Basic Approach

The Meiji Group's (the Group) philosophy is to brighten customers' daily lives as a corporate group in the Food and Health fields. We do this with the goal of continuing to find innovative ways to meet our customers' needs, today and tomorrow. In this way, we aim to achieve sustainable growth and increase corporate value over the medium- to long-term.

The Group has created and implements a Group governance structure, which includes our Board of Directors, to promote the realization of medium- and long-term corporate strategy outlined based on our Group Philosophy. The Company is with Audit & Supervisory Board members. The Board of Directors' oversight and Audit & Supervisory Board members' auditing heighten the objectivity and transparency of business management. Our Board of Directors is comprised of diverse directors. The Board deliberates and decides major Group matters, and appropriately monitors to ensure implementation. To improve the efficacy and transparency of the Board of Directors, we have established a system for reflecting the opinions of independent outside directors in management.

On the other hand, concerning business execution, the Company has introduced Chief Officer system to strengthen group management. Serving in the highest positions of responsibility within the Group, Chief Officers supervise and oversee Group business or functions. To promote Group strategy, our Group Strategy Committee, which is comprised of Chief Officers, outlines the direction of important Group matters. Executive Committee, which is chaired by the CEO (Chief Executive Officer) & President, deliberates and decides on important matters concerning strategy implementation, and ensures the rapid and appropriate implementation of operations.

See Corporate Governance Policy (PDF 659KB) for more information.

See Corporate Governance Report (PDF 1,035KB) for more information.

Corporate Governance System

Functions and Roles of Respective Committees

Board of Directors

Members: 3 independent outside directors (including two females) , 5 internal directors

Structure:

• While considering diversity such as their nationality, gender, or age, at least one-third of Board of Directors shall be independent outside directors.
  
• Director candidates are chosen considering diversity such as their nationality, gender, or age, and are nominated for their advanced knowledge and expertise in fields needed to realize the Meiji Group Vision 2026. These fields include areas such as business strategy, global business, sales and marketing, finance and accounting, HR/labor/personnel development, legal affairs, and corporate communications.
• The Board of Directors should be consist of managing directors to oversee core operations, executives to manage operating companies, and non-executive directors including at least one-third of independent outside directors. Currently the number of Board of Directors would be around 10.

Role: To formulate and pursue Group-wide strategies, oversee the management of operating companies, and carefully monitor the effectiveness of managers and directors from an independent and objective perspective, with a view to making the Group Philosophy a reality, contributing to the Group's sustainable growth and corporate value over the medium- to long-term, and improving profitability and capital efficiency.

Scope of delegation to management teams: Vital matters outlined by law, the Articles of Incorporation, and the Rules of the Board of Directors. Vital matters include overall Group direction and major investment proposals. The execution of businesses and operations outlined by the Board of Directors should be delegated to management teams in accordance with the Group Company Management Regulations and Work Regulations. The Board of Directors will receive periodic reports and review them.

Auditing Structure and Audit & Supervisory Board

Independent auditor	Ernst & Young ShinNihon LLC
Audit department (internal auditing)	Audit Department
Principal meetings auditors attend	Board of Directors, Executive Committee, Audit & Supervisory Board, Audit Department Liaison Meeting, and others

Structure:

• Audit & Supervisory Board: In principle, one regularly scheduled meeting shall be held monthly in accordance with Audit & Supervisory Board Regulations.
• Audits by the Audit & Supervisory Board: The Audit & Supervisory Board will consist of four Board members, of which two must be outside Audit & Supervisory Board members.
• Internal audits: Conducted by dedicated staff from the Audit Department.
• Accounting audits: Designates Ernst & Young ShinNihon LLC.
  Efforts to enhance and improve the audit functions of audits by the Audit & Supervisory Board:
• Assign dedicated staff to assist with Audit & Supervisory Boards' tasks.
• Audit & Supervisory Board members are encouraged to attend important meetings such as Board of Directors' meetings and Executive Committee meetings.
• Provide periodic reports and distribute important documents to the Audit & Supervisory Board

Audit & Supervisory Board Members: 2 outside audit & supervisory board members, 2 internal audit & supervisory board members

Nomination Committee

Members: 3 independent outside directors, 1 internal directors
Role: Deliberating on appointments and dismissals of directors and executive officers

*For reasons for appointment of directors and auditors, refer to the notice of convocation.

See the Notice of the 12th Ordinary General Meeting of Shareholders (PDF 187KB) for more information.

Compensation Committee

Members: 3 independent outside directors, 1 internal directors
Basic approach to structure: Compensation Committee should be comprised of independent outside directors and internal directors. At least half of members must be outside directors.
Role: Evaluating the performance of directors and executive officers, confirming compensation amounts, and reporting to the Board of Directors.
Evaluating revisions to the directors' compensation system and reporting on its deliberations to the Board of Directors, as necessary.

*Refer to "Director Compensation" for details.

Executive Committee (convenes twice a month in principle)

Members: Directors and executive officers
Role: Advisory body to the president and representative director
Function: Deliberating general important matters concerning operational implementation

Group Strategy Committee (convenes once a month in principle)

Members: Members designated by the CEO, President and Representative Director
Role and function: Determining the direction of critical matters such as the Group's general vision, business plan, business policy, and the distribution of management resources

Business Management System Features

The Company is strengthening its corporate governance structure through the following initiatives.

1. Appointment of three outside directors and two outside audit & supervisory board members, all of whom are designated as independent directors
2. Limitation of the term of service for directors to one year
3. Introduction of an executive officer system to separate business execution and audit functions and to accelerate management decisions while clarifying management responsibility
4. Introduction of Chief Officer system to strengthen group management. Serving in the highest positions of responsibility within the Group, Chief Officers work in line with basic management policies outlined by the Board of Directors to supervise and oversee Group business or functions.
5. Appointment of two female directors
6. Once a year, the Company analyzes and evaluates the effectiveness of the Board of Directors as a whole, taking into consideration the results of surveys on the role and management of the Board of Directors and problems or issues that the Board faces, including a self-evaluation questionnaire submitted by members of the Board of Directors. The Company then takes remedial measures to address any issues highlighted in the surveys. We work to improve the efficacy of the Board of Directors by having third-party assessments conducted approximately once every three years to evaluate the efficacy of the Board of Directors.
7. We are conducting individual meetings between the Chairperson of the Board and independent outside directors. Using a self-assessment survey, these meeting participants discuss how to improve the Board of Directors as well as issues and measures for further improving efficacy.

Organizational structure	Company with audit & supervisory board
Chairman of the Board of Directors	President and representative director
Directors	8 (including 3 independent outside directors)
Audit & supervisory board members	4 (including 2 outside audit & supervisory board members)
Appointment of independent directors	5 (Outside directors, outside audit & supervisory board members)
Number of times the Board of Directors convened in fiscal 2020	16
Number of times the Audit & Supervisory Board convened in fiscal 2020	15

Evaluation of Board of Directors

• The Board of Directors will annually analyze and evaluate its own effectiveness/performance.
• The evaluation method is a self-evaluation by Board of Directors' members (directors and Audit & Supervisory Board members) using a survey sheet. Since FYE March 2020, we adopted individual meetings between the Chairperson of the Board and independent outside directors as a new approach for evaluation of the Board of Directors.
• The results are analyzed and assessed to improve the effectiveness of the Board of Directors.
• The most recent evaluation analysis results indicate that the Meiji Holdings' Board of Directors is functioning effectively.
• We work to improve the efficacy of the Board of Directors by having third-party assessments conducted approximately once every three years to evaluate the efficacy of the Board of Directors.

Training for Directors, Audit & Supervisory Board Members, and Executive Officers

Meiji Holdings provides directors, Audit & Supervisory Board members, and executive officers with opportunities as necessary to further their understanding of their expected roles and duties, and opportunities to acquire required knowledge.

(Expected roles and duties)
Legal responsibility, corporate governance, compliance, risk management, etc.
(Required knowledge)
Group operations, organizations, financial status, etc.

Criteria for Independence

Meiji Holdings requires that independent outside directors and outside Audit & Supervisory Board members not being applicable to any of the following.

1. An executive director of Meiji Holdings or its subsidiary.
2. An executive director of the Meiji Holdings parent company or a fellow subsidiary of the Meiji Holdings parent company.
3. A party^(Note1) for whom Meiji Holdings is a major transaction partner or an executive director of said party, or a major transaction partner^(Note2) for Meiji Holdings or an executive director of said party.
4. A consultant, accounting specialist, or legal specialist earning major monetary amounts or other assets from Meiji Holdings other than director's compensation^(Note3) (If the party earning said assets is a corporation, union, or other organization, this shall refer to persons associated with said organization).
5. A party who was applicable to (1) during the 10-year period prior to selection.
6. A party who was applicable to (2) through (4) during the 1-year period prior to selection.
7. A relative within second degree of kinship to a party (excluding non-executives) who is currently applicable to (1) through (4) or who was applicable during the 1-year period prior to selection.
   1. A "party for whom Meiji Holdings is a major transaction partner" shall refer to a party who received payments from Meiji Holdings equal to or exceeding 2% of said party's total annual consolidated net sales or 100 million yen, whichever is higher, during the most recent fiscal year.
   2. A "major transaction partner for Meiji Holdings" shall refer to a party who made payments to Meiji Holdings that were equal to or exceeded 2% of our total annual consolidated net sales during the most recent fiscal year.
   3. "A consultant, accounting specialist, or legal specialist earning major monetary amounts or other assets from Meiji Holdings other than director compensation" shall refer to a party who received monetary payments or assets other than director's compensation from Meiji Holdings of a value equal to or exceeding 2% of said party's consolidated net sales of 10 million yen, whichever is higher, during the most recent fiscal year.

Multiple Positions as Independent Outside Director

When an independent outside director will hold the position of director at multiple listed companies, the number of positions must not exceed the amount appropriate for ensuring the ability to secure the time and labor required to execute the roles and responsibilities as a director or Audit & Supervisory Board member of Meiji Holdings.

Transactions between Related Parties

• When a director or Audit & Supervisory Board member of Meiji Holdings or a major operating company seeks to conduct a transaction with Meiji Holdings or a major operating company, said transaction shall require the approval of the Board of Directors.
• The transaction status of approved transactions must be reported to the Meiji Holdings Board of Directors.

Details of the Compensation of Directors and Audit & Supervisory Board Members

(FYE 3/2021)

Officer category	Remuneration	Monetary compensation				Stock compensation
		Base compensation		Performance-linked compensation
	amount	Total	Number of officers	Total	Number of officers	Total	Number of officers
Directors (other than outside directors)	¥285 million	¥142 million	7	¥106 million	5	¥37 million	5
Audit & Supervisory Board members (other than Audit & Supervisory Board members)	¥55 million	¥55 million	2	-	-	-	-
Member of the Board (Outside)	¥43 million	¥43 million	3	-	-	-	-
Audit & Supervisory Board Member (Outside)	¥26 million	¥26 million	2	-	-	-	-
Total	¥410 million	¥267 million	14	¥106 million	5	¥37 million	5

1. As per the resolution of the 1st Ordinary General Meeting of Shareholders held on June 29, 2010, the amount of remuneration for directors is capped at 1 billion yen per year (not including the employee portion of remuneration for directors who concurrently serve as employees).
2. As per the resolution of the 1st Ordinary General Meeting of Shareholders held on June 29, 2010, the amount of remuneration for Audit & Supervisory Board members is capped at 300 million yen per year.
3. We have introduced a transfer-restricted stock compensation plan for directors other than outside directors. As per the resolution of the 8th Ordinary General Meeting of Shareholders held on June 29, 2017, the amount of remuneration under this plan is capped at 200 million yen per year.
4. The amounts for monetary/stock remuneration indicates the amount appropriated (recorded in expenses).

Nomination and Compensation

Directors

(Nomination Policy)

• Internal director candidates: Requires vast experience and expert knowledge as well as management judgment skills and an excellent character. Elect executive directors for major operations and executives of operating companies.
• Independent outside director candidates: Requires an objective and multifaceted perspective on management, and satisfies our criteria for judging independence.
  Elect persons with the character, knowledge, and skills required to fulfill the role of an outside director.

(Nomination Method)

Nominated annually via a resolution by the Board of Directors following deliberation by the Nomination Committee.

(Compensation Structure in FYE March 2021)

Compensation for directors other than outside directors comprises the following:

1. Base compensation
   A fixed amount that reflects the director's status and responsibilities
2. Performance-linked compensation
   An amount that varies according to the company and the director's performance in the preceding fiscal year, and thus provides an incentive over the short term.
3. Stock-based compensation
   Compensation that is linked with the Company's stock performance, and thus provides an incentive over the medium-to-long term.

Base compensation and performance-linked compensation are paid in cash. Stock-based compensation takes the form of transfer-restricted stocks.
The ratio between the fixed component (base compensation) and variable component (performance-linked compensation + stock-based compensation) of the total remuneration is approximately 60:40.
For outside directors, who are not involved in the execution of business, the Company pays fixed compensation only; no incentive remuneration is paid.
To ensure objectivity and transparency in the process for determining the above remuneration system and the levels of remuneration, the Board of Directors determines the amounts separately based on the recommendations of the Compensation Committee, which is composed of four members: three outside directors and one internal director.
(Compensation Structure from FYE March 2022)
In line with the start of our 2023 Medium-Term Business Plan, we revised our directors' compensation system to further align the system with its intended objectives by linking compensation to the core benchmarks outlined in the 2023 Medium-Term Business Plan.
Compensation comprises the following:

1. Base compensation
   A fixed amount that reflects the director's status and responsibilities
2. Performance-linked compensation
   - An amount that varies according to the company and the director's individual performance in the preceding fiscal year, and thus provides an incentive over the short term.
   - Consolidated operating profit and ROIC are performance indicators for company performance.
   - Adopting new medium- and long-term target evaluations to further promote the achievement of medium- and long-term targets.
   - Payment amount calculation method:
   We set standard amounts for each evaluation benchmark for company performance and individual performance. We then calculate performance-linked compensation by multiplying each amount by a coefficient calculated based on the level of achievement for each evaluation benchmark. The total of the amounts calculated for each performance-linked compensation category represents the total amount of performance-linked compensation.
   [Benchmarks for company performance]
   1. Fiscal year target evaluation
      - Consolidated operating profit: Achievement of fiscal year target represents 100%. The coefficient fluctuates between 0% and 200% based on the rate of achievement (50% to 150%) for the fiscal year target.
      - ROIC: Achievement of fiscal year target represents 100%. The coefficient fluctuates between 0% and 200% based on the rate of achievement (80% to 120%) for the fiscal year target. Regardless of the level of achievement for the fiscal year target, the coefficient is reduced by half if earnings are less than capital costs.
   2. Medium- and Long-term Target Evaluation
      - Consolidated operating profit: Achievement of the medium- and long-term target, which is separate from the fiscal year target, represents 100%. The coefficient fluctuates between 0% and 200% based on the rate of achievement for the medium- and long-term target.
      [Benchmarks for individual performance]
      - The coefficient that fluctuates between 0% and 200% based on a seven-tier evaluation of individual performance, which is determined through comprehensive assessment by the CEO, President and Representative Director.
      - There is no individual performance evaluation for the CEO, President and Representative Director.
3. Stock-based compensation
   - Compensation that is linked with the Company's stock performance, and thus provides an incentive over the medium-to-long term.
   - The monetary amount for rights to financial compensation paid by the Company to allocate restricted stock fluctuates annually based on Meiji ROESG® from the previous fiscal year.
   - Payment amount calculation method:
   We set the Meiji ROESG®, which is calculated based on ROE figures and the results of ESG initiatives, as a performance indicator. The payment amount is calculated by multiplying the base amount by a coefficient calculated as detailed below.
   1. 100% for achieving 13pt, the target set for the period of the 2023 Medium-Term Business Plan.
   2. The minimum is set as 9pt, which is the actual figure for the Meiji ROESG®, and the maximum is 17pt. the coefficient fluctuates between 50% and 150% depending on the actual ROESG® figure.
   3. No stock-based compensation will be allocated if the Meiji ROESG® is lower than 5pt for two consecutive years.
      

      *ROESG is a registered trademark for a management indicator developed by Kunio Ito, a professor at Hitotsubashi University.

4. Compensation composition ratio
   To increase incentives for improved performance and promote the sharing of interests with our shareholders and stakeholders, we set compensation composition ratio that is approximately a 50-50 mix of fixed compensation (base compensation) and variable compensation (performance-linked compensation and stock-based compensation).
   We apply a higher rate of variable compensation as the rank and position of the executive increases. We set ratios of 45% to 50% for fixed compensation and 50% to 55% for variable compensation.
   
   The CEO, President and Representative Director shall decide on compensation amounts for individual directors based on the results of deliberations by the Compensation Committee, then the Board of Directors meeting.

Audit & Supervisor Board Members

(Nomination Policy)

• Elect persons with excellent character, knowledge, expert skills and a strong sense of ethics. Candidates must be able to provide accurate advice and conduct audits concerning the legality and appropriateness of company operations from an objective and neutral perspective.
• Include at least one person with appropriate knowledge related to finance and accounting.

(Nomination Method)
Nominated via a resolution by the Board of Directors following deliberation by the Nomination Committee and approval by the Audit & Supervisory Board.
(Compensation Structure)
The Company pays fixed compensation only; no incentive remuneration is paid. The amount of compensation for Audit & Supervisory Board members is determined through negotiation with the members concerned, and the amount will be within the limit resolved by the General Meeting of Shareholders.

Executive Officer Candidates

(Policy)
Evaluate performance and experience to elect parties capable of conducting transparent, fair, timely, and decisive decision-making and conducting optimal Group management.
(Method)
Nominated annually via a resolution by the Board of Directors following deliberation by the Nomination Committee.

Succession plan for the CEO and other top executives

Our Board of Directors decides on the succession plan for our Group CEO based on consultation with the Nomination Committee. The Board of Directors outlines implementation strategy for a succession plan based on the parameters (leadership values) required of executives. These parameters are outlined based on our Group Philosophy, our Code of Conduct, and business strategy.

Based on this implementation strategy, the Nomination Committee deliberates on the nomination and removal of the current CEO of the Company and the CEOs of our main Group companies, and selects CEO candidates. The Board of Directors receives regular reports on the status of the succession plan and deliberates on the details of the plan.

Leadership Value describes the standards that our executives must uphold to lead the group toward achieving its vision. The main thing we expect of top executives is the ability to "instigate change and lead reform efforts." To this end, Leadership Value outlines the following 10 competences across three themes:

1. Strategic planning and action: Imagination, decisiveness, ability to achieve breakthroughs, ability to channel creative energies
2. Organizational leadership skills: Ability to communicate and convince, ability to motivate, magnanimity for others' mistakes, ability to develop others' talents
3. Character: Ability to recognize and channel diverse talents, upstanding character
   Based on our Leadership Value, we will promote the development of succession planning.

Interlocking Ownership of Listed Stocks

When exercising voting rights for retained listed stocks, Meiji Holdings makes affirmative decisions based on deference to the decisions of the board of directors of the company in question. However, this excludes cases where said vote could have a negative impact on the relationships or transactions of the Meiji Group, or cases where there is the clear potential for a mutual loss of profit by shareholders.

Internal Control System

We provide products and services to a large number of customers through our food and pharmaceuticals business operations. In accordance with the Corporate Behavior Charter, the Meiji Group has established an internal control system befitting the Group and the Group companies that is based on mutual collaboration and multifaceted checking functions to ensure directors, executive officers, and other employees comply with the Food Sanitation Act, the Pharmaceutical and Medical Device Act, and other statutory laws and regulations and the Articles of Incorporation, thereby ensuring fair and sound business activities firmly rooted in compliance.

Compliance

Regarding "compliance as the cornerstone of its operations," the Meiji Group abides by statutory laws and regulations, international agreements, social norms, and the regulations of respective Group companies. The Group advances concerted initiatives aimed at inculcating and entrenching compliance awareness to ensure that employees carry out their duties equitably and honestly and based on a welldeveloped awareness of compliance and high ethical standards. Such efforts include improving and expanding educational and training programs, disseminating information through an in-house intranet, and making hotlines available.

Risk Management System

The Company has established specific rules for risk management and constructed an appropriate risk management system. For the whole Group, the Company systemically conducts precise risk management. In addition, it has established systems to minimize damage in the event of an emergency.
In light of lessons learned from the Great East Japan Earthquake in March 2011, the Group has established basic policies for business continuity plans as stated below.

Basic Policies for Business Continuity Plans

To ensure it can provide customers with the products and services they require, even in disaster, the Meiji Group has set out business continuity plans based on the following policies.

1. Ensure the safety of the lives of persons involved in the Group and their families
2. Discharge the Group's social responsibility
3. Minimize damage to businesses arising from cessation of operations

Communicating with Shareholders

Meiji Holdings works proactively and voluntarily towards communicating with shareholders, and promotes constructive communication with shareholders. Related initiatives are detailed below.

1. General communication with shareholders is managed by the Investor Relations (IR) Department, which is managed by the executive officer in charge of IR. To a practical extent, we also engage in dialogue with directors and Audit & Supervisory Board members, including outside directors.
2. To enhance communication, related departments (Investor Relations, Corporate Development, Corporate Administration, Risk Management, Sustainability Management) share information at liaison meetings.
3. In addition to one-on-one meetings, Meiji Holdings holds earnings conferences twice-yearly for institutional investors and securities analysts to announce the second quarter and the fiscal year results, as well as small meetings led by the Company President. We also hold telephone conferences with institutional investors and securities analysts at the end of the first and third quarter. We also provide information via our website for shareholders and investors. We publish our investment securities reports, earnings flash reports (Japanese/English), integrated report(Japanese/English), and earnings conference materials (Japanese/English) on this website. We also stream video of our earnings conferences and publish a Q&A summary to further communication.
4. Comments and feedback gained through investor relations activities are summarized into reports. The director in charge of Public Relations & Investor Relations reports to the Executive Committee and the Board of Directors regularly.
5. Due care is given to insider information during communication. Communication is conducted in accordance with the Rules Concerning the Prevention of Insider Trading, which outlines the handling of important information. We also establish a quiet period.