Corporate governanceCorporate governance
Skill matrix

Directors, Audit & Supervisory Board Members (as of June 28, 2023)
Directors

Knowledge and experience particularly expected by the Company

Hajimu Yoshimura

Masaki Fujiwara

Hiroshi Zumoto

Representative Director & President

Director, Vice President and Operating Officer
Executive General Manager of Corporate Planning
Division

Director and Senior Managing Operating Officer
COO of Power Supply System
Executive General Manager of Power Supply
System Manufacturing Division

Has rich experience cultivated as the president ofa group company of a major Japanese electronics
manufacturer and vice president of an overseas
subsidiary in the same group, among otherpositions. Since assuming his position as ourcompany’s Representative Director & President in
2018, he has been using his rich experience, broad
knowledge, and strong leadership to drive thegrowth strategy and managerial reforms.

8 years

Serving as director for
Status of attendance atBoard of Directors’ meetings
Owning

14/14 meetings
24,600 shares of our stockHas rich experience and broad knowledge basedon his service in various positions mainly theareas of management and accounting in thegroup companies of a major Japanese electronics
manufacturer and as a director at an overseas
subsidiary of the same group. Since appointed asa Director in June 2014, he has been in charge ofthe administrative department and the corporate
planning department. In April 2023, he was appointed
as Director, Vice President and Operating Officer.
9 years

Serving as director for
Status of attendance atBoard of Directors’ meetings
Owning

14/14 meetings
16,000 shares of our stock

Independence

Directors

Hajime Katsushima
Akira Uno
Koichi Ina
Audit & Supervisory
Board Members

Skills for ensuring the effectivenessof the Board of Directors

Overallbusinessmanagement
skillsKoichi Ina
Independent Outside Director

Has advanced knowledge of financial affairs due
to his work experience at a financial institution. In
addition, at the meetings of our company’s Board of
Directors, he takes advantage of his rich experienceand advanced knowledge cultivated through hisservice in positions, including outside director ofa listed company, to fulfill the decision-making
and supervisory functions of the Board, such as
identifying issues and giving advice about theGroup’s growth strategy and managerial reforms.
Since November 2019, he has been the chairman of
the Nomination and Compensation Committee. The
Company has registered him as independent officer
with the Tokyo Stock Exchange.

Possesses advanced knowledge of production
technology and research and development since
he worked in the management team of a leading
automobile manufacturer in Japan and as anengineer in factory management. At the meetingsof our company’s Board of Directors, he takes
advantage of his knowledge to fulfill decision-making
and supervisory functions of the Board, such as
identifying issues and giving advice about theGroup’s growth strategy and managerial reforms.
Since November 2019, he has been a member of
the Nomination and Compensation Committee. The
Company has registered her as independent officer
with the Tokyo Stock Exchange.

11/11 meetings

14/14 meetings

Overseas businessexperience

Requires overseas business management experience, and knowledge
and experience of an overseas business environment to respond to global
business development

Experience as a representative of overseas subsidiary, head ofoverseas business division, or executive officer

Business strategy

As the Company’s business area is a niche and highly specialized market
based on power electronics technology, this position requires a high levelof knowledge in such area as well as experience in executing businessstrategies

Executive in charge of business division, head of division andperson with equivalent experience as senior management

R&D andproduction

Requires knowledge and experience to develop safe, secure, and highquality products and realize integrated production from design to production

Executive in charge of R&D and production division, head of divisionand person with equivalent experience as senior management

Finance andaccounting

Requires accurate financial reporting, efficient management of invested
capital, and knowledge and experience to enhance shareholder returns

Executive in charge of accounting and finance division, headof division, person with equivalent experience and person withexperience in auditing firm, etc.

Legal affairs andcompliance

Requires knowledge and experience in legal affairs and compliance fields toensure effective corporate governance and improve the effectiveness of theBoard of Directors.

Experience as executive in charge of legal affairs and compliance,head of division, and person with experience in a law firm, etc.

14/14 meetings

Kazuhiro Egawa

Eriko Nashioka

Audit & Supervisory Board Member (Full-Time)

Independent Outside Audit & Supervisory Board
MemberIndependent Outside Audit & Supervisory Board Member

Hiroshi
ZumotoIchiro Kitano

Koichi Ina

Outside Director, Kubota Corporation
Chairman, Central Japan Industries Association

HajimuYoshimuraOutside Director, Hashimoto Sogyo Holdings Ltd.
Fellow, School of Business at Graduate School of
Economics, Kyoto University (Doctor of Economics)
Senior Executive Fellow, DMG Mori Co., Ltd.

Ichiro Kitano

26,400 shares of our stock

Eriko Nashioka

OwningManagement experience as a representative director or officer in
a company

KazuhiroEgawa

11,500 shares of our stock

Akira Uno

Chairman of the Board, Sansha Electric Manufacturing(Shanghai) Co., Ltd.

OwningRequires management experience and achievements in corporate
management and the formulation and promotion of management strategies
to realize the Group’s growth strategy

Functionalcore skills

Masaki Fujiwara

12,100 shares of our stock

Skill requirements

4 years

Serving as director for
Status of attendance atBoard of Directors’ meetings

Reasons for selecting skills

Corporate
management andmanagement
strategy

Businesscore skills

HajimeKatsushima

Owning

9 years

Status of attendance atBoard of Directors’ meetings

Ichiro Kitano
Kazuhiro Egawa

9,100 shares of our stock

OwningIndependent Outside Director

Serving as director for

Legal affairs andcompliance

14/14 meetings

Akira Uno

1 years

Finance andaccounting

Eriko Nashioka

Status of attendance atBoard of Directors’ meetings

Director and Managing Operating Officer
COO of Semiconductor
Executive General Manager of Engineering
Research and Development Division

Status of attendance atBoard of Directors’ meetings

R&D andproduction

Hajimu Yoshimura

2 years

Hajime Katsushima

Serving as director for

Business strategy

Hiroshi Zumoto

Status of important concurrent holding of positions
Chairman of the Board, SANREX LIMITED
Chairman of the Board, SANSHA ELECTRIC MFG.
(GUANGDONG) CO., LTD.

Worked for many years in research anddevelopment to develop products in the new energy
sector. In November 2016, he was appointed
representative director and president of a subsidiaryto engage in corporate management. He has been
controlling the power supply business since April
2021 and controlling the semiconductor businessand serving as the Executive General Manager ofthe Engineering Research and Development Division
since April 2023.

Overseasbusiness
experience

Masaki Fujiwara

Has been engaged in productivity improvement
and the strengthening of the production system formany years as a person responsible for production
technologies. He began to hold important positionsin the semiconductor business in 2012. He has
been controlling the semiconductor business since
his appointment as Director in June 2021 andcontrolling the power supply business since April
2023.
Serving as director for

Corporate
management
and management
strategy

Our criteria for appointment and dismissal of officers
and criteria for independence.
https://ssl4.eir-parts.net/doc/6882/ir_material1/207892/00.pdf

Audit & Supervisory Board Members

He has an abundance of working experienceand knowledge after long serving as a person
responsible for product design and the
manufacturing of power supplies. Since being
appointed an Audit & Supervisory Board Member
in June 2016, he has been making appropriate
suggestions based on his experience andknowledge and conducting on-site inspections
to help improve the effectiveness of the Audit &Supervisory Board’s auditing as a whole.
Serving as director for
Status of attendance at Boardof Directors’ meetings
Status of attendance at Audit &Supervisory Board meetings
Owning

7 years
14/14 meetings
14/14
5,200 shares of our stock

Audit & Supervisory Board Member, Sansha Solution
Service Co., Ltd.
Audit & Supervisory Board Member, Suwa Sansha ElectricCo., Ltd.

53

Leverages many years of experience as a lawyer
and advanced knowledge he has cultivated as alegal professional to appropriately advise the Boardof Directors from an expert viewpoint. He also visits
and inspects subsidiaries and business facilities
in his efforts to assess their situations. While Mr.
Egawa is a lawyer, he has not concluded an advisory
contract with our company. Therefore, our company
pays him no money other than the compensationfor officers. The Company has registered her as
independent officer with the Tokyo Stock Exchange.
Serving as director for

3 years

Status of attendance at Board of
Directors’ meetings

14/14 meetings

Status of attendance at Audit &Supervisory Board meetings

14/14

OwningHead of Eiwa Law Office

Has great experience and advanced knowledge
about finance and accounting as a certified public
accountant. She is also a licensed tax accountant.
She worked as a member of the Environmental
Accounting Technical Committee under theManagement Study and Research Committee of theJapanese Institute of Certified Public Accountants
and several committees of the Ministry of theEnvironment and the Ministry of Economy, Tradeand Industry. She appropriately advises the Boardof Directors from an expert viewpoint. She also visits
and inspects subsidiaries and business facilities inher efforts to assess their situations. The Company
has registered her as independent officer with theTokyo Stock Exchange.
Serving as director for

300 shares of our stock

Status of attendance at Audit &Supervisory Board meetings
Owning

3 years
13/14
1,000 shares of our stock

Outside Director (Audit and Supervisory Committee
Member), FUKUSHIMA GALILEI CO. LTD., Ltd.; Outside
Audit & Supervisory Board Member, OSAKA GAS CO.,Ltd., Representative Director, Institute for Environmental
Management Accounting, Head of Nashioka Accounting Office

SanRex REPORT 2023

54

Corporate governanceInterview with
OutsideDirectors

solves issues. We are still half way to achieving this point. I thinkthat we should devise more measures, even small ones, startingfrom planning (upstream).

What they expect of us
and our issues

Uno: You are right. At the meetings of the Board of Directors,
we receive many reports, but I sometimes feel that PDCA is
not implemented successfully. Some indicators were nearly
achieved, but in the end, they were not achieved. I want theorganization to steadily implement the PDCA cycle to be able toachieve plans consecutively. In particular, I think that productivity
and efficiency can be improved.

We interviewed the two Outside Directors and asked them to talk about what they expect of
the Sansha Electric Manufacturing Group, what issues the Group is facing and other topics.
We also asked them about key points of Board of Directors discussions of the introductionof the performance-based stock compensation plan that was announced in May 2023.

What roles should Outside Directors play?
Uno: Directors are appointed by shareholders. To put it inextreme terms, Outside Directors exist to serve the interestsof shareholders. I believe that we Outside Directors play a rolein giving advice and recommendations from the viewpointof shareholders. Because I have long been involved in the
management of a financial institution, I am conscious of financial
perspectives in particular when making remarks at the Board of
Directors’ meetings.
Ina: Because you are a finance professional, your perspective isa little different from mine, isn’t it? I myself learn a lot from yourrecommendations and opinions, Mr. Uno.
Uno: Thank you very much. I also learn a lot from yourperspective as a production professional, Mr. Ina.
Ina: I make statements regarding the improvement of production
efficiency and manufacturing based on my own experience.
I also believe that shareholders entrust a company with capitaland employees entrust a company with their lives. In a company,
the Board of Directors is an extremely important decision-making
body. Of course, I carefully watch the flow of money, but I also try
to be conscious of employees’ viewpoints. I believe that we also
have a duty to think deeply about employees working on sitewhen we are making decisions, such as asking ourselves, “Howwill employees feel about the direction this company is going?”and “What impact will our decision have on the employees
working on site?” valuation of CG23, the medium-termEmanagement plan aimed at achieving thevisionIna: I want to praise the company for achieving its major financial
indicators, such as net sales. On the other hand, CG23 is amedium-term plan aimed at achieving the Global Power Solution
Partner long-term vision. To achieve the vision, we need tochange our existential value. It is a great change, involving theshift from the idea of selling products to being a partner who

Akira Uno
Outside Director and chairman of the Nomination
and Compensation Committee
After serving as a director of The Sumitomo Bank, Limited(currently Sumitomo Mitsui Banking Corporation) and
Chairman and Representative Director of SMBC Consulting
Co., Ltd., he was involved in the privatization of postal services
as an executive officer of Japan Post Co., Ltd. He became a
Director of our company in 2014. He is also a Senior Executive
Fellow of DMG Mori Co., Ltd., a fellow of Graduate School of
Economics, Kyoto University (Doctor of Economics), and an
Special Assistant to the President, Kyoto University

55

Ina: As you pointed out, I think that there is room for
improvement in inventory control and quality control, among
other aspects. Above all, reviewing (Check) is the mostimportant part of PDCA. ROA should be higher if reviewing is
uncompromisingly implemented. I feel that a good point of thecompany’s employees is that they are very earnest and work on
improvements with a sense of urgency. Things will definitely bebetter if they implement the PDCA cycle surely and repeatedly
improve.

 iscussion about the introduction of aD
performance-based stock compensation planfor officers
Uno: I also serve as the chairman of the Nomination andCompensation Committee. We discussed the introduction ofthis plan for about a year. After deciding the outline of the plan,we spent time checking for negative elements. We repeatedly
discussed the plan, asking ourselves, “Will profit be distributed
arbitrarily?” and, “Will only the officers be treated favorably?”
positioning fairness as a fundamental requirement. We led thediscussion because we, the Outside Directors, are not eligible forthis compensation plan.
Ina: I also participated in the discussion as a member of thecommittee. You were very strongly aware of fairness, weren’t

you, Mr. Uno? We tended to place sales and profit at the centerof the discussion. I hope that introduction of this plan will enable
management to evolve to have a greater awareness of the stock
price.

 xpectations of the Sansha ElectricE
Manufacturing Group
Uno: Society as a whole is facing the problem of climate change.
Next-generation energy is a subject that the entire world should
address to solve this problem. In Japan, the public and private
sectors are working together with the goal of achieving carbon
neutrality. Our company’s products have the potential to play acentral role in solving this problem. Whatever the energy source,
be it solar, wind or hydrogen, they all need to be transformed
into electricity. I feel that this is a great opportunity for us, who
are good at supplying power stably using power conversion
technologies. I think it is a promising opportunity.
Ina: I completely agree with you. I think that our contribution to
next-generation energy is also a very important subject in termsof our role in society. At present, it is not realistic to capture allof the opportunities. Therefore, I hope that the company will
establish a position which will make us say, “This is what Sansha
Electric Manufacturing is for!” I want them to create a category
where Sansha Electric Manufacturing is the best in the world.
It could be a niche category. I think that mobility and agility are
our company’s advantages. I want the company to take onchallenges bravely by combining power semiconductors andpower supplies and leveraging our unique strengths.
Uno: Our company celebrated the 90th anniversary of its
founding in April 2023. There is no easy way for a company tocontinue operating for nearly 100 years. I hope that the company
will continue to achieve growth by solving social issues based on
its history and the unique technologies it has accumulated andcultivated.

Koichi Ina
Outside Director and member of the Nomination
and Compensation Committee
He served as the Senior Managing Director and Chief
Officer of Strategic Production Planning Group at Toyota
Motor Corporation, Chief Officer of Manufacturing Groupat the same company, and President of DAIHATSU MOTOR
CO., LTD. before accepting his position as a Director of
our company in 2019. He is also an Outside Director of
KUBOTA Corporation and the Chairman of the Central Japan
Industries Association.

SanRex REPORT 2023

56

Corporate governance

Characteristics of the corporate
governance system

Basic stance on corporate governanceAt the Sansha Electric Manufacturing Group, we practicemanagement based on our corporate philosophy to achieve our
purpose: Moving society forward through power electronics andcreativity. We will also enhance our corporate value sustainably
and contribute to the sustainable development of society byStrengthening
corporate
governanceachieving our vision: Global Power Solution Partner. To achievethis, we have set ensuring compliance and building a highly
transparent, efficient foundation of our business as our basic
policies on corporate governance.

Outside Directors
make up at least one thirdof the Board

The Nomination andCompensation Committee
is established voluntarily

The maximum number of Directors
is eight, and the Directors’ term ofoffice is one year

1984

2006

2007

2011

2014

2016

 orporate Planning ConferenceCestablished

Operating Officer system introduced

Officer retirement benefit system abolishedA whistleblowing contact established within
the internal audit department

Directors’ term of office shortened to one year

Outside Directors introduced

Assessment of the effectiveness of the Board of Directors begun
Risk Management Committee (currently Internal Control Committee)
established

2018

2019

2020

 tandards for assessment by outsideSaccounting auditors formulated

 omination and Compensation
N
Committee established utside officers elected to ensure that atOleast one third of officers are outside officers

 emale Outside Audit & SupervisoryF
Board Member elected
Disclosure of skills matrix

2021

2023

Whistleblowing contact established at an outside law firm

Purpose establishedIntroduced a performance-based
stock compensation plan

Corporate governance system chart
Nomination and Compensation
Committee

Number of meetings
held in FY2022

Board of Directors
Chairman Hajimu Yoshimura, Representative Director

Chairman Akira Uno, Outside Director

14
meetings

The Board of Directors holds a regular meeting each month in principle
and extraordinary meetings as needed. It makes decisions on basic
management policies and important strategies. It is also defined as
an organization that supervises business execution by Directors andOperating Officers.

General Meetingof Shareholders
Appointment
and dismissal

Main matters considered> Important management issues
including matters related to the
management plan, financial planand investments> Important personnel affairs andorganizations> M atters concerning the internal
control> S ustainability policy and strategy

Regulation Committee
Chairman Masaki Fujiwara, Executive General Manager
of Corporate Planning Division

With 4 inside and2 outside members

Chairman Masaki Fujiwara, Executive General Manager
of Corporate Planning Division

ReportReport3
meetings

It is attended by Operating Officers and presidents of subsidiaries based inJapan. It discusses the creation of regulations and detailed rules as needed
and delivers reports on important regulations to the Board of Directors.

Internal Control Committee

Board of Directors

Report andadviseNumber of meetings
held in FY2022

Instruct/
provideguidance

Accounting
auditing

Accounting
AuditorAdviseCorporate lawyer

Representative Director

Regulation
Committee

Report12

ReportInternal
ControlCommittee

Instruct/provide
guidance

Business departments
and group companies

ReportAppointment anddismissal
Collaboration

Main matters considered> B asic policy on determining
remuneration for officers> Performance-based
remuneration for Directors andremuneration for individual
Directors>C onsideration of the introductionof stock compensation
Number of meetings
held in FY2022

Chairman Ichiro Kitano, Full-Time Audit &Supervisory Board Member

ReportAuditing

Audit &
Supervisory
Board

Instruct/provide
guidance

Corporate Planning
Conference

It is chaired by an Outside Director, and a majority of its members must
be Outside Directors. The content of its deliberations are reported to theBoard of Directors. Deliberations on remuneration for officers are joined byan Outside Audit & Supervisory Board Member as an observer.

Audit & Supervisory Board

Appointment,
dismissal andinstruction

Main matters considered57

Nomination andCompensation Committee

Advisemeetings> Activities to promote compliance> Review of regulations> M easures to enhance information> D eliberations regarding projects
security
involving large payments> Response to the revision of laws
and regulations related to personnel
affairs

ReportAudit Department

Collaboration

Collaboration

With 1
inside and2 outside
members7

meetings> Proposal regarding the election of
Directors to be submitted to theGeneral Meeting of Shareholders
for resolution> Proposal on prospective officers
to be submitted to the Board of
Directors for discussion> A pproach to succession planning

Instruction

Number of meetings
held in FY2022

It is chaired by the Director and the Executive General Manager of the
Corporate Planning Division and attended by Inside Directors, Operating
Officers, presidents of subsidiaries based in Japan and heads of relevant
departments. It holds at least one meeting each month in principle.
It provides overall control and supervision of matters related to risk
management and compliance in the whole Group.

Appointment
and dismissal

Appointment
and dismissal

Number of meetings
held in FY2022

14

meetings

It holds a regular meeting each month in principle and extraordinary
meetings as needed. In accordance with audit plans, Audit & Supervisory
Board Members attend Board of Directors’ meetings and other important
meetings, view significant documents and materials, visit and inspect
principal facilities, and receive reports from Directors and other personnel
on the execution of duties to audit the legality and appropriateness of the
Directors’ execution of their duties.
Main matters considered> Audit policies and plans> Reappointment of accounting
auditor and remuneration foraccounting auditor> Proposals for the General Meetingof Shareholders> Preparation of audit report

Corporate Planning Conference
Chairman Hajimu Yoshimura, Representative Director

Number of meetings
held in FY2022

12

meetings

It is attended by Inside Directors, Full-Time Audit & Supervisory Board
Members, Operating Officers, presidents of subsidiaries based in Japan andthe heads of relevant departments. It holds at least one meeting each monthin principle. It makes advance deliberations on important business execution
matters for which resolutions are set to be made at meetings of the Board of
Directors. It also monitors the overall state of progress in the management
plan and manages day-to-day actions such as solutions to problems.
Main matters considered> Report on operations of eachbusiness and subsidiary> Report on the progress of eachproject

SanRex REPORT 2023

58

Corporate governanceNomination and Compensation Committee
We established the Nomination and Compensation Committee
in November 2019. Its objectives are to nominate Directors
and Audit & Supervisory Board Members and to increase theindependence, transparency and objectiveness of the Board of
Directors’ functions regarding Directors’ remuneration and othermatters. The committee will enhance our accountability andcorporate governance. To ensure the fairness and transparency
Composition of the Committee

Evaluation of effectivenessof the Audit & Supervisory Board

The Company evaluates the effectiveness of the Board of
Directors every year to maintain and increase its effectiveness.
The Directors and Audit & Supervisory Board Members are
subject to evaluation.

In FY2021, the Company’s Audit & Supervisory Board began to
conduct a self-evaluation on the effectiveness of its audits for the
purpose of assessing initiatives related to its functions and roles
and the effectiveness of audits attributed to these initiatives.

Date

From December 26, 2022 to February 27, 2023

Date

From November 29, 2022 to January 31, 2023

MethodQuestionnaire

MethodQuestionnaire

58 questions about the composition, roles, and operations of theBoard of Directors, their determination of strategies and orientation,
the effectiveness of the internal control system, and the Nomination
and Compensation Committee, and other matters

Current committee members

1

The committee consists of at least three Directors selected by the Boardof Directors.

2

Independent Outside Directors make up half of the committee or more.

3

The committee is chaired by a person selected from among theIndependent Outside Directors.
Meetings of the committee are attended by an Outside Audit &Supervisory Board Member as an observer.

4of the committee, an advisory body focused on decisions
regarding the nomination of prospective Directors and Audit &Supervisory Board Members and on Directors’ remuneration,
the committee deliberates about these matters and reports to
the Board of Directors. Since December 2021, an Independent
Outside Audit & Supervisory Board Member has been taking
part in deliberations on remuneration for officers as an observer.

Evaluation of the effectivenessof the Board of Directors

Akira Uno Independent Outside Director

Chair

Koichi Ina Independent Outside Director
Hajimu Yoshimura Representative Director& President
Masaki Fujiwara Director

Members

Observer(for deliberations on
remuneration for officers only)

Subjects of theevaluation
Summary ofevaluation
results* Attendance in FY2022: 100% (all members)

Officer remuneration system

Measures forincreasing
effectivenessWe have formulated a policy regarding the determination of remuneration for officers and the method for calculating it. It is as follows.
1

The officer remuneration system must be
intended to promote our continuous growthand medium- and long-term increase of ourcorporate value. It must encourage officers
to perform their duties to their utmost abilities
in accordance with our Group vision and tocontribute to the improvement of financial results.

2

On the basis of the data collected by outside
research bodies, remuneration for officers willconsist of base remuneration, which is a fixedamount for individual posts, and performancebased remuneration, to ensure that the soundincentives matched with the Directors’ duties willserve their intended functions.

3

Remuneration for Outside Directors andfor inside and outside Audit & Supervisory
Board Members will consist solely of baseremuneration, as they are independent from theexecution of business and variable performancebased remuneration is not appropriate for them.

Process of deliberation and determination of remuneration for officers
Matters regarding a
resolution of the General
Meeting of Shareholders
on remuneration for
officers and others

A resolution on monetary remuneration for Directors was passed
at the ordinary General Meeting of Shareholders for the 74th termthat took place on June 27, 2008, establishing an annual upper
limit of 300 million yen, excluding the employee wages of any
Director who is also an employee. Resolution on the monetarycompensation for Audit & Supervisory Board Members was
adopted by the ordinary
General Meeting of Shareholders for the 59th term that took placeon June 28, 1993 to set an annual upper limit of 40 million yen.

Stance on performancebased remuneration

The performance indicator for performance-based remunerationis consolidated operating profit ratio, chosen because it is themost important performance indicator related to the evaluation of
performance during the fiscal year under review. We calculated
performance-based remuneration by multiplying the standard
amount for the specific post by the coefficient appropriate to theconsolidated operating profit ratio. The amount of performance-

based remuneration for Directors is discussed by the Nomination
and Compensation Committee in accordance with theconsolidated operating profit ratio for the fiscal year under review
and reported to the Board of Directors. The Board of Directors
determines the amount of performance-based remuneration for
Directors in accordance with the report from the Nomination andCompensation Committee.

Matters regarding nonmonetary remuneration

The Company has introduced the performance-based stockcompensation plan (hereafter, the “Plan”) as non-monetary
remuneration. The purpose of the Plan is to increase Directors’
motivation to contribute to improved business results andenhanced corporate value in the medium and long term byfurther clarifying the link between Directors’ remunerationand the Company’s business performance and stock prices
and having Directors share the benefits and risks of stock
price fluctuations with shareholders. Points will be granted toeach Director according to their position and the degree ofachievement of performance targets, etc., based on the stock
issuance rules established by the Board of Directors. In principle,

the Company’s stock is granted to the Directors when they retire
from office. Regarding the upper limit in the amount of money tobe provided to the trust as a fund for the acquisition of stock, theinitial period of the trust will be approx. four years, and under thePlan and during the period covered, the Company will offer up to
320 million yen, which is the amount of funds for the acquisitionof stock necessary for granting the Company’s stock to Directors,
as compensation for the Directors who are in office during theperiod covered. Regarding the upper limit for the granting of
the Company’s stock to Directors, the total number of points
allocated to Directors shall not exceed 40,000 points per fiscal
year.

Base remuneration for Directors for the fiscal year under review
is the fixed remuneration for specific posts under the Regulations
on Remuneration for Directors and has been discussed by the
Nomination and Compensation Committee on the basis of officer
remuneration data surveyed by an outside research body.
The determination of remuneration for individual Directors isdelegated to Hajimu Yoshimura as Representative Director& President, on the basis of the resolution of the Board of
Directors. The Representative Director & President will determine
remuneration in accordance the amounts of remuneration
for individual Directors reported after deliberations by the
Nomination and Compensation Committee within the limit on
total remuneration in accordance with other resolutions that havebeen adopted at the General Meeting of Shareholders. The
reason this duty has been delegated is that we believe theRepresentative Director & President can appropriately determine
the remuneration for individual Directors in consideration of ouroverall financial results and other facts. The Nomination andCompensation Committee reviews the appropriateness of thedetermination of remuneration under the delegated authority prior
to decisions coming into affect. Remuneration for Audit &Supervisory Board Members is determined through deliberation
among them within the limit for the total remuneration for Audit& Supervisory Board Members as determined by a resolution
passed at the General Meeting of Shareholders.

Matters regarding
determination of
remuneration for
individual officers
and others

59

Evaluation in a total of 18 items on a four-grade scale

6 Directors (including Outside Directors) and 6 Operating Officers

Subjects of theevaluation•

Summary ofevaluation results

The self-evaluation concluded that the auditing activities
continued to function effectively in the fiscal year ended March
31, 2023, with improvements made from the previous year interms of regular interviews with the Representative Director &President and Outside Directors and cooperation with the internal
audit department.

Measures forincreasing
effectivenessAs a result of the analysis of the responses to the questionnaire,
we identified the following tasks to be done in the future. We will
ensure that the audit plans for the next fiscal year reflect thesetasks and strive to improve the quality of audits and reinforce ourcorporate governance system.

•

Kazuhiro Egawa Independent Outside Audit& Supervisory Board Member

Composition and operation of the Audit & Supervisory Board,
improvement of the internal control system, response to theBoard of Directors, three-way auditing, and other matters igh marks were generally given to the roles and services
H
played by Board of Directors members, the leadership of thechairperson and the Nomination and Compensation CommitteeT here still remained some problems with monitoringof management resources, successor nomination anddevelopment plans although discussion about them wasdeepened by the Nomination and Compensation Committee

As a result of the evaluation of the effectiveness of the Board of
Directors, the following tasks were identified•

Deepening discussion about the revision of personnel policies,
including human resource development, ensuring diversity andthe development of successors•

Sharing an understanding of the changes in the external
environment, risks, and other matters and thoroughly
discussing medium- to long-term management policies
Striving to improve the provision of information to outside
officers, such as the creation of regular opportunities toexchange information with them•

3 Audit & Supervisory Board Members•

Increasing the number of regular meetings with Outside
Directors and the President and enhancing the content of themeetings•

 nhancing information about the status of the establishment
Eof the risk management system

Internal control
We have established our basic perspective on internal control as
the Basic Policy on the Internal Control System and are striving
to improve it.

The Basic Policy on the Internal
Control System
https://www.sansha.co.jp/ir/governance.html

Risk management
Basic stance

Risk management system

As the risks facing businesses are diversifying, the Groupidentifies the various risks involved in its businesses, constructs
a management system for risk prevention and takes actions tominimize the impact of risks. Our basic stance is to respondswiftly and appropriately to respond under the authority of the
management team when any risk becomes a reality.

The Group has established the Internal Control Committee chairedby the Director and Executive General Manager of the Corporate
Planning Division. To manage and prevent risk, we are working
to develop our emergency response capabilities to address
emergency situations when they occur. We have established asystem for reporting to the Board of Directors as appropriate.
The committee discusses policies and specific measures toaddress risks that are presumed to be involved in the Group’sbusiness activities and to instruct individual departments.

Major risks and response measures
Risks

Details

Response policy and measures

Changes in
economic
environment

Impacts of economic slowdown and decline in capital
investment demand on business performance• Sales strategy that does not depend on
any specific region or industry

Business risks
Strategic risk

Product defects, delays in product development, suspensionof OEM supply and collaboration, rising prices of raw
materials, delays in procurement, changes in financial
positions of contractors, country risks, competition risks,
information security risks and labor shortage• Improvement in technology development,
quality and maintenance services• Manufacturing cost cuts, enhancement inproductivity and expense reduction• Consideration of alternative procurement
for main parts and revision to production
contractors••

Environmental
risks

RoHS Directive and other environmental regulations andspillage of chemical substances Impacts of fluctuations inforeign exchange rates and interest rates and a slide in shareprice on business performance• Quality management based on quality
management standards that comply withlaws and ordinances•

Chemicals management in strict compliancewith standards and procedures

Financial risks

Impacts of fluctuations in foreign exchange rates and interest
rates and a slide in share price on business performance• Forward foreign exchange contracts•

Reduction of cross-shareholding stocks

Treasury risks

Impacts of impairment in long-term assets, occurrence ofretirement benefit obligations, changes in accounting and/or
taxation systems on business performance• Regular reviews on possibility of collecting
the remaining value of assets•

Regular monitoring of pension asset
management at the internal committee forpension asset management

Natural risks
and pandemics

Damage to manufacturing bases and others caused bynatural disasters and business suspension due to a pandemic• Drills for swift first response to large-scaledisasters••

 ormulation of a business continuity plan (BCP)F
Encouragement of commuting off rush hours
and working from home•

Collection of information on country risks
Information security enhancement andmanagement of contractors
Enhancement of employment system as well as
education and training programs

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Corporate governanceCompliance

Information security
At the Sansha Electric Manufacturing Group, we understand that
we have an important social responsibility to ensure information
security. To respond to the trust of society as a whole, we haveestablished rules on information security under our Information
Security Policy, developed a system for managing information
security, and are pushing forward with relevant measures.
In response to the latest information security threats, we
strive to implement information security measures which are

Basic stance
We are convinced that the Group’s corporate value will be
increased by developing a corporate culture that values
compliance and by building sound business foundations as acompany winning trust from society. We have also establishedthe Sansha Electric Manufacturing Group Behavioral Charterfor constantly reviewing our business activities with a view torealizing our corporate philosophy.
We have adopted a system under which the management
and supervision of activities to promote compliance arecontrolled by the Internal Control Committee chaired by the
Executive General Manager of the Corporate Planning Divisionand these matters are reported to the Board of Directors asnecessary.

Respect for human rights
In the Sansha Electric Manufacturing Group Behavioral
Charter, the Group has clarified that, in its global operationof businesses, it will respect the human rights and diversityof not only its employees but also every person with arelationship with the Group. In addition, the Group willconsider human rights of all suppliers, including the suppliers
in its supply chain, in accordance with its Procurement Policy
and Supplier Selection Policy.
In its business activities, the Sansha Electric Manufacturing
Group will not tolerate discrimination against anyone or the
infringement of anyone’s personal dignity on the ground of
their race, nationality, birth, religion, belief, gender, sexual
orientation, age, disability or other attributes. In contrast, theGroup will provide equal opportunities and strive to build aworker-friendly system.

Information Security Policy
At the Sansha Electric Manufacturing Group, we understandthat we have an important social responsibility to ensure
the appropriate management of information, and we have

We have conducted a compliance awareness survey in the formof a questionnaire since FY2021. Its findings are reported to all
employees. The Board of Directors reviews of whether or not
the Group has a corporate culture that respects the objectives
and the spirit behind the Sansha Electric Manufacturing Group
Behavioral Charter. The Internal Control Committee endeavors
to identify risks on the basis of the survey results and improves
educational and awareness-raising activities regarding
compliance.
Based on the results of the questionnaire conducted in
FY2021, we continued awareness-raising and educational
activities related to compliance. As a result, the percentageof respondents who answered “yes” or “probably yes” to thequestion, “Do you think that you act with morals and a highethical standard in business and personal matters?” increased 8
percentage points from FY2021, to 90%.

Number of employees who participated in compliancetraining in FY2022 (total number)Compliance with laws, regulations and internal rules
We will comply with laws, regulations and other norms related to information security, establish rules on the handling of
information assets and manage them appropriately.

2

Information security management system
We will appoint a person responsible for the overall management of the entire Group’s information security and build
an information security management system with a responsible person in place at each organization. Under thismanagement system, we will implement information security measures to maintain and improve information security.

3

Implementation of security measures
We will strive to implement information security measures which are appropriate for the changes in the businessenvironment and business category, mainly reflecting the latest threats to information security, examples of attacks andvulnerabilities. If an information security incident should occur, we will respond to it promptly to minimize the damage
and take measures to prevent its recurrence.

4

Information security education and training
We will provide education and training needed to raise officers’ and employees’ awareness of information security.

5

Continuous improvement
To check the effectiveness of our information security measures, we will conduct self-inspections or self-audits andstrive to improve the measures continuously.

Whistleblowing system

Number of reports and inquiries received via our internal
helpdesks

The Group has set up compliance helpdesks (whistleblowing
contacts) to be contacted by employees regarding inquiries
about compliance and for the reporting of any dishonest
conduct. In October 2021, an external law firm helpdesk wasadded and the helpdesk services became available in English
and Chinese as well. Further, we have provided all employeesof the Group with information about these helpdesks via a card
which is distributed to the employees of the Group to carry withthem, as well as internal groupware, training sessions, and othermeans of communication. Through these and other initiatives,
we are striving to reinforce the helpdesk system and improve its
reliability.
Upon inquiry or notification of any dishonest conduct,
the Group will investigate the facts and take corrective andpreventive actions.
In accordance with the Whistleblower Protection Act and tothoroughly protect whistleblowers, the whistleblowing systemprohibits the dismissal or any other disadvantageous treatmentof a person for their whistleblowing.

869

Training on specific themes including information
security

1,862
868

Harassment prevention training

Data covers Sansha Electric Manufacturing Co., Ltd.

FY2020

FY2021

FY2022

1

5

6* Including reports and inquiries for which investigations were not conducted and reports
and inquiries which were found to be not problematic

Whistleblowing process flow

Anti-bribery Initiatives
At the Sansha Electric Manufacturing Group, we believe that
we need to strengthen measures against bribery risks, in lightof recent situations including the progress in the globalization ofbusiness, the tightening of laws and regulations, and the stricter
enforcement. We have therefore developed a basic policy andare striving to enhance initiatives to prevent violations.

Sansha Electric Manufacturing Group
Basic Policy for Prevention of Bribery
and Corruption
https://www.sansha.co.jp/ir/governance.html

Whistleblower
ReportPerson(s) and/or department(s)involved in thewhistleblowing
reportInvestigation

Sharing of
information

Internal helpdesks(in the Human Resources
Department and the Audit
Department)

ReportOrder for corrective
and preventive actions

61

11

Specialized training on laws and regulations, including
the Act on the Protection of Personal Information andthe Export Trade Control Orderestablished our Information Security Policy as described
below to respond to trust of society as a whole, including ourcustomers.

1

Compliance awareness survey

New employee training

appropriate for the business environment and provide officers
and employees with necessary training, such as giving them
relevant information, in our efforts to increase their awareness.
In addition, we check for security holes based on the
security diagnostics of external specialized institutions and takenecessary measures to improve our information security.

Instruction on
investigation

ReportSharing of
information

Outside helpdesk(in a law firm)

ReportPerson in charge of the administrative department (Executive
General Manager of the Corporate Planning Division)

Statuses of internal audits, accounting audits andthe internal control department
We have established the Audit Department as an independent
organization under the direct control of the President. It conducts
internal audits of each department and group company’s
execution of business from the perspectives of compliancewith laws, regulations and internal rules, the effectiveness andefficiency of operations, the reliability of financial reporting andasset protection.
Results of internal audits are reported to the President and

Full-Time Audit & Supervisory Board Member. If there are any
points that require improvement, the department monitors thestatus of improvements in its efforts to ensure the appropriate
execution of business.
In addition, Audit & Supervisory Board Members, the Audit
Department and the Accounting Auditor hold reporting sessions
regularly or as needed to exchange information and cooperatewith each other.

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