Human Resources Governance Leaders Co., Ltd.
Comments on Revisions to Japan’s Corporate Governance Code andto the Guidelines for Investor and Company Engagement(Summary)
May 2021
Human Resources Governance Leaders Co., Ltd. (“HRGL”) has submitted comments tothe Tokyo Stock Exchange on the revisions to Japan’s Corporate Governance Code andto the Financial Services Agency on revisions to the Guidelines for Investor and CompanyEngagement. A summary of our comments is as follows:
1. Introductioni.

HRGL’s stated mission is to build an ecosystem of corporate “sustainabilitygovernance,” while our purpose is to be a “family doctor” of corporate governancethat tells the growth story of a company. We work and engage closely with executives
at many of Japan’s listed companies, as well as institutional investors in Japan andabroad, with the aim of creating a trend among the nation’s listed companies ofestablishing sustainability governance to help to resolve social challenges.

ii. From that perspective, we wish to submit comments on the latest revisions to Japan’s
Corporate Governance Code (“CGC”) and to the Guidelines for Investor andCompany Engagement (“Engagement Guidelines”) so as to contribute both tocreating world-class guidelines and to solving practical problems.
2. Overall comments and assessment of the revisionsi.

To improve the substance of corporate governance, we focus on three elements interms of actual corporate practice: vision and basic policy; scope and methods ofoversight and monitoring; and disclosure and engagement with investors. We
consider that, at the Council of Experts Concerning the Follow-up of Japan’s
Stewardship Code and Japan’s Corporate Governance Code, where the revisions
were drafted, all discussion points included discussion on substantive improvementsto each of these elements, resulting in significant improvements to both the CGC andthe Engagement Guidelines.

ii. At the same time, we believe that, in order for the three elements to have an effective
impact, they must be linked through a narrative. From that perspective, however, therevisions make no specific reference to purpose or materiality, the most criticalelements in terms of companies’ vision and basic policy. Initiatives such as having
the board fulfill its functions, ensuring diversity, and overseeing sustainability should
be approached based on a narrative grounded in purpose and materiality. We would
like to see this point continue to be discussed at future Council meetings in order tomake it clearer in the revisions.

iii. While the CGC and the Engagement Guidelines were revised as a unit this time, wenote that certain initiatives which are critical in terms of comparison with global
standards but which represent some difficulty for companies have been included inthe Engagement Guidelines, to which the comply-or-explain principle does not apply.
Companies must understand why these initiatives were included in the EngagementGuidelines this time and avoid taking the Engagement Guidelines lightly despite theinapplicability of the comply-or-explain principle. In particular, those companies thatwish to list on the Prime Market should be reminded that they need to take anambitious approach to the initiatives in question.