PANEL DISCUSSION：SOURCING AND HARNESSING THE
POWER OF A DIVERSE BOARDOn February 8, 2022, the 30% Club Japan Investor Group hosted a panel discussion on the theme of "Sourcingand Harnessing the Power of a Diverse Board.” Panelists shared valuable experiences and thoughts on how toform a diverse board, as well as how to maximize the effectiveness of a board so that all perspectives can be
expressed and considered. There were approximately 90 participants on the webinar from corporates, asset
managers, and universities.
The panel discussion began with building a common understanding that promoting diversity on the board andthroughout the company will lead to an increase in corporate value. Panelists emphasized that it is important toremove the bias that we “cannot find qualified women directors” and that it’s important to look outside
conventional networks, and identify candidates with a broader range of experiences and skills that will be helpful
to the company. In addition, to enhance the effectiveness of the board, panelists advised that directors must be
properly informed and have an open atmosphere for discussion, the board must be comprised to have cognitive
diversity (diversity of thought), and directors must not be afraid to disagree with other’s opinions.

Photo of panelists and steering members:
Top (From left Tracy Gopal, Kanoko Oishi)
Middle (From left Nicholas Benes, Kaoru Kobu)
Bottom (Chris Vilburn)Speakers
Moderator:
Invesco Asset Management Head of ESG Kaoru Kobu
Panelists:
Mediva, Inc. Founder and President Kanoko Oishi
The Third Arrow Strategies Japan Board Diversity Network CEO Tracy Gopal
Board Director Training Institute Representative Director Nicholas Benes
Host:
Goldman Sachs Asset Management Head of APAC Stewardship Chris Vilburn【Summary】
The main topics of the panel discussion included the following:1) The importance of board diversity(Oishi) The board is the main point of contact with society. There are various opinions in society, and it isnecessary to reflect those opinions at the board level.
(Gopal) Some common misconceptions about board diversity are: 1) board diversity is for the benefit of investors
2) by choosing a female candidate, boards are getting less qualified candidates, and 3) one woman equals adiverse board. Not only does diversity help to meet investor demands, having a diverse board leads toimprovement in corporate performance and enhancement of governance. Having diverse directors, including
female directors, has advantages in creating innovation, reducing risk, as well as being able to hire andretain talent. And having one woman director is just the starting point, not the goal.
(Benes) For the growth of a company, not only the board but also the employees should also be diverse. It is
important to promote diversity looking into the future. Women and foreigners will be become more and moreneeded as future employees in Japanese corporates. By hiring more women and foreigners now, we can increase
their motivation and will be able to promote them to directors in the future.

2) How to effectively put together a board with diversity(Gopal) First, we need to get rid of the bias that we “cannot find qualified women directors.” Companies
should be flexible in considering the requirements for director candidates, and emphasize skills and diversity overage and title. Candidates should not be limited to Japanese living in Japan. Rather, female Japanese living
abroad and non-Japanese can also be considered for positions. Recently, many network groups of female
directors and candidates have been established in Europe and the United States. Such networks wereestablished because many companies found it "difficult to find female candidates." The networks not only matchthe needs of companies with the skills of director candidates, but also provides training for women directors. The"Japan Board Diversity Network" that I established is conducting similar support activities mainly for Japan.

(Benes) It is necessary for the board to consider what skills will be needed in the future and actively
search within a wide range of candidates. I recommend that companies use more recruitment firms to search
for a wider range of candidate directors. An automobile company once asked me specifically to help them find aforeign woman who speaks Japanese and had been CEO at an automobile company. I don’t know if such aperson even exists! Companies should look for people with a wider variety of skills and backgrounds. Successful
female entrepreneurs may be great candidates when looking for talented women directors.
(Oishi) Regarding the development of internal directors, we should reconsider the position of female employees
throughout the company and the ideal form of “leadership.” Management, which was traditionally regarded as"leadership," is illustrated with a strong leader at the top giving orders to everyone following that person in a formof a pyramid, but fundamentally "leadership" is to show the direction in which the company should beheading, with people naturally following because they agree with that vision. Japanese men (or women)
who hinder the increase in board diversity should not impose their own methods and should recognize that there
is a need for diverse forms of “leadership.”(Benes) Diversity means to be different from each other. It is important to understand that conflict of opinions iswhat often leads to innovation.
(Gopal) As BlackRock CEO Larry Fink says, "Diversity of Mind" is important. Harmony, Like-mindedness andAgreement are more comfortable, but you should seek to embrace the difference amongst each other.

3) How to maximize the effectiveness of a diverse board(Oishi) It is important that the directors are properly informed on the content of the resolutions as well as
the company's situation, and that the chairperson plays a central role in managing a board that accepts
diverse opinions.
(Gopal) Cognitive diversity is not limited to gender diversity, but is also achieved with diversity in age,nationality, sexual orientation, disability, etc. Cognitive diversity leads to the enhancement of the effectivenessof the board. A Skills Matrix, showing the skills of each directors is not only for the benefit of investors, but is alsoof benefit for the company, as it is a useful exercise for understanding whether the company has the necessary
skills for the company’s future growth.
(Benes) Japanese culture emphasizes cooperativeness, so there is a habit of avoiding disagreements. Also, it iseasy to think that the conventional method is better because of the normalcy bias. One should not be afraid tosay different opinions and should first check the rationality of the other person's opinion.
(Oishi) As for the support and information required for external directors, it is important to get a first-handunderstanding of what people in major departments are dealing with, and what kind of market situation exists. Itis also helpful to understand what the company looks like from the outside, such as through discussions withinvestors and contact points with customers.

4) Q&ARegarding the desirable composition of the board of directors, and breaking the normalcy bias:(Benes) As for the ratio of diverse talent on the board, it is desirable to consider the customer
composition of the company, and ensure that at least half of that composition is represented on theboard. For example, if 60% of customers are women, then at least 30% of directors should be women. This idea
is supported by Harvard Business School research.
(Oishi) It is better to have a majority of independent directors on the board. When the majority of the directors areexternal, it is difficult for the company’s proposals to pass if they are not supported with the proper basis andbackground. The company is required to have solid reasoning for each proposal to pass, which leads to thestrengthening of governance. It is also better to have more than one female directors. And for foreign directors, itis important that companies have the capacity to prepare materials in a foreign language.

Disclosure of Skill Matrix:(Gopal) Prudential Financial's skill matrix lists 15 different types of skills, and is a good disclosure to refer to.
(Benes) In Japan, a skill matrix is often disclosed in the AGM materials just before the general meeting, but
actually a skill matrix should be a tool for the nominating committee to think about what skills the company does
not have in the board now that will be required in the future 5 years or more.

What can external directors do to increase the effectiveness of the company when the board does not have an
open atmosphere for discussion:(Oishi) If there is a meeting for external directors only, they should discuss among themselves on how the board
should be and get everyone on the same page. Since the content of discussions will be included in the minutes, it
is important to speak up properly even if it is not an open atmosphere. This is not only for the company, but alsofor protecting oneself as an external director.

How to persuade biased men to fully understand open-mindedness and inclusiveness:(Benes) The meaning of unconscious bias is that oneself thinks one has no bias. It's important to refer to successstories and empathize with them.

Whether having compulsory regulations is effective in accelerating the promotion of diversity:(Gopal) California introduced a quota system for directors a few years ago, and I think the quota system iseffective. In Japan, diversity on the board is currently at the level of ‘Comply & Explain’ in the Corporate
Governance Code, which does not even recommend a minimum of one woman. Apart from the system, it is also
important to train and develop female director candidates.
(Oishi) It is difficult to legislate diversity in the Japanese environment, but I think it is meaningful for investors toenforce their voting rights. Voting against the president is a powerful method, but it also carries the risk oflosing its effectiveness if used excessively. Also, since many board members in Japan currently have no contact
with women director candidates, it is important to create opportunities to network with external directors ofother companies.
(Benes) In the near future, all companies in Japan will be short of human resources, and competition for acquiring
talent will intensify. Company executives should have a sense of crisis that they will not be able to create the besttalent base unless they expand their workforce to include more women and foreigners.

After the panel discussion and Q&A session, Chris Vilburn, the 30% Club Japan Thought Leadership groupleader, shared his impressions of the panel discussion as closing remarks.
The interview Series will be uploaded in the link below. (The website is currently under re-construction, so may
not be available at this point)
https://30percentclub.org/news/