Seiko Epson : Corporate Governance Report

Corporate Governance Report

Last Update: March 18, 2022

Seiko Epson Corporation

Yasunori Ogawa, President and Representative Director Contact: Legal and Corporate Governance Department [phone] Securities Code: 6724 https://global.epson.com/

The corporate governance of Seiko Epson Corporation (the "Company") is described below.

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

Basic Information

1. Basic Views

The general principles of corporate governance at Epson are as follows:

• Respect the rights of shareholders, and secure equality.
• Keeping the interests of shareholders, customers, communities, business partners, employees and other stakeholders in mind, work in an appropriately cooperative manner with them.
• Disclose company information as appropriate and ensure transparency.
• Directors, Executive Officers, and Special Audit & Supervisory Officers shall be aware of their fiduciary responsibilities and shall fulfill the roles and responsibilities expected of them.
• Epson shall engage in constructive dialogue with shareholders.

To achieve the goals declared in Epson's Management Philosophy, promote sustainable growth, and increase corporate value over the medium and long terms, Epson strives to continuously enhance and strengthen corporate governance so as to realize transparent, fair, fast, and decisive decision-making. Operating as a company with an Audit & Supervisory Committee, Seiko Epson will further improve the supervisory function of the Board of Directors, enhance discussions at Board of Directors meetings, speed up management decision-making, and further increase the effectiveness of corporate governance.

The general principles and policies regarding corporate governance at Epson are summarized in "Corporate Governance Policy," which is available for viewing on the corporate website. (https://global.epson.com/SR/organizational_governance/)

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

Epson continuously strives to enhance and strengthen its corporate governance based on the foregoing policy and has implemented all the principles (including the content of the Prime Market, which is to take effect on April 4, 2022) in the Corporate Governance Code after it was revised in June 2021.

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Disclosure Based on the Principles of the Corporate Governance Code

Principle 1.4

For the policy on cross-shareholdings, please see Article 5 in Epson's Corporate Governance Policy. Individual cross-shareholdings in the Epson Group (as of the end of March 2021) were analyzed by the Board of Directors in April 2021 based on Epson's compliance assessment criteria to determine the purpose of these cross-shareholdings and their associated risks and benefits. Epson is moving toward reducing those cross-shareholdings that were found to be non-essential.

Please see Article 6 in the Corporate Governance Policy for Epson's standards for exercising voting rights for cross-shareholdings.

Principle 1.7

Please see Article 8 in the Corporate Governance Policy for procedures relating to transactions with related parties.

Supplementary Principles 2.4.1

[Our policies for ensuring diversity in the promotion to core human resources]

Please see Article 11 in the Corporate Governance Policy for our policies for ensuring diversity.

[Our measurable goals and their status for the promotion of women to core human resources]

In 1983, Seiko Epson eliminated the gender pay gap and has sought to enable employees to enjoy a good work-life balance by providing leaves of absence, shorter workdays for women with young children, and financial assistance to help cover babysitter expenses. These and other actions have met with some success, as women stay with the company longer than men, on average.

However, there is still a gender gap when it comes to promotion to management and other leadership positions in Japan. Seiko Epson recognizes this as an issue and is taking additional action to support the advancement of more women in the workplace.

We will take action to ensure that female employees can take an increasingly active part in our company going forward. At the end of FY2020, women accounted for 3.2% (26 persons) of employees with management responsibilities and 6.3% (303 persons) of the leader class (equivalent to assistant managers). Specific efforts we are making include aiming to raise those numbers to 5% (40 persons) and 7% (350 persons) respectively and expanding the scope of candidates so we can increase the number of female employees with management responsibilities in future.

For details, see "Promotion of Diversity" at our website. (https://global.epson.com/SR/our_people/diversity.html)

[Our measurable goals and their status for the promotion of foreign nationals to core human resources] Epson has sites around the world to accurately identify and swiftly and flexibly meet the changing needs of customers in different regions. The Epson Group currently employs about 80,000 people. Epson is vertically integrated, which means we have control over the value chain. A high-performing, diverse workforce is essential for achieving vertical integration, making it vital for our operations divisions in Japan and Epson Group companies overseas to be on the same page in terms of business vision and policies. That is why we have a variety of international programs to promote communication and interaction among people at various levels within our operations divisions, Head Office, and other internal organizations.

For details, see "Promotion of Diversity" at our website.

（https://global.epson.com/SR/our_people/diversity.html）

Thus, Seiko Epson and the entire Epson Group are developing business processes globally and establishing environments and systems whereby diverse personnel can play an active role regardless of nationality, race, and the like. For that reason, we have not at this time established any voluntary and

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measurable targets for the percentage of employees with management responsibilities who are non- Japanese at Seiko Epson. Going forward, we will continually consider the necessity of setting such targets to ensure further diversity.

[Our measurable goals and their status for the promotion of midcareer hires to core human resources] Midcareer hires account for a greater percentage of employees with management responsibilities than they do of employees overall, as we have been actively appointing people with a wide range of career backgrounds to core positions. We have not at this time established any voluntary and measurable targets for this, but we will continually discuss and consider ways to ensure greater diversity.

[Our policies and implementation for human resource development and internal environment development to ensure diversity]

See "Promotion of Diversity" at our website for information about our human resources development policies and internal environment development policies to ensure diversity and for information about the status of those efforts. （https://global.epson.com/SR/our_people/diversity.html）

We have not at this time established any human resources development policies or internal environment development policies for midcareer hires, but we will be considering policies and measures on such matters as enabling more diverse work styles in order to acquire diverse human resources.

Principle 2.6

As stated in Article 13 of the Corporate Governance Policy, the Seiko Epson Corporate Pension Fund manages the Company's corporate pension reserves. The Company has adopted a funded corporate pension plan to help assure the appropriate management of conflicts of interest between the Company and corporate pension beneficiaries, and it has worked with the corporate pension fund and labor union to build a system for monitoring and supervising the management of the corporate pension.

The Company systematically promotes and assigns qualified individuals to manage the corporate pension fund and provides them with ongoing educational opportunities so that they can increase their professional knowledge of corporate pension fund management and fulfill the functions expected of them as asset owners.

In March 2021, the Corporate Pension Fund announced that it would support and accept the purpose of the Japanese Stewardship Code as an "institutional investor as an asset owner." The Fund, since it does not directly engage in stewardship activities, including exercising voting rights, requires institutional investors who manage assets to fulfill its stewardship responsibilities by improving and fostering the investee companies' corporate value and sustainable growth through constructive engagement or purposeful dialogue.

Principle 3.1

1. The Company's management philosophy is shared with the public. The Company has also shared the Epson 25 Renewed Corporate Vision, which includes a mid-range business plan). Details are provided on the Company's corporate website.
   Management Philosophy: (https://global.epson.com/company/epson_way/management/) Epson 25 Renewed Corporate Vision (and mid-rangebusiness plan): (https://global.epson.com/company/corporate_vision/?fwlink=global_top)
2. The Company's basic principles and policies regarding corporate governance are set forth in the Corporate Governance Policy, which is available on the corporate website. (https://global.epson.com/SR/organizational_governance/)

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1. The policies and procedures that the Board of Directors follows when deciding Director compensation are stated in "Policy on Determining and Calculating Compensation" under II 1. "Director Compensation" in this Report.
2. The policies and procedures that the Board of Directors follows when nominating Director candidates and dismissing Officers are stated in Article 24 of the Corporate Governance Policy.
3. The reasons for the selection of Directors who were selected at the General Meeting of Shareholders held on June 25, 2021, are stated in the convocation notice of the 79th Ordinary General Meeting of Shareholders. (https://global.epson.com/IR/information/meeting.html)

Supplementary Principles 3.1.3 [Our initiatives on sustainability]

For details, see "Implementation of Environmental Activities, CSR Activities etc." in "III. 3. Measures to Ensure Due Respect for Stakeholders" in this report.

[Information on investments in human capital and intellectual property]

Investments in human capital and intellectual property are disclosed in the Company's Epson 25 Renewed Corporate Vision (including the mid-range business plan).

（https://global.epson.com/company/corporate_vision/?fwlink=global_top）

Also see "Proactive Intellectual Property Activities" on our website for information about how we are investing in intellectual property.

（https://global.epson.com/technology/intellectual_property/）

[The impact of climate change-related risks and earning opportunities on our business activities and profits]

For details, see "Responding to TCFD Recommendations" at our "Sustainability" website.

（https://global.epson.com/SR/tcfd/?fwlink=sr_top）

Supplementary Principles 4.1.1

A summary of the scope of matters delegated to the management is provided in Article 16 of the Corporate Governance Policy.

Supplementary Principles 4.1.3

The Company's Director Nomination Committee, which is composed primarily of Outside Directors, discusses enhancements to succession plans and the Director appointment process, reviews the roadmap, selects Director candidates, establishes and implements development plans, and reviews the process for evaluating, narrowing down, and replacing candidates.

The Company selects candidates for senior management positions in order to systematically develop these individual as future executives. After their development is assessed, the HR Development Strategy Council, an advisory body to the President, devises and implements a concrete development plan. The state of development and issues are reported to the Director Nomination Committee, and development activities are further enhanced under the supervision and advice of the Outside Directors. Candidates to succeed the President are identified through the aforesaid process and developed by appointing them to key management roles and by providing them with other essential training opportunities.

Principle 4.9

The criteria for judging the independence of Outside Directors are described in "Matters relating to Independent Directors" under II. 1. Independent Directors in this report. The criteria are also listed in Appendix 2 to the Corporate Governance Policy.

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Supplementary Principles 4.10.1

For details, see "Supplementary Explanation" under "II. 1. Organizational Composition and Operation, Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Compensation Committee."

Supplementary Principles 4.11.1

As stipulated in Article 18 of the Corporate Governance Policy, the Company believes that a diverse Board of Directors is useful for facilitating substantive board discussions that cover all angles. Therefore, the Company has a fundamental policy of assembling a Board of Directors that is well- balanced and composed of persons who combine a broad spectrum of knowledge, experience, and skill, without regard to things such as gender, race, ethnicity, nationality, cultural background, or age.

The current Board of Directors reflects this policy and has articulated a management organization for realizing the Management Philosophy and corporate vision so as to enable the Company to achieve sustainable growth and improve corporate value over the medium to long term.

Please see the Notice of the 79th Ordinary General Meeting of Shareholders for information about the areas and skills where there are particularly high expectations for Directors. (https://global.epson.com/IR/information/meeting.html)

Supplementary Principles 4.11.2

Epson Officers who concurrently serve on the boards of other publicly listed companies shall keep the number to within reasonable limits based on Article 21 of the Corporate Governance Policy. As a general rule, Outside Directors in particular shall not concurrently serve as either a Director or a Kansayaku of more than three publicly listed companies other than Epson per the bylaws established by resolution of the Board of Directors. Per Epson policy, Directors shall attend at least 75% of the meetings of the Board of Directors per year.

Epson discloses information about Directors who hold important concurrent positions at other companies every year in the reference materials provided along with the notices of Ordinary General Meetings of Shareholders as well as in other business reports. (https://global.epson.com/IR/information/meeting.html) Information about Outside Directors who held important concurrent positions at other companies is provided in "Outside Directors' Relationship with the Company (2)" under II. 1. Directors.

Supplementary Principles 4.11.3

1. Overview of efforts to evaluate the effectiveness of the Board of Directors

The Board of Directors of the Company analyzes and evaluates the effectiveness of the entire Board of Directors every year based on Article 19 of the Corporate Governance Policy.

Evaluating the effectiveness of the Board of Directors

When evaluation is performed: February to March

When evaluation results are analyzed and issues are selected: April to May

Disclosure of issues in a Corporate Governance Report: June

Interim report to the Board of Directors (regarding actions taken to resolve issues): October

Final report to the Board of Directors (regarding action take to resolve issues): February of the following year

Disclosure in a Corporate Governance Report of the results of actions taken to resolve issues: June of the following year

2. Board of Directors effectiveness evaluation for the 2019 fiscal year

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