February 22, 2023
Japan Association of Corporate Directors
To Whom It May Concern■A Proposal by the Japan Association of Corporate Directors Concerning Corporate Governance
Toward Better Functioning of Boards of Directors Through Improving Gender Diversity[Introduction]
The Japan Association of Corporate Directors (hereafter, JACD)—comprised of 190 regular member
companies and 217 regular members, in addition to individual members and experts, for a total membership ofapproximately 450 people—is an organization that aims to restore the earning power of Japanese companies
through the promotion of corporate governance (CG). JACD has a history that spans over 20 years, since it wasestablished in November 2001. Many independent outside directors join JACD as individual members to learn
about CG in greater detail, and to improve themselves through discussions and participation in training programs.
Reflecting on the number of female board members at listed companies in Japan, the number of female board
members has increased 5.8 times in the 10 years from 2012 to 2022, steadily making progress toward achieving
the board diversity that investors have been requesting. However, the percentage of female board members
remains low at 9.1% (as of July 31, 2022), which is still a meager figure when compared to the percentage offemale board members in other countries.*1
Even when limited to Tokyo Stock Exchange (TSE) Prime Market listed companies, women still account for
only 11.9% of all directors.*2
JACD has established a Women's Working Group, consisting of 28 volunteer female JACD members whoare serving as outside directors, to discuss how boards of directors in Japanese listed companies can fulfill theirfunctions better by improving gender diversity. This document presents JACD’s views and recommendationson this issue, including the discussions held by our Women's Working Group and the opinions of the Chairman
and Vice Chairman.
At the same time, it also represents JACD’s views on the "ACGA Open Letter: Gender Diversity in TSE
Prime Market Boards" document published by the Asian Corporate Governance Association (ACGA) onOctober 19, 2022, as well as the draft of the "ICGN Japan Governance Priorities" document published by theInternational Corporate Governance Network (ICGN) on October 4, 2022.

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[Main points of contention]
The following are the three main points of contention from JACD in response to the proposals from both
ACGA and ICGN.
Specifically, these pertain to the two pathways for raising gender diversity among directors as proposed byACGA, and the recommendations by ICGN with regard to board independence.
At the same time, it also relates to “Principle 2.4: Ensuring Diversity, Including Active Participation ofWomen,” “Principle 4.7: Roles and Responsibilities of Independent Directors,” and “Principle 4.14: Directorand Kansayaku Training” in the revised version of “Japan’s Corporate Governance Code," which was releasedby the Tokyo Stock Exchange on June 11, 2021.
・In order to better embody diversity on the board of directors at a company, two or more female directors
should be appointed, not just one. Since the ratio of men to women in the Japanese population is roughly 1:1,
JACD believes it would be more natural for the composition of boards of directors to get closer to that ratio
in the future.
JACD recommends that member companies should have at least one female director, and will take theinitiative and serve as an example.
・The number of independent outside directors should be further increased, since the role of independent
outside directors—who have a variety of external perspectives and are responsible for overseeing theircompanies—is particularly important for improving the quality of decision-making by boards of directors.
・The CG system is becoming more and more sophisticated year by year, and each director must continue tolearn about it in greater detail. JACD will continue to proactively provide a wide range of opportunities for
directors to learn about the latest CG through training and other means.

2[Background and arguments]
・In order to break through the current stagnant situation in Japan, where corporate value has not increased toa satisfactory degree—as indicated by the fact that half of TSE Prime Market listed companies (922 out of1,837, or 50%*3) have P/B ratios below 1—companies must transform themselves by being flexible in theirthinking, having diverse viewpoints, and proactively taking risks. Everyone is aware of the need for Japanesecompanies to attempt drastic new measures, rather than following the conventional way of doing things.
・A company’s board of directors decides the path the company should take. The role of independent outside
directors, who possess a variety of external perspectives, is particularly important and enhances the qualityof the board’s decision-making. The number of independent outside directors should be further increased.
・The role of independent outside directors is providing oversight, not implementing decisions.
・Even if they are not familiar with the details of the business of the company they are participating in, they
can provide oversight as independent outside directors by using their own business knowledge and experienceat other companies, as well as various ways of thinking.
・If the ratio of men to women in the Japanese population is roughly 1:1, it would be more natural for thecomposition of boards of directors to get closer to that ratio in the future.
・With each passing year, the basic knowledge about corporate governance (CG) that independent outside
directors need to fulfill their oversight duties is becoming more and more sophisticated, in accordance withthe times. Therefore, all directors must enrich their knowledge in an equal and continuous manner.
・JACD has many independent outside directors as individual members, who enrich their CG-related
knowledge and learn from each other through discussions. JACD has a large female membership—mainlyindividual members—with more than 80 female members as of November 30, 2022.
・Making the most of these female Association members could be an immediate way to deal with the genderissues that foreign institutional investors are seeking to solve.
・In order to better embody diversity, two or more female directors should be appointed, not just one.
・JACD recommends that member companies should have at least one female director, and will take theinitiative and serve as an example.
・Decision-making by a broader and more diverse membership, as called for by management policy, will boost
corporate performance, enhance risk tolerance, and achieve sustainable growth.
・JACD hereby disseminates the above as recommendations, both in Japan and internationally.
Sources:*1: https://www.gender.go.jp/policy/mieruka/company/yakuin.html （In Japanese）
https://www.gender.go.jp/english_contents/pr_act/pub/pamphlet/women-and-men18/pdf/2-8.pdf (In English)*2: https://www.nikkei.com/article/DGXZQOCD125860S2A810C2000000/ （In Japanese）*3: https://www.jpx.co.jp/equities/improvements/follow-up/nlsgeu000006gevo-att/nlsgeu000006j7nb.pdf, 16p （In Japanese）

https://www.jpx.co.jp/english/equities/market-restructure/index.html

3(In English)■Co-signatories (titles omitted)
Kazuhiko Toyama
Chairman, Japan Association of Corporate Directors
Chairman of IGPI Group, Industrial Growth Platform, Inc. (IGPI)
Yasunori Nakagami
Vice Chairman and Chairman of the Committee on Independent Directors, Japan Association of CorporateDirectors
Chief Executive Officer, Misaki Capital Inc.
Sakie Tachibana Fukushima
Vice Chairman and Member of the Nomination Committee, Japan Association of Corporate Directors
President, G&S Global Advisors Inc.
<Three Representatives, Women’s Working Group>
Yoshimi Nakajima
Outside Director, Sekisui House, Ltd.
Outside Director, AEON Financial Service Co., Ltd.
Mariko Ohsato
Representative Director, Arc Communications Inc.
Outside Director, Uniden Holdings Corporation
Kanako Kuroda
Representative Director, Woman College Co., Ltd.
Outside Director, Miyoshi Oil and Fat Co., Ltd.
Eiji Maruo
Managing Director
Office Head, Japan Association of Corporate Directors<Contact Information>
Japan Association of Corporate Directors
https://www.jacd.jp/contact/contact-e.html

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