Corporate Governance

Basic Approach to Corporate Governance

MJS's main business is to provide business management systems and management expertise services. We recognize developing and building management systems and internal control systems and implementing necessary measures as the essential basis for corporate governance initiatives, and regard corporate governance as one of the most important management issues.

Going forward, we will continue to enhance the governance of both MJS and its subsidiaries, and strive to increase the corporate value of the Group as a whole.

Corporate Governance System

(1) Overview of the current system

MJS is a company with Audit & Supervisory Board members, and has instituted a General Meeting of Shareholders, Board of Directors, Audit & Supervisory Board members, Audit & Supervisory Board, and Accounting Auditors as stipulated by the Companies Act. We also maintain the Group's corporate governance system and strengthen its functionality under the system shown in the diagram below.

<Corporate Governance System Diagram>

(2) State of business management organization

The Company's decision-making bodies are the Board of Directors and the Management Committee. The Board of Directors meets once or twice a month on a regular basis to deliberate and decide upon matters stipulated under laws, regulations and the Articles of Incorporation, and important management matters as provided for under the Board of Directors Regulations. Seventeen regular meetings and one extraordinary meeting of the Board of Directors were held during the last fiscal year. The Management Committee is hosted by the President and CEO, and is composed of full-time directors and other persons nominated by the President. Meetings are held twice a month in principle. The Management Committee exists as an important decision-making body for the purpose of proactive deliberations on policies regarding prompt management decisions, business operations and management, and matters to be discussed by the Board of Directors. Twenty-four regular meetings and one extraordinary meeting of the Management Committee were held during the last fiscal year.

The Company also appoints outside directors and outside Audit & Supervisory Board members for the Board of Directors to receive advice and guidance as appropriate, with the aim of further enhancing supervisory functions. All outside directors and outside Audit & Supervisory Board members are appointed as independent officers to make decisions that take into account the interests of general shareholders by making recommendations for management from an objective and neutral perspective, as part of our efforts to further enhance corporate governance.

(3) Policies and procedures for nominating candidate directors and Audit & Supervisory Board members and determining remuneration for senior management and directors

When nominating candidates for director positions, the Company selects persons who are familiar with the Company's business, have extensive networks and a wide range of knowledge both inside and outside the industry, and can make appropriate decisions and management judgments. Candidate nominations are validated and finalized by the Board of Directors after initial deliberations by the Nomination Advisory Committee. The Company also appoints outside directors for the purpose of strengthening control over internal directors and enhancing check functionality from an objective perspective on management. When nominating outside directors, the selection policy is to choose candidates equipped with wide-ranging opinions, broad insights, sensitivity to market voices, and abundant knowledge and experience in the field from which they originate. Independent outside directors include persons who have management experience at other companies.
When nominating candidates for Audit & Supervisory Board members, the Company selects persons who excel in financial, accounting and legal knowledge, risk management skills, and management oversight capabilities. Nominations are validated and finalized by the Board of Directors after obtaining the consent of the Audit & Supervisory Board. When nominating candidates for outside Audit & Supervisory Board members, in addition to the aforementioned abilities, the Company chooses candidates equipped with wide-ranging opinions, broad insights, and abundant knowledge and experience in the field from which they originate. Again, nominations are validated and finalized by the Board of Directors after obtaining the consent of the Audit & Supervisory Board.

In determining remuneration for senior management and directors, the Board of Directors determines a policy for deciding the details of remuneration, etc., for each individual director. Resolutions by the Board of Directors on remuneration are made based on reports by the Remuneration Advisory Committee, which is consulted in advance regarding the details of the resolution.

Details of the policy for determining details of remuneration, etc., for individual directors are as follows.

(i) Basic policies
In order to secure diverse and excellent human resources and further improve corporate value, the Company's basic policy is to determine levels of remuneration for directors appropriate to individual roles and responsibilities with consideration for the levels of remuneration at listed companies as a whole and other companies in the same industry. Remuneration consists of fixed and performance-linked remuneration. Outside directors are paid only fixed remuneration, since they are responsible for monitoring and supervising management from an independent standpoint.

(ii) Policy for determining the amount of basic remuneration (monetary remuneration) paid individually to directors
Basic remuneration for directors of the Company is a monthly fixed remuneration, determined comprehensively taking into consideration the position, experience, and duties of each director.

(iii) Policy for determining the details of performance-linked remuneration and non-monetary remuneration, and methods for calculating the amounts or numbers thereof
Performance-linked remuneration, etc., is granted with respect to results and performance, and linked to profits obtained from the entire business. Specifically, the Company's consolidated ordinary income is used as an indicator of performance-linked remuneration. Remuneration is determined taking into consideration performance for a single fiscal year and paid on a monthly pro-rated basis as monthly remuneration.

(iv) Policy for determining the ratio of the amounts of monetary remuneration, performance-linked remuneration, etc., and non-monetary remuneration for individual directors
The ratio of remuneration by type for directors is determined comprehensively, taking into account the position, experience, duties and performance of each director.

(v) Matters concerning decisions on the details of remuneration paid to individual directors
The Remuneration Advisory Committee deliberates and determines policies for determining the amounts and other details of remuneration, etc., paid to individual directors, and the Company leaves the decision to the Chairman, the President, and the Chief Financial Officer (CFO) with the approval of the Board of Directors, who discuss and decide details of remuneration, etc., based on the policies determined by the Committee.

(4) Roles and functions of outside directors

Outside directors of the Company are responsible for raising opinions from a fair position outside the company that is not bound by the company's chain of command and practices and providing advice and criticism from the standpoint of a third party in establishing a compliance system.

The main activities of outside directors in the previous fiscal year were as follows: Shuichi Matsuda attended 17 of the 18 meetings of the Board of Directors held during the last fiscal year. He has advanced knowledge and extensive experience in the accounting field cultivated as an academic, certified public accountant and outside officer of other companies, and in supporting the growth of ventures and small and medium-sized companies, and actively expresses opinions from such perspectives at meetings of the Board of Directors. He plays an appropriate role to ensure the validity and appropriateness of decision making. Additionally, as a member of the Remuneration Advisory Committee, he attended one committee meeting held during the previous fiscal year and fulfilled his auditing function in the process of determining the Company's executive remuneration from an objective and neutral standpoint. Hirofumi Gomi attended all 18 meetings of the Board of Directors held during the last fiscal year. He has a high level of knowledge and extensive experience in financial administration, management strategy and governance developed through his experiences in an important position at the Ministry of Finance, the Financial Services Agency, and as an outside officer at other companies, and actively expresses his opinions from these perspectives at meetings of the Board of Directors. He plays an appropriate role in ensuring the validity and appropriateness of decision making. Additionally, as a member of the Remuneration Advisory Committee, he attended one committee meeting held during the previous fiscal year and fulfilled his supervisory function in the process of determining the Company's executive remuneration from an objective and neutral standpoint. Masanori Suzuki was newly elected and appointed at the 44th Ordinary General Meeting of Shareholders held on June 29, 2021. As such, he was not active during the previous fiscal year.

(5) State of audits by Audit & Supervisory Board members

The Audit & Supervisory Board consists of three Audit & Supervisory Board members, including two outside board members, and holds meetings once a month in principle.

Audit & Supervisory Board members attend important meetings including meetings of the Board of Directors and the Management Committee, view important approval documents and audit directors' execution of duties, the decision making of the Board of Directors, status of the development of internal control systems and competing transactions, etc., based on the Audit & Supervisory Board Regulations, Audit & Supervisory Board Audit Standards, and MJS Group Internal Audit Regulations.

Audit & Supervisory Board members receive reports from directors and accounting auditors on the status of their execution of duties as necessary, coordinating closely with the internal audit department and requesting explanations as necessary.

With regard to subsidiaries, the Audit & Supervisory Board members communicate and exchange information with directors and auditors of subsidiaries, and receive business reports as needed.

Hiroshi Makino is a full-time Audit & Supervisory Board member who has been involved in the operations of the Company's sales and management divisions for many years, and in recent years has served as the head of the Internal Audit Office. He has extensive experience and considerable knowledge of compliance and risk management issues. Outside Audit & Supervisory Board member Nobuaki Usui served as commissioner of the National Tax Agency and Vice-Minister of Finance. He has considerable knowledge as an expert in tax and finance. Outside Audit & Supervisory Board member Keiichi Tadaki has served as a public prosecutor, Vice-Minister of Justice, and Prosecutor General. He has extensive knowledge and insights in law and compliance, in his current capacity as an attorney.

(6) State of internal audits

The Internal Audit Office consists of eight members, including the department manager, and was established as an organization under the direct control of the President, independent of other administrative and business divisions.

Based on MJS Group Internal Audit Regulations and the annual business audit plan, the Internal Audit Office conducts audits of the head office division, branches and subsidiaries with an emphasis on rationality and efficiency in overall business activities and the effectiveness of information management and risk management systems, and evaluates internal controls related to financial reporting. When internal control issues are discovered in accounting audits, the office cooperates with accounting auditors to monitor the state of improvements.

Internal Audit Office issues regular reports to the Board of Directors and Audit & Supervisory Board, and works closely with Directors, Audit & Supervisory Board members and accounting auditors to improve the effectiveness and efficiency of audits.

(7) State of accounting audits

The Company outsources its statutory accounting audits to BDO Sanyu & Co., an auditing corporation, and consults and obtains advice as necessary. The duration of the continuous audit period, names of certified public accountants who carried out the audit, and membership of the team of assistants aiding in auditing work are as follows.

Continuous audit period 33 years
Names of certified public accountants who carried out the audit Affiliated auditing corporation
Kota Yamamoto
Koji Kumagai
Nobuhiko Tamai
BDO Sanyu & Co.
As above
As above
Composition of team of assistants aiding in audit operations Certified public accountants
5
Others
5

(8) State of initiatives to enhance auditing functions

The Company has nominated and submitted notices for two outside Audit & Supervisory Board members as independent officers. The reasons for the appointment of these independent outside Audit & Supervisory Board members are described in Section 2.1. (Audit & Supervisory Board Members) of the report.

The main activities of outside Audit & Supervisory Board members in the previous fiscal year were as follows: Nobuaki Usui attended 17 out of 18 meetings of the Board of Directors held during the last fiscal year. He also attended all 14 meetings of the Audit & Supervisory Board and one meeting of the Remuneration Advisory Committee, giving his opinions as needed with regard to matters being discussed. Keiichi Tadaki attended all 18 meetings of the Board of Directors and all 14 meetings of the Audit & Supervisory Board held during the last fiscal year, giving his opinions as needed with regard to matters being discussed.

(9) Limitation of liability of directors and Audit & Supervisory Board members

In accordance with Article 427 Paragraph 1 of the Companies Act, the Company and its outside directors and outside Audit & Supervisory Board members have entered into agreements (called limited liability agreements) to limit liability for damages when falling under the requirements stipulated by law with regard to liability for damages under Article 423 Paragraph 1 of the Act. The maximum amount of liability for damages under these agreements is the minimum liability limit stipulated by law.

For more information on corporate governance, please refer to our Corporate Governance Report.