Oki Electric Industry : Corporate Governance Report (As of December 23, 2022)

(6703)   Report

This document has been translated from the Japanese original (as submitted to the Tokyo Stock Exchange) for reference purposes only. If there are any discrepancies between this document and the Japanese original, the original prevails. Corporate Governance Last Update: December 23, 2022 Oki Electric Industry Co., Ltd. Takahiro Mori, Representative Director and COO Contact: Atsushi Yamauchi, General Manager of the Corporate Secretariat Stock code: 6703 URL The corporate governance of Oki Electric Industry Co., Ltd. (the "Company" or "OKI") is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes, and Other Basic Information 1. Basic Views To earn the trust of its various stakeholders, the OKI Group recognizes ensuring sustainable growth and increasing corporate value over the medium to long term as its most important management priorities. To this end, we are working to enhance corporate governance based on our fundamental policies, including "enhancement of management fairness and transparency," "timely decision-making processes," and "full compliance and fortification of risk management." Reasons for Non-Compliance with Principles of Japan's Corporate Governance Code This corporate governance report is based on the code revised in June 2021 (including principles for the prime market that will become effective from April 2022). [Principle 1-4:Cross-Shareholdings] (1) Policy on cross-shareholdings The Company is gradually reducing its cross-shareholdings, taking into overall consideration such factors as enhancing the medium- to long-term corporate value of the Company and the share-issuing companies. (2) Details on verifying cross-shareholdings The Board of Directors reviews cross-shareholdings each year. The Company considers quantitative and qualitative factors when determining the suitability of its holdings of each stock. (3) Standards for the exercise of voting rights on cross-shareholdings In exercising its voting rights on cross-shareholdings, the Company categorizes agenda items as follows. We make decisions and exercise voting rights based on exercise criteria. When appointing executives, the Company considers such factors as the total number of executives and the ratio of Independent Directors. For executive compensation, the Company looks at such factors as business performance and the status of assets. For the appropriation of surpluses, the Company considers such factors as business performance and retained earnings. The Company gives special consideration to proposals related to anti-takeover measures, M&A, and third-party share allocations. [Principle 2-4 (1) Ensuring Diversity in Appointment of Core Personnel] (1) Approach to Ensuring Diversity The OKI Group promotes diversity and inclusion (D&I) with the aim of creating a workplace where all employees can work and make the most of their abilities, based on its policy of promoting human resource measures aimed at sustainable growth, such as fostering innovation and improving employee engagement. The OKI Group's D & I strategy is to strengthen human resources. This management strategy aims to foster innovation, increase motivation, and achieve sustainable growth of the organization by respecting the diversity of employees and levering their value. In order to foster a corporate culture that respects differences in gender, age, disability, sexual orientation and gender identity (SOGI), nationality, and personal life, and that enables diverse human resources to work with a sense of fulfillment and to demonstrate their full potential, we are working to build systems that take into account internal enrichment activities and diversity, realize flexible work styles that increase efficiency, and develop systems to evaluate and appoint individuals.

Aiming to support women so they can grow and develop their careers in ways that allow them to demonstrate their full potential, OKI has drawn up an action plan to promote women's participation and advancement in the workplace. We have set the following action plan targets to be achieved by April 2023: (1) reduce the number of overtime hours for full- time employees so that it is equal to or lower than the monthly average for fiscal year 2019 (24 hours); and (2) increase the ratio of female managers to 5%. The ratio of female managers in fiscal year 2021 was 3.61% for OKI and 5.13% for the OKI Group. We continue to provide training to cultivate female leaders on a selective basis to raise female employees' awareness about becoming managers. We are also engaged in workplace training for appointing female employees as managers. mid-career employees to managerial positions> OKI employs people of all nationalities who are capable of working globally. For mid-career hires, we are also promoting the hiring of personnel who promote IT/AI and innovation, as well as those who will be responsible for future management. In order to promote these human resources to management positions and diversify our core human resources, we will continue to discuss more specific policies and targets. Content and Status of Implementation of the Human Resources Development Policy and the Internal Environment Development Policy for Ensuring Diversity The OKI Group regards human resources as one of the most important management resources for sustainable development in response to changes in the social environment. By implementing actions based on five action guidelines ("Act with integrity," "Challenge and drive change," "Perform with speed and agility," "Be passionate, and determined to succeed," and "Proactively encourage excellence as 'Team OKI,'") the OKI Group aims to foster "autonomous employees" who can respond flexibly according to their roles and generate results while involving others. In addition, we are promoting diversity and inclusion initiatives to realize "a workplace where all employees thrive at work and demonstrate their full potential." To enable everyone to balance work and childcare/caregiving, OKI maintains a host of systems to support balancing work with childcare/caregiving, including the flextime system, the teleworking system, systems to provide special work conditions for people caring for children and nursing the elderly, as well as a Special Leave for Particular Purposes system, which can be used to nurse family members, to attend children's school events, and so forth. For further details, please refer to OKI Report 2022. (URL.html) [Supplementary Principle 3-1 (3) Sustainability Initiatives] (1) Sustainability Initiatives The OKI Group, as described in its corporate philosophy, underpinned by "enterprising spirit," has long aimed to contribute to people around the world through its core business, namely the provision of products and services that can serve the development of the information age. What underlies the Group's CSR initiatives is our commitment to the pursuit and fulfillment of this idea. Based on this recognition, we enacted the "OKI Group Charter of Corporate Conduct" to ensure the Group as a whole fulfills its social responsibilities precisely in ways that comport with the Group's corporate philosophy. In addition, in accordance with the Charter, OKI set up the "OKI Group Code of Conduct," to be followed by all OKI executives and employees. This Code of Conduct has been adopted across all Group companies and incorporated into OKI's educational programs in order to be made well known and compulsory. The Charter and the Code are regarded as the basis for OKI Group Values that all Group executives and employees hold in esteem in their pursuit of increasing corporate value. In order to maintain this stance over the long term and "Delivering OK! to your life." as "a corporate group that helps create a safe and convenient infrastructure for customers and society as a whole through the key Japanese concepts of Monozukuri and Koto-zukuri," which is our vision, we specified the materiality in our Medium-Term Business Plan 2022 from the twin perspectives of creating social value and strengthening management infrastructure. Our environmental, social, and governance (ESG) initiatives, which embody this materiality, were summarized in the OKI Report 2022 (URL.html) for fiscal year 2021. In fiscal year 2020, OKI established the "Sustainability Promotion Working Group (WG)" as a promotional structure in order to strengthen sustainability initiatives based on materiality. The WG is chaired by the President, and comprises the heads of related corporate sections, the Business Group, and the Marketing & Sales Group. In order to encourage all Group employees to take personal responsibility for sustainability, in fiscal year 2020 the WG hosted a variety of events, including seminars given by outside lecturers, and dialogues on the theme of ESG led by the President and the heads of all of OKI's divisions. OKI will continue to accurately disclose the progress of initiatives, and, based on this, to advance dialogue with stakeholders, provide feedback for activities, and so forth. (2) Investments in Human Capital and Intellectual Property Based on the policies of Medium-Term Business Plan 2022, we are building a personnel system that will lead to the further revitalization of manufacturing sites toward the realization of sustainable growth. Furthermore, to realize the AI edge strategy, we are enhancing AI education in the Company and working to develop AI personnel with practical skills. We will continue to actively invest in human capital. With regard to intellectual property, the Company has formulated a Medium-Term Intellectual Property Plan to build a business portfolio in growth/focus areas and reduce intellectual property risks in existing businesses. Appropriate management is carried out through setting targets such as for the number of patent applications. As mentioned above, we will continue to invest more actively in non-financial assets. (3) Disclosure Based on TCFD or Equivalent Framework In the OKI Group too, we have set ourselves the target of reducing life-cycle CO2 emissions by 40% in 2030 compared to fiscal year 2013 and achieving net-zero CO2 emissions from energy used at all plants and business sites by fiscal year 2050. To work towards these goals we have set in motion the Medium-Term Environmental Plan 2022. The main measures called for in the plan are promoting businesses that contribute to the achievement of the SDGs, taking steps towards decarbonization, and bolstering supply chain management. We are also constructing a framework through which we can distribute information to stakeholders about the processes and results of the aforementioned measures, but which also helps us achieve sustainable growth. In particular, we are working to develop products that help resolve environmental problems, lending our resources to the creation of a circular economy, reducing CO2 at our business sites, and stepping up our efforts to make the transition to renewable energy. OKI announced its support for the TCFD in May 2019 from a perspective of a positive economic and environmental cycle. Along with systemically managing climate- related risks, opportunities, and countermeasures for them, OKI aims to enhance information disclosure about these efforts. For further details, please refer to OKI Report 2022.（URL.html） [Principle 5-2: Establishing and Disclosing Business Strategies and Business Plans] The Company's capital policy is to invest for sustainable growth, to maintain a sound financial structure that allows for such risks, and to provide stable and continuous returns to shareholders. In the "Medium-Term Business Plan 2022" up to FY2022, we have set targets for profitability, stability, and capital efficiency, and are implementing various measures such as structural reforms and growth strategies. Based on the progress made, the Company will continue to consider about reviewing of its business portfolio and allocation of management resources. [Disclosure Based on the Principles of Japan's Corporate Governance Code] Details of the items disclosed in accordance with the principles of Japan's Corporate Governance Code are as follows. [Principle 1-7: Related Party Transactions] The Board of Directors supervises transactions involving conflicts of interests between the Company and Directors in accordance with the rules of the Board of Directors, and Audit & Supervisory Board members conduct audits in accordance with the auditing standards. The Company does not have any major shareholder who owns 10% or more of its shares. [Principle 2-6: Roles as Asset Owners of Corporate Pension Funds] The OKI Corporate Pension Fund manages funds for corporate pensions of the Company and its domestic group companies. Each year, the Investment Management Committee drafts investment targets, asset allocations, and investment consignees, which are decided by the Board of Trustees. Members of both the Investment Management Committee and the Board of Trustees include employee representatives as well as people with expertise in the finance and human resources departments, appointed by the Company. Committee members and clerical staff improve their expertise by receiving advice from pension management consultants. Important matters related to the operation of the Fund have been resolved at the Board of Representatives in accordance with the Fund's Articles of Incorporation, and conflicts of interest that may arise between our company and beneficiaries are also managed appropriately. The Company entrusts the specific selection of fund investments to multiple investment institutio