Corporate Governance

Basic Policy

The primary goal of our business operations is to fulfill our social responsibilities to all of our stakeholders, including our direct customers, shareholders, employees, trading partners, bondholders and local communities. In order to achieve this goal, we will strengthen our management practices and construct a corporate governance system designed to accelerate decision-making and ensure proper execution of business while increasing efficiency and transparency.

Overview of our Governance

The LIFULL Board of Directors has established a Managing Officer system to further stimulate discussions at its monthly meetings. The Board of Directors is comprised of 9 members including 4 outside directors who form the core of the management and aim to accelerate decision-making and improve the validity, efficiency and transparency of business initiatives.
In principle, the Board of Directors convenes once per month and, in addition to making decisions on basic policies and other important matters, supervises the execution of business by the managing officers in line with these decisions.
We have also adopted an auditor system. There are four auditors, with one full-time auditor and three external auditors. In general, all of the auditors attend the monthly meetings of the Board of Directors. The full-time auditor also attends important meetings such as management conferences, and supervises the overall execution of the directors' responsibilities.
In addition, a Management Committee consisting mainly of the full-time directors and managing officers convenes each week to make proposals to the Board of Directors on matters related to strategic decision making and deliberate decisions to be made by the Board of Directors in advance.
Meetings of the Audit & Supervisory Board are generally convened once per month wherein Audit & Supervisory Board members exchange opinions on issues discussed at the meeting of the Board of Directors and the status of company management, draw up auditing plans including auditing policies and determine important auditing-related matters.

Reasoning for this System

Internal regulations stipulate that the chairperson of the Board of Directors shall be the Representative Director. The Company has currently implemented this scheme to prioritize business execution, but it is the aim of the Company to separate decision-making and supervision from business execution in the future.
Under the current system, oversight of management is performed by strengthening the cooperation between Directors and Corporate Auditors and effectively utilizing the functions of Corporate Auditors in our decision-making processes.

Policies and Procedures for the Board of Directors to Appoint Executives and Nominate Candidates for Directors or Corporate Auditors

Directors, auditors, and other executive candidates are appointed based on the experience, expertise and consideration for a balanced skill matrix of officers deemed necessary by the Company. In situations where the Company requires appointments of independent directors, candidates must also meet the criteria for independence and possess the necessary attributes. The Company also takes diversity into account in its decisions. The appointment criteria also stipulate that candidates must have the appropriate personal qualities to serve as officers. The Audit & Supervisory Board evaluates and provides feedback on Director and Corporate Auditor candidates nominated by the Representative Director. The Representative Director selects candidates for Director and Corporate Auditor and receives feedback from the Audit & Supervisory Board based on their evaluation. After considering this feedback, the Representative Director nominates candidates appropriately who are approved for election at the General Shareholders' Meeting by the Board of Directors.

Criteria for Independence of Outside Directors

The Board of Directors of the Company recognizes outside directors and outside corporate auditors (*1) who are independent of the management of the Group, fair and objective as independent directors as defined by the Tokyo Stock Exchange.
We have established the following selection criteria for outside directors in order to enable the selection of highly independent outside directors. However, if the Board of Directors reasonably determines that a candidate is suitable for the post of outside director, the criteria set out in this policy shall not exclude the candidate from being selected. A candidate selected in this manner cannot be appointed as an independent director. Persons selected for a post as outside director should do their best to maintain their independence until stepping down.

• A person who executes business on behalf of the Company or its affiliated companies (*2)
• A person who has an important business relationship with the Company (*3) or who executes business on behalf of such a person*2
• A person who is a major shareholder (directly or indirectly holding 10% or more of the voting rights) of the Company or who executes business on behalf of such a person (*2)
• A person who executes business on behalf of a major investor (directly or indirectly holding 10% or more of the voting rights) of the Company or its affiliated companies (*2)
• A consultant, an accounting expert, or a legal expert who receives a considerable amount of cash or other assets (*4) other than remunerations as a director of the Company or its affiliated companies (when a party who receives such assets is an organization, such as a corporation or an association, this shall refer to a person who is associated with that organization)
• A person to whom any of (a) to (e) above have applied in the past three years
• A person who is a close relative of a person to whom any of (a) to (e) above apply (*5)

1. *1 As we do not create distinctions on the independence of directors and corporate auditors, we collectively refer to them as "outside officers.
2. *2 A person who executes business on behalf of the Company or its affiliated companies includes directors (other than outside directors), executives, and corporate officers and employees, etc.
3. *3 A person who has an important business relationship” as defined in Article 2, Paragraph 3, Item 19 of the Ordinance for Enforcement of the Companies Act
4. *4 A considerable amount of cash or other assets” is defined as cash or other assets of ¥10 million or more received in the previous fiscal year other than those received as remuneration as a corporate officer
5. *5 A close relative” is defined as relatives and those sharing a means of livelihood

Conflicts of Interest

Oversight of Business by Directors who are not Managing Officers

No applicable items.

Evaluating the Performance of the Board of Directors

Since June 2016, the Board of Directors has undergone annual assessments and evaluations to determine its effectiveness. Each of the Directors and Corporate Auditors receives and completes a questionnaire, and the results of this questionnaire as well as areas for improvement are reported and discussed at a subsequent meeting.

The effectiveness of the Board of Directors is evaluated based on the following:

• a Number of members and composition of the Board of Directors
• Appropriateness of the standards for the Board of Directors
• Facilitation of meetings
• The mid-term strategy of the Board of Directors and discussion of executive candidates

For the latest analysis and evaluation of the effectiveness of the Board of Directors, a summary of the results has been published in the Corporate Governance Report (in Japanese.)

Executive Support

The Company has also established an independent internal audit department (consisting of four personnel) separate from the areas being audited.

• Create the annual schedule for the Board of Directors.
• Share the agenda items appropriately with outside directors in order to provide ample opportunity for discussion in meetings.
• Ensure appropriate time for reviewing materials to provide ample opportunity for discussion in meetings.
• Share agenda item materials 4 business days prior to meetings for directors to review to provide ample opportunity for discussion in meetings.

Provide the following support to executives to ensure ample opportunity for discussion in meetings:
The full-time corporate auditors also attend Management Meetings not only for the purpose of confirming the discussions and decisions made within meetings, but also to provide their own opinions on agenda items

Executive Training

The executives all possess abundant experience as well as professional knowledge and understanding in their respective areas. However, in order to maximize the benefits of their knowledge and experience in forming and executing the Company's business strategy, we provide them with the following training:

• Explanation of the Company and its businesses for newly appointed executives held by a member of Corporate Planning on dates separate from Board of Directors meetings
• Opportunities to explain the Mid-Term Management Plan and business strategies of the Company for outside directors on dates separate from Board of Directors Meetings
• Reports to outside directors on overviews and strategies of subsidiaries held by executives of subsidiaries of the Company on dates separate from Board of Directors Meetings

Internal Audit Office

The Company has also established an independent internal auditing office (4 members) which reports directly to the representative director. The Internal Audit Office ascertains the risks related to the Company itself as well as its subsidiaries and carries out internal audits based on the internal audit plan formulated based on importance and urgency.
Additionally, the office regularly reports the results of its audits to the Representative Director and Full-Time Internal Auditor who, then, reports these results to the Audit & Supervisory Board. The Internal Audit Office also ensures coordination with the Board of Directors by directly reporting its audit plans and results.
If the Audit and Supervisory Board members should require support personnel for logical reasons, the Company will assign the appropriate personnel. These personnel will not receive instructions or orders regarding auditing work from anyone other than Audit and Supervisory Board members. In addition, the appointment, removal, evaluation and relocation of these personnel shall be reported in advance to the Full-Time Internal Auditor and receive the approval of the Audit and Supervisory Board.

Directors

Executive Profiles

Audit & Supervisory Board Members

Executive Profiles

Skill Matrix for the Board of Directors and Audit & Supervisory Board

When naming Directors, the Company takes a holistic approach considering the balance of the overall skill matric with emphasis on the necessary experience and professional knowledge of each candidate, and independent officers must be meet the independency criteria. Finally, the Company also pays consideration to the diversity of the board as well as ensuring that each Director possesses the personal qualities to serve as officers.
In addition, based on our Mid-Term Management Plan, we have selected 10 skill areas. We disclose the following skill matrix with the intention of achieving a balanced and diverse composition, both overall and in terms of scale, for the Board of Directors and Audit & Supervisory Board.
(Note: The table below does not represent all the knowledge and experience possessed by each director and auditor.)

*Corporate Philosophy: Credo: Altruism. Corporate Philosophy: Create a society where everyone can attain "comfort" and "happiness" through continuous social innovations

Reason for Nominating Directors and Audit & Supervisory Board Members

Diversity of the Board of Directors

We have set the percentage of female members of the Board of Directors as a KPI for our Focal Point for Sustainability, Diversity & Inclusion.
Sustainability Issues and Goals

Number of the Company’s shares held by Directors and Audit & Supervisory Board Members and Attendance at Meetings

*The number of the Company's shares held is as of March 31, 2024.
*Shares held by Representative Director, Chairperson, INOUE Takashi, are listed according to the actual number of shares as reported on the most recent Change Report submitted on March 15, 2023.

Determination Process for Remuneration of Directors and Auditors

Policies for determining remuneration for directors and corporate auditors are described in the Corporate Governance and Securities Reports.
As directors are responsible for increasing value provided by the Company, the basic remuneration policy for directors is to secure and maintain an appropriate level for the execution of duties compared to the wage level of employees. Remuneration for full-time directors is based on sharing interests such as profits and risks due to changes in the Company's business performance and stock prices with shareholders with consideration to mid- to long-term contributions to business performance and improvement of corporate value. Remuneration for other officers consists solely of basic remuneration for their duties.
Remuneration for directors is determined by their LIFULL Group Vision Achievement Score (LVAS), a proprietary evaluation system that incorporates evaluation criteria, including 1) altruistic contributions, referring to contributions to society; 2) degree of growth and innovation; 3) contributions to the Group; and 4) embodiment of the organization’s vision. The amount calculated based on each officer's LVAS is paid as monthly remuneration over the following period.
Furthermore, remuneration amounts for each director and Auditory & Supervisory Board member are determined by the Board of Directors with approval from the Audit & Supervisory Board within the limits determined at the General Meeting of Shareholders with consideration given to Company performance, management duties, economic conditions and other factors.

Total Executive Remuneration

(For FY 2023/9)

Budget for Director Remuneration: ¥240 Million / Year
Budget for Auditor Remuneration: ¥50 Million / Year
*At the end of the current fiscal year, there are currently 8 Directors (including 5 Outside Directors) and the number of auditors is 4 (all of whom are outside auditors). The above table does not include one outside director who serves without remuneration. The discrepancy with the number of auditors in the table is due to the inclusion of one auditor (including one outside auditor) who retired at the conclusion of the 28th Ordinary General Meeting of Shareholders held on December 22, 2022.

Overview and Goals

The Nomination and Remuneration Committee has been established as an advisory body to the Board of Directors and follows the Nomination and Compensation Committee Regulations determined by the Board of Directors. The Board of Directors is responsible for consulting with the Nomination and Compensation Committee on matters such as the appointment, reappointment and succession plans for the Representative Director and other Directors, as well as the policy and content of director remuneration
This committee meets in March and September for matters related to nomination proposals and in January for matters related to remuneration proposals. The committee also meets on an ad hoc basis for urgent matters.

Composition

In addition to have an Independent Outside Director serve as the chairperson, over half of the members of the committee itself are also Independent Directors (2 Independent Outside Directors and Independent Outside Auditor (Full-time)) to ensure the independence of the committee.

Financial Reporting

In order to ensure the reliability of financial reporting, the Company has formulated the "Basic Policy for Constructing an Internal Control System" and established the basic policies for internal controls related to financial reporting. Based on this, the Company has developed related regulations such as the "Implementation Standards for Auditing of Internal Control Systems" and conducts evaluations by the internal control evaluation officer. Under the responsibility of management (the President and Representative Director), the Company produces an "Internal Control Report" as mandated by the Financial Instruments and Exchange Act. If there are areas for improvement in internal controls related to financial reporting, the internal control evaluation officer proposes improvement measures to management and addresses them accordingly.

Structure and Status of Internal and Accounting Audits

The auditors receive regular reports on the summary and results of financial audits from the accounting auditor. They, then, exchange information and opinions to improve the internal structure. Additionally, the internal audit department conducts internal audits based on the internal audit plan, regularly reports the results to the Representative Director and the Audit & Supervisory Board who, then, exchange opinions to enhance the overall auditing system.

Risk Management

Information Security

Promotion of Information Security

▼Security Efforts

We have established a committee devoted to the management of confidential information to protect and improve information management within the Group. This committee is charged with the regular review and approval of information security as well as internal information sharing, warnings and instructions regarding information security to team leaders.
The leaders of each individual department are also responsible for the management of information systems within their department. We also monitor whether the structure and operation of each ISMS is functioning effectively and continue to maintain and improve information security.