Standards and Procedures for Appointment and Dismissal of CEO

The Company considers the appointment and dismissal of a chief executive officer (hereinafter referred to as “CEO”) to be the most important strategic decision from the perspective of the Company’s sustainable growth and enhancement of corporate value on a medium- to long-term basis, and based on such understanding, has established the “Standards and Procedures for Appointment and Dismissal of CEO” as set forth below, with the aim of selecting the most eligible person as CEO, whether internally or externally, and establishing procedures for objective, timely and transparent appointments and dismissals.

1. Appointment Standards for CEO

The Company has established the “Core requirements” for a CEO, in particular, as the appointment standards for a CEO, based on the prerequisite that the relevant CEO shall meet the requirements (“‘prerequisites’ for All Directors and Audit & Supervisory Board Members” and “requirements for Inside Directors in particular” in the Selection Standards for Directors and Audit & Supervisory Board Member in Attachment 1 of the Guidelines.

Core requirements for a CEO

  • Presence in terms of dignity and quality as the highest ranking member of the top management.
  • Absence of any health problem mentally or physically.
  • Excellent exercise of leadership.
  • Excellent capability of responding to change.
  • Ability to make reasonable decisions and willingness to take responsibility for decisions made.
  • Willingness to develop human resources and promote talented people proactively.
  • Ability to undertake management from a global perspective.
  • Possibility of exercising excellent management ability based on a great deal of experience and achievements in the management of a previous company or companies (if a CEO is selected from external qualified candidates).

2. Appointment Procedures for a CEO

  • The Nomination and Compensation Committee, which consists entirely of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members of the Company, shall submit a proposal to the Board of Directors after selecting the CEO candidate.
  • If a CEO candidate is selected internally, the Nomination and Compensation Committee shall select such candidate from among internal qualitied candidates through deliberations, including the implementation of individual interviews as necessary, while simultaneously taking into consideration overall evaluations from the perspective of the requirements in the abovementioned 1 and attendance in training programs based on plans for the development of human resources, among other factors.
  • If no candidate is available internally, the Nomination and Compensation Committee shall select a CEO candidate externally from among qualified candidates.
  • The Board of Directors shall conduct deliberations on a candidate submitted by the Nomination and Compensation Committee and determine the next CEO. In doing so, the chairperson of the Nomination and Compensation Committee shall provide a detailed explanation on the selection, including reasons for choosing the relevant candidate (if a CEO is selected from among external candidates, reasons for such selection shall be presented).
  • The Nomination and Compensation Committee shall determine a tentative successor in an emergency plan by September 30 of every year in the case of an unexpected incident occurring to a CEO, subject to deliberations based on the evaluation of such a successor by members of the Nomination and Compensation Committee. The selection (cancellation and replacement) of a tentative successor is implemented every year.

3. Dismissal Standards for a CEO

The Company has established “Underperformance” and “Applicable factors that make a CEO unsuitable to assume the highest ranking management position” as dismissal standards for CEO.

  1. (1)(Underperformance)
    • The Group remains unprofitable for three consecutive years in terms of consolidated operating income.
  2. (2)(Applicable factors that make a CEO unsuitable to assume the highest ranking management position.)
    • If the CEO’s health conditions are too poor to discharge his/her duties as a CEO.
    • If any matter that applies mutatis mutandis as reason for the disqualification of Directors specified in Article 331 of the Companies Act.
    • If the Company’s credibility is considered to be damaged and the smooth operation of businesses is affected due to the CEO’s behavior or words, findings of any misconduct/occurrence of losses and damages for which the CEO should be responsible, or other factors.

4. Dismissal Procedures for CEO

  • Deliberations and necessary surveys pertaining to the applicability or non-applicability of factors in the abovementioned 3. (2) shall be made through meetings held by Independent Officers comprising all Independent Outside Directors and Independent Audit & Supervisory Board Members of the Company. If the dismissal of CEO is decided to be appropriate at a meeting of Independent Officers, the chairperson (chief Independent Outside Director) shall submit a proposal for the dismissal of CEO to the Board of Directors.
  • If the requirement in the abovementioned 3. (1) or any fact considered to be reason for dismissal without the need for deliberation by a meeting of Independent Officers is identified, the Board of Directors shall resolve to dismiss the CEO unconditionally.
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