Sysmex : Corporate Governance Report (last updated December 22, 2021)( PDF format / 693KB )

Corporate Governance Report

Last Update: December 22, 2021

Sysmex Corporation

Hisashi Ietsugu, Chairman, President and CEO Contact: Joji Hayashi, Vice President of IR & Corporate Communication Department Securities Code: 6869 https://www.sysmex.co.jp/en

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

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

Basic Information

1. Basic Views

The Company considers reinforcing corporate governance one of its most important management topics. We aim to maximize the overall corporate value of the Group through enhancing management robustness and transparency, as well as improving management speed and efficiency.

The Company has adopted the system of a company with an Audit and Supervisory Committee to reinforce the Managing Board's audit and supervisory functions and increase management transparency and objectivity.

In addition, the Company has introduced the executive officer system to speed up decision-making of its business execution and to respond more swiftly to changes in the business environment.

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

This information is based on the code as revised in June 2021. [Supplementary Principle 4.10 Use of Optional Approach] Supplementary Principle 4.10.1

The Company's Managing Board has established the Nominating Committee and Compensation Committee, which are voluntary bodies, to ensure the independence, objectivity and accountability of the Managing Board with respect to the consideration of particularly important matters, such as the nomination and compensation of members of the Managing Board and senior management. By including independent outside directors as members of each committee, the Company conducts a wide range of examinations from various perspectives, thereby enhancing the soundness and transparency of management.

In the future, we will also consider the possibility of having a majority of the members of each committee be independent outside directors.

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

[Principle 1.4 Cross-Shareholdings]

Our basic policy is to reinforce and stabilize the management base, as well as contribute to regional economic development, in order to ensure sustainable increases in the Group's corporate value.

When increasing or liquidating our holdings of shares in a particular company, as well as exercising voting rights, we consider the economic rationality of investees' moves from a medium- to long-term perspective and in connection with and forecasts for the regional economy and make decisions after the Managing Board verifies the purpose and rationality of holding such shares each year.

The Management Board judges that the Company's individual holdings is appropriate at the end of each half fiscal year.

[Principle 1.7 Related Party Transactions]

Based on the Companies Act, competing transactions and conflict-of-interest transactions by members of the Managing Board require Managing Board approval, in accordance with the Company's Managing Board Regulations. Furthermore, a member of the Managing Board who engages in such transactions shall report them to the Managing Board without delay.

Transactions with major shareholders that exceed certain provisions in the Managing Board Regulations and items with a high level of importance require the approval of the Managing Board.

Also, the content of related party transactions, transaction conditions and the policy for determining transaction conditions are disclosed in the Company's securities report.

Furthermore, the Company regularly confirms with related parties that systems are in place to avoid being disadvantageous to the Company.

[Principle 2.4 Ensuring Diversity, Including Active Participation of Women Supplementary Principle 2.4.1

The Core Behaviors of the Sysmex Way, our Group corporate philosophy, promises employees that "We honor diversity, respect the individuality of each employee, and provide them with a workplace where they can realize their full potential. We value the spirit of independence and challenge, provide employees with opportunities for self-fulfillment and growth, and reward them for their accomplishments". Based on this, we have in place a human resource development system that develops capabilities in an ongoing and systematic manner. We promote diversity and inclusion, and we have introduced various systems in an effort to create a corporate culture that provides diverse employees with a sense of unity globally and the ability to maximize their skills.

We are working to increase the female managers ratio and the ratio of mid-career recruits assigned to management posts. The results of these efforts are disclosed in our integrated report.

Please refer to our website. (https://www.sysmex.co.jp/en/ir/library/annual-reports/index.html)

[Principle 2.6 Performing Functions as Asset Owner of the Corporate Pension]

The Company invests defined benefit pension assets through a pension asset investment committee composed of personnel who are suitably qualified to make pension investments. The status of investing is monitored in accordance with the Fundamental Policy on Investing Pension Assets set forth by the Company.

[Principle 3.1 Full Disclosure]

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1. Corporate Philosophy, Business Strategies and Business Plans

The "Sysmex Way," the corporate philosophy for the Sysmex Group, consists of three parts: the Mission, which defines our social raison d'être and states how we hope to contribute to society; the Value, which describes the values and management style that we must abide by; and the Mind, which expresses the mindset and code of conduct that every employees within the Sysmex Group must observe. Based on this framework, we have formulated core behaviors that indicate the specific value we provide to customers, employees, business partners, shareholders and society.

In April 2021, Sysmex commenced a new mid-term management plan (from the fiscal years ending March 31, 2022 to 2024), seeking to promote transformation toward achieving robust sustainable growth for the Group and reinforcing the management base that supports it. Under this Group mid-term management plan, we have defined hemostasis, immunochemistry and life science as key fields in addition to the hematology field, which is the Group's largest source of earnings. We will prioritize the allocation of management resources to these fields to enhance R&D efforts, create new value and expand our product lineup. We will also seek to achieve dynamic growth through the creation and ongoing cultivation of new businesses, centering on surgery support robots. Sysmex sees the realization of a sustainable society as a management priority. On a groupwide basis, we are pursuing priority issues (materiality), such as the resolution of medical issues through products and services, environmental consideration and the realization of an attractive workplace. In addition to instilling confidence among diverse stakeholders, we aim to achieve sustainability management.

Please refer to our website (https://www.sysmex.co.jp/en) for more information on our corporate philosophy and mid-term management plan.

2. Basic Views and Guidelines on Corporate Governance

Please refer to our website and the "I.1. Basic Views" section of this report.

(https://www.sysmex.co.jp/en/corporate/governance/corporate_governance.html)

3. Determining the Remuneration of the Senior Management and Members of the Managing Board

(1) Policy

Compensation for members of the Managing Board (excluding members of the Audit and Supervisory Committee and outside members of the Managing Board) divides broadly into three categories: fixed compensation, performance-linked compensation and non-monetary compensation. This framework allows the Company to adjust individual compensation in line with performance and vary the percentage of compensation received in each category by individual. Compensation for outside members of the Managing Board comes solely from the fixed-compensation portion of compensation for members of the Managing Board.

(2) Procedures

Based on the above-stated policy, compensation amounts for members of the Managing Board (excluding Audit and Supervisory Committee members) are set within the scope approved at the general meeting of shareholders. The Group has internal regulations in place for fixed compensation and medium- to long-termincentive-based compensation. In addition, based on authority for determining performance-linked compensation delegated by the Managing Board, Chairman and CEO allocates the total amount of performance-linked compensation, deciding on individual compensation amounts for individual members of the Managing Board based on evaluation factors specific to each member. As compensation amounts for individual members of the Managing Board are determined according to these procedures, the Managing Board judges the content to be in line with its decision policies.

Compensation amounts for Audit and Supervisory Committee members are deliberated and determined by the Audit and Supervisory Committee.

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4. Appointment and dismissal of the Senior Management and Nomination of Member of the Managing Board Candidates

(1) Policy

The Managing Board nominates candidates for internal members of the Managing Board (excluding members of the Audit and Supervisory Committee) by considering the balance among knowledge, experience and experience that facilitates accurate and swift decision-making, appropriate risk management, the monitoring of business execution and the ability to cover the Company's various functional divisions and business divisions, as well as sufficient social credibility. In nominating outside members of the Managing Board (excluding members of the Audit and Supervisory Committee), the Managing Board's conditions are that candidates have abundant work experience and broad-based insight, and be able to offer appropriate advice on the Company's management.

If satisfying the above-stated selection criteria is problematic, the Managing Board shall decide on the dismissal of its members (excluding members of the Audit and Supervisory Committee).

In appointing member of the Audit and Supervisory Committee candidates, the Managing Board takes into overall account the candidates' knowledge of finance and accounting, understanding of the Company's fields of business and diverse perspectives on corporate management.

If satisfying the above-stated selection standards is problematic, the Managing Board shall decide on the dismissal of members of the Audit and Supervisory Committee, based on the consent of that committee.

(2) Procedures

Based on the above-stated policy, decisions on the nomination of candidates for or the dismissal of members of the Managing Board are considered by the Nominating Committee, an advisory committee to the Managing Board, and resolved by the Managing Board. Proposals on the appointment and dismissal of members of the Audit and Supervisory Committee are approved by the Audit and Supervisory Committee.

5. Explanations with Respect to the Individual Appointments and Dismissals

Career histories and reasons for appointment for each candidate nominated as a member of the Managing Committee, as well as reasons for dismissal, are included in the convocation notice of the ordinary general meeting of shareholders.

Supplementary Principle 3.1.3

Symex considers initiatives on sustainability to be important management priorities. To realize a sustainable society and ensure the Company's sustainable growth, we have identified priority issues (materiality) and are pursuing specific measures. In addition, we have formulated the Sysmex Eco-Vision 2025 based on our Environmental Policy: "By shaping the advancement of healthcare, our global environmental conservation activities contribute to the creation of a fulfilling and healthy society." We are promoting environmental conservation throughout product and service lifecycles and across the value chain of our business activities. With regard to the impact of climate change on the Company, we have expressed our support for the recommendations of the TCFD and we are assessing risk and opportunities based on this framework. The Company's views are disclosed in the Sustainability Data Book.

Please refer to our website. (https://www.sysmex.co.jp/en/csr/report/index.html)

[Principle 4.1 Roles and Responsibilities of the Board (1)]

Supplementary Principle 4.1.1

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Based on laws and regulations, the Articles of Incorporation and Managing Board Regulations, the Managing Board defines matters for the board itself to handle, makes important management decisions and supervises the execution of duties. Furthermore, the Company has adopted the executive officer system, and the executive officers execute the duties for which they are responsible within the scope entrusted to them by the president.

[Principle 4.9 Independence Standards and Qualification for Independent Members of the Managing Board] Sysmex has formulated the following independence standards for outside members of the Managing Board. If the outside members of the Managing Board do not fall under any of the following categories, they are considered to be independent from the Company and present no risk of conflict of interest with general shareholders.

(Relationships with the Company)

1. An executive1 or previous executive the Company or its subsidiaries (the "Sysmex Group") (Major clients or suppliers)
2. A party whose major client is the Sysmex Group2 or an executive thereof
3. A major client of the Sysmex Group³ or an executive thereof

(Specialized service providers)

1. A consultant, accountant or legal professional who receives a large amount of monetary consideration or other property4 from the Company besides executive compensation (if the party that has obtained the property is a corporation, partnership, or other organization, a person who belongs to the organization)
2. A person who belongs to an auditing firm that performs statutory audits for the Sysmex Group (Donations or grants)
3. A person who receives donations or grants exceeding a certain amount⁵ from the Sysmex Group (If the recipient of the donations or grants is a corporation, partnership, or other organization, the executive of that organization)
   (Lenders)
4. Major financial insitution6 from which the Sysmex Group borrows or executives of such institutions' parent companies or subsidiaries
   (Principal shareholders)
5. A principal shareholder7 of the Sysmex Group or if the principal shareholder is a corporation, an executive of that corporation
6. An executive of a company whose principal shareholder is the Sysmex Group

(Mutual dispatch of executives)

1. An executive of a company whose relationship with the Sysmex Group involves the mutual dispatch of outside directors (an executive who is a member of the Sysmex Group who is an outside director of another company, and an executive of another company who is an outside director of Sysmex)
2. A person who has been in the above categories (2) through (10) within the past three years
3. A close relative to a person8 (limited to people in important positions9) who falls into the above categories (1) through (11)
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