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Corporate Governance

Corporate Governance

三越伊勢丹HD 総務統括部グループ総務部, 三越伊勢丹HD チーフオフィサー室広報IRDIV, 三越伊勢丹HD グループ総務部法務コンプライアンス部, 三越伊勢丹HD 秘書室, 三越伊勢丹HD 監査役室, 三越伊勢丹ヒューマン・ソリューションズ 人財開発事業部

Basic Views on Corporate Governance

We pursue initiatives in corporate governance with the aim of contributing to the sustainable growth of the Isetan Mitsukoshi Group and improving its corporate value over the medium to long terms.

In combination with measures to build excellent relationships with customers, employees, shareholders, business partners and local communities—our stakeholders—the Group is overhauling its corporate governance structure, along with management reform. This entails the establishment and strengthening of legal frameworks for the general meeting of shareholders, the Board of Directors and the accounting auditors.
As part of these efforts, for the purpose of further advancing corporate governance, the Company decided on the transition of its organizational design to a company with a nominating committee, etc. effective June 2020.
With the transition to a company with a nominating committee, etc. as a turning point, the Group will work to further increase the transparency of our corporate activities and ensure thorough compliance in our management, while taking measures to create and deliver value in various forms for all stakeholders associated with the Group. Aiming to become a corporate Group that is deeply trusted by all of its various stakeholders, the Group will continue taking a range of measures including speeding up management decision-making, strengthening management oversight mechanisms and enhancing internal control systems.
 

三越伊勢丹HD チーフオフィサー室広報IRDIV

Corporate Governance System

governanceContent

Composition of directors and at each committee

Composition of directors

Composition of directors and at each committee

Composition at each committee

Composition at each committee

management oversight mechanisms

Board of Directors

Responsibilities of the Board of Directors

In light of the Company’s fiduciary responsibilities and accountability to shareholders, with the aim of promoting the Group’s sustainable growth and the enhancement of corporate value over mid- to long-term and further advancing corporate governance, the Company made a transition from a company with the Audit & Supervisory Board to a company with a nominating committee, etc. in June 2020.
The Company will clearly separate the roles between “execution” and “oversight” by the transition of its organizational design, whereby the Board of Directors’ roles are focused on the establishment of general direction of the Group and the oversight/monitoring of business execution, in order to enhance the oversight function of the Board of Directors. To this end, the Company will create a framework suited to monitoring “execution” and “oversight” through such measures as having Outside Directors comprise a majority of the Board of Directors. The Company will also clearly set forth in the Regulations of the Board of Directors and Regulations of Decision Making Process for the Group criteria for making proposals to be decided upon by the Board of Directors, and delegate authority to Executive Officers in order to enhance the agility of management.
Furthermore, the Company will establish the statutory Nominating Committee, Compensation Committee and Audit Committee in order to implement important governance measures such as selection and dismissal of top management in a highly objective and transparent manner under the leadership of Outside Directors.

Composition of the Board of Directors

The Company’s Articles of Incorporation stipulates that the number of Directors shall not exceed 15, of which Outside Directors are in the majority in order to strengthen corporate governance. Furthermore, the policy of the Company for the Board of Directors is to appoint a diverse range of people with broad and highly specialized knowledge and skills, as well as high ethical standards. For Outside Directors in particular, the Company invites people from different fields and industries, primarily those with practical business-world experience, in order to actively take in a wide range of opinions from objective and specialist perspectives and ensure well-balanced management. All Outside Directors satisfy the Independence Standards of the Company. Furthermore, the Regulations of the Board of Directors set out that the Board of Directors shall be chaired by a non-executive Director.
The Company’s views on the composition of the Board of Directors, important concurrent positions of the Directors, and their attendance at the Company’s Board of Directors meetings are described and disclosed in the “Notice of the Convocation of the Ordinary General Meeting of Shareholders.”

Responsibilities and Composition of the Three Statutory Committees

(1) Nominating Committee
The Nominating Committee will engage in discussion and make decisions related to the “nomination” of officers with a high degree of objectivity and transparency, under the leadership of Outside Directors. In order to do so, the Nominating Committee will clarify officer selection standards and focus on enabling independent judgments by Outside Directors, by measures including the utilization of personnel evaluations and other objective indicators and increased contact with prospective nominees.
The Nominating Committee is comprised of a majority of Outside Directors and chaired by an Outside Director. The President and CEO (Representative Executive Officer), who is also one of the members to improve the effectiveness of the succession plan, shall leave the meeting as in the operations by the Nomination and Remuneration Committee when making a decision on reappointment of the current President and CEO (Representative Executive Officer), which is important in terms of corporate governance, in order to improve the effectiveness.

(2) Compensation Committee
Like the Nominating Committee, the Compensation Committee will engage in discussion and make decisions related to “remuneration” of officers and take steps to further enhance corporate governance, under the leadership of an Outside Director. The committee will discuss issues and policy related to officer remuneration plans, including the Company’s approach to incentives for officers to enhance corporate value, and it will utilize various objective indicators such as personnel evaluation, and participate in third-party surveys on remuneration to enable independent judgments by Outside Directors concerning the appropriateness of individual remuneration proposals.
The Compensation Committee is comprised of a majority of Outside Directors and chaired by an Outside Director. The President and CEO (Representative Executive Officer) shall not be included in the members to eliminate arbitrariness.

(3) Audit Committee
The Audit Committee will monitor the legality and appropriateness of the execution of duties by Executive Officers and Directors, and strengthen oversight functions through audits. In addition, the Audit Committee will work to enhance the audits of the Group as a whole by coordinating with the Internal Audit Division and Audit & Supervisory Board Members at each Group company, and further enhance the audit system encompassing the entire group with the organizational transition as a turning point
The Audit Committee is comprised of a majority of Outside Directors, and internal non-executive Directors serving as its full-time members.

三越伊勢丹HD 総務統括部グループ総務部, 三越伊勢丹HD チーフオフィサー室広報IRDIV, 三越伊勢丹HD グループ総務部法務コンプライアンス部, 三越伊勢丹HD 秘書室, 三越伊勢丹HD 監査役室, 三越伊勢丹ヒューマン・ソリューションズ 人財開発事業部

Information on officers

Directors

Director Ken Akamatsu Chairman of the board of Directors
Chairman, Isetan Mitsukoshi Ltd.
Director Toshihiko Sugie Director, President and CEO  (Representative Executive Officer)
Nomiation Committee Member
President, Representative Director, Executive Officer, Isetan Mitsukoshi Ltd.
Director Toru Takeuchi Director, Executive Vice President  (Representative Executive Officer)
Chairman, Isetan Mitsukoshi Ltd.
Director Hidehiko Igura Managing Executive Officer and CFO
Chairman, Isean Mitsukoshi Ltd.
Director Shigeru Nishiyama Managing Executive Officer, General Manager, General Affairs Department, CRO
Compensation Committee Member
Chairman, Isetan Mitsukosi Ltd.
Director Toshinori Shirai Chairman of Audit Commitee
Outside Director Michiko Kuboyama Audit Committee Member
Outside Director Masami Iijima Chairman of Nomination Committee
Compensation Committee Member
Outside Director Miwako Doi Chairman of Compensation Committee Member
Nomination Committee Member
Outside Director Takashi Oyamada Nomination Committee Member
Audit Committee Member
Outside Director Takeo Hirata Compensation Committee Member
Outside Director Hidetoshi Furukawa Nomination Committee Member
Audit Committee Member
Outdside Director Fukutaka Hashimoto Audit Committee Member

Executive Officers

President and CEO  (Representative Executive Officer) Toshihiko Sugie CEO
President, Representative Director, Executive Officer, Isetan Mitsukoshi Ltd.
Executive Vice President  (Representative Executive Officer) Toru Takeuchi CMO
Chairman, Isetan Mitsukoshi Ltd.
Senior Managing Executive Officer Takuya Matsuo General Manager of Real Estate Department
Managing Executive Officer Hidehiko Igura CFO
Chairman, Isetan Mitsukoshi Ltd.
Managing Executive Officer Shigeru Nishiyama General Manager of General Affairs Department and CRO
Chairman, Isetan Mitsukoshi Ltd.
Managing Executive Officer Hideki Katagiri General Manager of Group Business Operations Department
Managing Executive Officer Akira Kimbara General Manager of Group Corporate Strategy Office

Policy on “Nomination” of Executives

As a policy of selection and dismissal of senior management Executive Officers, including Representative Executive Officers, the Company stipulates the maximum age and the maximum reappointment term of officers for each position in the Regulations of Age Limits of Executive Officers in Office to promote appropriate rotation. Given this, selection of Executive Officers, including Representative Executive Officers and Executive Officers with special titles, and their reappointment after the expiration of the one-year term of the appointment contract shall be determined by the Nominating Committee by appropriately evaluating quantitative results of respective Executive Officers during their term of appointment contract, along with qualitative aspects, such as contributions in materializing the Group’s “Our philosophy.” As such, the fairness and transparency of the selection and dismissal of management executives is secured.

Decision on selection and reappointment of the CEO

Before the transition to a company with a nominating committee, etc., the Company worked on the following measures to ensure transparency and fairness in deciding on selection and reappointment of the CEO.

1.At the time of inauguration of the CEO, the CEO submits in person a commitment (goals to be achieved) for the estimated term of office, of which acceptance/non-acceptance is discussed.
2.In the following and subsequent years, the CEO explains progress for the commitment, future earnings forecasts, etc., and after the CEO leaves the meeting, four Outside Directors who are members of the Committee deliberate on the acceptance/non-acceptance of reappointment of the CEO.

Succession plan of the CEO

The Company actively created opportunities where Outside Directors can monitor candidates after the following contents were periodically reported and shared at the Nomination and Remuneration Committee.

1.Listing of candidates for a CEO successor (for emergencies, at the time of change before expiration of term, and the maximum term of office)
2.Clarification of requirement for the CEO
3.Training plans for each candidate and plans for relocation to sectors that each candidate should experience in the future

Furthermore, with regard to the development of candidates, the Company has created a reserve group of candidates for the CEO successor by spending adequate time and resources by providing systematic education opportunities such as the “business leader program” which is a selective education program for managerial positions and the “business executive program” after assumption of office as executive officer.
As described above, the Company has worked on the decision on reappointment of CEO and the succession plan while ensuring transparency and fairness. After the transition to a company with a nominating committee, etc., the Company will position the decision on selection and reappointment of CEO as one of the most important tasks of the Nominating Committee, and the Committee will actively discuss its approach to the matter in order to further enhance the initiatives that have been implemented.

Policy on nomination of candidates for Director

With regard to nomination of candidates for Director, the policy of the Company is to look for candidates from a diverse range of people with broad and highly specialized knowledge and skills, as well as high ethical standards.
For Outside Directors in particular, the Company invites people from different fields and industries, primarily those with practical business-world experience, in order to actively take in a wide range of opinions from objective and specialist perspectives and ensure well-balanced management.
Candidates for Director are determined at the Nominating Committee, which is comprised of a majority of Outside Directors and chaired by one of them, and the proposal is submitted to the general meeting of shareholders.
Regarding senior management Executive Officers, the Board of Directors shall determine candidates after the deliberation by the Nominating Committee.

The reasons for nomination of each candidate for Director are described in the “Notice of the Convocation of the Ordinary General Meeting of Shareholders” (Reference Documents for the General Meeting of Shareholders).
As described above, Outside Directors lead the deliberation and decision-making regarding the nomination, which is important in terms of corporate governance, in order to improve the objectivity and transparency. The Nominating Committee will work to further clarify the officer selection standards of the Company.

Independence Standards for Independent Outside Executives

In designating Outside Directors as independent officers, the Company has compiled its proprietary “Independence Standards for Independent Directors and Independent Auditors of Isetan Mitsukoshi Holdings Ltd.,” for assessing their independence and outside officers who do not come under any of the following categories are nominated as independent officers.
1) Business executives of the Group
2) A person for whom the Group is a major business partner, or an executive director, executive or manager thereof
3) A major business partner of the Group, or an executive director, executive, manager or other employee thereof
4) An executive officer of a principal lender of the Group
5) A consultant or accounting or legal expert who has received financial or other economic benefits from the Group exceeding a certain sum, other than remuneration of Directors or Audit & Supervisory Board Members
6) A shareholder or an executive officer thereof who holds at least 5% of the total issued shares of the Company
7) Any person who has come under categories 1) to 5) above in the last three years
8) Spouses or relatives within the second degree of kinship of anybody coming under categories 1) to 5) above
 
A “major business partner” in 2) and 3) above means “any business partner for whom the annual transaction amount with the Company, on a consolidated basis, exceeds 1% of the total annual transaction amount of either party, over the preceding three years, even if this occurs on only one occasion,” a “principal lender” in 4) above means “any lender from whom the Group’s balance of borrowings exceeds 2% of the consolidated total assets of the Company as of the end of the fiscal year,” and a “certain sum” in 5) above means “a sum of at least 10 million yen in any of the preceding three fiscal years.”

Policies and procedures with regard to the Compensation Committee’s decisions concerning remuneration of senior management executives and Directors are as follows.

(1) Policy regarding the remuneration, etc. of officers

The Company has established the following four basic principles regarding executive remuneration (excluding Outside Directors and Audit & Supervisory Board Members).

(1) Promotion of common interests between shareholders and officers
(2) Expansion of incentive effects to improve financial results and shareholder value
(3) Provision of remuneration at a level by no means inferior to competing companies (upon achieving goals)
(4) Ensuring objectivity and transparency in methods of evaluation and remuneration decision

These basic principles have been formulated as “Director Remuneration Principles” in the “Director Remuneration Guidelines.” Based on these basic principles, the Nomination and Remuneration Committee, a voluntary advisory body, has actively discussed ways for linking to the short-term performance and the medium- to long-term performance in the entire remuneration and approach to the share-based remuneration system. After the transition to a company with a nominating committee, etc., the Compensation Committee, comprising a majority of Outside Directors, will be led by Outside Directors in discussing and deciding on the policy of remuneration and individual amounts of remuneration, and continue its deliberations and initiatives so that the executive remuneration system functions better as a healthy incentive towards the sustainable growth of the Company.

(2) Matters concerning the process for determining executive remuneration

Under the above Director Remuneration Principles, the objectivity and transparency of the entire process of determining executive remuneration are ensured through the effective deliberation at the Compensation Committee, a statutory committee that is comprised of a majority of Outside Directors and chaired by one of them.

(3) Types of remuneration, etc. of officers and the method by which they are determined

Under the Director remuneration system of the Company, executive remuneration is composed of three elements: monthly “basic remuneration” along with “bonuses” and “share-based remuneration” which are paid or granted annually. For Executive Officers, including the President and CEO (Representative Executive Officer), bonuses that are paid as a form of performance-linked remuneration shall account for 25% of the total annual remuneration for each individual, with the aim of clarifying their responsibilities for business execution.
Meanwhile, share-based remuneration shall account for 15% of the total annual remuneration for each individual, with a view toward promoting shareholdings by officers and their common interests with the shareholders. (Bonuses shall not be paid to internal Directors except for those who concurrently serve as Executive Officer, and Outside Directors.)
The Company is currently conducting fundamental considerations on ways for linking to the short-term performance and the medium- to long-term performance in the entire remuneration and approach to the share-based remuneration system that has replaced the remuneration-type stock options scheme, so that the officer remuneration system functions better as a healthy incentive towards the sustainable growth of the Company. In FY2020 and onwards after the transition to a company with a nominating committee, etc., the Compensation Committee will continue such considerations and work to bring discussion results into shape.

<Bonuses>
;For Executive Officers including President and CEO (Representative Executive Officer), performance-linked bonus as described hereunder has been introduced as a strong motivation towards the achievement of goals based on the Director Remuneration Principles.

Base amount of bonus = Basic remuneration x 5 (months)
Amount of bonus to be paid = Base amount of bonus x [1] Payout ratio (degree of achievement against the corporate performance goal) x [3] Allocation ratio (weight) + Base amount of bonus x [2] Payout ratio (personal qualitative evaluation) x [3] Allocation ratio (weight)

[1] Payout ratio (degree of achievement against the corporate performance goal)
Since the Company’s foundation in FY2008, the Group has adopted consolidated operating income as its indicator to strongly motivate officers to achieve annual goals, with a view toward quickly establishing a sound operational base for the Group and launching its management on a growth track into the future.
Specifically, the payout ratio shall be 1.00 (100%) upon the full achievement of the operating income goal, and designed to vary within the range between 0.00 (0%) at minimum and 2.00 (200%) at maximum, in proportion to the degree of achievement. The amounts of consolidated operating income corresponding to such minimum and maximum factors shall be determined for each fiscal year, based on the absolute standards of the targeted amount, with a view toward providing clear and effective incentives.

[2] Payout ratio (personal qualitative evaluation)
The payout ratio of qualitative evaluation shall be subject to a five-grade evaluation (between 0.50 (50%) at minimum and 1.50 (150%) at maximum) by President and CEO (Representative Executive Officer) at the end of each fiscal year, based on the assessment of the degree of achievement of the qualitative goals established through the interview with the President and CEO (Representative Executive Officer) at the beginning of each fiscal year.

[3] Allocation ratio (weight)
The allocation ratio (weight) between the degree of achievement against the corporate performance goal and the personal qualitative evaluation shall also be determined for each fiscal year following a review of its positioning.

< Remuneration-type Stock Options>

With regard to share-based remuneration, stock options whose exercise price is set at one yen were granted to Directors (excluding Outside Directors) up until FY2019 as follows, based on the remuneration-type stock options scheme involving an exercise price set at one yen, with a view toward promoting shareholdings by officers and enhancing awareness towards improving shareholder value over the long-term.
Maximum number of stock options to be granted (each stock option being equivalent to 100 shares of the Company) = Basic remuneration x 6 (months) / Reference price of a share of the Company (*)
* Reference share price = “Average price of share over the three months up to the month prior to the resolution on issuance” or “the price of a share on the day four days prior to the date of the resolution on issuance (if no closing price is quoted on such day, the closing price of the immediately preceding business day)” at the Tokyo Stock Exchange, whichever is higher.

 Cross-shareholdings 

Policy on cross-shareholdings

The basic policy of the Group is to not acquire or hold cross-shareholdings in principle, except when cross-shareholdings are deemed conducive to sustainable growth and enhancement of corporate value of the Group over the medium- to long- term. With regard to the cross-shareholdings the Company currently holds, every year at the Board of Directors, the Company comprehensively verifies whether it is rational to continue holding such cross-shareholdings from quantitative and qualitative aspects including the purpose of holding, transaction status, and dividend earnings. Regardless, the Company will proceed with phased sales in consideration of factors such as the market environment and status of shares held with the aim of reducing cross-shareholdings.

Standards for exercising voting rights in relation to cross-shareholdings

Regarding the exercise of voting rights for cross-shareholdings, an overall judgment is made as to whether or not exercise of such rights would spur sustainable corporate value of said company or contribute to sustainable growth and enhancement of corporate value of the Group over the mid- to long-term. Such voting rights are duly exercised for each agenda item.

Policy in the case that cross-shareholders indicate their intention to sell shares

When shareholders who hold the Company’s shares for the purpose of cross-shareholding (cross-shareholders) indicate their intention to sell their shares, the Company will not hinder the sale of the shares by, for instance, implying a possible reduction of business transactions.

Systems to Enhance Governance Functions of the Company

The Company made a transition to a company with a nominating committee, etc. in June 2020, and set up the Nominating Committee, the Compensation Committee, and the Audit Committee, three statutory committees that are comprised of a majority of Outside Directors.
The Nominating Committee and the Compensation Committee strive to enable independent judgments by Outside Directors concerning discussions and decision-making related to the “nomination” and “remuneration.” To this end, the committees will take various measures, such as increasing contact with prospective nominees and utilizing personnel evaluations and other objective indicators. The Audit Committee will endeavor to build and operate a system that ensures both the effectiveness and independence so as to sufficiently exercise its audit functions.

DFF Inc., 三越伊勢丹HD 総務統括部グループ総務部

Basic Policy for Internal Control Systems at Isetan Mitsukoshi Holdings Ltd.

Basic Approaches to the Internal Control System and the Progress of System Development Updated
Isetan Mitsukoshi Holdings Ltd. (hereinafter the “Company”) develops the system below (hereinafter the “Internal Control System”) to ensure the compliance of its business operations as part of its attempts to conduct healthy and transparent group management and maximize corporate value.

1.Compliance Systems

“Systems to ensure that business duties as executed by Executive Officers and employees of the Company are in compliance with laws, regulations, and the Articles of Incorporation” (Article 416, Paragraph 1, Item 1 (e) of the Companies Act and Article 112, Paragraph 2, Item 4 of the Companies Act Enforcement Regulations)

(1) The Board of Directors shall regularly hold meetings in accordance with the “Regulations of the Board of Directors,” where they shall resolve mainly the matters required by law to be discussed at the Board of Directors meetings (hereinafter the “Matters Required by Law to Be Discussed”) and supervise the execution of Executive Officers’ duties, preventing actions that are not in compliance with laws, regulations, and the Articles of Incorporation.

(2) The Group General Affairs Department shall establish sections and individuals with jurisdiction over compliance-related matters, maintaining and improving systems for compliance with internal control and laws and regulations.

(3) In order to increase the legal compliance, efficiency, and legitimacy of the Board of Directors’ decision-making and supervision, there shall be Outside Directors that constitute the majority of Directors.

(4) An independent, specialized Internal Audit Division shall be created. Internal audits will be in accordance with the “Regulations of Internal Audits” and be implemented as each division works with the Internal Audit Division to audit the legal compliance and legitimacy of business affairs.

(5) In the case that the Company or the Group commits an act of wrongdoing, the Company shall confirm the nature of the situation in a timely manner and form the “Isetan Mitsukoshi Group Hotline” as a point of contact for internal reports from employees for self-betterment.

2.Risk Management Systems

“Regulations and other systems involving management of risks of loss to the Company” (Article 112, Paragraph 2, Item 2 of the Companies Act Enforcement Regulations)

(1) Risks shall be prevented from occurring by identifying, evaluating, and analyzing risks that may occur in the course of business operations and using this information to select risks that require prioritized response.

(2) In the case that a risk does occur, company-wide internal management systems that allow for rapid response shall be organized through methods such as the establishment of a countermeasures headquarters and the managing of information.

(3) Relevant regulations shall be established with regards to risk recognition, evaluation, and response and be made well-known and thoroughly understood.

(4) Audits by the Internal Audit Division will attempt to detect risks facing the Company at an early stage and settle them.

(5) Involvement with anti-social forces shall be eliminated and any unjust demands shall be rejected to prevent related damages.

3.Internal Control Systems Regarding Financial Reporting

“Systems to ensure the appropriateness of financial reporting” (Article 24-4-4 of the Financial Instruments and Exchange Act)

(1) Company-wide policies and procedures shall be indicated to ensure appropriate financial reporting and conduct that are adequately built and operated.

(2) Appropriate evaluation and response shall be taken regarding the risk of misstatements made on items of importance in financial reports, and systems shall be adequately built and operated to reduce such risk.

(3) The Company shall build and operate methods to identify, understand, and process truthful and impartial information that is then communicated to the appropriate parties in a timely manner.

(4) A financial reporting-related monitoring system shall be built and appropriately operated.

(5) A system shall be built to report internal control issues (deficiencies) understood through the course of monitoring in a timely and appropriate manner.

(6) Adequate support shall be given to information technologies relating to internal controls involved in financial reporting.

4.Information Storage Management Systems

“Systems regarding the storage and management of information relating to the execution of business duties of Executive Officers of the Company” (Article 112, Paragraph 2, Item 1 of the Companies Act Enforcement Regulations)

(1) The following documents related to the execution of business duties by Executive Officers shall be recorded, stored, and managed together with related materials for a prescribed period according to the “Document Retention Policies”:

(i) Minutes of the general meeting of shareholders
(ii) Minutes of the meetings of the Board of Directors
(iii) Minutes of the meetings of the Board of Executive Officers
(iv) Financial statements
(v) Copies of documents submitted to government administrative offices, other public agencies, and markets for financial instruments
(vi) Other documents as determined by the Board of Directors

(2) Protection and management systems and other methodologies shall be used to create regulations such as the “Information Retention Policies” for management information, trade secrets, and personal information of customers, etc. that should be kept confidential according to laws and regulations including the Companies Act and the Financial Instruments and Exchange Act, and the compliance of related Directors, Executive Officers, and employees shall result in its safe storage.

5.Systems for the Efficient Execution of Duties

“Systems to ensure the efficient performance of Executive Officers’ professional duties at the Company” (Article 112, Paragraph 2, Item 3 of the Companies Act Enforcement Regulations)

(1) The segregation of duties and hierarchy of commands among Executive Officers shall be determined by the Board of Directors.

(2) The Board of Directors shall resolve mainly the Matters Required by Law to Be Discussed and delegate the authority for decision-making on other matters of importance to Executive Officers. Those matters of importance shall be resolved/determined through the deliberation by the Board of Executive Officers, which mainly consists of Executive Officers.

(3) The Company shall adopt an executive officer system to streamline the business execution through clarification of the executive duties of executive officers.

(4) The Company shall adopt a chief officer system, whereby the Chief Officer assigned by the President and CEO (Representative Executive Officer) to be in charge of important areas of operation shall promote control of issues of the entire Group covering multiple divisions.

(5) The Company shall define details of duties, responsibilities and procedures in “Regulations of Duties and Authority”, “Regulations of the Conduct of the Business”, and “Regulations of Decision Making Process for the Group” for execution of duties.

6.Group Company Management Systems

“Systems to ensure the compliance of the business conducted by the corporate groups consisting of the Company and its subsidiaries” (Article 112, Paragraph 2, Item 5 of the Companies Act Enforcement Regulations) The Company shall develop a system to ensure the compliance of the business conducted by each company in the Group, as described below.

1. “Systems relating to reports to the Company on items relating to the execution of business duties by the Directors of the Company’s subsidiaries” (Article 112, Paragraph 2, Item 5 (a) of the Companies Act Enforcement Regulations) With regards to business management, in addition to the introduction of integrated accounting systems and efforts toward uniform management through the widening of target scope, approval and reporting systems shall be managed and monitored as necessary. Additionally, the “Regulations on Group Company Management” shall be used as a base for reporting by Group companies to the Company regarding matters of importance and for establishing rules regarding discussion in pursuit of improved risk management and efficiency across the entire Group.

2. “Regulations regarding the management of risk of loss to subsidiaries of the Company and other systems” (Article 112, Paragraph 2, Item 5 (b) of the Companies Act Enforcement Regulations)

(1) Regarding risk management for the Group, needed items shall be established in the “Basic Regulations on Risk Management,” and a specialized independent division as a division responsible for matters related to risk management shall be created within the Group General Affairs Department. The said division shall work with companies in the Group in promoting risk management.

(2) In order to realize comprehensive risk management across the entire Group, a Compliance and Risk Management Promotion Committee shall be created consisting of the Company’s President and CEO (Representative Executive Officer) as the chairman as well as members selected by said chairman.

3. “Systems to ensure the efficient execution of business duties by Directors, etc. of subsidiaries of the Company” (Article 112, Paragraph 2, Item 5 (c) of the Companies Act Enforcement Regulations)

(1) The Company shall optimize its business operations by respecting the independence of the Group companies while also managing their managerial affairs and providing advice and guidance, as well as by dispatching Directors and Audit & Supervisory Board Members as necessary to understand the state of their management.

(2) The Group companies shall receive a resolution of approval by the Company’s Board of Executive Officers or Board of Directors for important items which are deemed to have major effects on their management.

4. “Systems to ensure the compliance of the execution of duties of Directors and employees of subsidiaries of the Company with laws, regulations, and Articles of Incorporation” (Article 112, Paragraph 2, Item 5 (d) of the Companies Act Enforcement Regulations)

(1) The Internal Audit Division shall conduct internal audits of Company Group companies, auditing the legal compliance, appropriateness, etc. of executed business duties.

(2) A compliance guidebook and other documents shall be created and thoroughly disseminated throughout the Group while training regarding appropriateness and legal compliances is held to foster an awareness of compliance.

(3) An “Isetan Mitsukoshi Group Hotline” shall be established as a point of contact for internal reports regarding the Group as a whole, and corrective measures and future prevention measures shall be undertaken from a compliance standpoint with regards to these reports from employees, etc.

7.Items Relating to Audit Committee Staff

“Items relating to Directors and employees to assist with the duties of the Audit Committee of the Company, items relating to these Directors’ and employees’ independence from Executive Officers, and items relating to the ensured efficacy of the Audit Committee’s instructions to these Directors and employees” (Article 112, Paragraph 1, Items 1, 2, and 3 of the Companies Act Enforcement Regulations)

(1) The organization dedicated to assist the duties of the Audit Committee shall be established with assigned staff (hereinafter “Audit Committee Staff”). The Audit Committee may give instructions to those staff regarding items necessary to auditing duties.

(2) Audit Committee Staff shall report on matters requested by the Audit Committee and have authority to collect information necessary for such reporting.

(3) Audit Committee Staff shall be independent from executive operational systems, be attached to the Audit Committee, and carry out their duties as instructed by the Audit Committee. Personnel changes, evaluation, discipline, and other such treatment pertaining to those staff shall require the consent of the Audit Committee.

(4) Audit Committee Staff shall be dispatched as part-time Audit & Supervisory Board Members to the Group companies in order to enhance the audit structure of the entire Group.

8.Systems Relating to Reports to the Audit Committee

1. “Systems for reports to the Audit Committee of the Company by Directors (excluding Directors who are Audit Committee Members), Executive Officers, and employees of the Company as well as systems relating to other reports to the Audit Committee” (Article 112, Paragraph 1, Item 4 (a) of the Companies Act Enforcement Regulations)

(1) The Company shall stipulate in the “Audit Committee Regulations” established by the Board of Directors the items that should be reported by Directors, Executive Officers, and employees to the Audit Committee as requested by the Audit Committee or without delay upon the occurrence of any issue, and Directors, Executive Officers, and employees shall make any necessary report to the Audit Committee. Additionally, the Audit Committee may request reports from Directors, Executive Officers, and employees as necessary even when the previous conditions do not apply.

(2) Directors, Audit & Supervisory Board Members, etc., and employees of a subsidiary, or individuals who have received reports therefrom may report to the Audit Committee of the Company on important matters that may affect the business or performance of such subsidiary.

(3) The Company shall maintain the appropriate operation of the Group-wide internal hotline system, the Isetan Mitsukoshi Group Hotline, and regularly report to the Audit Committee about the operation status thereof, reported matters, and investigation results.

2. “Systems to ensure that individuals who give applicable reports under item a. are not subject to unfavorable treatment because of such reporting” (Article 112, Paragraph 1, Item 5 of the Companies Act Enforcement Regulations) It shall be forbidden to treat individuals who give reports to the Audit Committee in an unfavorable manner because of the applicable reports.

9.Policy for Processing Auditing Fees

“Items relating to the advance payment of fees resulting from the execution of duties of Audit Committee Members of the Company, or fees resulting from the execution of applicable duties including repayment procedures, or policies involved in the processing of obligations” (Article 112, Paragraph 1, Item 6 of the Companies Act Enforcement Regulations)
When Audit Committee Members bill for prepayment of fees, etc. for the execution of their duties based on Article 404, Paragraph 4 of the Companies Act, fees or obligations related to those billings must be processed unless it is deemed that they are not necessary for the execution of those Audit Committee Members' duties.

10.Systems Relating to the Ensured Efficacy of Audit Committee Audits

“Other systems to ensure the efficient operation of the Company’s Audit Committee’s audits” (Article 112, Paragraph 1, Item 7 of the Companies Act Enforcement Regulations)

(1) The Audit Committee shall regularly hold meetings to exchange opinions with the Representative Executive Officer, Chairman of the Board of Directors, Directors who are not Audit Committee Members, and accounting auditors for the purpose of collecting information, sharing information, and sharing the understanding of issues.

(2) In addition to the Board of Directors, Audit Committee Members appointed by the Audit Committee may attend important meetings in order to understand the decision-making process for important matters as well as the state of executed duties.

(3) The Internal Audit Division shall report Group-wide internal auditing plans, the findings of audits, and the audit status to the Audit Committee and work together with the Audit Committee to exchange information, etc. The Audit Committee may request the Internal Audit Division to carry out an investigation and give any specific instruction to the Internal Audit Division if deemed necessary, including the case where the Audit Committee receives a report on any misconduct or material fact of violation of laws and regulations or the Articles of Incorporation in relation to the execution of the duties of an Executive Officer. Any personnel matter and discipline pertaining to the head of the Internal Audit Division shall require the consent of the Audit Committee.

Revised on June 15, 2020

DFF Inc., 三越伊勢丹HD 総務統括部グループ総務部

Corporate Govrernance

DFF Inc., 三越伊勢丹HD 総務統括部グループ総務部