Introduction

Features of IDEC’s governance

Evolution of governance(As of June 30, 2024)

more than half of all directors,
and all of them are

independent directors

Inside directors

Ratio ofoutside directors

660

Governance

We have ensured that outside directors constitute themajority of all directors since FY2017. The Board of Directors
is a diverse body made up of men and women with different
backgrounds and areas of expertise.
Additionally, we introduced a performance-based
stock-based compensation (performance share units) and
restricted stock (restricted stocks) executive compensationin an effort to review the compensation scheme in FY2024.

%(FY)

Corporate governance initiatives

The IDEC Group is further enhancing its governance system
to ensure management transparency and effectiveness onbehalf of its shareholders and other stakeholders.

2017

2

Female directors represent
30% of the Board of Directors

2018

2019

2020

2021

2022

2023

2024

2025

Establishment of “The IDEC Way”

Management Philosophy/Policy
Establishment of the IDEC Corporate Governance Policy

Related material issue

Male directors

7

Ratio offemale directors

330

Major sustainability KPIs (FY2023-2025)%

 umber of items with below average scores in the Board ofN
Directors’ effectiveness assessment 20% or less
Number of serious legal violations 0

Transition to a Company with an Audit & Supervisory Committee

Establishment of theNominating Committee

Institutional design

Establishment of theRemuneration Committee

Business Strategy

Business foundation

Female directors

Initiatives for
Realization of Vision

A commitment to effective governanceValue Creation Story

4

Outside directors

The IDEC Group has separated the business executivefunction and the supervisory function of the management
in order to realize efficient corporate management, andhas proactively appointed outside directors since early on.
The IDEC Corporate Governance Policy was establishedto set forth and communicate our views on governanceand our operating policy in FY2017. We transformed into a
Company with an Audit & Supervisory Committee in FY2019,
established a voluntary Nominating Committee in FY2022,
and a Remuneration Committee in FY2023.

Message1

Outside directors represent

Establishment of the CSR Committee(Name changed to Sustainability Committee in 2024)

More information is available here.

Outside directors actively
participate in outside directors’
exchange sessions and other events

Directors (outside directors)

7 (4)

10 (7)

Ratio of female directors

14%
2016

10%

Remuneration system(performance-based remuneration)

9 (6)

11%

10 (6)

33%

30%

PSU/RS
The new remuneration
system43 IDEC Report 2024

Data andCompany Overview

3
4

The effectiveness of the Board of
Directors has been continuously
evaluated since FY2016

Foundation for
Value Creation

https://us.idec.com/idec-us/en/USD/sustainability/
governanceIntroduction

Governance

IDEC Corporate Governance Policy

Policy for cross-shareholding
Guided by these principles, we formulated and issued the
IDEC Corporate Governance Policy to improve our corporate
value in line with “The IDEC Way.” We are taking action under
this policy to further strengthen our governance practices sothat we can govern our company more effectively.

Appointment / Dismissal

Nominating
Committee

Audit &
Supervisory
Committee

Board of Directors(Majority beingoutside directors)

Directors(Majority beingoutside directors)

Directors(excluding Audit & Supervisory
Committee members)(Audit & Supervisory
Committee members)

Reporting

Audit &
Supervisory
Committee

9Nominating
Committee

3

Remuneration
Committee

4

Top Management
Meeting

8

Executive Officers’
Meeting12

Sustainability
Committee

2

Selection

Internal
Audit Dept.

Top Management Meeting

Accounting
auditing

CEO
Executive Officers’ Meeting

Sustainability Committee

Internal control system
Various departments / Group companies

InsideMale

FemaleOutsideMale

FemaleCooperation

Instructions / Reporting

Auditing

To ensure the credibility of our Group’s financial reporting,
we have established the Internal Control Policy on Financial
Reporting and clearly defined our Group-wide system for

Main details of dialogue and matters of interest
 usiness results and progress of the medium-term
Bmanagement plan
Activities of the Nominating Committee and Remuneration
Committee
The new remuneration system
Succession plans
Status of action and initiatives to address climate change
Response to human rights issues
Diversity & inclusion efforts
Approach to shareholder returns

Data andCompany Overview

7

Execution of Business

Foundation for
Value Creation

Board of Directors

44 IDEC Report 2024

Auditing

Number ofmeetings
heldBusiness Strategy

Number of times
held per year
Meetingbodies

Accounting
AuditorTo gain their confidence in and fairly evaluate our management,
the CEO, senior executive officers and head of the Strategic
Planning Division play active roles in IR and SR activities.
This includes diligently responding to requests for interviews
from shareholders and institutional investors. The informationacquired from those interactions, including appraisals andopinions concerning markets, is regularly reported to theBoard of Directors, and six such reports were made in FY2024.
By sharing the opinions received as feedback with theBoard of Directors, we can take concrete action to address
them. We also work to enhance investor relations tools
such as our Shareholder Newsletter and website to betterhelp shareholders and investors make informed investment
decisions, and proactively disclose our financial results andmanagement strategies, as well as sustainability information,news and other topics.
The Strategic Planning Division, which is responsible
for these activities, coordinates with related departments tocollect and analysis various management information. While
ensuring thorough control over insider information, the division
provides information internally and publicly in an timely andappropriate manner.

Initiatives for
Realization of Vision

Reporting

Remuneration
Committee

Appointment /Dismissal

Appointment / Dismissal

Constructive dialogue with shareholders,investors, and analysts
Value Creation Story

General Meeting of Shareholders

In the interest of maintaining its financial health, the IDECGroup does not, in principle, hold shares in other companies
except when there is a rationale for doing so.
A rationale for cross-shareholding exists when the Board of
Directors has decided that a particular case of cross-shareholding
promises to increase the IDEC Group’s corporate value by realizing
synergies and improving both sides’ competitive advantages in
the market. Such decisions must be based on a validation of
the profitability of the cross-shareholding relationship that duly
examines the risks, costs, and returns involved from a medium tolong-term perspective, and must comprehensively consider theintended aims, such as maintaining and strengthening a business
relationship or establishing a capital or business alliance.
Furthermore, the company regularly validates thesignificance of existing cross-shareholdings in light of various
criteria, including the purpose of holding those shares. If
a particular case of cross-shareholding is determined to
be inappropriate, the shares are sold off after taking into
account diverse considerations such as the impact on thecompany and the market, and the issuer’s financial strategy.
We do not engage in inappropriate practices withcross-shareholders such as continuing or reducing
transactions, or impeding the sale of stocks based on thefact that we maintain those cross-shareholdings.
Moreover in the exercise of voting rights in relation tocross-shareholdings, the company makes comprehensive
decisions to vote in favor or opposition, taking into accountvarious factors including whether the company in question has
established an appropriate governance structure and is making
decisions leading to the medium to long-term enhancementof corporate value, and whether a matter will contribute to theimproved corporate value of the IDEC Group.

Message

The basis of the IDEC Group’s corporate governance is toensure management transparency and effectiveness for thesake of shareholders and other stakeholders. For this reason,
we assign outside directors and separate the management
supervisory function from the executive function so as to always
maintain a high priority on transparency and effectiveness.

implementing that policy, in line with standards for assessing
internal controls on financial reporting. We have also createda framework for continuous self-auditing by divisions andGroup companies and independent monitoring by the Internal
Audit Department.

Introduction

Governance

Succession plan

Nominating Committee and Remuneration Committee

ChairmanHiroshi
Kobayashi

Outside Director

Yasuo
Himeiwa

Outside Director, Certified Accountant

Michiko
Kanai

Outside Director, Lawyer

Members

Key details

Proposed re-elections for the next fiscal year
November 8, 2023 Report on the progress of next-generation executive
development
November 28, 2023

Selection of a candidate for substitute director and
Audit & Supervisory Committee member

March 21, 2024

Report on candidates for director for the next fiscal year
Report on the progress of next-generation executive
officer development

Remuneration Committee members
Chairman

Representative Director Chairman
Members

Outside Director

Hideyuki
OhkuboOutside Director

Yasuo
Himeiwa

Outside Director, Lawyer

45 IDEC Report 2024

Deliberations over the remuneration regulations

June 13, 2023

Explanation of remuneration under the new system

Schedule for determining remuneration
November 8, 2023 Deliberation over the handling of PSU and RS when
an officer steps down mid-way through their term

March 21, 2024

Outlook regarding the achievement of
remuneration KPIs
Deliberations over performance-based
remuneration levels

FY2022

FY2023

FY2024

Lectures delivered byoutside directors

Gain deeper insight into each area ofexpertise to be prepared as a director

Action learning

Carry out actions based on themes
set to reflect the actual work

Conducted in alternate months

Weakness analysis

Individual training for each field andcompetency based on one’s own
strengths and weaknesses

Conducted in alternate months

Outside management
training

Taking part in management training
programs provided by outsideorganizations

Executive coachingTransform one’s mindset andbehavior as an excellent leader in a
1-on-1 format

Liberal arts

Hone insight into the natureof things through lectures anddialogue with experts

FY2025 onward

Held 8 times in total

Training location
dependent on trainee(2 weeks to 4 months)
Coaching depending on
trainee (8 to 10 months)

Conducted dependingon the trainee

Data andCompany Overview

Michiko
Kanai

Outside Director, Certified Accountant

April 27, 2023

Outside training

Hiroshi
Kobayashi

Key details

Aims of the development activity

Foundation for
Value Creation

Toshi K.
FunakiDate

Succession plan program

Business Strategy

Representative Director Chairman

DateIn-house training

Toshi K.
Funaki

Initiatives for
Realization of Vision

Nominating Committee members

The process of selecting candidates for directorships isbased on a skills matrix outlining the expected skills andother requirements. The Nominating Committee recommends
candidates to the Board of Directors on the basis of the skills
matrix review, and the nominations are made part of the agendaof the General Meeting of Shareholders through voting at a
Board of Directors attended by a majority of independent
outside directors.
Directors who are deemed to no longer possess the
expected skills and qualities of their position are considered
for dismissal. Also, if a director is found to have violated laws,
regulations, the articles of incorporation, or otherwise be
unfit for the discharge of their duties, the Board of Directors,
acting on a report by the Nominating Committee, votes onwhether to include a proposal for the director’s dismissal in
the General Meeting of Shareholders agenda. This vote must
be made at a meeting attended by a majority of independent
outside directors.

Value Creation Story

Status of committee meetings and major matters for deliberation (FY2024)

The voluntary Nominating Committee established in 2021
discussed the selection of next-generation executive
candidates and how to train them, and then developed andlaunched a succession plan for cultivating next-generation
executive leadership.
The committee promoted the development programamong the selected next-generation executive candidates,
arranged outside training, 1-on-1 action learning provided byoutside directors, lectures on specialized topics and otheractivities, and provided opportunities for candidates to deepen
their contact with current directors and executive officers while
gaining hands-on experience with actual management issues
through attendance at each Top Management Meeting and
Board of Directors. While candidate directors for the next fiscal
year were chosen from among the next-generation executive
candidates in June 2023, the newly appointed directors willcontinue with the development program including executive
coaching following their appointment, and the Nominating
Committee will request appropriate reports on the status of
their development, which it will use to offer opinions on thedevelopment plan.

Message

The Company established the Nominating Committee andRemuneration Committee in 2021 and 2022 respectively,
and operates them as non-statutory advisory bodies to theBoard of Directors. The Nominating Committee considers
and deliberates over the nomination of candidates for director,
plans to cultivate candidates for the next-generation of top
management and succession plans, while the Remuneration
Committee considers and deliberates matters related to the
remuneration system and regulations, and makes remuneration
decisions in accordance with the system. Both committees
report to the Board of Directors. The members of eachcommittee comprise directors selected by the Board of
Directors, a majority of whom are outside directors, and include
the Chairman of the Board of Directors as an inside director.

Policy and procedure for director
appointment and dismissal

Introduction

GovernanceDirector remuneration

Overview of the remuneration system

Share-based remuneration

Basic Policies

Medium-term
remuneration

Long-term
remuneration

Incentive to achieve themedium-term management plan

Incentive to enhance
corporate value

Basic ratio

For those living in JapanPSU 10%

Bonus

RS 5%

For those living outside Japan

25%

60%

Phantom stock60%

Medium-term KPIs and weighting reflected in evaluation
Category

Base compensation

Corporate performance

Performance-based remuneration
Bonus

35%

ROIC

35%

CO 2 reduction rate

15%

External ESG assessment

15%

Formula for calculation of performance-based remunerationand method of performance linking
 hen bonuses and PSUs are issued, the payment amounts and number of shares issued areWdetermined in proportion to corporate performance and individual evaluations.
W hen PSU and RS-based shares vest, their assets values are linked to the share price.

Factors
causingvariation

FormulaCash remuneration
Short-term incentives
Bonus

Total number of issued
share units over three years
for each position × mediumterm KPIs × individual
evaluation coefficient* PSU: Performance Share Units; RS: Restricted Stock Units

46 IDEC Report 2024

Number of RS-based
shares to be issued as set
for each position

Data andCompany Overview

Based calculated amount× operating profit margin
× individual evaluation
coefficient

Performance-based remuneration
Share-based remuneration
Medium-term incentives
Long-term incentives
PSU
RS

Foundation for
Value Creation

To raise awareness of the need to improve business performance in each fiscal year andclarify the commitment to stakeholders with respect to such matters, performance-based
monetary compensation reflecting key performance indicators (KPIs) is divided into 12
and paid monthly together with monthly basic remuneration.
Bonus amounts are calculated by multiplying a standard amount for bonus calculate set
for each officer by a payment coefficient (0-200%) corresponding to the business results
for the fiscal year. KPIs used for calculation are the consolidated operating profit margin
in each fiscal year and human resource evaluations (excluding titled directors) concerningbusiness results, etc. from the division for which the director is responsible.

ESG

WeightingBusiness Strategy

Basic remuneration is a fixed monthly payment and determined in a comprehensive mannerin consideration of the position, responsibilities and IDEC’s financial status.

Medium-term KPIs

Operating profit margin

Initiatives for
Realization of VisionBase
compensation

40%

Value Creation Story

When serious misconduct or violations involving a director haveoccurred, based on a report from the Remuneration Committee
the company may demand the forfeiture or return of all of partof bonuses and share-based remuneration.

Cash remuneration

Malus and clawback of remuneration

Short-term
remuneration
Incentive to achieve theplans of the fiscal year
Share-based
remuneration

When determining the remuneration for each individual, theRemuneration Committee conducts deliberations that take
into account their position, performance, expertise and otherqualities and reports those details to the Board of Directors.
The Board of Directors, which comprises a majority of
independent outside directors, entrusts the CEO with making
the determinations. The CEO shall respect the reports madeby the Remuneration Committee when determining the details
of individual compensation.

Fixed
remuneration

Policy for determining remuneration, etc.
for individual directors

Performance-based
remuneration

To ensure that the remuneration of directors (other thanoutside directors and directors who are Audit & Supervisory
Committee members) adequately functions as an incentive fordirectors to pursue the sustainable enhancement of corporate
value, the individual remuneration of directors is paid as basic
remuneration as a fixed amount based on position in lightof the scope and size of responsibility for management,
etc., performance-based remuneration (bonuses) andnon-monetary (share-based remuneration) remuneration.
Remuneration for outside directors and directors who are Audit& Supervisory Committee members is limited to fixed basic
remuneration, in the interest of preserving the independenceof their management oversight role.

Remuneration comprises basic remuneration as a basic compensation, performance-based
remuneration (bonuses) and non-monetary remuneration (share-based remuneration) at
a ratio of 60:25:15.

Message

Composition of remuneration

Share-based remuneration comprises PSU as a medium-term incentive and RS as along-term incentive.
PSUs are issued as shares in the common stock of the company with transfer
restrictions, based on the number of share units issued for each position multiplied bya payment coefficient linked to the attainment rate of financial indicators emphasized in
the medium-term management plan and non-financial indicators such as CO2 reduction
rates. The KPIs used for calculating PSUs are the degree of attainment of targets statedin the medium-term management plan as financial indicators, the degree of attainmentof ESG-related targets as non-financial indicators, and human resource evaluations(excluding titled directors) regarding business performance in the division for which thedirector is responsible.
RS is issued as shares in the common stock of the company with transfer restrictions.
The number of shares is determined based on a number equivalent to a base monetaryamount determined in light of the company’s business performance, the scope of
responsibilities of each director and various circumstances.
Note that if a director is a non-resident of Japan when share-based remuneration isissued, they shall be granted phantom stock in lieu of PSU and RS.

Introduction

GovernanceEfforts to evaluate effectivenessChange in average effectiveness evaluation score

In terms of items such as strengthening ESG initiatives, the remuneration system, andsuccession planning, evaluations improved since FY2023. The overall evaluation was
generally positive, and the Board of Directors was evaluated as functioning effectively.
Based on the evaluation results, we recognized the following issues, and are engagedin efforts to improve upon them.

Outline of the effectiveness evaluation in FY2024

Issues and initiatives based on evaluation of effectiveness of the Board of Directors

4

3.8

Survey period
Response status

Further enhancementof Board of Directors
discussions

Set up and disclosure of weighted average cost of capital(WACC) and indicators (ROE and ROIC) to be targeted as part ofthe medium-term management plan based on capital efficiency

February 2024

Roles and responsibilities of the Board of Directors
Size and composition of the Board of Directors

Promote diversity
Strengthen andinvolvement in ESG
initiatives

Discussions basedon dialogues
with shareholders
and investors

E xchange of opinions on the theme of human capital at outside
directors’ exchange sessions

Design and operation of organizations such as the Board of Directors
Relationship and dialogue with shareholders

Establish operationof the new
remuneration system

47 IDEC Report 2024

Set period for provisionof documents
and secure time
for deliberations

Provide materials at an early stage, set agenda items to secure

Revise businessportfolio based on
capital efficiency

Set up opportunities for discussions on analysis and response

Promote diversity
Strengthen andinvolvement in ESG
initiatives

time for deliberation, and implement effective time managementof the Board of Directors

relating to capital efficiency in the progress report for the
medium-term management plan

Continue diversity and ESG initiatives
Establish opportunities for discussion by the Board of Directors

Set up opportunities to discuss strategies based on DX, such as

Board of Directors

Discuss the shift to DX
Discussions basedon dialogues
with shareholders
and investors

F inancial results briefings, reporting IR and SR activities to ay remuneration based on the new remuneration systemP heck operational issues and proceduresC

Establish operationof the new
remuneration system

Establish operation of new remuneration system through the

Operation of
successor planning pdate top-management succession planUImplement a HR development program R development in line with a curriculumH lection of one executive candidate to the Board of Directors
EPeriodic meetings of the Remuneration Committee andNominating Committee

Committee operation

the introduction of ERP systems

the Board of Directors

Set up opportunities for discussion by the Board of Directors

Remuneration Committee

Report on the materials and state of implementation / progressof each committee to the Board of Directors

Data andCompany Overview

Committee operation

Initiatives (plan)

Foundation for
Value Creation

Operation of
successor planning

Issues identified

Financial results briefings, reporting IR and SR activities to theDeliberation and management at the Board of Directors
Succession plan

(FY)

Business Strategy

Questionnaire evaluation items

2024

1

FY2024
Initiatives (actual)

Anonymous 5-point questionnaire

All targets answered

2023

2

FY2023All directors except the CEO

40

4.0

Initiatives for
Realization of Vision

Number of questions

4.1

Average0

Issues identified

Evaluation method

Audit & Supervisory Committee members

3

2022

Target members

OutsideValue Creation Story

In order to improve the effectiveness of the Board of Directors, anevaluation of all directors except the CEO has been conducted using aquestionnaire method every year since FY2016.
A third-party organization has conducted the questionnaire survey
and analyzed the responses since FY2022. The results of their evaluation
are reported to the Board of Directors, whose members share the issues
identified and continuously strive to make improvements.

5

Message

Results of effectiveness evaluation in FY2024

Inside