Seiko Epson : Corporate Governance Report (dated July 31, 2023) (987KB)

Note : This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

Corporate Governance Report

CORPORATE GOVERNANCE	Seiko Epson Corporation
	Last Update: July 31, 2023
	Seiko Epson Corporation
	Yasunori Ogawa, President and Representative Director
	Contact: Legal and Corporate Governance Department [phone]
	Securities code: 6724
	https://corporate.epson/en/

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 the Company are as follows:

• Respect the rights of shareholders, and ensure equality.
• Bear in mind the interests of, and cooperate with, stakeholders, including shareholders, customers, local communities, business partners, and Epson personnel.
• Appropriately disclose company information and maintain transparency.
• Directors, Executive Officers, and Special Audit & Supervisory Officers shall be aware of their fiduciary duties and shall fulfill the roles and responsibilities expected of them.
• Engage in constructive dialogue with shareholders.

To realize our Purpose, which expresses our aim or reason for being in society based on the Epson Way, which defines the Company's values and behaviors based on the Management Philosophy, EXCEED YOUR VISION, promote sustainable growth, and increase corporate value over the medium and long term, the Company strives to continuously enhance and strengthen corporate governance so as to realize transparent, fair, fast, and decisive decision-making.

Under a company with an Audit & Supervisory Committee, to further increase the effectiveness of corporate governance, the Company further improves the supervisory function of the Board of Directors, further enhances deliberation and speeds up management decision-making.

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://corporate.epson/en/sustainability/governance/pdf/epson_governance_policy_e.pdf

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 foregoingpolicy and has implemented all the principles in the Corporate Governance Code after it was revised in June 2021.

Disclosure Based on the Principles of the Corporate Governance Code

Updated

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 2023) were analyzed by the Board of Directors in April 2023 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.

1

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]

As stated in Article 11 of its Corporate Governance Policy, the Company takes full advantage of the value of human diversity and increases synergies between individuals and organizations. Further, it provides an environment and systems that allow the workforce to succeed, regardless of gender, nationality, age, race, physical abilities and disabilities, hiring time and other differences.

[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 FY2022, women accounted for 4.1% of employees with management responsibilities and 7.1% of the leader class (equivalent to assistant managers), but we aim to raise those numbers to 8% and 10%, respectively, and to have one or more female executive officers by the end of FY2025. Furthermore, we will take steps to expand the pool of candidates so we can increase the number of female employees with management responsibilities in future.

For details, see "Diversity, Equity and Inclusion" on our website. https://corporate.epson/en/sustainability/our-people/diversity/

[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 "Diversity, Equity and Inclusion" on our website. https://corporate.epson/en/sustainability/our-people/diversity/

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 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. The ratio of foreign executive officers as of the end of FY2022 was 10.7%.

[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. Midcareer hires accounted for 19.7% of employees with management responsibilities as of the end of FY2022.

[Our policies and implementation for human resource development and internal environment development to ensure diversity] For information about our human resource development and internal environment development policies to ensure diversity, see our 81st Annual Securities Report, pp. 45-47.https://corporate.epson/en/investors/publications/pdf/ar2023.pdf

For information about the implementation of these policies, see "Diversity, Equity and Inclusion" on our website. https://corporate.epson/en/sustainability/our-people/diversity/

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

2

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 established and publicly announced a purpose statement in September 2022. The purpose statement articulates the type of value the Epson Group offers the world, the company's unique reason for being, and its aspirations. In conjunction with this, we redefined the relationships among the components of our philosophical framework, which consists of the Purpose statement, the Epson Way, which are shared values and behavior within the Epson Group, and a corporate "vision" that outlines strategies for realizing the Purpose. Details are provided on the Company's corporate website.
   Purpose https://corporate.epson/en/philosophy/purpose/Epson Way
2. • Management Philosophy and EXCEED YOUR VISION: Universal principles that underlie the Epson Group
   • Principles of Corporate Behavior and the Epson Global Code of Conduct: Guides to values and conduct based on the Management Philosophy

https://corporate.epson/en/philosophy/epson-way/Vision

• Epson 25 Renewed Corporate Vision (including the Mid-Range Business Plan)
• Environmental Vision 2050

https://corporate.epson/en/philosophy/vision/

1. As stated in "I.1. Basic Views" of this report, 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://corporate.epson/en/sustainability/governance/pdf/epson_governance_policy_e.pdf
2. 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 Remuneration" in this Report.
3. 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.
4. The reasons for the selection of Directors who were selected at the General Meeting of Shareholders held on June 27, 2023, are stated in the convocation notice of the 81st Ordinary General Meeting of Shareholders. https://corporate.epson/en/investors/information/pdf/notice_230525.pdf

Supplementary Principles 3.1.3 [Our initiatives on sustainability]

The movement toward sustainability around the world is accelerating, with the expansion of ESG investment and the formulation of sustainability-related policies in various countries and regions. Against this backdrop, companies are increasingly being asked to take a stance on how to respond to the issues facing society through their business activities. Epson has been contributing to solving various social issues through the provision of its products and services. Going forward, under the banner of our Corporate Purpose, we will continue to work with our customers and partners from a long-term perspective with the goal of achieving sustainability and enriching communities by pursuing both business growth and solutions to social issues.

For details, see our 81st Annual Securities Report, pp. 25-35.https://corporate.epson/en/investors/publications/pdf/ar2023.pdf

[Information on investments in human capital]

Epson is committed to contributing to the resolution of social issues through its business based on the Corporate Purpose, with the aim of enhancing corporate value and sustainable growth over the medium to long term. To achieve this, it is necessary to expand and create businesses through environmental, co-creation, and DX initiatives, in line with the positioning, strategies, and policies for each business domain defined in the long-term vision, Epson 25 Renewed. These activities are supported by efforts to strengthen the management base through human resource strategies. Epson is promoting the pillars of its human

3

resource strategy, which are "allocate human resources to priority areas," "strengthen human resource development" and "organizational activation," in order to develop human resources who are capable of thinking autonomously about what services are required in a society undergoing change and how to provide solutions to social issues, and are capable of producing services and solutions, as well as to create an environment in which they can demonstrate their abilities.

For details, see our 81st Annual Securities Report, pp. 43-48.https://corporate.epson/en/investors/publications/pdf/ar2023.pdf

[Information on investments in intellectual property]

The mission of the Intellectual Property Division, which is responsible for the intellectual property at Epson, is to "Convert intellectual property (IP) in the broad sense (as well as IP rights, this includes assets like brands and data) into assets that drive sustainable growth of Epson's value."

To achieve "sustainability and enrich communities," which is the aim of our corporate vision based on our corporate purpose, the Intellectual Property Division works closely with management, operations divisions, and development and strategy departments, converts IP into corporate value by proactively exploiting all IP to support business growth, and supports the realization of sustainable growth in Epson's value by tirelessly engaging in such activities.

For details, see our 81st Annual Securities Report, pp. 49-51, and "Proactive Intellectual Property Activities Based on Purpose" on our website.

81st Annual Securities Report https://corporate.epson/en/investors/publications/pdf/ar2023.pdfProactive Intellectual Property Activities Based on Purpose https://corporate.epson/en/technology/intellectual-property/

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

Climate change is greatly impacting society and Epson sees it as a serious social problem. The goal of the Paris Agreement is to limit the increase in global average temperature to well below 2℃ compared to pre-industrial levels and to pursue efforts to limit it to 1.5℃. Epson has pledged to do its part by achieving its goal of reducing its total emissions in line with the 1.5℃ scenario by 2030. As stated in Environmental Vision 2050, which was announced along with the Epson 25 Renewed corporate vision, Epson seeks to become carbon negative and underground resource14 free by 2050 by decarbonizing and closing the resource loop. We are also providing products and services that have a smaller carbon footprint and are developing environmental technologies.

For details, see our 81st Annual Securities Report, pp. 36-42.https://corporate.epson/en/investors/publications/pdf/ar2023.pdf* Non-renewable resources such as oil and metals

Supplementary Principles 4.1.1

As stated in Article 16 of the Corporate Governance Policy, after establishing the strategic direction of the Company, the Board of Directors shall use its supervisory function on general operations to ensure that these operations are fair and transparent. The Board of Directors shall also make decisions on the important business affairs of the Company, such as decisions on the formulation of management plans and business plans and decisions on investment projects that exceed a certain fixed amount of money.

Principle 4.9

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

Supplementary Principles 4.10.1

The Company has established a Director Nomination Committee and a Director Compensation Committee as discretionary deliberative bodies. The Committees, the majority of whose members are Outside Directors, were established to ensure transparency and objectivity regarding selections for and compensation of Directors, Executive Officers and Special Audit & Supervisory Officers. The human resources department is the secretariat.

For details, see "Supplementary Explanation" under "II. 1. Voluntary Established Committee(s)"

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,

4

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 81st Ordinary General Meeting of Shareholders for information about the areas and skills where there are particularly high expectations for Directors. https://corporate.epson/en/investors/information/pdf/notice_230525.pdf

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://corporate.epson/en/investors/information/pdf/notice_230525.pdf

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.
   Annual cycle for evaluating the effectiveness of the Board of Directors (general principles) 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 to November
   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 2021 fiscal year
   The results of actions taken to address issues that were raised when the effectiveness of the Board of Directors was evaluated for the 2021 fiscal year are provided below. The effectiveness of the Board of Directors in the 2021 fiscal year was evaluated by having all Board members complete a questionnaire. The questionnaire results showed that the Board of Directors is functioning effectively.

1. Set aside more opportunities to discuss progress and issues related to the environment, DX, and co-creation to accelerate the realization of Epson 25 Renewed.

The Board of Directors set aside more opportunities for the Board members* to discuss progress and issues related to the environment, DX, and co-creation and took additional steps, as described below, to accelerate the realization of Epson 25 Renewed.

• Environment:
  The Board of Directors discussed at length initiatives to decarbonize, close resource loops, reduce customers' environmental impact, strengthen environmental communication, and develop environmental technologies. Discussions were oriented, in part, toward setting environmental targets aligned with the business growth strategy.
• DX:
  The Board of Directors discussed initiatives toward formulating and coordinating digital transformation (DX) strategies among the businesses, improving and deploying digital infrastructure, and utilizing data. They also set a clear direction for addressing issues in DX promotion, including in data utilization. The acquisition of DX and IT talent was a priority issue in the 2020 fiscal year evaluation of Board effectiveness. The Company has begun, and will continue taking, a different approach to this issue than before, including referral-based recruitment and hiring overseas IT engineers dispatched by temporary staffing agencies as regular employees.
• Co-creation:
  The Board of Directors discussed the sourcing of environmentally progressive startups, the proactive exploration based on

5