Corporate GovernanceCorporate GovernanceCorporate GovernanceCorporate Governance

Organo Group Report (Integrated Report)

Corporate Governance Structure Diagram

Board of Directors

The Board of Directors consists of nine Directors (including five Outside Directors). In principle, it meets at least once a month (a total of 14 meetings during the 81th fiscal period) to make decisions on important business matters and oversee business execution.

By ensuring that Independent Outside Directors make up at least one-third of the Board—currently a majority—we strengthen the Board's oversight of management.

All three Audit and Supervisory Board Members attend Board of Directors meetings, receive reports and business explanations from Directors, and provide their opinions as needed—auditing the business execution of executives including the Representative Director and below.

The Board of Directors is structured at an appropriate size and composition to exercise oversight across all areas of management while ensuring fairness and transparency. We believe diversity on the Board is essential for multifaceted, effective deliberations. Accordingly, we identify the knowledge, experience, and capabilities the Company needs to achieve sustainable growth and maximize long-term corporate value, and appoint Directors who collectively bring these qualities—creating a Board whose strengths are complementary.

Transition of Board of Directors Size and Composition

We have an Audit and Supervisory Board, and it consists of three Audit and Supervisory Board Members (including two Outside Audit and Supervisory Board Members). In principle, it meets once a month (a total of 14 meetings during the 81th fiscal period) to establish the auditing policy for the fiscal year, the division of duties among each member, specific implementation items, and the audit schedule—and audits the execution of duties by Directors. Audit and Supervisory Board Members attend important meetings, including those of the Board of Directors, to audit and verify the decision-making process of Directors. They also report on and discuss audit results at meetings of the Audit and Supervisory Board. Two members have appropriate expertise in finance and accounting, and one has appropriate expertise in legal affairs. We have also established a Secretariat for the Audit and Supervisory Board to support the duties of its members.

Nomination and Remuneration Advisory Committee

The Nomination and Remuneration Advisory Committee has been established as a voluntary advisory body to the Board of Directors. Its purpose is to ensure objectivity and transparency in the processes for nominating officers—including the appointment and dismissal of Directors and Executive Officers—and for determining the remuneration of Directors and other officers, and to ensure that nominations and remuneration amounts are appropriately set. The Committee consists of three or more Directors elected by resolution of the Board, with a majority being Outside Directors to ensure independence. The Committee currently has six members: five Independent Outside Directors and one Inside Director, with an Independent Outside Director serving as Chairperson. It met ten times during the 81th fiscal period.

Special Committee

In April 2022, we established a Special Committee to ensure fair transactions in important dealings with our parent company Tosoh Corporation and its subsidiaries (excluding the Company and its subsidiaries), to monitor and oversee conflicts of interest between the parent company group and minority shareholders, and to appropriately protect minority shareholder interests. The Committee ensures its independence by consisting solely of Independent Outside Directors (five members).

In FY2024, the Company held repeated discussions at the Nomination and Remuneration Advisory Committee regarding the current roles of its Board of Directors and individual Directors, and redefined those roles in line with recent changes to the state of boards of directors in Japan, following a resolution by the Board of Directors. (Corporate Governance Guidelines Articles 13 to 15) The discussions confirmed that the Company is a company with an Audit and Supervisory Board adopting a so-called hybrid model that emphasizes the decision-making function of the Board of Directors while also strengthening its supervisory function. While we previously defined the roles of Independent Outside Directors, we first clarified the roles of Directors, and then further defined the position of Independent Outside Directors, as well as the stance and perspectives they should hold. The Company will continue to investigate how the Board of Directors and individual Directors can lead to the enhancement of corporate value.

Redefined Corporate Governance Guidelines (Excerpt)

Article 13 (Form of Corporate Organ)

• - The Company selects "company with an Audit and Supervisory Board" as its form of corporate organ. The Company positions the Board of Directors as an organ that determines basic policies for the entire Group, makes high-level management decisions, and supervises business execution. It places emphasis on the decision-making function of the Board of Directors for important business execution, and also strives to strengthen the supervisory function of the Board of Directors. The Company has also established a voluntary Nomination and Remuneration Advisory Committee with Outside Directors constituting a majority of its members, which enhances transparency and objectivity in the nomination of Directors and other officers and the determination of their remuneration and other matters. In addition, the Audit and Supervisory Board audits the execution of duties by Directors.

Article 14 (Roles of the Board of Directors)

• - Entrusted by shareholders, the Board of Directors is responsible for realizing efficient and effective corporate governance, and through this, achieving sustainable growth for the Company and maximizing long-term corporate value.
• - To fulfill the responsibilities outlined in the preceding item, the Board of Directors realizes more sophisticated and in-depth management decisions and makes the best decisions based on discussions from the objective and multifaceted perspectives of Inside and Outside Directors with diverse experience and insight. It also strives to strengthen its supervisory function toward the goal of enhancing corporate value, as well as ensuring compliance and risk management.

Article 15 (Roles of Individual Directors)

• - Directors participate in the Board of Directors with logical thinking skills based on objective and multifaceted perspectives, and strive to ensure that more sophisticated and in-depth discussions take place.
• - Independent Outside Directors contribute to strengthening the supervisory function of the Board of Directors from a standpoint independent of business execution, toward the goal of enhancing corporate value, as well as ensuring compliance and risk management.
• - Independent Outside Directors have a strong interest in the Group's fields of business and other matters, actively understand the environment surrounding the Group, and make decisions based on their knowledge.

Assessment Method for the Board of Directors' Overall Effectiveness

The Company conducts a survey for all Directors and Audit and Supervisory Board Members every year. Based on the results of the survey, the Board of Directors' overall effectiveness is analyzed and assessed and measures to maintain and improve the function of the Board are discussed.

Scope

A total of 12 people including nine Directors and three Audit and Supervisory Board Members

Period

FY2024 (April 2024 to March 2025)

Implementation timing

February–May 2025

Implementation method

Survey by third-party organization

Major Initiatives Implemented in FY2024

We implemented the following initiatives based on the evaluation results of FY2023.

Enhanced effectiveness of deliberations by providing explanation in advance

Regarding the Management Meeting and the Risk Management Committee, which are bodies that deliberate on proposals to be submitted to the Board of Directors, the Company provided notices of their meetings to outside officers and shared information with them to encourage them to participate in these meetings. The Company also sent meeting minutes to them after the meetings to provide information before Board of Directors' meetings are convened. In addition to the above, concerning important matters, the Company also considered a system for providing explanations and supplemental information regarding unclear points in information prior to Board of Directors' meetings.

Consideration toward realization of management conscious of cost of capital and stock prices

In preparation for discussions centered on the "cost of capital" at Board of Directors' meetings and other meetings, the Company invited outside experts to provide training designed to help management acquire knowledge and raise awareness. Opportunities for discussion were provided at Board of Directors' meetings to discuss matters related to the next fiscal year's profit plan, including the trends of the Company's cost of capital and market evaluation, comparison with competitors, business portfolio analysis, capital allocation, shareholder returns, and capital policies.

Held discussions on "value creation and provision through utilization of digital technology and data" and "investment in human capital and alignment with management strategy"

At Board of Directors' meetings, initiatives and future plans regarding "promotion of utilization of data" and "initiatives to link human capital with enhancement of corporate value" were reported and opportunities for discussion were provided. These issues will continue to be discussed at Board of Directors' meetings and the initiatives will be further invigorated.

FY2024 Evaluation Assessment and Future Initiatives

The following are the assessment results and future initiatives based on the analysis and assessment of effectiveness conducted in FY2025. The Board of Directors will implement these to further improve its function going forward.

Establishment of internal control systems, including those of overseas subsidiaries, and management and oversight of their operation

As the Group's overseas business development accelerates, in order to strengthen the governance of domestic and overseas Group companies, the Board of Directors will consider mechanisms for efficiently aligning management of Group companies with the Company's management to improve two-line oversight so as to strengthen the Group's internal controls.

Human resource strategy and initiatives for improving employee engagement, ensuring diversity of core personnel, securing and developing human resources, etc.

The Company will seek to secure human resources and implement appropriate development plans by visualizing the quality and quantity of human resources required for realizing ORGANO 2030. The Company also aims to link individual growth with business strategies by means of human resources skills mapping. The Company will also continue to consider measures that will lead to improved employee engagement.

Discussions on "alignment of the Group's intellectual property strategy and business strategies"

Based on the current status of the Company's intellectual property (number of cases, comparison with competitors, etc.), the Company will provide topics for discussion at Board of Directors' meetings regarding specific initiatives to enhance corporate value, such as commercialization and competitiveness.

Discussions on "analysis and evaluation of cost of capital, etc." and "review of business portfolio"

The Company will continue to analyze and evaluate cost of capital, etc., and provide an opportunity for discussion at Board of Directors' meetings to consider the business portfolio while bearing in mind medium- to long-term management plans.

Previous Assessments