Basic Views on Corporate Governance for the Group

Based on our Group mission to sensitize the world to beauty, the POLA ORBIS Group offers a number of brands each with differing properties. We deploy our businesses based on the recognition that our strengths are in our high brand loyalty through direct ties with customers, R&D capabilities in the skincare area through concentration of our resources, and multi-value chain strategy exploiting strong synergistic effects of our brands upon each other. Each operating company under the Group umbrella essentially manages itself autonomously and independently, while POLA ORBIS HOLDINGS, as the holding company, retains management control over each operating company and strives to increase corporate value through ensuring sound management and improved efficiency in Group operations overall.


The POLA ORBIS Group also incorporates compliance into CSR activities, emphasizing compliance as an integral part of business. The POLA ORBIS Group strives to realize sustainable development of the Group through initiatives where the Group, as a good corporate citizen, works to deepen cooperation and establish trustful relationships with various stakeholders, including shareholders and business partners, and fulfills its corporate responsibilities. In addition, the Company has established the POLA ORBIS Group Code of Conduct to cover the various facets of responsible corporate activity, including legal compliance, environmental protection, and shareholder relations, and all executives and other employees pledge to abide by the Code of Conduct.

Corporate Governance Structure

Overview of Key Corporate Governance Structures

  Purpose and Activities Members Meeting Schedule

1. Board of Directors

Discusses important matters related to business management, including medium- to long-term strategies for the Group, possible risks and optimum allocation of resources, and makes decisions on these matters. Six directors (two of whom are independent outside directors) At least once a month. In 2018, directors met 22 times, including extraordinary meetings

2. Board of Corporate Auditors

Corporate auditors attend general shareholders' meetings, Board of Directors' meetings, Group Managerial Meetings and other important events; gather reports from directors, employees and accounting auditors; and supervise the execution of duties by directors. One full-time corporate auditor and two independent, part-time outside corporate auditors, as stipulated under Article 2, Paragraph 16 of Japan’s Companies Act At least once a month. In 2018, corporate auditors met 16 times, including extraordinary meetings

3. Group Managerial Meeting

Established in 2017 to clarify management and execution functions. Receives reports from all companies on important matters (management issues, risks) pertaining to the execution of Group operations and discusses the content thereof. Directors and corporate auditors of the Company as well as presidents of subsidiaries and corporate officers of key companies Monthly. In 2018, strategy meetings were held 19 times

4. Nomination Advisory Committee (voluntary)

Ensures objectivity, transparency and effectiveness in decision-making processes, including nomination of Company directors, appointment of corporate officers and nomination of directors at subsidiaries, by discussing and recommending individuals based on a request for advice from the Board of Directors regarding personnel essential from a management perspective. Decides on composition (of members) according to matters for deliberation, from the perspectives of ensuring objectivity, transparency and effectiveness in the decision-making process.
For particularly important personnel decisions, such as the appointment or dismissal of directors, corporate officers or representative directors at key subsidiaries, the majority of members will be outside directors.
Structure introduced in January 2019

5. Compensation Advisory Committee (voluntary)

Ensures objectivity, transparency and effectiveness in decision-making processes regarding system design of the compensation program for Company executives, compensation for Company directors and compensation for directors and corporate officers at subsidiaries of the Company by discussing and recommending compensation based on a request for advice from the Board of Directors. Decides on composition (of members) according to matters for deliberation, from the perspectives of ensuring objectivity, transparency and effectiveness in the decision-making process. For particularly important matters for deliberation, such as a revision to the director and corporate auditor compensation system and compensation for Company directors, the majority of members will be outside directors. Structure introduced in January 2019

6. Internal Audit Division

Evaluates and verifies management activities (risk management, internal controls, governance) that will contribute to the achievement of management targets at the Company and each Group company, and offers advice, recommendations and suggestions for improvement. Thirteen members, eight of whom are in charge of internal audits In 2018, there were nine audits at 11 companies

7. Group CSR Committee

Applies a lateral perspective across the Group to oversee risks associated with corporate activities, primarily from strategic and administrative perspectives, and also tracks the status of compliance practices and important CSR-related issues. Committee chair (the executive responsible for CSR), committee members (Group executives and outside experts) and a committee secretariat In 2018, the Group CSR Committee met five times

The Company’s Stance on Its Response to the Corporate Governance Code

 The Company has, as a holding company, thus far strove to enhance the corporate value of the Group as a whole through management and supervision of group companies so as to ensure soundness of management and enhance efficiency.
 The Board of Directors of the Company would like to take this formulation and application of the Corporate Governance Code as an “opportunity for further evolution” that will allow the Group to reflect on the corporate governance of the Company thus far and to continuously enhance corporate value going forward.
 The Board of Directors of the Company considers it necessary to understand and carry out the objectives as required under the Corporate Governance Code, as well as to continuously evaluate, improve, and develop the Corporate governance of the Company, so that each group company can, in the same way as human beings, grow by becoming independent and autonomous, and by continuously learning, deliberating and improving, while acquiring and exerting the flexibility necessary to accept the diversity from individual personalities, external changes, and heterogeneity.
 The Board of Directors of the Company has formulated the “Basic Policy on Corporate Governance” based on the five fundamental principles specified in the Corporate Governance Code so as to meet the expectations of shareholders and other stakeholders and to fulfill its responsibilities.

Five Fundamental Principles

1.Securing the Rights and Equality of Shareholders

The Company shall respect shareholder rights and develop an environment as well as provide information so that shareholders can exercise their
rights appropriately, and endeavor to secure substantive equality of shareholders.

 

2.Appropriate Cooperation with Stakeholders

The Company shall strive to realize sustainable development of the Group through initiatives where the Group, as a good corporate citizen, works
to deepen cooperation and establish trustful relationships with various stakeholders, including shareholders and business partners, and fulfills its
corporate responsibilities.

 

3.Ensuring Appropriate Information Disclosure and Transparency

The Company shall strive to ensure fairness and transparency in decision-making by disclosing financial information and non-financial
information of the Group in an appropriate and proactive manner in accordance with the disclosure policy separately established, in addition to
carrying out appropriate information disclosure in compliance with relevant laws and regulations.

 

4.Responsibilities of the Board of Directors, etc.

The Company shall strive to ensure the effectiveness and fairness of the Board of Directors so as to fulfill its administrative and supervisory
function over the management of Group companies as a pure holding company in charge of the business administration of multiple subsidiaries.

 

5.Dialogue with Shareholders

The Company shall make efforts to engage in constructive dialogue with stakeholders and enhance the efficiency thereof by proactively
implementing public relations and investor relations activities.

Reference

Basic Policy regarding Executive Compensation

POLA ORBIS HOLDINGS’ executive compensation is set by the Board of Directors, based on discussions and recommendations by the Compensation Advisory Committee, in accordance with following basic policy.

 

1.  Basic Policy

POLA ORBIS Group regards executive compensation as one of the critical means for materializing the sustainable growth of the Group, as well as the medium- to long-term enhancement of its corporate value.

POLA ORBIS HOLDINGS, as a holding company, clearly defines the respective roles and responsibilities of directors, etc. of the Company, who are primarily tasked with making decisions regarding the overall management of the Group while supervising its business execution, as well as the directors of subsidiaries, who are delegated authority to execute business from the Company. As such, executive compensation of the Group shall be based on the actual performance results in the domain of such business execution, which provides intense motivation for the executives to achieve performance targets, not only over the short term, but also over the medium to long term.

In addition, the Company intends to further motivate executives to share the common interest with shareholders, by establishing a more focused linkage between their compensation and the stock value.

 

2. Compensation Standard

The compensation standard is set at a level that is comparable with industry peers or companies of a similar size at home and abroad, and is commensurate with the role and level of responsibility of each individual, in consideration of the business environment of POLA ORBIS Group, as well as its need to stay competitive vis-à-vis the external market.

 

3. Compensation Structure

Executive compensation of POLA ORBIS Group (excluding outside directors) consists of “basic compensation,” “annual bonus,” and “medium- to long-term incentive (performance share-based compensation),” while compensation for outside directors consists of “basic compensation” and “medium- to long-term incentive (non-performance share-based compensation).” The compensation for corporate auditors consists of only “basic compensation”, because of their role of auditing directors’ execution of business from an objective position.

 

Executive Compensation Structure of POLA ORBIS Group 

 

Note) The ratio of variable compensation with respect to the overall executive compensation shall be set at a level between 30% and 40%, depending on individual executive grade. Regarding the variable compensation, the “annual bonus” and “medium- to long-term incentive” vary respectively in the range from 0% to 200%, with the former depending on the Group’s level of achievement of performance targets in each fiscal year, and the latter depending on POLA ORBIS Group’s level of achievement of performance targets under the medium-term management plan, etc.


4. Process for Determining Executive Compensation
In order to ensure objectivity and transparency in the process for determining the executive compensation, POLA ORBIS HOLDINGS has established the Compensation Advisory Committee, the majority of which is comprised by outside directors, as a voluntary advisory body to the Board of Directors. Based on deliberations at, and the report from the Compensation Advisory Committee, the executive compensation of the Group is determined by the Board of Directors. 
 


Total, including compensation by executive classification, and total by type of compensation (Fiscal 2018)