ESG

Message from Outside Directors
Olympus shifted to a Company with Nominating Committee, etc. in June 2019 with the aim of becoming atruly global company based on its transformation plan, Transform Olympus . Through this, the Company will
strive to accelerate decision-making in business execution, strengthen corporate governance, and further
enhance transparency. In this section, we hear from four outside directors on the new structure and desired
future direction.

Expectations of Ongoing Growth
by Realizing the Goals ofTransform Olympus

include creating a Board of Directors consisting of a majorityof independent outside directors, appointing an independent
outside director as Chairman of the Board and voluntarily
establishing committees in the three areas of nominations,compensation and compliance that are chaired by an outside
independent director although Olympus employs the Companywith Board of Company Auditors system described in theCompanies Act of Japan.
I have been engaged in the management of Olympus
as an outside director since 2012 and during that timethe effectiveness of the Board has increased steadily.
Now, Olympus has shifted to a Company with Nominating
Committee, etc. in line with the globalization of business underTransform Olympus , which aims to drive further corporate
evolution. Moving ahead, I believe the Board could focus
more on discussions of its medium- and long-term strategy
while increasing the speed of business execution through theseparation of corporate monitoring and business execution.
Fundamentally, my role as Chairman of the Board has notchanged under the new management structure and I willcontinue working to ensure highly effective debate andmanagement on the part of the Board of Directors.

Sumitaka Fujita
Outside Director(Chairman of the Board / Chairman of the Nominating Committee)

Steering the Focus of Board Discussion toa Medium- and Long-Term Management
Strategy Following the Shift to a Company with
Nominating Committee, etc.
Olympus seized upon the opportunity brought about by thescandals that came to light in 2011 to make major reforms
and appoint a new management team. The four-year period
from 2012 saw a reorganizing of management foundations
as a means to break away from the scandals that included

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efforts to rebuild Olympus’ management foundation througha policy of selection and concentration for businesses andstrengthen its financial situation. Since 2016, Olympus has
pushed ahead with certain priority strategies alongside theMedium-Term Management Plan 16CSP in order to achievesustainable growth. In addition to moving onto a new phase inmanagement, the themes of Board of Directors’ deliberations
have been shifted to more aptly reflect future aspirations,
including key medium- and long-term challenges, in line withthe change to the management phase. Olympus has also
taken unique steps in its corporate governance system that

Importance of Continued Evaluation of thePerformance of Directors and Corporate
Officers by the Nominating Committee
I was appointed Chairman of the Nominating Committee inJune 2019. Generally, Japanese companies function somewhat
as a “company community” where directors are chosen fromamong employees, the president is chosen from among thesedirectors, and his or her successor is chosen by the president
personally in line with an employment system characterizedby lifetime employment and seniority based on the lengthof service. While this is not entirely bad, it can at times bedetrimental. A nominating committee mechanism of which themajority is comprised of outside directors is vital to addressingthe above situation. It’s important that the Nominating
Committee continuously evaluation of the performance ofDirectors and Corporate Officers, however, rather than suddenly
nominating or dismissing someone. Also, it’s necessary toclearly define the qualities required for critical positions inmanagement and business execution, make a list of personnel
with such a qualities, and establish solid succession plans fromthe perspective of management continuity.

The Importance of a Stronger Awareness of the
Executive Officers
Olympus holds briefings for outside directors prior to board
meetings as well as regular meetings that consist solely ofoutside directors in order to improve the effectiveness of theBoard. The issues that converge during the meeting solelyof outside directors are then fed back into the executive
management team. Shifting to a Company with Nominating
Committee, etc. has further strengthened corporate
governance, and a vital component of this is monitoring
through the Company’s internal control systems. With wellfunctioning internal control systems, the Board is able toentrust business execution to executive officers so the Board
can focus its attention more on monitoring. I intend to makesure the Company’s internal control systems are functioning
appropriately through my role on the Board in order topermeate corporate governance globally throughout the Group.
What’s important is how the company is actually being run inaddition to making formal changes to the governance structureand establishing a framework for internal control. I believethat this requires a strong awareness of business execution
and a mindset to pursue true corporate transformation andsustainable growth as well as foster a better corporate culture.

Expectations for Sustainable Growth underTransform Olympus
In 2018, the Board of Directions held considerable discussion
concerning Transform Olympus . In particular, it was decided
that diversity in the composition of the Board was of utmost
importance to achieve Olympus’ aim of becoming a competitive
global medtech company. With this in mind, Olympus
appointed three new foreign directors to the Board.
Transform Olympus is a key plan guiding Olympus on its
way to becoming a truly global medtech company and further
enhancing corporate value. The journey will by no means besmooth sailing, but I expect the steady implementation of theplan to contribute to the realization of sustainable growth and to“Making people’s lives healthier, safer and more fulfilling,” whichis “Our Purpose” based on Olympus’ corporate philosophy.

Olympus Integrated Report 201953

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Message from Outside Directors

Maintain Audit Quality and Explore New
Initiatives
Olympus has entered a new stage by shifting to a Company
with Nominating Committee, etc. with the aim of transforming
into a truly global medtech company. However, I don't believe
this necessitates any major change to the traditional method ofauditing.
For example, although ties between the accounting auditor
and Audit Committee members remain essential, there isfundamentally no change in their relationship due to the shift in
corporate governance structure. Both parties can still readily
exchange information through regular meetings, joint visits tooverseas subsidiaries and evaluations. That’s why I see thisyear as a time to facilitate a smooth transition to a Companywith Nominating Committee, etc. while maintaining a standard
level of audit quality. In terms of auditing method itself, I would
like to explore new initiatives while continuing to implement
a direct approach through inventory audits and other means
and an indirect approach based on cooperation with the Audit
Division, as in the past.
Although Olympus had an statutory auditors meeting, it has
operated as an independent system, thus tending to focus
rather strongly on the more defensive aspects of governance.
Since I also have the right to vote in the board from thestandpoint of a director, I intend to actively voice my opinion
and offer advice and devise proposals as required that makethe best use of my outside experience in order to help drive
growth in Olympus as a global medtech company.
Although it is optional for a Company with Nominating
Committee, etc. to have standing Audit Committee members,
Olympus has elected two such members. I think this is a really
good move. To ensure the auditing function is performing
effectively, it is important to share information with standing
members who actively gather information internally, whichmakes it possible for me to provide advice that reflects myspecialized knowledge as an outside director.

Aiming to Strengthen Internal Audit Globally
Overseas revenue account for 80% of the total at Olympus, so
it’s vital that the Company conducts audits with an awarenessof global perspectives. Up until now, each region has been
served by an internal audit division, with Japan handling globaloversight. In April 2019, Olympus shifted to a system in whicha Chief Internal Audit Officer (CIAO), who reports directly tothe CEO, will be responsible for managing and supervising
the Group’s overall internal auditing in Europe, North America,and Asia, including Japan. Under this new system, it will
be necessary to analyze risk from a global standpoint andefficiently and effectively invest resources into the required
regions and divisions.
The major audits by the Audit Committee are based oninternal control systems. Accordingly, it will be extremely
important to coordinate closely with internal audit divisions
around the world to make sure the Company’s internal control
systems are functioning effectively worldwide. In addition toestablishing a new framework for the internal audit divisions
following the significant change made in April 2019, I also
believe it is the role of an Audit Committee member to makesure that directives are taken on board locally and awarenesshas changed. Moving ahead, I have high expectations thatOlympus employees will continue to act based on “OurCore Values” and that Olympus will strive vigorously toward
becoming a company that contributes to the purpose of“Making people’s lives healthier, safer and more fulfilling.” I
personally will do everything I can to support Olympus throughthis major transition period.

A Year for Maintaining Audit
Quality and Exploring New
Initiatives
Atsushi Iwasaki
Outside Director(Member of the Audit Committee)

54

Creating Greater Healthcare
Impact and Enhanced
Corporate Value
D. Robert Hale
Outside Director(Member of the Nominating Committee)

Working in Partnership with the Board andManagement Team to Support Value Creation

become a global champion for medical technology based inJapan. I support this goal.

I believe Olympus is one of the world’s best medical technology
companies, and it is an honor to serve all Olympus stakeholders
as an Outside Director.
My firm, ValueAct Capital, is a major shareholder of Olympus.
ValueAct Capital’s business model is to identify and study theworld’s best companies and invest with a long-term outlook
when we believe one of these companies is at a strategic
inflection point and poised to create substantial corporate
value. We then work in partnership with the board andmanagement team to support value creation for the benefit of
all stakeholders. A ValueAct partner often joins the company’sboard of directors during our investment period based on ashared belief that such an aligned partnership can be helpful tothe company.
In that way my ValueAct colleagues and I have all together
served in 52 public company board positions since our firm
was founded in the year 2000, including for leading global
technology companies like Microsoft, Rolls Royce andMotorola. For investments where we have served on the board,
our average investment period is over five years, so we arein the “same boat” as long-term shareholders. We also try touphold high standards of corporate governance.
This is ValueAct’s first investment in Japan, but I think
Olympus is already really a global company, with over 80% of
its sales outside of Japan. I also think Olympus has one of thebest businesses in the global medical technology industry.
It is especially unique to have the market leadership that
Olympus has in GI endoscope systems. I don’t think it isoverstatement to say that without Olympus, the entire specialtyof gastroenterology would not exist as it does today. Hundredsof millions of patients around the world have been diagnosed
and treated using Olympus technologies with life-saving results.
I think Olympus can build further on its success in medicaldevices. Takeuchi-san has a strong vision for Olympus to

Bringing Learning and Experiences to Support
Olympus to Become a Competitive GlobalMedtech Company
Olympus investors I have spoken with who do not knowValueAct Capital well want to know what I will do as anOlympus board director. My first answer is that I am just one
board director among a diverse group of 15. I look forward toparticipating in fact-based discussions so that collectively we
can make the best governance decisions. My second answer
is that I bring learnings from personal and ValueAct experiences
serving on boards outside of Japan that I think are universally
applicable in areas like strategic planning, budgeting andfinancial analysis, talent and compensation, communications,etc.
My third answer is that each company, Olympus included,
has specific focus areas that are critical to the future. I
think these specific focus areas at Olympus relate to what
is most important to enhance to become a competitive
global medtech company. I see cost structure and efficiency,
product development cycle and quality/regulatory assurance,and capital allocation (business development, portfoliomanagement, capital structure) as particularly critical. I hope I
can help Takeuchi-san and his team in some small way as theywork on these areas.
I am optimistic about what Olympus can achieve going
forward, with all board members and employees around theworld cooperating. The opportunities for greater healthcare
impact and more corporate value creation in the years to comeat Olympus are truly exciting.

Olympus Integrated Report 201955

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Message from Outside Directors

Maximize Growth Potential in the TherapeuticSolutions Division by Increasing Management
Agility
Olympus is a company that I have been aware of and admiredalmost since my first day in a healthcare business over 30 years
ago. Through the years, Olympus technology, physician training
and procedural development has no doubt saved thousands
and thousands of lives. These real-world results have helped
Olympus create excellent positions in key medical markets,particularly gastronintestinal endoscopes. As a result, I am
extremely excited to be here at the beginning of the next 100years for the company.
To me, the potential of the company seems significant. The
bedrock of Olympus historical success has been investment
in outstanding new technologies. This has been particularly
evident in flexible endoscopy. The images physicians can see
today are simply amazing. With its strong market positions,
Olympus now stands on the cusp of even more innovation thatwill help even more patients.
At the same time, the evolving regulatory environment,changing markets and medical economic realities demandan even more sophisticated, global approach. The hurdle
required to obtain and maintain clearance to market products
is increasing in almost every region of the world. The potential
for new, disruptive technologies entering the market is as highas it’s ever been. Established markets are struggling with ways
in to serve an ever-increasing aging population at affordable
costs. Governments in emerging markets are attempting toprovide quality healthcare to broader and broader segments of
their populations within constrained budgets.
In order to meet these challenges, Olympus embarked on
the Transform Olympus initiative. The team recognized theneed to become a truly global medical technology company
by increasing management agility to maximize potential in the
Therapeutic Solutions Division.

Strive for Further Innovationin Therapeutic Devices toHelp Even More Patients
Jim C. BeasleyOutside Director(Member of the Compensation Committee)

56Becoming more global, agile, and successful at therapeutics
means many things. It means growing and maintaining a
deep understanding of local markets and regulatory hurdles
around the world. It means that R&D must be as close to thecustomer as possible from a relationship standpoint and evena geographic one. It also means fast decision action cycles
based on these insights.

Leverage Experience and Know-How Gainedat Global Medical Device Companies
Moving to a Board with three committee structure is a key
step in this transformation. It allows for faster decision making
in the business while maintaining high levels of accountability
for management. I believe the increasing diversification of theBoard with members that have broad, global experiences isalso important. It greatly improves the company’s ability totackle global challenges as well as to attract and retain talent
with deep expertise in markets around the world.
Olympus has to have the processes and the capability to
get technology to each regulated region or country aroundthe world. I have a lot of experience with that and more than
30 years’ experience in innovation, market expansion, global
growth, and business development at global medical devicecompanies. I have confidence this will aid me in being a strong
team member on an already strong and impressive Board. I
look forward to working with my colleagues and managementin the dawn of the next 100 years of Olympus.