HR/compensation systems, etc.)
• Acquisition or disposal of important assets (capital investment, M&A, etc.)
• Accounting and financial matters (huge amount of expenditures, etc.)

【Supplementary Principle 4-11-1.View on a board structure】 Please refer to Article 15 of our Corporate Governance Guidelines.

<https://www.renesas.com/document/gdl/corporate-governance-guidelines>

【Supplementary Principle 4-11-2.Concurrently Position of Directors and Corporate Auditors】

Please refer to our "19th Securities Report" posted on our website for the situation of concurrent position of Directors and Corporate Auditors.

<https://www.renesas.com/document/rep/1499506?language=ja> *Only Japanese is available

【Supplementary Principle 4-11-3.Summary of the evaluation of board effectiveness】

As stated in "Reasons for Non-compliance with the Principles of the Corporate Governance Code" above, the Company did not conduct the survey on the efficiency of the Company's Board of Directors in FY2020. For the reference, the self-evaluation result (including the evaluation of improvement status addressed previous year) and items to be improved prevailed through the questionnaire which was conducted in the past are as follows:

Self-evaluation covers, including but not limited to, the structure/diversity of Board of Directors, activation of independent outside directors, the maturity of the materials for the Board of Directors meeting, agenda of the Board of Directors meeting, sufficiency of explanation provided for each agenda by executive managements, appropriateness of proceeding management of the Board pf Directors meeting (whether or not the board members feel free to give its comments, etc.), time reserved to discuss the agenda, frequency of the Board of Directors meeting.

1. The Board of Directors filled its role to the certain extent in FY2017 and is expected to make deeper discussion for business strategy and technology strategy.
2. There is no issue under current operation as for the sufficiency of materials for the Board of Directors meeting and explanations provided to board members by executive managements, proceeding management of the Board of Directors meeting, discussion time, and frequency of the Board of Directors meeting. On the other hand, aiming for "Accelerate the Leap from Structural Reforms to the Growth Stage", we need to consider

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