Governance
Policy and procedure for director
appointment and dismissal
worldwide. Candidates for representative director and otherexecutive positions are provided with general management
training tailored to their future duties, and with opportunities toparticipate in important meetings, including the Top Management
Meeting and the Executive Officers’ Meeting.
The Nominating Committee receives reports on the progressof development of candidates, and expresses opinions on
succession planning to the Board of Directors.

The process of selecting candidates for directorships is based ona skills matrix outlining the expected skills and other requirements.
The Nominating Committee recommends candidates to theBoard of Directors on the basis of the skills matrix review, andthe nominations are made part of the agenda of the General
Meeting of Shareholders through voting at a Board of Directors
meeting attended by a majority of independent outside directors.
Directors who are deemed to no longer possess theexpected skills and qualities of their position are considered
for dismissal. Also, if a director is found to have violated laws,
regulations, the articles of incorporation, or otherwise be unfit
for the discharge of their duties, the Board of Directors, acting
on a report by the Nominating Committee, votes on whether
to include a proposal for the director’s dismissal in the General
Meeting of Shareholders agenda. This vote must be made at a
meeting attended by a majority of independent outside directors.

Value Creation Story

We established a voluntary Nominating Committee in 2021
as an advisory body to the Board of Directors for objective,
independent decision-making on director nominations andplans for developing next-generation executive candidates.
The committee is made up of a majority of outside directors
and frankly communicates its objective opinions on candidate
selection and training to the management.
Our succession planning program seeks to continuallycultivate talent who can help lead our sustainable growth

Introduction

The voluntary Nominating Committee
and succession planning

Business Strategy

Correspondence between medium-term management plan and director skill areas
Four Basic Strategies

Skills matrix of the Board of Directors

P.19

Action Themes

Required Skill Elements

Strengthen sales based on technical problem-solving

Promotegrowthstrategy ccelerate product development and sales on regional and industryA
needs
Expand business in China, India and other focus markets

International business
Sales and marketing
R&D and manufacturing

Build strategic partnerships through M&A and alliances

Improve
profitability

 educe manufacturing costs through Group-wide jointRprocurement, part standardization, etc.

R&D and manufacturing

Enhancebusinessfoundation

Increase operational efficiency by promoting DX

IT strategy
 ersonnel affairs andP
development

Promote initiatives to reduce environmental impacts

Legal affairs and risk management

4Personnel affairs and development

7

Financing and accounting

3

R&D and manufacturing

4

Sales and marketing

6

International business8

 trengthen corporate platform by advancing decent work practices,S
promoting diversity, and increasing investment in human capital ersonnel affairs andP
development

Industry knowledge

5

Improve management transparency and effectiveness egal affairs and risk
Lmanagement

IT strategy

3

Environmental measures

Environmental measures

3

Create well-being through safety and ANSHIN technology
Improve product quality and manufacturing capabilities

IDEC Report 2023

5

Enhancement priority

Nominating Committee and Remuneration Committee

DataEnhance
ESG
initiatives

No. of relevant directors

Corporate management andmanagement strategy

IT strategy

Review and consolidate low-profit and unprofitable products
 trengthen business structure by promoting PMI and rigorousS
management of key projects

P.59

Governance

Strengthen competitiveness through production reform

Skill area

Foundation For Value
Creation

Four basic strategies of the medium-term management plan56

GovernanceIntroducing a new director and IDEC’s succession plan

Nominating Committee members
ChairmanToshi K. FunakiRepresentative
Director ChairmanMembers

Outside Director

Yasuo Himeiwa

Outside Director,
Certified Accountant

Michiko Kanai

Outside Director,
Lawyer

New Director

Remuneration Committee members

RepresentativeDirector Chairman
Members

Hiroshi Kobayashi
Hideyuki Ohkubo
Yasuo Himeiwa

Outside Director
Outside Director
Outside Director,
Certified Accountant

Michiko Kanai

Outside Director,
LawyerFoundation For Value
Creation

Takao Funaki joined IDEC CORPORATION (USA) in 1995, working
in the IT and Marketing departments. Later, he moved to IDECCORPORATION’s Marketing department and was put in chargeof global strategy. Afterwards, he headed IDEC Australia andthen IDEC Germany, where he oversaw the realignment of IDEC’s
European organization. He also launched the digital marketingtransformation project and led the development of global marketing
platform. Starting in FY2023 he concurrently served as Executive
Officer in charge of US Business and President of APEM Inc.,
working to strengthen our business in North America. As a director
newly appointed in FY2024, he is in charge of not only our North
American business, but also manufacturing, procurement & SCM,
and is working hard to reform our production systems worldwide.

ChairmanToshi K. Funaki

Newly appointed Director

Takao Funaki

Business Strategy

Hiroshi Kobayashi

Value Creation Story

We established a voluntary Nominating
Committee in 2021 as an advisory body to theBoard of Directors for objective, independent
decision-making on director nominations andplans for developing next-generation executive
candidates. We also created a voluntary
Remuneration Committee in 2022 to review
and deliberate on remuneration systems.

sessions with outside directors, and lectures on
specialized topics. The candidates were also
given opportunities to attend sessions of theTop Management Meeting and the Board ofDirectors’ Meeting to directly experience actual
management issues and come into close contact
with executive officers and directors. In its third
meeting of FY2023, the committee discussed
and reported the selection of director candidates
for the next fiscal year from among the nextgeneration executive candidates.

Introduction

Activities of the Nominating Committeeand Remuneration Committee (April 1, 2022 – March 31, 2023)

The voluntar y Nominating Commit tee
established in 2021 discussed the selection of
next-generation executive candidates and how
to train them, and then developed and launcheda succession plan for cultivating tomorrow’s
executive leadership.
In its second year, FY2023, the committee
carried out a training program for people
selected as nex t-generation executivecandidates. The training included activities suchas external seminars, one-on-one action learning

A Remuneration Committee meeting

DateMeeting

Sept. 14, 2022

Training Report Meeting

Remuneration Committee Activities
Main focuses

Participants
3 members

Preliminary Briefing

3 members

Nov. 8, 2022

1st Meeting of theNominating Committee

Skills matrix-based recommendation of candidates for newdirector appointments for next fiscal year, and scheduling ofsuccessor training

All members

Dec. 7, 2022

2nd Meeting of theNominating Committee

Confirmation of director candidates for next fiscal year andscheduling of future nominations

All membersMar. 23, 2023

3rd Meeting of theNominating Committee

Decision on content of report to director candidates

All members

Nov. 2, 2022

IDEC Report 2023

Meeting

Main focuses

ParticipantsNov. 2, 2022

Preliminary Briefing

Briefing and preliminary questions on Remuneration
Committee discussions and grand design for remuneration

4 members

Nov. 8, 2022

1st Meeting of theRemuneration Committee

General discussion of grand design for executive
remuneration

All members

Dec. 7, 2022

2nd Meeting of theRemuneration Committee

Discussion of grand design for remuneration systems, andsystem details

All membersMar. 23, 2023

3rd Meeting of theRemuneration Committee

Decision on remuneration systems to be applied in the next
fiscal year

All members

Nominating Committee and Remuneration Committee

Data

Training reports by next-generation executive candidates
Briefing and preliminary questions on Nominating Committee
discussions, training reports by next-generation executive
candidates

Date

GovernanceNominating Committee Activities

57

Governance(Established as secretariat ofRemuneration Committee)

Strategic Planning Division
members

Proposaldrafting

PSU 10%

RS 5%

40%
Non-residents of Japan
Bonus

25%

Phantom shares

Basicremuneration
60%

60%

Non-monetary (share-based) remuneration

Comprises performance share units as a medium-term incentive,
and restricted stocks as a long-term incentive.
Performance share units are provided in the form of theCompany’s common stock, subject to restrictions on transfer. The
amount is based on a finalized number of share units calculated bymultiplying the number of share units provided to each position by apayout coefficient reflecting the degree of achievement of financial
KPIs and nonfinancial KPIs (e.g., CO2 reduction rate) that are focusesof the medium-term management plan.
Restricted stocks are provided in the form of the Company’scommon stock, subject to restrictions on transfer. The amount isequivalent to a standard amount determined by taking into accountthe Company’s performance, the scope of the director’s duties, andvarious circumstances. In cases where the director is not a resident ofJapan as of the provision of share-based remuneration, an equivalentamount of phantom shares is provided in lieu of performance share
units and restricted stocks.
In cases where a director is guilty of serious misconduct,
violations, etc., the Board of Directors will, based on the report madeby the Remuneration Committee, demand forfeiture or repayment of
the director’s bonus and share-based remuneration, partially or in full.

Remuneration at the individual level is discussed by the Remuneration
Committee, which reports the results to the Board of Directors.
Decisions on matters concerning individual remuneration are madesolely by the CEO at Board meetings where independent outside
directors constitute the majority. In making these decisions, the CEO isexpected to respect the Remuneration Committee’s report.

Linkage
FormulaBonus

Base amount×
Corporate performancecoefficient×
Individual assessment
coefficient
3-year total number ofshare units provided, asset for the position
×

PSU

Corporate performancecoefficient (including
nonfinancial assessments)
×
Individual assessment
coefficientRS

When rights areestablishedAt payment

Number of restricted
stocks provided, as setfor each positionCorporate performance &individual assessment-* Level of preceding
fiscal year’s operating
income margin

Corporate performance &individual assessment
Share price whenrights established* Achievement rate for final
fiscal year of medium-term
management plan
(Number of shares provided
each year is fixed)* Fluctuation in asset value(Number of shares provided
each year is fixed)

rights established

Share price when
* Fluctuation in asset value

Data

Senior executive officer in chargeof corporate strategy planning

Residents of Japan

GovernanceWorking GroupApprox.
weightFoundation For ValueCreation

Presentation

Performance-based cash remuneration whose amount reflects therelevant KPIs. The amount is paid in 12 equal monthly installments,
together with the monthly basic remuneration. Specifically, theamount is calculated by multiplying the standard bonus set for theposition by a payout coefficient (0–200%) indicative of the director’s
performance for the fiscal year.

Long-term
remuneration
Incentive to improve
corporate value

Business Strategy

Discussion

Performance-based remuneration (bonus)

Medium-term
remuneration
Incentive to achieve
the medium-term
management plan

Value Creation Story

Reporting

Fixed monthly amount determined by comprehensively taking
into account the director’s position/duties and the Company’s
performance.

Cash remuneration

Consultation

Remuneration
Committee

Decisions

Basic remuneration

Short-term
remuneration
Incentive to achieve thefiscal year plan
Share-based
remuneration

Board of Directors

Remuneration for directors other than outside directors and directors
who are Audit & Supervisory Committee members comprises basic
remuneration (a fixed amount based on position), performance-linked
remuneration (bonus), and non-monetary (share-based) remuneration,
calculated in a ratio of 60 : 25 : 15. Remuneration for outside directors
and directors who are Audit & Supervisory Committee members islimited to fixed basic remuneration, in the interest of preserving theindependence of their management oversight role.

Fixedremuneration

System for reviewing officer
remuneration systems

Overview of new remuneration system

Performance-based
remuneration

As was indicated by the results of the survey
on the effectiveness of the Board of Directors
and by other observations, there were issues
in the design of our system of remuneration
for directors, and a need to establish a
Remuneration Committee. We launched avoluntary Remuneration Committee with amajority of outside directors on October 1, 2022
as a body for reviewing and deliberating on thedirector remuneration system. Since then, thecommittee has been examining remuneration
system proposals.
Through this committee, we are working
to increase objectivity and transparency in not
only next-generation executive training andselection, but also the remuneration decisionmaking process.
In FY2023, the committee reviewed anddiscussed our officer remuneration system with
the input of outside experts. Using the insights
gained, the committee developed a new granddesign for remuneration.

Introduction

Establishment of voluntary
Remuneration Committee* PSU: performance share units, RS: restricted stocks

Outside experts

IDEC Report 2023

Nominating Committee and Remuneration Committee

58