Introduction
Message from the Chairman of the Board

Value Creation

Business Sustainability

Corporate Governance

DataHitachi Integrated Report 2024

Corporate GovernanceCorporate Governance

History of Hitachi's Corporate Governance Reform

Hitachi views the expansion of long-term and overall returns to shareholders and investors as an important management objective. Hitachi maintain good relationships with a wide range of stakeholders,
and we recognize that these relationships make up an important portion of our overall corporate value. Accordingly, we are striving to establish a system that will improve our corporate value primarily
through the implementation of measures focused on promoting constructive dialogue. To advance these efforts effectively, we are working to improve our corporate governance by ensuring thoroughseparation between the oversight and execution of management, establishing a swift business execution system, and striving to achieve highly transparent management.

Message from the Chairman of the Board
Transforming Governance:
From Formality to Substance
Hitachi has implemented a series of management reforms,
including portfolio changes, to become a global leader in theSocial Innovation Business. These efforts were spurred bysignificant losses during the global financial crisis. One of thecatalysts that enabled Hitachi to carry out these management
reforms was governance reforms aimed at achieving worldclass standards.
Specifically, the Hitachi Group has promoted the Social
Innovation Business, and Directors and Executive Officers
have the same vision. This includes a comprehensive
reevaluation of the Board of Directors’ composition and theoperation of board meetings. By welcoming independent
directors with diverse global perspectives, including thosewith experience as overseas CEOs, we transformed theBoard into a forum for candid and vigorous discussions
where Executive Officers are rigorously challenged. Proposals
for M&A deals from Executive Officers were sometimes
rejected after thorough discussion. Before undertaking
significant acquisitions such as ABB’s power grids businessand GlobalLogic, and making Hitachi High-Tech a wholly
owned subsidiary, we rigorously evaluated their potential
to enhance corporate value. Post-acquisitions, an advisoryboard of independent directors oversees the integration
process and monitors investments.
Hitachi’s governance has transformed from formality tosubstance, thanks to the proactive efforts of Executive
Officers in redefining the Board’s composition and improving
meeting efficiency. Directors have enthusiastically responded

to the suggestions from Executive Officers, who havegenuinely embraced these recommendations.

Developing a Dynamic and Effective Board of Directors
Our Directors includes individuals with management
experience at global organizations and expertise in various
specialized fields. The Board is well-balanced, with nine of
the 12 members being independent directors, including fivenon-Japanese individuals and two women.
The Board’s effectiveness is evident in its deep involvement
in formulating and reviewing the Mid-term Management Plan2024. From the initial concept stage to finalization, the Board
held five rounds of discussions with executives on businesschallenges and growth strategies. This iterative process isreflected in Hitachi’s new business operation structure andthe evolution of the Lumada strategy. We also engaged inforward-thinking discussions to backcast from 2050, beyond
the three-year scope to fiscal 2024. Even after formulating
the Mid-term Management Plan 2024, we have continued
to discuss critical themes such as growth strategy, risk
management, and human resource strategy.
With the expanding demand for DX and GX, we expect tomeet the targets in the Mid-term Management Plan 2024.
Improved cash generation and increasing shareholder return,coupled with positive evaluation from the capital markets,demonstrate the Board’s effectiveness.
Given the breadth of Hitachi’s businesses and thecomplexity of issues discussed at board meetings, finding
individuals who can maintain the Board’s high effectivenessis challenging, even on a global scale. Therefore, theKatsumi Ihara
Chairman of the Boardand Nominating Committee

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Introduction
Message from the Chairman of the Board

Value Creation

Business Sustainability

Corporate Governance

DataHitachi Integrated Report 2024

Corporate GovernanceNominating Committee creates and regularly updates a list ofdirector candidates with a medium- to long-term perspective,
interviewing likely prospects. Experience and skills areimportant, but the candidates’ commitment to enhancing
Hitachi’s corporate value is crucial.
A deep knowledge of digital and environment fields isespecially desirable for Hitachi’s Directors. Our newindependent director, Isabelle Deschamps, fully embodies
this principle. Deschamps’ extensive experience in legal
affairs and corporate governance in global management,
particularly in organizations renowned for their environmental
focus, such as Unilever and Rio Tinto, makes her a valuableaddition to our team.
As the Chairman of the Nominating Committee, I willcontinue to focus on acquiring top-level talent to maintainand enhance the effectiveness of the Board of Directors.

Strategic Priorities forthe Board and Committees
As Hitachi shifts toward organic growth and transforms intoa digital-centric company under the Mid-term Management
Plan 2024, the Nominating Committee prioritizes developing
CEO candidates with a medium- to long-term focus. Amid
accelerating changes in the managerial environment, weare progressing with systems to globally select and cultivate
management personnel capable of leading growth. Besides
identifying candidates for the next CEO and the CEO
thereafter, we are developing a group of executive candidates
from younger talent called the “Future 50.” These forwardthinking development mechanisms are designed to impart
both quality and quantity to Hitachi’s talent pool.
Given Hitachi’s diverse business operations, investors
might question the Company’s diversification. However,the synergies, collaboration within the Hitachi Group,and co-creation with customers underscore its strategic
strengths. All Hitachi businesses are inherently connected
through the pervasive impact of digital technology, which
fosters synergies and enables the pursuit of new growth

opportunities. Future CEOs must have the ability tocultivate and adapt this distinctive competitive advantage,effectively communicating its value to the capital markets
comprehensively.
Another important aspect is the compensation system for
Directors and Executive Officers, which serves as a growthengine. In fiscal 2023, the executive officers’ compensation
system was revised, and in fiscal 2024, a restricted stock
unit (RSU) system was introduced for directors. These
revisions aim to promote awareness and foster a mindset
toward enhancing corporate value based on transparency
and fairness, aligned with shareholders’ perspectives. Goals
based on materiality that promote sustainable management
have also been integrated into the Executive Officer
compensation system, in connection with the performanceindicators specified in the Mid-term Management Plan
2024. To align viewpoints with the capital markets andstrengthen connections to increase corporate value, wehave introduced a framework for comparing our TSR tothat of other global companies. In the year since the revisedcompensation system’s introduction, Executive Officers havepositively received it due to its high degree transparency,
T h e c o m p re h e n s i v e i m p l e m e n t a t i o n o f a p a y - f o rperformance basis, which rewards contributions to growthand innovation, is essential for attracting accomplishedglobal talent.
We continue to enhance internal control effectiveness

September, 2023: Board of Directors Meeting in Sweden

through the utilization of the Tripartite Audit* 1 and atriangular pyramidal monitoring system*2. Monitoring global
operations to maximize synergies as One Hitachi while
improving efficiency will remain essential. To seize business
opportunities in emerging areas such as generative AI
and drive global growth, we recognize the heightened
importance of compliance and risk management. We will
persistently work on projects such as formulating a robustrisk management framework for generative AI and effectively
mitigating business risks arising from AI.

Driving Corporate Value throughStrategic Governance
Evolving governance is instrumental in enhancing corporate
value. The establishment of a disciplined environment
through a highly independent board significantly contributes
to the value creation. To foster transparent and effective
governance, it is imperative to have directors who can offer
constructive advice on Hitachi’s management challenges andgrowth strategies. Moreover, we firmly believe that fosteringhigh-quality discussions between executives and directors,
while maintaining mutual respect, will greatly bolster Hitachi’s
growth and evolution.
Currently, Hitachi aims to capture new opportunities forhigh growth in areas such as data centers, semiconductor
manufacturing, and services for social infrastructurebusinesses, driven by the emergence of generative AI, in
addition to DX and GX. The Board of Directors’ vital role is tosupport executives from a governance perspective, enabling
Hitachi to demonstrate its holistic capabilities in these growthareas. Through high-quality discussions, we will enhance theeffectiveness of the Board of Directors and further enhance
corporate value.
*1 Audit system based on cooperation and close communication among the Audit
Committee, the Internal Audit Office, and the accounting auditor.
*2 To strengthen the auditing system and functions, in addition to the current Tripartite
Audit system, there is an oversight system, headed by the Audit Committee, thatrecognizes, supervises, and supports the resolution of material risks and issues incollaboration with headquarters and business unit administration.

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