Toward enhancing the effectiveness of the Board of Directors

With the aim of improving the operation of the Board of Directors and enhancing its functions, Matsuda Sangyo conducts evaluations on the effectiveness of the Board by distributing a questionnaire to the Board after explaining the objectives of the survey, then analyzing the opinions and feedback received through all their responses. 

 

Evaluation items　(1) The operation of the Board of Directors, and the system that supports such operation (2) Agenda at meetings of the Board of Directors, and the system that supports the deliberation of such agenda(3) The system that supports the Board of Directors

 

Overview of the evaluation of the Board of Directors conducted in FY2024

(a) Regarding the operation of the Board of Directors and the system that supports such operation, the selection of the agenda based on laws and internal regulations, frequency of meetings, contents of materials, and time for deliberations, among other factors, were evaluated to be appropriate. However, there was the intention to bring forward the timing for the prior sharing of detailed materials.

(b) Regarding the agenda at meetings of the Board of Directors and the system that supports the deliberation of such agenda, it was evaluated that adequate discussions were conducted on agenda and management plans that indicate the broad direction of the Company's medium- to long-term strategy, matters related to complianceand financial reports,  the development and operation of the risk management system, and contents of activities required in view of recent changes in the environment (importance of information related to the disclosure of non-financial information, etc.).

(c) The system that supports the Board of Directors was evaluated to be adequate in aspects including opportunities for regular meetings and exchanges of opinions with external officers, securing opportunities to
provide information to the directors and the Audit and Supervisory Committee, opportunities to seek advice from external experts, and cooperation with the internal audit department.

 

Efforts toward enhancing effectiveness

(a) Overview of efforts for the year ended March 31, 2025
A Nomination and Remuneration Committee has been established since 2023, and it has commenced activities to strengthen the governance of the Board of Directors. The Board of Directors also engaged in extensive discussions on activities required in view of recent changes in the environment (importance of information related to the disclosure of non-financial information, etc.), such as reports from the Sustainability Committee and the Total Risk Management (TRM) Committee, reports on sound management, and IR activities. Efforts have also been made to hold seminars to acquire and enrich specialized knowledge, including increasing the number of seminars held.

(b) Overview of efforts for the year ending March 31, 2026
The Company's Board of Directors will continue to strengthen its supervisory function and decision-making function, and continuously make improvements toward enhancing the effectiveness of the Board of Directors. Based on the results of the survey, the Company aims to share detailed materials on the meeting agenda beforehand and as early as possible, as well as to deepen deliberations in the Board of Directors and further enhance disclosures, etc. in view of the importance of non-financial information including human capital management, health and safety, and social contribution activities.

１．Qualification of directors

Based on the stance of pursuing a composition and scale to realize an efficient and effective Board of Directors, Matsuda Sangyo identifies the knowledge, experience, and capabilities that each director should possess in consideration of the management strategy, and summarizes this information in the skill matrix. (Refer to the “List of Directors’ Skills”) 

 

２．Policy and procedures for nominating directors

• The appointment of directors who are not members of the Audit and Supervisory Committee is carried out
  based on a comprehensive assessment that includes their qualities, experience, skills, career history,
  personality, and job performance. Directors are selected with consideration for the balance and diversity of
  quality, experience, and skills in the Board of Directors as a whole.
• The appointment of directors who are members of the Audit and Supervisory Committee is carried out based
  on a comprehensive assessment that includes their expertise in diverse fields, experience, and personality
  aspects as suitable candidates to fulfill the roles of giving advice that contributes to enhancing medium- to
  long-term corporate value, supervising management through the Board of Directors, supervising of conflicts
  of interest by the Company and the relevant persons-in-charge, and reflecting intentions to the Board of
  Directors from an independent and neutral position, among others. Directors are selected with consideration
  for the balance and diversity of knowledge, experience, and skills in the Board of Directors as a whole.

3．Policy and Procedures for Directors’ Remuneration

• The basic policy for the remuneration of directors who are not members of the Audit and Supervisory Committee is that it shall consist of a fixed remuneration component and a stock compensation component.
• At the request of the Nomination and Remuneration　Committee, a draft proposal on the amount of fixed　monthly remuneration for individual directors (who are not members of the Audits and Supervisory　Committee) is　prepared in consultation with the President and　Representative Director, Executive Vice　President, and the Director in charge of Human Resources, based on　standards established that take into　consideration the evaluation of the responsibilities each director should fulfill, their position, the number of　years in office, and their performance. This draft is then proposed to the　Nomination and Remuneration　Committee with an　explanation of its contents.
• The stock compensation plan employs a mechanism known as a “Board Incentive Plan” (BIP) for officers’ remuneration. In line with this mechanism, payment will be made for the purpose of clarifying the relationship between directors’ remuneration and the Company’s performance and share value.
• The remuneration of directors who are members of the Audit and Supervisory Committee consists of a fixed　remuneration, and the basic policy is to pay the full amount of remuneration on a monetary basis.
• The amount of remuneration for individual directors (who are members of the Audit and Supervisory　Committee) is deliberated by the Audit and Supervisory Committee based on comprehensive consideration of　the evaluation of the responsibilities that members of the Committee should fulfill, their experience, expertise,　and other factors. A draft is prepared, and then proposed to the Nomination and Remuneration Committee with　an explanation of its contents.Taking reference from the reply from the Nomination and Remuneration Committee, the amount of　remuneration for individual directors is decided with the unanimous agreement of all members of the Audit　and Supervisory Committee.

Matsuda Sangyo has established an internal control system based on the Companies Act and the Regulations for Enforcement of the Companies Act.  

 

Audit status

Matsuda Sangyo’s Audit and Supervisory Committee is made up of four Directors who are Audit and Supervisory Committee Members, all of whom fulfill the requirements for independent officers. Hence, all members are registered with the Tokyo Stock Exchange as independent officers. In addition, two Directors who are Audit and Supervisory Committee Members are qualified certified public accountants, and therefore have the financial and accounting expertise to gain a good understanding of the overall work and business of our company.

 

The audit activities of the Audit and Supervisory Committee are conducted in accordance with field-work standards that are based on the Audit and Supervisory Committee Regulations. The Audit and Supervisory Committee conducts audits based on the yearly audit plans, formulated in accordance with the risk analysis and evaluation.
 

Internal audit status

Matsuda Sangyo has established the Internal Audit Dept. as its internal audit section, and this audit office conducts internal audits based on the Internal Audit Regulations. Based on the yearly internal audit plan reported to the President and Representative Director, Board of Directors, and Audit and Supervisory Committee, an audit of business operations is carried out on the status of the development of internal controls across all the operations of Matsuda Sangyo and its subsidiaries, the effectiveness and efficiency of operations, and compliance status. It requests the audited department to take remedial actions on issues raised and verifies the implementation status of such actions. 

 

The Audit and Supervisory Committee, accounting auditors, and Internal Audit Dept. report on audit plans and results, exchange opinions, and attend audits in person, etc. as necessary, built close relationships with each other, and put effort into strengthening the audit system. 

With the aim of maximizing the value of the entire corporate Group, Matsuda Sangyo is working on strengthening Group governance, taking reference from the Practical Guidelines for Corporate Governance Systems  (METI) and other guidance. 

 

Matsuda Sangyo’s internal control system is established for the entire corporate Group, including our subsidiaries. The Regulations for the Management of Affiliated Companies sets out a system for managing subsidiaries by classifying the business divisions and corporate divisions respectively as business management and administrative management. The TRM Committee, which serves as our risk management system, works to strengthen Group-wide risk management system by adding subsidiaries to the departmental subcommittees.