[Translation for Reference and Convenience Purposes Only]

CORPORATE GOVERNANCE REPORT
Kuraray Co., Ltd.

Last Update: March 30, 2023
Kuraray Co., Ltd.
Hitoshi Kawahara
President and Representative Director
Contact: +81-3-6701-1070
Securities Code: 3405
https://www.kuraray.com
The corporate governance of Kuraray Co., Ltd. (hereinafter “Kuraray” or the “Company”) is described
below.

I

Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other
Basic Information

1. Basic Views
The Company believes that the maintenance of appropriate relationships with various stakeholders and thefulfillment of social responsibilities through establishing a corporate governance system that ensures effective andfair management would contribute to the long-term and sustainable enhancement of corporate value.
The Company has adopted the governance system as “a company with Audit & Supervisory Board.” Under thisframework, the Company has established corporate governance function centered on its Board of Directors andAudit & Supervisory Board to improve the effectiveness of supervisory and monitoring function while maintaining
management efficiency and to handle issues including management remuneration, selection of new company
officers, internal control and risk management.
Through the above establishment of function, the Company believes that the effectiveness of supervisory andmonitoring function would be improved while maintaining management efficiency, contributing to the long termand sustainable enhancement of corporate value.
Reasons for Non-compliance with the Principles of the Corporate Governance Code
The Company complies with all of the principles set forth in the Corporate Governance Code.
Disclosure Based on the Principles of the Corporate Governance Code[Principle 1-4: Cross-Shareholdings]<Policy on Cross-Shareholdings>
The Company has set forth the policy on cross-shareholdings and standards for exercising voting rights pertaining
to cross-held shares as follows.
1. Coming from the viewpoint of stable and long-term business operation, the Company may hold the sharesof its business partners, etc. if maintaining and strengthening the relationships with such business partners are
deemed to contribute to corporate value enhancement.
2. Regarding the shares held pursuant to the preceding paragraph (hereinafter, “cross-held shares”), theCompany regularly examines economic rationality and significance of holding individual stock at the Board1

of Directors meetings in consideration of benefits and risks associated with such holding, capital cost andother factors. The Company will sell shares of stocks, as necessary, whose holding was deemed not to beappropriate based on the examination to reduce such stocks.
3. Concerning the voting rights pertaining to the cross-held shares, the Company appropriately exercises suchvoting rights in light of the objectives of shareholdings set forth in the preceding two paragraphs, taking into
consideration the business conditions of the companies and potential impact on the business operation of theCompany or a subsidiary of the Company (hereinafter “the Group”). Particularly, the Company carefully
exercises such voting rights in a case where the performance of the companies has been sluggish for a long
period of time or a serious scandal has occurred or in a case where a proposal that would impair shareholders’value was made.
<Content of Examination on the Propriety of Holding Cross-Held Shares>
In the fiscal year ended December 31, 2022, the Company sold all shares of four stocks and part of two stocks of
its cross-held listed shares. Additionally, as the result of an examination at the Board of Directors meeting held
on February 9, 2023 of the economic rationality and significance of holding individual cross-held listed stocks
for the fiscal year ended December 31, 2022 (examination on cross-held shares as of the end of December 2022)
in consideration of benefits and risks, capital cost and other factors associated with such holding, the Company
plans to continue with the sale of some stocks.
[Principle 1-7: Related Party Transactions]
The Company stipulates that transactions with competitors held by a Director, transactions between the Company
and a Director, and transactions involving any conflict of interests would require the approval of the Board of
Directors.
[Supplementary Principle 2-4-1: Ensuring Diversity in the Promotion to Core Human Resources]
The Kuraray Group consists of employees from various nationalities and backgrounds, and the active
participation of all diverse members is crucial to the long-term and sustainable improvement of corporate value.
To achieve this, the Company has developed the “Kuraray Group Global HR Policy” as a common HR policy to
the Group. In addition, the Company has established the “Kuraray Group Diversity and Inclusion Guiding
Principles” that is focused on diversity of human resources. Based on these policies, the Company is improving
human resource development program or the environment of workplaces.
The Group’s goals and progress for ensuring diversity in the promotion to core human resources are as follows.
<Goals for ensuring diversity in the promotion to core human resources>
1. Assumptions
 “Core human resources” are defined as managers. The state of progress will reflect the status of inclusion offoreign national managers by allowing not only the Company’s registered employees (excluding production
plants), but also registered employees of overseas affiliates who work at the Company’s Japan locations to beeligible for management positions.
 “Women, foreign nationals, and mid-career hires” are regarded as one category of diversity components, andtargets are set for the percentage of the total number of persons in this category to the total number of managers.
2. Goals Women, foreign nationals, and mid-career hires accounted for 12% of managers as of September 30, 2021
(women 5.1%, foreign nationals 1.2%, mid-career hires 7.7%, with some overlap among each).
 The goal is to reach 25% by fiscal 2030.
3. Progress Women, foreign nationals, and mid-career hires accounted for 13% of managers as of December 31, 2022
(women 5.6%, foreign nationals 1.3%, mid-career hires 7.6%, with some overlap among each).

2

[Principle 2-6: Roles of Corporate Pension Funds as Asset Owners]
Regarding the management of corporate pension funds of the Company, the Finance Department, which
specializes in fund management, monitors management policy, method and status through an externalmanagement agency.
[Principle 3-1: Full Disclosure](i) Company objectives (e.g., business principles), management strategies and management plans<Company objectives (e.g., business principles)>Based on our history and moving towards the future, we at the Company develop our corporate activities byadhering to “Our Mission,” which represents how the Group should act to meet society’s expectations andmake contribution thereto, and act in accordance with “Our Values” and “Our Commitment.”[Our Mission]
We are committed to developing new fields of business using pioneering technology that improves theenvironment and enhances the quality of life throughout the world.
For people and the planet ̶ to achieve what no one else can.
[Our Values]
Philosophy:
Respect for individuals,
Close cooperation to attain shared goals,
Constant creation of new value
Guiding Principles:
Safety is the cornerstone of everything we do
Customers’ needs are our top priority
We act on ideas in the workplace[Our Commitment]
We will constantly develop and provide safe, high-quality products and services.
We will maintain a sound relationship with society through good communication.
We will strive to preserve and improve the global environment, and to secure safety and health inall our workplaces.
We will value all members of the Kuraray community and respect their rights.
We will always conduct businesses in a free, fair and transparent manner.
We will honor all intellectual property and secure data and information in a proper manner.
The Company formulated “The Kuraray Group Code of Conduct” as our guiding principles by breaking
down “Our Commitment” and ensures that the officers and employees of the Group are fully aware of it, ofwhich implementation status is checked as necessary.
<Management strategies and management plans>
In line with our long-term vision “Kuraray Vision 2026,” which lays out our vision for our centennial in
2026, and our Sustainability Long-Term Vision, we started the five-year Medium-Term Management Plan,“PASSION 2026,” spanning from fiscal 2022 to fiscal 2026.
1. Long-term vision “Kuraray Vision 2026”
Kuraray Group’s mission in the Corporate Statements is: “For people and the planet—to achieve what
no one else can.” We aim to become a “Specialty Chemical Company contributing to customers, society
and the planet and growing sustainably by incorporating new innovation platforms into its own
technologies” under the Kuraray Vision 2026, a long-term vision toward 2026, the centennial of theCompany’s founding.

32. Sustainability Long-Term Vision
We have formulated the Sustainability Long-Term Vision to promote sustainability as a united group.
This Sustainability Long-Term Vision will serve as our basic policy on sustainability.
Sustainability Long-Term Vision“As a sustainability leader, Kuraray will develop innovative solutions with unique products and cleaner
technologies to improve the natural environment and enhance quality of life for people everywhere.”
As one initiative for the Sustainability Long-Term Vision, we aim to reduce Scope 1 and 2 GHG
emissions by 30% from 2019 levels by 2030 to achieve net zero carbon emissions in 2050. In addition,
to respond to sustainability issues that are becoming more and more important, we reorganized the CSR
Committee and established the Sustainability Committee, chaired by the President, in January 2022.
Under the new organization, we promote initiatives to solve material issues.
Details of the Medium-Term Management Plan “PASSION 2026” are disclosed on the Company’s website.
(URL: https://pdf.irpocket.com/C3405/OMfg/WHzC/QwQl.pdf)(ii) Basic views on corporate governance
The Company believes that the maintenance of appropriate relationships with various stakeholders and thefulfillment of social responsibilities through establishing a corporate governance system that ensures effective
and fair management would contribute to the long term and sustainable enhancement of corporate value.
(iii) Policies and procedures for determining the remuneration of Executives and Directors
The Company’s basic policy for the remuneration of its Directors is to have a competitive level and systemof remuneration that can secure and retain competent Directors fit for their positions and responsibilities inorder to achieve long-term and sustainable improvements in corporate performance and corporate value. The
Remuneration system comprises three parts: (1) fixed remuneration as basic remuneration in accordance withjob responsibilities, (2) performance-linked remuneration as an incentive to achieve yearly business results,and (3) stock-based remuneration designed to enhance corporate value over medium to long term and sharing
value with shareholders through appropriate corporate management, provided remuneration for Outside
Directors shall solely comprise fixed remuneration without performance-linked or stock-based remuneration
as their role is to supervise management from an independent standpoint.
The specific level and system of remuneration will be verified and deliberated by the Corporate Advisory
Committee, mainly comprising outside officers and outside experts, on whether the level and system of
remuneration are appropriate, based on the results of a survey by a specialized external research institution
on executive remuneration covering companies such as those listed on the Prime Market of the Tokyo Stock
Exchange, and the salary of the managers of the highest level in the Company. The Board of Directors
receives reports on the results from the Committee and gives it due consideration to determine the level andsystem of remuneration.
(iv) Policies and procedures for the election and dismissal of executives and for the appointment of the candidates
for Directors and Members of Audit & Supervisory Board
1. The Company appoints individuals who have experience, knowledge and capabilities required for
Directors of the Company as candidates at the Board of Directors meeting with the attendance of Outside
Officers, and they are elected as Directors by resolution of the General Meeting of Shareholders. However,the candidates for Outside Directors shall satisfy the criteria of independence provided separately.
2. The Company appoints individuals who have experience, knowledge and capabilities required forMembers of Audit & Supervisory Board of the Company as candidates at the Board of Directors meetingwith the attendance of Outside Officers, and they are elected as Members of Audit & Supervisory Board by4resolution of the General Meeting of Shareholders after obtaining the consent of the Audit & Supervisory
Board. However, the candidates for Outside Members of Audit & Supervisory Board shall satisfy the criteria
of independence provided separately.
The election and dismissal of Directors and the appointment and removal of Representative Directors andDirectors with special titles are determined by the Board of Directors after deliberation at the aforementioned
Corporate Advisory Committee.
(v) Explanations on the election and dismissal of executives and the appointment of each candidate for Director
and Member of Audit & Supervisory Board
Regarding the reasons for nominating each candidate for Director and Member of Audit & Supervisory Board,please refer to the Notice of Convocation of the General Meeting of Shareholders.
[Supplementary Principle 3-1-3: Disclosure of the Sustainability Initiatives]
Since its foundation, the Group has conducted management that aims for the improvement of the natural andliving environments through our business activities, to contribute to the sustainable advancement of society.
Positioning sustainability as one of its key management strategies, key priority issues (materiality) for thesustainable advancement of the Company and society have been selected at a management level, and we areworking on solutions to those issues across the entire Group.
In the Medium-Term Management Plan “PASSION 2026,” we have summarized the sustainability-related
measures that the Group will address in our “Sustainability Medium-Term Plan.”
We have declared our endorsement of the Recommendations of the Task Force on Climate-related Financial
Disclosure (TCFD), and we are striving to enhance our disclosures in the four areas recommended by TCFD,
namely “Governance,” “Strategy,” “Risk Management,” and “Indicators and Targets.” The Group will actively
promote sustainability and help to improve the natural environment and enhance quality of life for people
everywhere with unique technologies and products. Detailed information about the Kuraray Group’s sustainability
initiatives and disclosures based on the TCFD framework can be found on the Company’s website.
Kuraray Report (integrated report) https://www.kuraray.com/csr/report_backnumber
Sustainability website
https://www.kuraray.com/csr
Sustainability Medium-Term Plan https://www.kuraray.com/csr/report2022/4p-model[Supplementary Principle 4-1-1: Scope of the Matters Delegated to the Management]
The Company clearly defines the scope of the matters delegated to the management by specifying the matters tobe judged and determined by the Board of Directors as matters to be discussed in the Board of Directors’Regulations.
[Principle 4-9: Independence Standards for Outside Officers]
1. The Company judges that its Outside Officers and the candidates for the Outside Officers are fully independent
from the Company if they do not fall under any of the following items:(1) A business executive of the Group(2) A counterparty that has transactions principally with the Group, or a business executive thereof(3) A major business partner of the Group, or its business executive thereof(4) A major lender of the Group, or its business executive thereof(5) A counterparty that receives a large amount of donations from the Group, or its business executive thereof(6) A major shareholder of the Company (who possesses 10% or more of the total voting right either directly or
indirectly), or its business executive thereof(7) A business executive of the party whose major investor (who possesses 10% or more of the total voting righteither directly or indirectly) is the Group(8) A consultant, certified public accountant or other accounting professional, attorney or other legal professional
who receives a large amount of monetary or other assets from the Group other than the executive remunerations(in case of a legal entity, association or other organization, a person belonging thereto)5(9) A person who belongs to an accounting firm that conducts the statutory audit of the Company(10) A person who has fallen under the above criteria (1) in the past ten years(11) A person who has fallen under any of the above criteria (2) through (9) in the past three years(12) A person whose position constitutes him/her as having an Outside Officer’s interlocking relationship with theGroup(13) A relative of the persons listed in the above criteria (1) through (11)
2. Even in cases where a person falls under any of the above items, if the person is deemed to be appropriate forthe post of an independent Outside Officer in light of his/her personality, knowledge and other qualities, theCompany may appoint him/her as independent Outside Officer on the condition that the reasons why the person
is deemed appropriate for the post are explained to the public.
[Supplementary Principle 4-10-1: Nomination Committee and Remuneration Committee Disclosures
The Company has established “Corporate Advisory Committee” comprised mainly of Outside Officers andoutside experts, as an advisory organ to the Board of Directors, with a view to enhancing transparency, fairness
and objectivity in decision making concerning important matters of management, including nomination andremuneration of Directors, and further strengthening its corporate governance. Details on the mandates and rolesof the Corporate Advisory Committee, as well as the policy regarding the independence of the committee aredisclosed in the supplementary explanation under “Committee’s Name, Composition, and Attributes of
Chairperson” in this Report. Other details are disclosed on the following website.
Kuraray Report (integrated report)
https://www.kuraray.com/csr/report_backnumber[Supplementary Principle 4-11-1: Policies on the Structure and Size of the Board of Directors]
1. The Company’s Board of Directors shall be comprised of the Directors with diverse backgrounds in theirknowledge, experience and expertise, and the number of Directors shall not exceed twelve as prescribed in
the Articles of Incorporation in order to enable swift and bold decision making.
2. In the light of the importance of the Outside Directors’ functions in corporate governance, the Company
stipulates that, in its Board of Directors, at least one-third of its directors shall be appointed as independent
Outside Directors to ensure transparency and fairness in its decision making.
When appointing candidates for Directors pursuant to the above policies, the Company takes into consideration
diversity, including gender and internationality, as well.
The skills matrix for Directors and Members of Audit & Supervisory Board of the Company is stated on thelast page of this report.
[Supplementary Principle 4-11-2: Status of Concurrent Posts Held by Directors and Members of Audit &Supervisory Board]
The Company regularly confirms the status of concurrent posts held by all of its Directors and Members of Audit& Supervisory Board at the Board of Directors meetings and is notified of the changes in such status in advanceif any. The status of concurrent posts is also stated in the business report.
[Supplementary Principle 4-11-3: Analysis and Evaluation of the Effectiveness of the Board of Directors]
1. Analysis and Evaluation Method
The Company distributed "Questionnaire on Evaluation of the Effectiveness of the Board of Directors" (nonanonymous) to all the Directors and Members of Audit & Supervisory Board in December 2022 and collected
responses and opinions from all members in January 2023. The secretariat of the Board of Directors aggregated
the responses, and analyzed and evaluated the effectiveness of the Board of Directors based on the data.
<Questionnaire > (38 questions in total)⚫ Concerning Structure of the Board of Directors⚫ Concerning Agenda of the Board of Directors

6

⚫
⚫

Concerning Operations of the Board of Directors
Concerning Partnerships, Communication Systems, Etc. Outside the Board of Directors

2. Outline of Analysis and Evaluation Results
The analysis and evaluation confirmed that the Company’s Board of Directors is generally functioning properly
and that the effectiveness of the Board of Directors is secured in all aspects such as the composition of the Boardof Directors, including size and diversity, the scope of matters presented and reported, operations of the Boardof Directors, including the timing for scheduling meetings, frequency of the meetings, deliberation time, andpartnerships and communication systems outside the Board of Directors such as those for providing additional
information and training opportunities to the Directors.
In light of the results from this evaluation, the Company will continue to examine and implement necessary
measures to make discussions more lively and productive at the Board of Directors meetings.
[Supplementary Principle 4-14-2: Training Policy for Directors and Members of Audit & Supervisory Board]
1. The Company continuously provides lectures and trainings by the internal specialist team or outside experts
to its Directors and Members of Audit & Supervisory Board at the time when they assume their offices or whenneeded thereafter, regarding the Company’s management strategies, organization, financial status, legal
compliance, corporate governance and other important matters.
2. The Company shall provide the summary of the business and organization of the Group to its Outside Officers
at the time when they assume office or when needed thereafter, and create opportunities of the Company’s onsite tour, etc. as needed.
[Principle 5-1: Policy for Dialogue with Shareholders]
1. The Company engages in constructive dialogue with shareholders and investors with an aim to maintain its
growth and enhance its corporate value and the common interests of its shareholders over the mid-term.
2. In order to promote dialogue with shareholders and investors, the Company prepares a framework based on
the following policies:(1) President or an officer responsible for investor and public relations deal with the interviews withshareholders to the extent reasonable.
(2) President and an officer responsible for investor and public relations oversee the dialogue withshareholders and the measures related thereto.
(3) An officer responsible for investor and public relations holds information exchange on a day-to-day basis
among divisions responsible for corporate management planning, general affairs, finance, accounting andlegal affairs to establish an organic coordination system.
(4) In addition to holding individual interviews with shareholders and investors, the Company works for a
full provision of information through financial briefing sessions, explanatory meeting on medium-term
management plan and other means.
(5) President or an officer responsible for investor and public relations report to the Board of Directors about
the opinions and concerns obtained from the dialogue with shareholders and investors as necessary.
(6) Insider information shall be strictly managed based on the internal regulations during the dialogue withshareholders and investors.

7

2. Capital Structure
Foreign Shareholding Ratio

10% to less than 20%[Status of Major Shareholders]Name / Company Name
The Master Trust Bank of Japan, Ltd. (Trust account)

Number of Shares
Owned (Shares)
61,150,700

Percentage (%)
18.27

Custody Bank of Japan, Ltd. (Trust account)

28,469,800

8.51

National Mutual Insurance Federation of Agricultural
Cooperatives

10,882,700

3.25

Nippon Life Insurance Company

10,448,963

3.12

Kuraray Employee Stock Ownership Plan

6,151,689

1.84

SMBC Nikko Securities Inc.

6,099,300

1.82

Meiji Yasuda Life Insurance Company

5,969,412

1.78

THE BANK OF NEW YORK MELLON 140042

4,808,851

1.44

Kuraray Business Partner Stock Ownership Plan

4,671,300

1.40Japan Securities Finance Co., Ltd.

4,510,000

1.35

Controlling Shareholders (excluding Parent
Company)
Parent Company—
None

Supplementary Explanation
The information above is the status of major shareholders as of December 31, 2022.
In addition to those stated in the Status of Major Shareholders, there are 20,171,061 shares of treasury stock(percentage: 5.68%) owned by the Company as of the same date.

3. Corporate Attributes
Listed Stock Market and Market Section

Tokyo Stock Exchange, Prime Market

Fiscal Year-End

DecemberType of Business

Chemicals

Number of Employees (consolidated) as of
the End of the Previous Fiscal YearSales (consolidated) as of the End of thePrevious Fiscal Year

1,000 or more
¥100 billion to less than ¥1 trillion

8Number of Consolidated Subsidiaries as of
the End of the Previous Fiscal Year

50 to less than 100

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholders—
5. Other Special Circumstances which may have Material Impact on Corporate Governance

—

9

II

Business Management Organization and Other Corporate Governance Systems
regarding Decision-making, Execution of Business, and Oversight in Management

1. Organizational Composition and Operation
Organization Form

Company with Audit & Supervisory Board[Directors]
Maximum Number of Directors Stipulated
in Articles of Incorporation
Terms of Office Stipulated in Articles ofIncorporation

12
1 yearChairperson of the Board

Chairman

Number of Directors

11

Appointment of Outside Directors

Appointed

Number of Outside Directors

4

Number of Independent Directors

4Outside Directors’ Relationship with the Company (1)NameAttributeJun Hamano

From another company

Keiko Murata

Academic

Satoshi Tanaka

From another company

a

b

c

Relationship with the Company (*)
d
e
f
g
h
i

j

k

〇
〇
〇

Kiyoto Ido
From another company〇* Categories for “Relationship with the Company”* “” When the person currently falls or has recently fallen under the category“” When the person fell under the category in the past
* “” When a close relative of the person currently falls or has recently fallen under the category“” When a close relative of the person fell under the category in the pasta. Executive of the Company or its subsidiaries
b. Non-executive director or executive of a parent company of the Company
c. Executive of a fellow subsidiary company of the Company
d. A party whose major client or supplier is the Company or an executive thereof
e. Major client or supplier of the Company or an executive thereof
f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or otherproperty from the Company besides remuneration as a director
g. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal
entity)10

h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f)(the director himself/herself only)
i. Executive of a company, between which the Company’s Outside Directors/Members of Audit & Supervisory
Board are mutually appointed (the director himself/herself only)
j. Executive of a company or organization that receives a donation from the Company (the director
himself/herself only)
k. Others
Outside Directors’ Relationship with the Company (2)NameJun Hamano

Designationas
Independent
Director○

Supplementary Explanation of theRelationship
Mr. Jun Hamano is concurrently
serving as President of The Ohara
Memorial Institute for Science ofLabour. The Ohara Memorial
Institute for Science of Labour
was established by Mr.
Magosaburo Ohara, theCompany’s first president, in
1921 with the purpose ofpromoting sound business
management, enhancing thewelfare of the laborers andcontributing to the improvementand development of social
welfare.
As a part of its social contribution
activities, the Company pays
annual membership fee to support
the research activities of theInstitute. The amount of annual
payment of the said membershipfee is less than 1 million yen.

11

Reasons of Appointment
Mr. Jun Hamano has been
appointed as Outside Director,
because based on his wealth ofexperience and broad insightgained through economic
administration and other roles at
the Economic Planning Agencyof Japan and the Cabinet Office,he can be expected to provide
objective opinions andsuggestions that are useful for theCompany’s management. In
addition, he has been designatedas Independent Director based on
the judgment that there would be
no conflict of interest withordinary shareholders.

Keiko Murata

Designationas
Independent
Director○

Satoshi Tanaka

○

Name

Supplementary Explanation of theRelationship

Reasons of Appointment—

Ms. Keiko Murata has been
appointed as Outside Director,
because based on her experiencein economic administration andanalysis of Japan and overseas at
the Cabinet Office, and deep
insight as Professor Emeritus ofTokyo Metropolitan University
and Professor of the Graduate
School of Rissho University, she
can be expected to provide
opinions and suggestions thatwould be useful for helping to
improve the Company’s
management and corporate value.
In addition, she has been
designated as Independent
Director based on the judgmentthat there would be no conflict ofinterest with ordinary
shareholders.

Mr. Satoshi Tanaka has served as
Representative Director,
Executive Vice President and inother positions of Mitsui & Co.,
Ltd. in the past. The sales ofMitsui & Co., Ltd. to theCompany for the most recent
fiscal year were less than 0.1% of
Mitsui & Co., Ltd.’s revenue forthe same period. He also serves
as Representative Director,
Executive Vice President &Executive Officer at Sekisui
House, Ltd. The sales of Sekisui
House, Ltd. to the Company forthe most recent fiscal year wereless than 0.1% of Sekisui House,
Ltd.’s net sales for the same
period.

Mr. Satoshi Tanaka has been
appointed as Outside Director,
because based on his wealth ofexperience and broad insightgained through his service as
Director responsible for the
Corporate Staff Unit andRepresentative Director of Mitsui& Co., Ltd., he can be expected
to provide opinions andsuggestions that would be usefulto the Company’s management.
In addition, he has been
designated as Independent
Director based on the judgmentthat there would be no conflict ofinterest with ordinary
shareholders.

12

Name
Kiyoto Ido

Designationas
Independent
Director○

Supplementary Explanation of theRelationship—

Reasons of Appointment
Mr. Kiyoto Ido has been
appointed as Outside Director,
because based on his wealth ofexperience in economic
administration gained at the
Ministry of Finance of Japan,
etc., and broad insight whichwere developed throughinternational experiences at the
Ministry of Foreign Affairs andother professional research
institutions, he can be expected toprovide opinions and suggestions
that would be useful to theCompany’s management. In
addition, he has been designatedas Independent Director based on
the judgment that there would be
no conflict of interest withordinary shareholders.

A Discretionary Committee Corresponding to a
Nomination Committee or Remuneration Committee

Yes

Committee’s Name, Composition, and Attributes of Chairperson

Committee’s
NameCommittee
Corresponding
to Nomination
Committee
Committee
Corresponding
to Remuneration
Committee

The
Corporate
Advisory
Committee
The
Corporate
Advisory
Committee

All

Full-time

Internal

OutsideOutside

Other

Chairperson

Committee

Members

Directors

Directors

Experts

8

0

1

4

2

1

Internal
Director

8

0

1

4

2

1

Internal
Director

Members

13

Supplementary Explanation
The Company has established “Corporate Advisory Committee” comprised mainly of Outside Officers andoutside experts, as an advisory organ to the Board of Directors, with a view to enhancing transparency, fairness
and objectively in decision making concerning important matters of management, including nomination andremuneration of Directors, and further strengthening its corporate governance.
The Corporate Advisory Committee was comprised of eight members: the Chairman and Director (Mr. Masaaki
Ito) four Outside Directors (Mr. Jun Hamano, Ms. Keiko Murata, Mr. Satoshi Tanaka, and Mr. Kiyoto Ido), one
Outside Member of Audit & Supervisory Board (Ms. Tomomi Yatsu), and two outside experts (Mr. Takeshi
Komura and Mr. Go Egami (listed under the name Mr. Haruki Kohata)), as of the submission date of this Report.
No head of the Committee has been appointed, and meetings are chaired by the Chairman and Director of theCompany. The total number of Outside Directors and Outside Members of Audit & Supervisory Board comprises
more than half of the members; therefore, the Company believes that the independence of the Corporate Advisory
Committee has been adequately secured.

[Members of Audit & Supervisory Board]
Establishment of the Audit & Supervisory Board

Established

Maximum Number of Members of Audit &Supervisory Board Stipulated in Articles of

5

Incorporation
Number of Members of Audit & Supervisory Board

5

Cooperation among Members of Audit & Supervisory Board, Independent Auditors, and Internal Audit
Department
The Members of Audit & Supervisory Board regularly have meetings with the Independent Auditors and receive
reports on audit planning, implementation status and audit content. Also, the Members of Audit & Supervisory
Board receive reports on internal audit results by the Corporate Auditing Division. The Members of Audit &Supervisory Board also serve as corporate auditors of core subsidiaries to conduct subsidiary audits as needed andattend periodic Group Auditor Liaison Meetings consisting of the subsidiary auditors to deepen theirunderstanding of each company.
Appointment of Outside Members of Audit &Appointed

Supervisory Board
Number of Outside Members of Audit &3

Supervisory Board
Number of Independent Members of Audit &3

Supervisory Board

14

Relationship of Outside Members of Audit & Supervisory Board with the Company (1)NameAttribute

Mitsuhiro Nagahama

From another company

Tomomi Yatsu

Attorney at lawab

Relationship with the Company (*)
c d e
f g h
i
j
k

l

m





Kenji Komatsu
From another company* Categories for “Relationship with the Company”* “” When the person currently falls or has recently fallen under the category“” When the person fell under the category in the past
* “” When a close relative of the person currently falls or has recently fallen under the category“” When a close relative of the person fell under the category in the pasta. Executive of the Company or its subsidiaryb. Non-executive director or accounting adviser of the Company or its subsidiaries
c. Non-executive director or executive of a parent company of the Company
d. Corporate auditor of a parent company of the Company
e. Executive of a fellow subsidiary company of the Company
f. A party whose major client or supplier is the Company or an executive thereof
g. Major client or supplier of the Company or an executive thereofh. Consultant, accountant or legal professional who receives a large amount of monetary consideration or otherproperty from the Company besides remuneration as a Member of Audit & Supervisory Board
i. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal
entity)j. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h)(the Member of Audit & Supervisory Board himself/herself only)
k. Executive of a company, between which the Company’s Outside Directors/Members of Audit & Supervisory
Board are mutually appointed (the Member of Audit & Supervisory Board himself/herself only)
l. Executive of a company or organization that receives a donation from the Company (the Member of Audit& Supervisory Board himself/herself only)
m. Others
Relationship of Outside Members of Audit & Supervisory Board with the Company (2)Name
Mitsuhiro
Nagahama

Designationas
Independent
Auditor○Supplementary Explanation of theRelationship

Reasons of Appointment

Mr. Mitsuhiro Nagahama hasserved as Chairman and in otherpositions of Mizuho Securities
Co., Ltd. in the past. Sales ofMizuho Securities Co., Ltd. to theCompany for the most recent
fiscal year were less than 0.1% ofMizuho Securities Co., Ltd.’srevenue for the same period.

Mr. Mitsuhiro Nagahama has
been appointed as Outside
Member of Audit & Supervisory
Board because he has a wealth ofexperience at financial
institutions and broad insight, anda track record at other companies
as an outside officer. In addition,
he has been designated as

15

Name

Designationas
Independent
AuditorSupplementary Explanation of theRelationship

Reasons of Appointment

Furthermore, Mr. Mitsuhiro
Nagahama has served as Deputy
President and in other positionsof Mizuho Corporate Bank Ltd.
(currently: Mizuho Bank, Ltd.) in
the past. The balance of loans
outstanding from Mizuho Bank,
Ltd. to the Company for the mostrecent fiscal year was less than
2% of the Company’s
consolidated total assets for thesame period.

Independent Member of Audit &Supervisory Board based on the
judgment that there would be no
conflict of interest with ordinary
shareholders.

Tomomi Yatsu○―――

Ms. Tomomi Yatsu has been
appointed as Outside Member ofAudit & Supervisory Board
because she has broad insight as acertified public accountant andattorney at law and a wealth ofexperience as outside officer ofother companies. In addition, she
has been designated as
Independent Member of Audit &Supervisory Board based on the
judgment that there would be no
conflict of interest with ordinary
shareholders.

Kenji Komatsu○―――

Mr. Kenji Komatsu has been
appointed as Outside Member ofAudit & Supervisory Board
because he has track records inmanagement at many othercompanies both domestically andinternationally, and he has awealth of experience and broad
insight developed through his
career. In addition, he has been
designated as Independent
Member of Audit & Supervisory
Board based on the judgment that
there would be no conflict ofinterest with ordinary
shareholders.

16[Independent Directors/Members of Audit & Supervisory Board]
Number of Independent Directors/ Members of Audit
7& Supervisory Board
Matters relating to Independent Directors/Members of Audit & Supervisory Board
The Company has appointed all Outside Officers as Independent Directors /Members of Audit & Supervisory
Board, insofar as they meet the qualifications thereof.
[Incentives]
Introduction of a Performance-linked Remuneration
System, Introduction of a Restricted Stock
Compensation Plan (Introduction of Monetary
Compensation Linked to Stock Price (“Phantom
Stock”) in Lieu of Restricted Stock Compensation
for Directors Who Are Non-residents of Japan)

Status of the Measures Regarding Incentives for
Directors

Supplementary Explanation(1) Introduction of a performance-linked remuneration system: the Company abolished the prior bonus scheme
to Directors and introduced a performance-linked remuneration system in July 2006, thereby strengthening the
incentive for increasing the Company’s corporate value. In addition, to respond to the increase in the amount of
performance-linked remuneration in conjunction with the improved business performance, it was resolved toincrease the maximum amount of annual remunerations to Directors from ¥450 million to ¥800 million(including ¥100 million annually for Outside Directors) at the Company’s 131st Ordinary General Meeting of
Shareholders held on June 22, 2012. Performance-linked remuneration is not paid to Outside Directors.
(2) Calculation method of performance-linked remuneration: as a short-term performance incentive, theperformance-linked remuneration for the President shall be the amount that is obtained by multiplying theamount of actual consolidated net income attributable to owners of the parent for the current fiscal year (before
deducting performance-linked remuneration (bonus)) by 0.75/1000. The performance-linked remuneration for
Directors shall be determined by multiplying the said amount by a predetermined index corresponding to theposition of each Director. The amounts of performance-linked remuneration paid to Directors in charge ofbusiness units shall be determined so that they partially reflect the performance of the relevant business units.
(3) Introduction of a restricted stock compensation plan: at the 140th Ordinary General Meeting of
Shareholders held on March 25, 2021, the Company resolved to abolish the existing stock options plan, andintroduce a restricted stock compensation plan, with the aim of incentivizing Internal Directors and Executive
Officers to improve the Company’s corporate value in a sustainable manner as well as raise the degree they sharevalue with shareholders. Restricted stock compensation for Directors under this plan shall not exceed the annual
amount of ¥90 million, separately from the maximum amount of fixed remuneration by position andperformance-linked remuneration. The number of shares to be granted under the plan shall not exceed 60,000
shares each year. Restricted stock compensation is not paid to Outside Directors. Monetary compensation linked
to stock price (“phantom stock”) has been introduced in lieu of restricted stock compensation for Directors who
are non-residents of Japan.

17

Internal Directors and Executive Officers

Recipients of Restricted Stock Compensation

Supplementary Explanation
No further stock options will be granted because the stock option scheme was abolished in March 2021.
However, the exercise of previously-granted stock options held by Directors and Executive Officers on
retirement will continue until such time as all Directors and Executive Officers currently holding stock options
have retired.
[Director’s Remuneration]
Disclosure of Individual Director’s Remuneration

No Individual Disclosure

Supplementary Explanation
Details of the disclosure status are as follows:・Total amount of remuneration paid by classification, amount of monetary remuneration paid by type of
remuneration, and the number of eligible Directors and Members of Audit & Supervisory Board, as well as themethod for determining the remuneration, etc. for Directors and Members of Audit & Supervisory Board aredisclosed in the business report.
(Reference) Page 27 of the Notice of Convocation of the 142nd Ordinary General Meeting of Shareholders(Directors and Members of Audit & Supervisory Board of the Company)
http://xml.irpocket.com/C3405/enconvocationnotice142nd.pdf
Policy on Determining Remuneration Amounts andCalculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
Details of the policy on determining remuneration amounts paid to Directors and the method for determination
are as follows:
In respect to remunerations, etc. for Directors, the Company’s basic policy is to have a competitive level andsystem of remuneration that can secure and retain competent Directors fit for their positions and responsibilities
in order to achieve long-term and sustainable improvements in corporate performance and corporate value. The
remuneration system for Directors comprises three parts: (1) fixed remuneration as basic remuneration inaccordance with job responsibilities, (2) performance-linked remuneration as an incentive to achieve yearlybusiness results, and (3) stock-based remuneration designed to enhance corporate value over medium to longterm and sharing value with shareholders through appropriate corporate management, provided remuneration for
Outside Directors shall solely comprise fixed remuneration without performance-linked or stock-based
remuneration as their role is to supervise management from an independent standpoint.
・ Type of remuneration paid to Directors
Remuneration to Directors is comprised of monetary remunerations (fixed remuneration by position andperformance-linked remuneration) and restricted stock compensation.
・ Maximum amount of annual remunerations to Directors
Regarding the maximum amount of annual remunerations to Directors of the Company, the following was
resolved at the 125th Ordinary General Meeting of Shareholders of the Company held on June 28, 2006 and the140th Ordinary General Meeting of Shareholders of the Company held on March 25, 2021.

18

<1> Amount of annual remunerations to Directors: ¥800 million or less resolved at the 131st Ordinary
General Meeting of Shareholders<2> Amount of restricted stock compensation to Directors (aside from <1> above): annual amount of ¥90
million or less, up to 60,000 shares each year, resolved at the 140th Ordinary General Meeting of Shareholders
・ Calculation method of remuneration, etc. paid to Directors
The calculation method of the remuneration by type is as follows. The Corporate Advisory Committee led by
Outside Officers and outside experts evaluates the amount of remuneration, calculated based on the calculation
method described below, from an objective standpoint, and reports back to the Board of Directors. The Board of
Directors determines the amount of remuneration for each Director after giving due consideration to the contentsof this report.
Fixed remuneration by position: Fixed remuneration by position, in principle, is the amount obtained bymultiplying the amount of fixed remuneration by position for the President which serves as the basis with the
remuneration coefficients predetermined according to each position. The fixed monthly remuneration of the
President is approximately six times the regular monthly salary of the managers of the highest level.
Performance-linked remuneration: Net income attributable to owners of the parent (before deducting
performance-linked remuneration (bonus)) is the index for calculating the performance-linked remuneration as
it is a clear indicator of the results of business operations and corporate management. Performance-linked
remuneration for the President shall be the amount that is obtained by multiplying the amount of actual net
income attributable to owners of the parent by 0.75/1000. The performance-linked remuneration for Directors
shall be determined by multiplying the said amount by a predetermined remuneration coefficient corresponding
to the position of each Director. Moreover, the amounts of performance-linked remuneration paid to Directors
in charge of business units shall be determined so that they partially reflect the performance of the relevantbusiness units. Performance-linked remuneration is not paid to Outside Directors.
Restricted stock compensation: A number of shares shall be allotted in consideration of the responsibilities of
the President and the level of remuneration at other companies. From the perspective of sharing value withshareholders, the plan is designed so that those in higher positions receive more allotment of shares. Restriction
on transfer is to be lifted at the time of retirement.
(Reference) Page 27 of the Notice of Convocation of the 142nd Ordinary General Meeting of Shareholders(Directors and Members of Audit & Supervisory Board of the Company)
http://xml.irpocket.com/C3405/enconvocationnotice142nd.pdf[System for Supporting Outside Officers]
The information is shared among Outside Officers through distributing and explaining in advance theproposals to be deliberated at the regular and extraordinary meetings of the Board of Directors. Staff membersof Secretariat Group, General Affairs Department assist in the sharing of this information to the Outside Directors.
The Company appoints Staff for Members of Audit & Supervisory Board to assist Members of Audit &Supervisory Board including Outside Members of Audit & Supervisory Board. The staff collects and provides
information necessary for auditing activities and offers other forms of support.

19

[Status of Retired Representative Directors and Presidents, etc.]
Names, etc. of Advisers and Counselors, etc. Formerly Served as Representative Directors and Presidents,
etc.

Name

Position

Form andConditions of Work
(Full-time/Parttime;
Compensation, etc.)

Responsibilities

Date of
Retirement as
President, etc.

Term of
Employment

Total number of Advisers, Counselors, etc. formerly served as Representative Directors and Presidents, etc.: —Other matters—

2. Matters on Functions of Business Execution, Auditing, Oversight, and Decision-Making ofNomination and Remuneration (Overview of Current Corporate Governance System)(1) Board of Directors and business execution body
The Board of Directors (convenes at least once a month), according to the Board of Directors’ Regulations,deliberates and decides important management matters, including legal matters, and supervises the execution ofbusiness. The Board of Directors is chaired by the Chairman and Director. The maximum number of Directors
is 12 in order to promote agile management decision-making by the Board of Directors, and the term of office
is one year to clarify their responsibilities to the shareholders. There are currently 11 incumbent Directors,
including one female and one foreign national. Four Outside Directors have a wealth of experience in and broad
insight into economics, finance, and management, and assume the function of managerial oversight from an
independent third-party standpoint.
No personal, capital, transactional or other relationship that would present a conflict of interest exists between
the Company and the Outside Directors.
・ Mr. Jun Hamano supervises the management from an objective standpoint as Outside Director and isproviding opinions and suggestions based on his wealth of experience and broad insight gained througheconomic administration and other roles at the Cabinet Office, etc.
・ Ms. Keiko Murata supervises the management as Outside Director and is providing opinions andsuggestions based on her experience in economic administration and analysis of Japan and overseas at the
Cabinet Office and deep insight as a Professor Emeritus of Tokyo Metropolitan University and Professor of the
Graduate School of Rissho University.
・ Mr. Satoshi Tanaka supervises the management from an objective standpoint as Outside Director and isproviding opinions and suggestions based on his wealth of experience and board insight gained through hisservice as Director responsible for the Corporate Staff Unit and Representative Director of Mitsui & Co., Ltd.
The sales of Mitsui & Co., Ltd. to the Company for the most recent fiscal year were less than 0.1% of Mitsui &Co., Ltd.’s revenue for the same period.
・ Mr. Kiyoto Ido supervises the management from an objective standpoint as Outside Director and isproviding opinions and suggestions based on his wealth of experience in economic administration gained at the20

Ministry of Finance, etc., and broad insight which were developed through international experiences at the
Ministry of Foreign Affairs and other professional research institutions.
Pursuant to Article 427, Paragraph 1 of the Companies Act, the Company has entered into contracts with
Outside Directors which limit their liability for damages under Article 423, Paragraph 1 of the same Act. The
maximum liability amount under such contracts shall be the amount stipulated in laws and regulations. However,
the aforementioned liability limitation shall be applied only in cases where such Outside Directors executed theirduties in good faith and without gross negligence. As the chief executive responsible for business execution, thePresident appointed by the Board of Directors exercises control over the execution of business in the Group.
Every executive officer (one-year term of office) appointed by the Board of Directors is responsible for businessexecution in the Group organization. As the heads of internal companies, divisions and major functionalorganizations, the executive officers bear responsibilities for operations and business results. In this way, theCompany clearly separates the responsibilities of Directors, that is, decision-making and supervision of the
management, from the responsibilities of business execution. Some Directors hold concurrent positions as
executive officers. The President has established the Executive Committee (in principle, convenes twice amonth) and various other councils and committees to deliberate and report on important matters concerning theGroup’s management policies and business execution.
(2) Audit & Supervisory Board and Internal Audit
The Audit & Supervisory Board consists of five Members, of which four are males and one is female, andthree of them are independent Outside Members of Audit & Supervisory Board, the majority thereof. The
Outside Members of Audit & Supervisory Board have a wealth of experience and broad insight into areas suchas finance, law and management, and assume an auditing function from an independent third-party standpoint.
No personal, capital, transactional or other relationship that would present a conflict of interest exists between
the Company and the Outside Members of Audit & Supervisory Board.
・Mr. Mitsuhiro Nagahama has a wealth of experience at financial institutions and broad insight, and conducts
audit as Outside Member of Audit & Supervisory Board based on his track record as outside officer of othercompanies.
・Ms. Tomomi Yatsu conducts audits as Outside Member of Audit & Supervisory Board based on her broad
insight as a certified public accountant and attorney at law and her wealth of experience as outside officer ofother companies.
・Mr. Kenji Komatsu conducts audits as Outside Member of Audit & Supervisory Board based on his trackrecords in management at many other companies both domestically and internationally, and a wealth ofexperience and broad insight developed through his career.
Members of Audit & Supervisory Board attend meetings of the Board of Directors and other important
meetings, and monitor the Directors’ execution of duties through inquiries conducted by such means as theexamination of important documents and requests for explanations of the state of business affairs. In principle,
the Audit & Supervisory Board convenes monthly.
The Members of Audit & Supervisory Board regularly have meetings with the Independent Auditor, receive
reports on audit planning, implementation status and audit content. Also, they receive reports on internal audit
results by the Corporate Auditing Division. The Members of Audit & Supervisory Board also serve as corporate
auditors of core subsidiaries to conduct subsidiary audits as needed and attend periodic Group Auditor Liaison
Meetings consisting of the subsidiary auditors to deepen their understanding of each company.
Pursuant to Article 427, Paragraph 1 of the Companies Act, the Company has entered into contracts withMembers of Audit & Supervisory Board which limit their liability for damages under Article 423, Paragraph 1of the same Act. The maximum liability amount under such contracts shall be the amount stipulated in laws and21

regulations. However, the aforementioned liability limitation shall be applied only in cases where such Membersof Audit & Supervisory Board executed their duties in good faith and without gross negligence.
In addition, Staff for Members of Audit & Supervisory Board are appointed to assist the duties of Membersof Audit & Supervisory Board.
(3) Status of Independent Auditor
No special interests exist between the Company and the Independent Auditor, PricewaterhouseCoopers Aarata
LLC, or the engagement partners of the auditing firm who audit the Company. In addition, the auditing firm
voluntarily takes steps to ensure the engagement partners are not involved in audits of the Company for longer
than the prescribed period of time. The names of the certified public accountants who engaged in the duties ofIndependent Auditor and the composition of assistants of audit engagement during the fiscal year ended
December 31, 2022 were as follows:
Names of the certified public accountants who engaged in the duties of Independent Auditor:
Designated limited liability partners: Hiroyuki Kawase (continuous audit years: 2 years) / Kazuaki Sekine(continuous audit years: 3 years)
Composition of assistants of audit engagement:
Eight certified public accountants; four employees who have passed the qualification exam foraccountants; and 14 other staff

3. Reasons for Adoption of Current Corporate Governance System
The Company has adopted the structure of “a company with the audit & supervisory board,” whereby thefairness and transparency in the management is deemed to be secured, by having Outside Members of Audit &Supervisory Board who offer a wealth of management experience and professional knowledge added to theexisting structure where Outside Directors are elected to provide valuable opinions and suggestions to the
management also from an objective perspective.

22

III Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Meeting of Shareholders and Smooth Exercise of Voting Rights
Supplementary Explanation
We dispatch the notification of General Shareholder Meeting, in
Early Notification of Generalprinciple, three weeks prior to the meeting. The convening notice for the
Shareholder Meeting
142nd Ordinary General Meeting of Shareholders (held on March 29)
was dispatched on March 7.
Scheduling of General
We hold the General Meeting of Shareholders in March to avoid the peakMeeting of Shareholders
season of other companies’ shareholders meetings.
Avoiding the Peak Day
The exercise of voting rights via electromagnetic means has been
Electronic Exercise of Voting
introduced from the 126th Ordinary General Meeting of Shareholders
Rightsheld on June 20, 2007.
Participation in Electronic
An electronic voting rights exercise platform for institutional investors
Voting Platform
operated by ICJ, Inc. (Investor Communications Japan) can be used.
The convening notice of the General Meeting of Shareholders is prepared
Provision of the Convocation
in English and posted on the Company’s website and the electronic voting
Notice in English
rights exercise platform.
The General Meeting of Shareholders is broadcast live exclusively toshareholders in the form of a participatory virtual general meeting. VideoOtherof the General Meeting of Shareholders is available on the Company’s
website on the following day of the meeting.
2. IR Activities
Supplementary Explanation
Preparation and Publication ofDisclosure Policy
Regular Investor Briefings for
Individual Investors

Regular Investor Briefings forAnalysts and Institutional
Investors

Disclosure policies were prepared and announced in2007. It is currently disclosed on the Company’s
website:https://www.kuraray.com/disclosure
Investor briefings for individual investors are held asneeded.
The Company holds meetings for analysts andinstitutional investors, including conference calls, fourtimes a year. Audio and video archives of suchmeetings are available (English version also available)on the Company’s website on the same or next day toeliminate the information gap between the analysts andinstitutional investors who can attend the briefings andthose including individual investors who cannot due tolocation in remote areas.

23

Presentation byRepresentatives

None

Available

Supplementary Explanation

Regular Investor Briefings forOverseas Investors

Posting of IR Materials on
WebsiteEstablishment of Department
and/or Manager in Charge ofIR

The Company holds investor briefings in Europe, theUnited States, and Asia three times or thereabouts ayear in principle.
The Company also participates in conferences held bysecurities companies several times a year.
In addition to financial results, materials for timely
disclosure, press releases, videos and materials of theresults briefings, explanatory materials of mediumterm management plan, integrated reports, status ofcorporate governance and stock information, etc.,
other materials such as dividend policy, past businessperformance data, contents to provide the Company’s
overview and other materials are posted for theconvenience of investors.
IR-related services are handled by Corporate
Communications Department, Corporate Management
Planning Office.

Presentation byRepresentatives

None

3. Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation
Stipulation of Internal Rules for
Respecting the Position of
Stakeholders

Internal rules for respecting the position of stakeholders are set forth in“Our Commitment” and “The Kuraray Group Code of Conduct” and havebeen announced.

Implementation ofEnvironmental Activities andCSR Activities, etc.

In 2022, Kuraray formed the Sustainability Committee, which took theplace of the former CSR Committee. Chaired by the President, theSustainability Committee is tasked with making swift decisions andformulating response measures in a timely manner regarding matters suchas the selection of important sustainability-related issues and the
distribution of management resources. In fiscal 2022, the Sustainability
Committee confirmed and evaluated the state of progress and issues facing
the project team engaged in CCUS (Carbon Dioxide Capture, Utilizationand Storage), which it is addressing as a corporate theme, in addition to thesix project teams it has established (Global Climate/GHG emission
reduction, TCFD Promotion, Sustainability Portfolio, Sustainability
Procurement, Diversity & Inclusion, and Sustainability Strategy Proposal),bringing about the steady implementation of initiatives. The Sustainability
Committee also confirmed PDCA related to Responsible Care items.
The Company declared its support for the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD) in 2020. In 2021,
it established the cross-organizational TCFD Promotion Team, and from2022 it commenced progressive disclosure on its website and in the
Kuraray Report. In 2023, it announced the results of the scenario analysis,
the core of TCFD disclosure. The Company will continue with work aimed24Supplementary Explanation
at enhancing TCFD disclosure. In 2020, the Kuraray Group became asignatory of the United Nations Global Compact (UNGC). Clearly stating
its corporate position through support and involvement in these global
initiatives, the Company will further promote sustainability management
based on the Kuraray Group’s Corporate Statements, and continue helping
to realize a sustainable society.
Development of Policies on
Information Provision to
Stakeholders

The policies on information provision to stakeholders are set forth in the
Disclosure Policy of the Kuraray Group and the Company Disclosure
Guidelines.

Other

Policies on and measures for promoting diversity:
By formulating the Kuraray Group Global Human Resources (HR) Policy,
the Company is promoting the employment of a diverse workforce
encompassing not only females but also foreign national, persons withdisabilities and seniors under the policies to ensure non-discrimination on
any ground such as gender, race and nationality, and to respect diversity
and individuality (Transferring contract workers to full-time permanent
employees is also actively underway.)
With the establishment of the Act to Partially Amend the Act on Promotionof Women’s Participation and Advancement in the Workplace on May 29,
2019, we formulated and announced the business owner action plan withthe purpose of raising the ratio of women among newly-recruitedemployees by 10% or more compared to December 31, 2019, in both theEC (general) and FL (clerical) streams, by December 31, 2024. The
Company aims to ensure that all employees will be able to develop careers
while balancing work with childcare, nursing care, and other householdchores. We have been creating mechanisms that enable everyone tocontinue their careers even when contending with various life events(family circumstances). For instance, we have made arrangements forflexible working styles, such that include teleworking and flextime, andhave also established a scheme through which the employees are given
temporary leave, allowing them to accompany their spouse when theirspouse is assigned to overseas posts, and a comeback recruitment systemfor corporate alumni. We have also pursued initiatives that raise employee
awareness in order to promote diversity and inclusion wherein women are
also actively involved. Under the workplace management with the focus on
work-life balance, an average of 176 hours of overtime are worked by
employees each year (approximately 15 hours per month), while the rate oftaking yearly paid vacations is approximately 94%.

25

IV Matters Related to the Internal Control System
1. Basic Views on the Internal Control System and the Progress of System Development(Basic Views on the Internal Control)
Recognizing that developing and operating the internal control system is an important management issue, theGroup has determined at its Board of Directors the Basic Policy for Establishment of an Internal Control System
as following:
1. Systems to ensure compliance of execution of duties of Directors and employees with laws, regulations andthe Articles of Incorporation(1) The Board of Directors, based on the Articles of Incorporation, Regulations of Board of Directors,
and other internal regulations, will make decisions concerning important management items of theGroup, in addition to supervising the execution of duties by Directors and Executive Officers. To
strengthen the supervisory functions of the Board of Directors, at least one-third of its Directors
will be appointed as Independent Outside Directors.
(2) The Company has established “Corporate Advisory Committee” mainly comprised of Outside
Officers and outside experts, as an advisory organ to the Board of Directors, with a view toenhancing transparency, fairness and objectivity in decision making concerning important mattersof management, including nomination and remuneration of Directors.
(3) To promote corporate activities from the standpoint of sustainability, a Sustainability Committee
chaired by the President will be established, and the committee presents and reports to the Board of
Directors regarding important matters.
(4) Policies regarding compliance with laws and regulations will be defined as The Kuraray Group
Code of Conduct. In order to conduct systematic development and operation of a compliancestructure as the Group, a Risk Management and Compliance Committee will be established, which
reports directly to the President.
(5) As an internal reporting system for discovering unfair and illegal actions and unethical actions
within the Kuraray Group at an early stage and aiming for independent resolution, a Kuraray Group
Employee Counseling Room and a Global Compliance Hotline will be established. In addition, aGovernance Hotline will be established as an internal reporting system independent from the
management team to notify Members of Audit & Supervisory Board via an external law firm.
(6) As a prevention measure against the violation of the antitrust laws, regular education and training
will be held for executives and employees from each Group company, raising awareness of theinternal guidelines regarding the antitrust laws and conducting regular monitoring of the compliancestatus.
(7) The Corporate Auditing Division, in compliance with the Internal Audit Regulations, will audit theconditions of business execution within the Group.
(8) Based on the Financial Instruments and Exchange Act, an internal control system will be establishedto ensure propriety of financial reporting, and will be operated appropriately.
(9) The Kuraray Group Code of Conduct will prescribe that the Group will deal with Anti-social forcesand groups in a firm manner, and will not have any association with such forces and groups,
thoroughly disseminating the rules throughout the Group.
2. Systems concerning storage and management of information regarding execution of duties of Directors
Records regarding execution of duties of Directors such as approval documents, request documents, etc.,26and minutes and materials of General Meetings of Shareholders, Meetings of Board of Directors, and othermain meetings will be stored and managed appropriately in accordance with laws and regulations andinternal regulations.
3. Regulations and other systems regarding management of risk of loss
(1) Based on the Group Risk Management Regulations, systematic risk management will be conducted
throughout the Group.
(2) Based on the Company Emergency Headquarters Operational Regulations, in the event of asignificant crisis regarding the business activities of the Group, the Company Emergency
Headquarters will be established headed by the President to deal with the issue.
(3) Assuming a significant crisis such as a large-scale natural disaster, etc., a business continuity plan
(BCP) will be defined on a per-division basis to minimize any interruption of business, and the BCP
will be reviewed regularly.
4. Systems to ensure efficient execution of duties by Directors(1) For decisions made by the President or requests of approvals by the Board of Directors regarding
significant management items of the Group, preemptive deliberations will be held by the Executive
Committee and various committees, aiming for swift management decision-making and efficientbusiness execution.
(2) Authority to operate businesses as managers of Companies, Divisions, and key organizations will
be delegated to Executive Officers, etc., appointed by the Board of Directors, and execution ofbusiness at each organization will be made in an appropriate and efficient manner.
5. Systems to ensure the propriety of business operations at the corporate group, composed of the Company
and subsidiaries(1) Business operation of each Group company will be conducted according to the management policiesof the Group as a whole, as defined in the medium-term management plan and annual management
plan. Based on the Domestic Affiliated Companies Management Standards and the Overseas
Affiliated Companies Management Standards, each Group company will present and report to theBoard of Directors or Executive Committee of the Company concerning important items.
(2) Decision-making standards will be defined for each Group company within the Domestic AffiliatedCompanies Management Standards and the Overseas Affiliated Companies Management Standards,
and will be managed appropriately and efficiently. Additionally, to promote unified operations
through aiming for communication of views within the Group, a liaison meeting will be held as
required between the President of the Company and the Presidents of each Group company.
(3) Based on The Kuraray Group Code of Conduct, the system will be put in place to enable appropriate
execution of duties by Directors and employees of each Group company. In addition, officers will
be seconded from the Company to each Group company, to supervise business execution by
Directors and employees of each company, and the Corporate Auditing Division will conduct
internal audits in accordance with the Internal Audit Regulations.
6. Independence from Directors of employees assisting the duties of Members of Audit & Supervisory Boardand items regarding ensuring the effectiveness of instructions given to these employees
Staff for Members of Audit & Supervisory Board will be assigned to assist the duties of Members of Audit& Supervisory Board. Staff for Members of Audit & Supervisory Board will receive direction and orders
from Members of Audit & Supervisory Board, and concerning personnel affairs and salary of Staff forMembers of Audit & Supervisory Board, decisions will be made after deliberations between the officer
supervising personnel affairs and Members of Audit & Supervisory Board.

27

7. Systems regarding reporting to Members of Audit & Supervisory Board of the Company and systems toensure persons who make reports do not receive detrimental treatment as a result of making a report(1) Members of Audit & Supervisory Board will attend Meetings of Board of Directors and receive
reports concerning conditions of business execution at the Company and each Group company
through liaison meetings, etc., with Presidents of significant subsidiaries.
(2) The Corporate Auditing Division will periodically report to the Audit & Supervisory Board
concerning conditions of internal audits at the Company and each Group company.
(3) Upon discovering important issues regarding significant violations of laws and regulations or othercompliance issues, Directors and officers of the Company and each Group company will swiftly
report to Members of Audit & Supervisory Board. Members of Audit & Supervisory Board may
request reports regarding these items as required from employees of the Company and the Group.
(4) Employees of the Company and each Group company can notify Members of Audit & Supervisory
Board of these matters using the Governance Hotline.
(5) Regarding persons who make the above reports and notifications, internal regulations will stipulatethat persons who make reports do not receive detrimental treatment on the grounds of making thereport.
8. Items regarding prepayment of expenses, procedures for reimbursement, and policies regarding processingof other expenses and liabilities arising from execution of duties by Members of Audit & Supervisory Board
When Members of Audit & Supervisory Board request prepayment or reimbursement, etc., for expenses
arising during the course of execution of duties, unless the contents are especially unreasonable, payment
will be processed without delay.
9. Other systems to ensure that audits by Members of Audit & Supervisory Board are made effectively
In order to exchange opinions regarding challenges facing the Company, important audit issues, etc.,
Members of Audit & Supervisory Board will periodically meet with the Representative Directors, andimplement interviews with Directors, Executive Officers, and important employees.
(Progress of the System Development for Internal Control and Risk Management in the fiscal year ended
December 31, 2022)
1. Initiatives relating to compliance(1) To work toward improving compliance awareness, seminars on an open workplace andcommunication with respect for oneself and others were implemented for Senior Managers atdomestic Group companies, and the Senior Managers who attended the seminars subsequently
implemented training for employees in their respective divisions.
(2) With establishment of the Kuraray Group Antitrust Compliance Program, the Company strives toimplement the program across the entire Group. In fiscal 2022, the Company continued to monitor
the compliance system in high-risk businesses and areas and took various measures such as
education and training for employees, as well as annual audits of project bids.
(3) The Corporate Auditing Division implemented an assessment on the development and operation
status of an internal control system (J-SOX) to ensure propriety of financial reporting of theCompany and the Kuraray Group. Results of the assessment were audited byPricewaterhouseCoopers Aarata LLC, and was reported to the Board of Directors.
2. Initiatives relating to risk management(1) Self-assessment of risks was implemented at each domestic and overseas organization based on the
Kuraray Group Risk Management Regulations. Following discussions at the Risk Management andCompliance Committee, the President specified significant business risks and appointed supervisorsin charge of each risk in order to implement measures to avoid and reduce such risks.

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In December 2022, we identified the following items as priority issues in the Kuraray Group risk
management for fiscal 2023.
i. Steadily implement information security enhancement measures across the entire Group to
further strengthen confidential information management.
ii. To mitigate risks of occupational incidents, continue to implement measures to address issues
in operational management and facility management at overseas plants, and also identify andimprove issues in safety management systems at overseas affiliated companies through theactivities of Global Process Safety Management Audit Team.
iii. To address the supply risk of raw materials, fuels, secondary materials and equipment, reinspect
all items, including general-use products, from a supply chain perspective and implement
countermeasures against risks, starting with those of a high priority based on the BusinessContinuity Plan (BCP) of each business, thus further enhancing the precision and effectivenessof BCP(2) In addition to conducting leakage and fire drills at business sites, the Company proceeded with theestablishment of systems for sharing information within the Company Emergency Headquarters
using a teleconferencing system, to prepare for situations where it would be difficult to assembleon site, including on holidays and at night. The Company Emergency Headquarters, which wasestablished in response to the security incident of October 2021, was dissolved in June 2022 after
implementing emergency responses and formulating subsequent countermeasure plans. As apermanent system, the Company newly appointed an officer in charge of confidential information
management and established a confidential information management team under that officer, andthe countermeasure plans are being implemented.
3. Initiatives relating to internal control of the corporate group(1) The “Corporate Advisory Committee,” comprised of one Internal Director, five outside officers andtwo outside experts, met twice during the year. As an advisory body to the Board of Directors, theCommittee deliberated on Director candidates and executive compensation, etc. and maderecommendations and reports on the outcome to the Board of Directors.
(2) For the purposes of communicating top management policies for the operation of the Kuraray Groupand sharing of Group-wide issues and information, the Company held individual meetings with the
management teams of the major Group companies, either face-to-face or online as necessary, in its
efforts for intra-Group communication. Based on the Domestic Affiliated Companies Management
Standards and the Overseas Affiliated Companies Management Standards, each Kuraray Group
company has presented and reported to the Board of Directors or Executive Committee of theCompany as needed concerning their respective important items.
4. Initiatives relating to audit systems of Members of Audit & Supervisory Board
Members of Audit & Supervisory Board met with Representative Directors to exchange opinions
regarding challenges the Company faces, important audit issues, etc., while implementing interviews
with Directors, Executive Officers, and other important employees.

2. Basic Views on Eliminating Anti-Social Forces and the Progress of System Development
The Group declares in Corporate Statement, “Our Commitment” how the Group fulfills its accountability
and responds to the expectation from the society in regard with the diverse connections to the society. In the
Kuraray Group Code of Conduct, which embodies “Our Commitment,” we have pledged that we take aresolute stance against, and will not associate with, anti-social groups or organizations. In order to ensurethat its Directors and employees comply with this code of conduct, the Company strives to familiarize themwith this code through creating and distributing Kuraray Group Compliance Handbook, which offers

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explanations of the Kuraray Group Code of Conduct, and holding training on corporate ethics. In addition,
the Company separately stipulates the prohibition of illegal profit offering and handling of donations, etc.
and is working on educational activities on a Group-wide basis to maintain a sound relationship with thesociety. In case of any unreasonable demands, etc. made by anti-social forces, the Company has a system inplace whereby General Affairs Department of the Head Office, the responsible division, collects and collates
information, and Manager of General Affairs Department deals with the case as a person in charge ofpreventing unreasonable demands through coordinating with the relevant external authorities including thepolice and attorneys.

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V

Other

1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not adopted

Supplementary Explanation

2. Other Matters concerning Corporate Governance System
1. Basic Stance toward DisclosureWith our mission of “We are committed to developing new fields of business using pioneering technology that
improves the environment and enhances the quality of life throughout the world. For people and the planet—toachieve what no one else can,” the Group is striving to enhance its corporate value. Under this mission, our basic
stance toward disclosure is to fulfill our accountability to the society through timely and sufficient disclosure of
information.
Our basic policy on disclosure is to strictly control the corporate confidential information while at the same time
actively disclosing information as a corporate group that is open to society through implementing the principles
of “We will maintain a sound relationship with society through good communication” and “We will honor all
intellectual property and secure data and information in a proper manner” both stipulated in our commitment(comprised of six principles).
In accordance with the Disclosure Policy of the Kuraray Group which is a written outline of such basic stanceand the Company Disclosure Regulation specifying the principles and practice of disclosure, the Company has
established the internal system as following in order to accurately execute the disclosure of “corporate information
required for disclosure” (hereinafter, “important corporate information”) as set forth in the rules of the Tokyo
Stock Exchange for timely disclosure.
2. The Timely Disclosure System of the Company’s Information(1) Organization in charge of disclosure
Corporate Communications Department, Corporate Management Planning Office takes charge as thedivision responsible for the disclosure of important corporate information of the Group.
(2) Collection and control of information
Important information of the Group (determining events, occurring events, or information related to financial
results) is reported from each business execution organization to the top management and its staff, that is, theGeneral Manager of Corporate Management Planning Office. Matters requiring the judgment and determinationof the top management are presented for discussion at the Executive Committee.
Corporate Communications Department, Corporate Management Planning Office responsible for disclosure
obtains the important information in a timely manner via managers in charge of disclosure that are placed in eachbusiness execution organization, Corporate Management Planning Department of the Corporate Management
Planning Office, administrative organization of the Head Office and other divisions.

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In the event of accidents, disasters and other emergencies, Corporate Communications Department, Corporate
Management Planning Office obtains the information in a timely manner via the communication network
provided in the “Corporate Emergency Headquarters Operating Specifications” or through the duties at theEmergency Headquarters.
(3) Judgment and Determination regarding Disclosure
Matters relevant to important corporate information are disclosed in a timely manner by Corporate
Communications Department, Corporate Management Planning Office. Matters that are uncertain whether they
are relevant to the important corporate information are subject to the judgment by Manager of Corporate
Communications Department, Corporate Management Planning Office after discussion by the Corporate
Communications Department, the Corporate Management Planning Office and Legal Department, Corporate
Sustainability Division.
Even when information is not deemed to be relevant to the important company information, if such matters
are required to be disclosed in fulfilling the Group’s accountability to the society, President makes decision after
the discussion at Executive Committee. Notwithstanding the foregoing, in the event of emergencies, President
or an officer authorized by the President shall make decision regarding disclosure after the discussion withManager of Corporate Communications Department, Corporate Management Planning Office.

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【Skills Matrix for Directors/Members of Audit & Supervisory Board】

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