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Corporate GovernanceCorporate Governance
Executive Summary
Corporate GovernanceBusiness Ethics and Compliance

Basic Concept
Hitachi views the expansion of long-term and comprehensive benefits for shareholders and investors as an important management goal. We also recognize that positive relationships with thediverse stakeholders of Hitachi and the Hitachi Group form an important part of our corporate value. In this context, we strive to develop systems to maintain good relationships with stakeholders and enhance our corporate value, including measures to encourage constructive dialogue.

Risk Management
Information Security
Governance Data

Topic

Overview

We endeavor to ensure the distinct separation of management oversight and business execution, to establish a system for the agile execution of business, to deterCorporate
Governancemine appropriate compensation and to achieve highly transparent management.
Specifically, we select directors who possess the qualities that make them suitable to lead Hitachi management, including global experience and knowledge across avariety of fields, excellent character, and broad experience and knowledge of business management. We strive to establish a highly transparent and independent
corporate governance structure and to introduce an executive compensation system that is linked to the enhancement of corporate value.

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Corporate Governance
Hitachi views the expansion of long-term and overall returns to shareholders and investors as an important management objective. Hitachi, Ltd. and Hitachi Group companies 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

Executive Summary

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 toCorporate Governanceimprove our corporate governance by ensuring thorough separation between the oversight and execution of management, establishing a swift business execution system, and striving to achieve

Business Ethics and Compliancehighly transparent management.

Risk Management
Information Security
Governance Data

Hitachi’s Corporate Governance Framework and Features (as of June 2023)
GRI 2-9/2-11/2-12/2-13/2-18/2-19/2-20/2-24

Structure

POINT 1

General meeting of shareholders
Senior Executive Committee
Appointment

ReportAppointment/
oversight

2

President & CEO

Hitachi established the Nominating Committee, the Compensation
Committee and the Audit Committee, with independent directors
comprising the majority of members and serving as chairpersons.
This system ensures transparency in management, separates theoversight and execution of management, facilitates the full exercise of oversight functions, and enables discussions and reports
to be conducted appropriately within these three committees.

Executive Vice Presidents
and Executive Officers/
Senior Vice Presidents andExecutive Officers/
Vice Presidents andExecutive Officers

members
10 non-executive(including two women)

1

1

1

Nominating
Committee

Compensation
Committee

Audit
Committee

4 directors

4 directors

5 directors*

3 AuditInternal
Auditing
Office3 Audit

Executive
Officer
Department
in charge

Executive
Officer
Department
in charge

Department
in charge

3 Audit
3 Audit
3 Report

Independent* One standing Audit Committee member

POINT 2

Independence of the Board of Directors

Increased the number of independent directors, including
non-Japanese directors, in 2012.

3 Report

Non-independent

Transitioned to a company with committees (currently acompany with a nominating committee, etc.) in 2003.

Board of Directors

2 executive members

Transparency in Management

Accounting Auditors

Department
in charge

The Board of Directors, which is chaired by an independent director, has 12 members, including nine independent directors, two
directors who are also serving as executive officers, and one
director who is not serving as an executive officer. The chairmanof the Board is an independent director. In addition, we haveestablished a system that facilitates the full exercise of oversightfunctions by maintaining a separation between management
oversight and execution.

POINT 3

Enhanced Collaboration throughTripartite Auditing

Hitachi’s Audit Committee and internal audit sections collaborate
with third-party accounting auditors to strengthen Tripartite
Auditing aimed at increasing the effectiveness of internal controls.

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Hitachi Sustainability Report 2023

Experience, Knowledge and Capabilities Required for Directors
GRI 2-10

ApproachCorporate Governance
Executive Summary

Corporate Governance137

Hitachi Directors need to have a wide range of experience and knowledge in global and diverse fields to be worthy of leading Hitachi’s management to expand the Social Innovation Business globally,and have the qualities of broad experience and expertise in management.
The experience, knowledge, capabilities and other qualities required for Hitachi directors are as follows.

Business Ethics and Compliance
Risk Management
Information Security

Core Skills
Core qualities that ensure management oversight efficiency and decision-making functions

Number ofapplicabledirectors

Professional Skills

Number ofapplicabledirectors

Expertise and experience that enhance discussions pertaining to the promotion of the Social
Innovation BusinessGovernance Data
Corporate
management

Corporate management experience and knowledge

12peopleGovernment andinternationalorganizations

Leadership experience in government, governmental agencies,
international organizations or economic associations that facilitates anunderstanding of and response to regulations and social issues, aswell as practical experience at educational institutions

4
peopleGlobal businessBusiness experience outside Japan or management experience at acompany that develops business globally

12peopleLegal affairs

Expertise and practical experience in legal affairs indispensable for
global business and the development of new business1
personRisk management

Knowledge of risk assessment and management necessary tomaintain operations

12
peopleR&D andintellectual property

Expertise and practical experience in R&D or intellectual property
facilitating the utilization of technology and the incorporation of newtechnologies

2
peopleFinance andaccounting

Knowledge and management experience pertaining to financial
accounting necessary for medium- to long-term corporate value
creation from a financial perspective

12
peopleDigitalPractical experience in industrial fields vital for promoting digitaltransformation (DX) in the Social Innovation Business4
peopleBoard of Directors Composition (as of June 2023)
Structure

GRI 405-1

Activities

Independence(ratio of independent directors)

Diversity(ratio of non-Japanese and female directors)

Diversity(by country of origin)
Germany 1 person
United Kingdom

Independent
directors
Nine people

75%

Non-Japanese
Directors
Five people

1 person

41.7%

2 people

United States

2 female directors(16.7% of overall director total)India

1 personIndustrial fieldJapan

7 people

Finance

RetailEnergy and resources

Materials andchemicals

Transportationand logistics
Machinery
Electricity and gas
IT and services

Electric andprecision instruments

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Highly Experienced Directors
Structure

Activities

Corporate Governance
Executive Summary

Name

Notes

Main industrial fields

Corporate GovernanceBusiness Ethics and Compliance

Katsumi Ihara

Engaged in Sony Group management, possessing a wealth of experience and insight in the field of international corporate
management.

Electric and precision
instruments, financeIndependent director
Nominating Committee chairman
Audit Committee member
Compensation Committee member

Ravi Venkatesan

Possesses a wealth of experience and insight in international corporate management at Microsoft India and other companies,
and in particular, the digital field and business in emerging markets.

IT and services

Independent director

Cynthia Carroll

Possesses a wealth of experience and insight as a manager of large international corporations including Anglo American.

Materials and chemicals,
energy and resources

Independent director
Nominating Committee member

Ikuro Sugawara

Held a leading position in the Ministry of Economy, Trade and Industry, and possesses a wealth of experience and insight in
the administrative field.

General industry

Independent director
Audit Committee member

Joe Harlan

Possesses a wealth of experience and insight in international corporate management, including at the Dow Chemical
Company.

Electricity and gas, energy
and resources, materials
and chemicals

Independent director
Compensation Committee member

Louise Pentland

Attorney licensed in New York and the UK possessing a wealth of insight into corporate legal affairs and corporate governance cultivated through experience as a Legal Officer at PayPal Holdings and other large global corporations.

IT and services, financeand retailIndependent director

Takatoshi Yamamoto

Possesses extensive insight into business and management in the fields of corporate analysis and international corporate
management.

Finance

Independent director
Compensation Committee chairman

Hiroaki Yoshihara

Possesses a high degree of professional knowledge and a wealth of experience in the fields of international corporate management, finance and accounting.

Finance, general industry

Independent director
Nominating Committee member
Audit Committee chairman

Helmuth Ludwig

Mainly engaged in Siemens Group management, possessing a wealth of experience and insight in international corporate
management and the digital field in particular.

Machinery, manufacturing

Independent director
Audit Committee member

Keiji Kojima

Engaged in R&D at Hitachi and its group companies, most recently in the Smart Life sector, possessing a wealth of experience and achievements, particularly in digital businesses related to Lumada global deployment.

IT and services

Director, Representative Executive Officer,
President & CEO
Compensation Committee member

Mitsuaki Nishiyama

Engaged in operations in accounting and financial affairs and management at Hitachi and Group company etc., possessing a
wealth of experience and achievements.

Materials and chemicals

Director
Audit Committee member

Toshiaki Higashihara

Engaged in managing a wide range of fields at Hitachi and its group companies, including the social infrastructure and electric
power system businesses, possessing a wealth of experience and achievements that include promoting the global expansionof Hitachi Group business.

Transportation andlogistics, IT and services,energy and resources

Director, Executive Chairman, Representative
Executive Officer
Nominating Committee member

Risk Management
Information Security

Positions at Hitachi and responsibilities

Governance DataIntroduction

GovernanceCorporate Governance
Executive Summary

Corporate GovernanceBusiness Ethics and Compliance
Risk Management
Information Security
Governance DataManagement

Social Innovation

Administrative Performance of theBoard of Directors
Structure

SocialGovernance

Board of Directors Meetings in FY2022

The Nominating Committee has the authority to determine
proposals submitted to the general meeting of shareholders
for the election and dismissal of directors. The Nominating
Committee consists of four directors, three of whom are independent directors.
This committee determines director candidates, holds
preliminary discussions concerning the appointment anddismissal of the CEO and receives advance reports on theselection and dismissal of executive officers.
In fiscal 2022, the Nominating Committee held meetingson 10 days.

■ Primary Activities
In addition to deciding upon the contents of proposals madeconcerning director appointments at the Annual General
Meeting of Shareholders, the Nominating Committee confirmed receipt of a preliminary report on the executive officer
system implemented in fiscal 2023. In addition, it promoted
committee-related activities, including discussions and individual interviews aimed at developing candidates for future management and leadership positions.

Audit Committee

FY2022 Board of Directors Meeting Results
Meetings held
Nine days
Average number of agenda items
7.6 per meeting
3.1 hours
Average meeting length(longest meeting 5.3 hours)

The Audit Committee has the authority to audit the executionof duties of directors and executive officers and to decide on
proposals submitted to the general meeting of shareholders
for the election and dismissal of accounting auditors. The
Audit Committee currently consists of five directors, including four independent directors and one standing Audit
Committee member.
Hiroaki Yoshihara, the chairman of the Audit Committee,
has been involved in accounting and other business practices
at the KPMG Group for many years and possesses a considerable wealth of knowledge concerning finance and accounting.
In fiscal 2022, the Audit Committee held meetings on
15 days.

Discussion of Major Themes
Discussions/Deliberations

CEO REPORT
Mid-term
Management Plan
Settlementof accounts
Risk management■ Primary Activities

Business strategy

100

200

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Activities

Nominating Committee

The Board of Directors approves the basic management policy
for the Hitachi Group and oversees the execution of the duties
of executive officers and directors in order to sustainably
enhance corporate value and shareholders’ common interests.
The basic management policy includes the Mid-term Management Plan and annual budget compilation. The Board of­Directors focuses on strategic issues related to the basic management policy, as well as other items to be resolved that areprovided in laws, regulations, the Articles of Incorporation, andthe Board of Directors Regulations.
In fiscal 2022, CEO Keiji Kojima reported on the progress of
the Mid-term Management Plan 2024, including overall priority
items and progress in each sector, and confirmed consistency
with the plan. In promoting the execution of management strategies, more time is spent discussing and deliberating than isused to explain quarterly financial reports and business strategies. In addition, at the Board meeting, CEO Kojima reports anddiscusses important topics for the executive side that were discussed at the Senior Executive Committee, facilitating a sharedunderstanding with the executive side.

0

Assurance

Activities of the Three Committees

Activities

Explanations

Environmental

300

400

Total annual time (minutes)

The Audit Committee conducted activities that were focusedon its priority matters for consideration, which included thestrengthening of collaboration and the facilitation of information

sharing under a “Tripartite Audit” (audit by the Audit
Committee, internal audit and audit by accounting auditors),
and auditing of the establishment and operation of internal
control systems from the perspective of risk management andvalidity of execution of duties. In addition, a standing committee member worked to obtain information as needed in atimely and accurate manner, mainly by collaborating with theInternal Auditing Office, among other departments, andattending important internal meetings such as the Senior
Executive Committee, and facilitated information sharing withother committee members.

Compensation Committee
The Compensation Committee has the authority to determine
remuneration policies for directors and executive officers andremuneration for individuals (including amounts of remuneration) based on them. Currently composed of four directors,
including three independent directors, the committee strives
to ensure objectivity, transparency, and fairness in the remuneration determination process.
In addition, the Compensation Committee verifies andreviews details of the process used for determining remuneration for individuals, including assessments concerning basic
remuneration amounts, evaluations of progress made toward
individual targets, and performance appraisals that are tied toshort-term incentive compensation.
In fiscal 2022, the Compensation Committee held meetingson 8 days.

■ Primary Activities
The Compensation Committee determined remuneration
amounts for individual directors and executive officers inaccordance with established policies while verifying andreviewing the processes and results of appraisals for performance and individual targets tied to short-term incentive
compensation for executive officers. In addition, the committee reviewed the executive compensation system while giving
due consideration to compensation granted to managers at
global companies and the goal of sharing value with shareholders, and decided upon policies covering remuneration for
directors and executive officers in fiscal 2023.

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Director and Executive Officer Compensation
SystemCorporate Governance
Executive Summary

Fiscal 2023 Revision of Executive Compensation System

Compensation structure(1) Directors

Corporate Governance

At a meeting of the Compensation Committee, Hitachi discussed the executive compensa-

Compensation for Directors is basic remuneration as fixed pay. The amount of basic remuneration is decided by adjusting ation system to enable continued growth over the next ten years, through a modal change

basic amount to reflect full-time or part-time status, committee membership and position, and travel from place of residence,

toward growth in MMP 2024. A decision was made to amend the executive compensation

etc. A Director concurrently serving as an Executive Officer is not paid compensation as a Director.

system to establish a system that can secure competitive superiority over global companies,(2) Executive Officers

Business Ethics and Compliance
Risk Management
Information Security

ensure effective Pay-for-Performance that rewards contributions to growth and innovation,

Governance Dataand increase corporate value by strengthening sustainable management. For specific details,

medium- and long-term incentive compensation as variable pay. The basic amount of Basic compensation, short-term incen-

please see the following page.

tive compensation and medium- and long-term incentive compensation is set based on the ratio of compensation for theCompensation for Executive Officers consists of Basic compensation as fixed pay and short-term incentive compensation andWith regard to employee compensation as well, Hitachi has introduced a framework in

President & CEO, which in the past was 1:1:1, but has been changed to 1:1.2:2, increasing the ratio of variable pay with awhich individual targets are linked to the company’s targets, and compensation is determinedfocus on LTI, which takes the form of stock compensation, and the compensation ratios for other executives have also been

according to the achievement of those targets. The management targets put forward in MMP

set based on this ratio. This takes into account the composition of executive compensation for major global companies includ-2024 are applied as evaluation indexes when deciding compensation for individual employ-ing European and the United States companies, in order to increase corporate value through the growth of global businesses.

ees. Hitachi will cultivate a growth mindset among both executives and employees and strive

If it is found that an executive officer has engaged in misconduct during their term of office, any compensation alreadypaid shall be returned to the company (clawback provision).

to achieve global growth as One Hitachi.

Please refer to Compensation to Directors and Executive Officers in the Annual Securities Report (The 154th Business Term)
Annual Securities Report (The 154th Business Term) P108 Compensation to Directors and Executive Officers
https://www.hitachi.com/IR-e/library/stock/hit_sr_fy2022_4_en.pdf

Basic Policy of the New Executive Compensation System
Key Principles: New Incentive Plan

Aiming for growth, profitability,
and cash generation

Accelerate sustainable
management

Emphasize alignment
with shareholder value

Ensure global competitivenessin business and compensation

1 Alignment with the Mid-term Management Plan 2024●

Aligned with mid or long-term growth ofcorporate value and business performance●

Corp. value growth throughPay-for-Performance

Linkage with the+
Mid-term
Management Plan 2024

Mid- or long-term
growth beyond
the mid-term plan

Attract and retain key talentTransparency, objectivity and fairness• In the Short-term incentive compensation and Medium- and long-term incentive compensation, set performance metrics toward the Mid-term Management Plan as Key
Performance Indicator (“KPI”) to encourage executives to achieve them.
2 Establishment of compensation program and corporate performance program that foster a growth mindset• Pursue an optimal balance between short and medium- to long-term performance about “growth,” “improving profitability” and “cash generation,” aiming for improvement ofshort-term performance and medium- to long-term growth in corporate value.
• Establish a compensation program that significantly rewards performance by setting stretched goals and commensurate compensation levels.
3 Setting indicators to promote sustainable management• Develop specific indicators and goals related to “Environments,” “Business with Integrity” and “Quality of life” under its sustainability strategy, and encourage their implementation.
4 Expansion of stock compensation that rewards growth in corporate value over the medium to long term
• Expand stock compensation to better align with medium- to long-term corporate value.
5 Competitive compensation levels with a global perspective• Ensure competitive compensation levels to attract and retain key executives in the global market, regardless of their residence or origin, who lead global management of a
global organization.
6 Compensation benchmarking with objectivity and transparency• Reference the benchmarks in the US and European markets in addition to the benchmarks in the Japanese market for analysis and level-setting from multiple perspectives.
7 Transparency and objectivity through enhanced compensation disclosure and shareholder engagement• Endeavor to gain investors’ understanding and support through sufficient disclosure of the compensation program with a global perspective and ongoing shareholder
engagement, and continuously improve the program based on the insights gained through the engagement.

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Assurance

Compensation to Executive Officers (Fiscal 2023)
SystemActivities

Corporate Governance

Before amendment

After amendment

Base compensation: short-term incentive:
medium- and long-term incentive = 1:1:1 ratio

Base compensation: short-term incentive:
medium- and long-term incentive = 1:1.2:2 * ratio

Executive Summary

Corporate GovernanceBusiness Ethics and Compliance
Risk Management

Fixed pay

Variable pay

Fixed pay

Information Security
Basic compensation

Governance Data

Short-term incentive
compensation

Medium- and long-term
incentive compensation

Variable pay

1

2

3

Basic compensation

Short-term incentive
compensation

Medium- andlong-term incentive compensation* For President & CEO

Basic compensation

1

Set according to the relevant position by adjusting that amount to reflect financial results and individual performance.

Short-term incentive compensation

2

3

Medium- and long-term incentive compensation

Short-term incentives (STI)

Medium- and long-term incentives (LTI)
Individual
evaluation:
10%

Company-wide performance:
70%

President
Executive officers
in charge ofcorporate affairs

Company-wide performance:
40%

Executive officers
in charge ofbusiness

Company-wide
performance: 30%

1• Revenues• Lumada business• Adj. EBITA Margin revenues• EPS• Core FCF

Individual evaluation:
40%

Divisional performance:
30%

Individual
evaluation: 20%

Sustainability:
20%

3

Sustainability:
20%

3

Sustainability:
20%

3

1

3

• Revenues• Lumada business• Adj. EBITA Margin revenues• Core FCF• Materiality—“Environment,”“Business with Integrity” and“Quality of Life” —based on thesustainability strategy

Compensation withincumbency condition:
30%

Compensation with stock price condition:
70%

When the Midterm Management
Plan targets areachieved
Max. +20%

2

1

TSR growth rate
TOPIX comparison

Global competitive
comparison

2

ROIC
+10%

Sustainability:+10%

Points of amendment
1 Strengthening the link with the Mid-term Management
Plan 2024• Adopt the key indicators set forth in the Mid-term­Management Plan 2024 adopted as KPIs (STI)• Introduce incentives for achieving the Mid-term Management
Plan (LTI)

2 Strengthening the link with Corporate Value
Enhancement• Increase the stock price condition compensation ratio (LTI)• Establish a global competitive comparison (LTI)

3 Further evolving of Sustainable Management• Separate sustainability evaluations and set at 20% (STI)• Create new evaluations regarding our Materiality—­“Environment,” “Business with Integrity” and “Quality ofLife”—based on the sustainability strategy (STI)