On the Release of Bridgestone’s
Corporate Governance Code Report
The Bridgestone Corporation, as part of its efforts in working towards the achievement of its ultimate
goal of “becoming a truly global company” and of being “Dan-Totsu” in all aspects of its business, is in
the process of further enhancing its corporate governance.
This process of enhancement and reform has been implemented on an ongoing basis since the company
was first established in order to respond over time to the changing conditions and issues deemed
important, and in order to ensure that the quality of management and the transparency of decision
making processes was constantly improved.
It is our intention to fully employ our governance structure in order to further strengthen internal
controls, promote timely decision making, and continue to realize the ever more effective and efficientplanning and execution of our business activities.
Since our first report in 2016, Bridgestone has been using the Corporate Governance Code as a tool forevaluating our governance policies and systems and continuously communicating our approach andprogress in their achievement to our stakeholders.
On behalf of everyone here at Bridgestone, I thank you for your ongoing support and understanding andlook forward to hearing your response to this report and your evaluation of our efforts to date as we
strive to create a company that we can all be proud of.
May 2019

Masaaki Tsuya

Chairman of the Board
CEO and Representative Executive Officer
Bridgestone Corporation

2019 Report on the Corporate Governance Code
1. Changes in Corporate Governance and Our Governance Structure (As of May 2019)
An overview of the development and current structure of Bridgestone’s corporate governanceare shown diagrammatically here in (1) our changes in the corporate governance system and (2)corporate governance structure diagram.
‹Changes in Corporate Governance›
Year

Mission & Foundation
Framework

Management Oversight

Strategic Business Unit (SBU) organization structure(Followed by a progressive, continuous review of the operational structure)
Two oﬃcers (CEO, COO) system in Bridgestone Americas
Introduction of Executive Committees

2006
2010

Independent Non-Executive
members of the Board of Directors

The Bridgestone Essence

2011

Environmental Mission
Statement

2012

Reports the
Changes Reﬂected

Operational execution

Two oﬃcers (CEO, COO) system in Bridgestone Corp.

Safety Mission Statement
2013

Discretionary board advisorycommittee (Governance / Nomination /Compensation)

2014

Compliance Committee

Introduction of Global Executive Committee

Restructure SBUs: BSCAP China + Asia Paciﬁc
BSEMEA Europe + ME, Africa, Turkey, & Russia

Quality Mission Statement
2016

Adoption of new corporate structure:“Company with Nominating Committee, etc.”

2017
2018

Global CSR Commitment“Our Way to Serve”

Restructuring of the Board’s authority(Authority delegation)

Establishment of Global Mining & Agricultural Solution Company

2016 Report

Global CSR Commitment “Our Way to Serve”
Reﬁning Mid-term Management Plan formulating process
Establishment of Global Sustainable Procurement Policy,
Global Human Rights Policy and Code of Conduct
Integrating Olympic and Paralympic related business relatedwith the sports and cycle business2017 Report
May 2018 Report
Dec 2018 Report

Continuous discussions to advance corporate governance system further‹Corporate Governance Structure›
General Meeting of Shareholders
Board of Directors (11) (includes 8 outside directors)
Inquiry

Audit Committee

ReportAdvisory Committee to theBoard of Directors
Governance Committee
Compliance Committee

Compensation Committee

Management OversightOperational execution
Representative Executive Oﬃcers (3)Executive Oﬃcers (8)(including three foreign members)

Corporate Oﬃcer responsible
for Internal Auditing
Internal Auditing Oﬃce

Internal
Audit

COO

Global EXCO
Executive Oﬃcers and Corporate Oﬃcers (12)(including six foreign members)

CEO

Vice Chair
Other policy management meetings
Oﬃcer Nomination andCompensation Meeting

SBUs (Strategic Business Unit)
Domestic/overseas groupcompanies & internal companies
CEOInternal Control Systems

1

COO

GBS
Support (Global Business Support)

Accounting
audit

Independent Auditors

Nominating Committee

2. About This Year’s Report
This year’s report (released in May 2019) discusses the status of enhancement and improvement
eﬀorts implemented since the previous revisions announced by the Company in December 2018.
The key enhancements are listed as follows:
Our main improvements since previous report(1)

Principles of Japan’s Corporate Governance Code

Restructuring the framework of policies and policy management

2.2

Code of Conduct

4.1

Roles and Responsibilities of the Board

5.2

Establishing and Disclosing Business Strategies and Business Plans(2)

Enhancing communication with suppliers related
to Global Sustainable Procurement Policy

2.3.1

Sustainability Issues, Including Social and Environmental Matters(3)

Promoting the BridgeLine (channels for whistleblowers)

2.5

Whistleblowing

3.1.2

Full Disclosure(4)

Enhancing disclosure for shareholders
5.1

Policy for Constructive Dialogue with Shareholders(5)

Result of the Board eﬀectiveness evaluation in 2018

4.11.3 Preconditions for Board and Audit Committee Eﬀectiveness3. Current Status of Our Enhancement and Improvement Eﬀorts Reported in Accordance withJapan’s Corporate Governance Code

Section 1: Securing the Rights and Equal Treatment of Shareholders
General Principle 1
Companies should take appropriate measures to fully secure shareholder rights and develop an
environment in which shareholders can exercise their rights appropriately and eﬀectively.
In addition, companies should secure eﬀective equal treatment of shareholders.
Given their particular sensitivities, adequate consideration should be given to the issues andconcerns of minority shareholders and foreign shareholders for the eﬀective exercise of shareholder
rights and eﬀective equal treatment of shareholders.

The Company recognizes that it is essential for the sustainable development of the business tocollaborate with various stakeholders and that our shareholders constitute our primary
stakeholder. Based on this understanding, the Company strives to develop an environment
wherein shareholders can adequately exercise their rights by providing them with a wide variety
of information and opportunities to exercise their rights.
Moreover, the Company endeavors to secure the rights of minority and foreign shareholders
and thereby seeks to secure the substantive equality of the rights of all shareholders.

2Principle 1.1 Securing the Rights of Shareholders
Companies should take appropriate measures to fully secure shareholder rights, including voting
rights at the general shareholder meeting.

The Company endeavors to ensure the rights of shareholders by managing operations in orderto ensure timely disclosure of not only statutory disclosure documents but also of otherinformation in both Japanese and English, by conducting the Annual General Shareholders’Meeting in a manner such that the voting rights of all shareholders can be exercised eﬀectively,
and by ensuring adequate time and opportunity for dialogue between management andshareholders.

Supplementary Principle 1.1.1
When the board recognizes that a considerable number of votes have been cast against a proposalby the company and the proposal was approved, it should analyze the reasons behind opposing votes
and why many shareholders opposed, and should consider the need for shareholder dialogue and othermeasures.

Based upon the understanding that the Annual General Shareholders’ Meeting is theCompany’s highest decision-making body, the Company takes the results of shareholders’execution of their voting rights as an important indication of their intent. The Board of Directors
therefore formally analyses the reasons and causes for proposals where the total votes in
opposition exceed 20%.

Supplementary Principle 1.1.2
When proposing to shareholders that certain powers of the shareholders’ meeting be delegated tothe board, companies should consider whether the board is adequately constituted to fulﬁll its
corporate governance roles and responsibilities. If a company determines that the board is indeed
adequately constituted, then it should recognize that such delegation may be desirable from theperspectives of agile decision-making and expertise in business judgment.

In order to further promote the separation between the executive and supervisory functions
and further strengthen the supervisory role of the board, the Company has adopted the“Company with Nominating Committee, etc.” model of corporate governance. Moreover, in addition
to establishing the committees legally required under this model, the Company has established a
Governance Committee comprised entirely of Independent External Directors, all of whom meet
the Company’s benchmark for independence (hereinafter referred to as “Independent Directors”).
The Governance Committee serves as an advisory body to the Board of Directors with theobjective of ensuring that the Company maintains the structures and processes needed to ensure
appropriate levels of governance.
3

The Articles of Incorporation currently stipulate that the Board of Directors is responsible fordecisions such as determining the level of interim dividend payouts. In the event of further suchdelegations of authority by the General Shareholders’ Meeting to the Board of Directors, theCompany will continue to enhance its structures and procedures of governance in order todischarge these responsibilities while ensuring the necessary levels of expertise in, andtimeliness of, its decision making.

Supplementary Principle 1.1.3
Given the importance of shareholder rights, companies should ensure that the exercise ofshareholder rights is not impeded. In particular, adequate consideration should be given to the special
rights that are recognized for minority shareholders with respect to companies and their oﬃcers,
including the right to seek an injunction against illegal activities or the right to ﬁle a shareholder
lawsuit, since the exercise of these rights tend to be prone to issues and concerns.

The Company has established a “Share Handling Regulations” which formally stipulates
procedures for the exercising of the rights of minority shareholders and any other procedures inrelation to shares in order to ensure that shareholders are able to exercise their rights in full.

Principle 1.2 Exercise of Shareholder Rights at General Shareholder Meetings
Companies should recognize that general shareholder meetings are an opportunity for constructive
dialogue with shareholders, and should therefore take appropriate measures to ensure the exercise ofshareholder rights at such meetings.

The Company has and will continue to make every eﬀort to ensure that shareholders areprovided with the services and support necessary to ensure that they are able to exercise theirrights at the General Shareholders’ Meeting including such measures as scheduling the Meeting
to avoid clashing with the “peak period” for holding General Shareholders’ Meetings in Japan,
early dispatch of proxy statements, provision of an online voting platform, and provision of
information in English.

Supplementary Principle 1.2.1
Companies should provide accurate information to shareholders as necessary in order to facilitate
appropriate decision-making at general shareholder meetings.

Taking the requests from shareholders into consideration, the Company attempts to provide
clear and relevant information to shareholders in a manner intended to facilitate their decision
making. This includes providing more comprehensive information regarding candidates for board
membership and publishing the “Guidelines for Determining the Independence of Board Members,”
and including forecasts on earnings in the ﬁnancial report.
4Supplementary Principle 1.2.2
While ensuring the accuracy of content, companies should strive to send convening notices forgeneral shareholder meetings early enough to give shareholders suﬃcient time to consider the agenda.
During the period between the board approval of convening the general shareholder meeting andsending the convening notice, information included in the convening notice should be disclosed byelectronic means such as through TDnet1 or on the company’s website.
1 TDnet: The Tokyo Stock Exchange operates a real-time internet service (Timely Disclosure network) which distributes the information provided
by listed companies on a timely basis in accordance with its listing rules.

The Company strives to ensure adequate time for deliberation of Shareholders’ meeting
agenda items by sending convening notices as early as possible and in advance of the deadline
prescribed by the Companies Act in Japan. In addition, in cases where board approval is made on
proxy items before sending the convening notice, notiﬁcation of such is made in advance at thetime of the decision on the corporate website and through other digital methods.

Supplementary Principle 1.2.3
The determination of the date of the general shareholder meeting and any associated dates should
be made in consideration of facilitating suﬃcient constructive dialogue with shareholders and ensuring
the accuracy of information necessary for such dialogue.

The Company strives to promote the accessibility of the General Shareholders’ Meeting bymeasures including scheduling the Meeting to avoid clashing with the “peak period” for holding
General Shareholders’ Meetings in Japan.

Supplementary Principle 1.2.4
Bearing in mind the number of institutional and foreign shareholders, companies should take steps
for the creation of an infrastructure allowing electronic voting, including the use of the Electronic
Voting Platform, and the provision of English translations of the convening notices of generalshareholder meeting.

In order to better accommodate the needs of the increasing numbers of overseas investors
holding shares, the Company has introduced an Electronic Voting Platform and provides
convening notices in English on its corporate website, along with a wide range of other material
and data for investors in English.

5Supplementary Principle 1.2.5
In order to prepare for cases where institutional investors who hold shares in street name express
an interest in advance of the general shareholder meeting in attending the general shareholder
meeting or exercising voting rights, companies should work with the trust bank (shintaku ginko) and/or
custodial institutions to consider such possibility.

The Articles of Incorporation of the Company restricts the exercise of voting rights at Annual
Shareholders’ Meetings to nominee shareholders or their proxies.
In consultation with the trust bank which manages the shareholders’ registry as the agent of
the Company, and, taking into consideration both domestic and international implications, legal
obligations, social trends and operational issues, the Company will continue to monitor thesituation regarding the attendance of investors who are not registered on the shareholders’registry.
Principle 1.3 Basic Strategy for Capital Policy
Because capital policy may have a signiﬁcant eﬀect on shareholder returns, companies should
explain their basic strategy with respect to their capital policy.

The Company, in full recognition of the importance of the interests of shareholders, aims tostrengthen the foundations of the business in order to promote future growth. As part of its basic
policy for the enhancement of business performance the Company has set an annual ROE targetof 12%.
While maintaining levels of internal reserves suﬃcient to enable future investments in order tomaintain growth, the Company endeavors to balance the need to maintain a strong ﬁnancial
position with that of ensuring an appropriate level of return to its shareholders. In overall
consideration of quarterly business performance, current ﬁnancial position, mid-term
proﬁtability forecasts, investment plans and cash ﬂow, the Company strives to meet shareholder
expectations for returns by setting dividends in a stable and sustainable level within aconsolidated payout ratio range of between 20% to 40%.

Principle 1.4 Cross-Shareholdings
When companies hold shares of other listed companies as cross-shareholdings2, they should
disclose their policy with respect to doing so, including their policies regarding the reduction ofcross-shareholdings. In addition, the board should annually assess whether or not to hold eachindividual cross-shareholding, speciﬁcally examining whether the purpose is appropriate and whether
the beneﬁts and risks from each holding cover the company’s cost of capital. The results of thisassessment should be disclosed.
Companies should establish and disclose speciﬁc standards with respect to the voting rights as totheir cross-shareholdings, and vote in accordance with the standards.
2 Cross-shareholding: There are cases where listed companies hold the shares of other listed companies for reasons other than pure investment
purposes, for example, to strengthen business relationships. Cross-shareholdings here include not only mutual shareholdings but also
unilateral ones.

6

The Company maintains a policy whereby it will not hold shares in other companies other thanthose which are of strategic importance; that is, necessary to maintain or enhance business
partnerships, or contribute to business proﬁtability. The Company maintains a policy whereby it
will not hold shares outside the scope of this deﬁnition. As part of this policy, the rationality of,and need to maintain, any such strategic holdings including stock brands, number of shares held,
and the proportion of cross-shareholdings, and other related issues must be reviewed andreported to the Board of Directors on an annual basis.
In exercising its voting rights regarding cross-shareholdings, the Company will consider thecontent of proposals in terms of the investment strategy as approved by the Board in addition totheir overall impact on enhancing proﬁtability and sustainable business growth, corporate
governance and shareholder return and then take proper action.

Supplementary Principle 1.4.1
When cross-shareholders (i.e., shareholders who hold a company’s shares for the purpose ofcross-shareholding) indicate their intention to sell their shares, companies should not hinder the saleof the cross-held shares by, for instance, implying a possible reduction of business transactions.

When a publicly traded company that cross-holds Bridgestone shares (as cross-shareholdings)
indicates an intention to divest itself of any such cross-held shares, the Company in no way
hinders such companies from taking such action.

Supplementary Principle 1.4.2
Companies should not engage in transactions with cross-shareholders which may harm theinterests of the companies or the common interests of their shareholders by, for instance, continuing
the transactions without carefully examining the underlying economic rationale.

The Company engages in no transactions that harm or impair the interests of companies thatcross-hold shares of the Company (cross-shareholders), nor does it engage in any transactions
that harm or impair the common interests of the shareholders.

Principle 1.5 Anti-Takeover Measures
Anti-takeover measures must not have any objective associated with entrenchment of the
management or the board. With respect to the adoption or implementation of anti-takeover measures,
the board should carefully examine their necessity and rationale in light of their ﬁduciary responsibility
to shareholders, ensure appropriate procedures, and provide suﬃcient explanation to shareholders.

The Company has no anti-takeover measures in place and currently has no plans to introduce
any such measures. Shareholders will be fully informed in advance of the nature and reason forany such measures should they be deemed necessary in the future.
7

Supplementary Principle 1.5.1
In case of a tender oﬀer, companies should clearly explain the position of the board, including any
counteroﬀers, and should not take measures that would frustrate shareholder rights to sell theirshares in response to the tender oﬀer.

In any instance where the shares of the Company are made the target of a tender oﬀer bid theBoard of Directors will clearly convey its position on such bid to its shareholders and will not act
in such a manner as to interfere improperly with any shareholder in the exercising of their rights
to accept any such oﬀer.

Principle 1.6 Capital Policy that May Harm Shareholder Interests
With respect to a company’s capital policy that results in the change of control or in signiﬁcantdilution, including share oﬀerings and management buyouts, the board should, in order not to unfairly
harm the existing shareholders’ interests, carefully examine the necessity and rationale from theperspective of their ﬁduciary responsibility to shareholders, should ensure appropriate procedures,and provide suﬃcient explanation to shareholders.

After due consideration by the Board of Directors and in accordance with appropriate
procedures, the Company will provide shareholders with explanations of the rationality and needfor any changes in capital policies that would result either in changes of control or signiﬁcantdilution.

Principle 1.7 Related Party Transactions
When a company engages in transactions with its directors or major shareholders (i.e., related party
transactions), in order to ensure that such transactions do not harm the interests of the company or thecommon interests of its shareholders and prevent any concerns with respect to such harm, the board
should establish appropriate procedures beforehand in proportion to the importance andcharacteristics of the transaction. In addition to their use by the board in approving and monitoringsuch transactions, these procedures should be disclosed.

In accordance with its Regulations of the Board of Directors, the Company requires that any
transactions between Directors and Executive Oﬃcers and the company or its subsidiaries, andany transactions with other corporations which may constitute a conﬂict of interest with theCompany, must be authorized in advance and subsequently monitored by the Board of Directors.
The Regulations also stipulate that Directors obtain prior approval for any transactions withcorporations that hold 5% or more of the Company’s total shares. The Regulations further requirethat any such approved transactions be reported to the Board of Directors on an annual basis.

8Section 2: Appropriate Cooperation with Stakeholders
Other Than Shareholders
General Principle 2
Companies should fully recognize that their sustainable growth and the creation of mid- to long-term
corporate value are brought about as a result of the provision of resources and contributions made by arange of stakeholders, including employees, customers, business partners, creditors and local
communities. As such, companies should endeavor to appropriately cooperate with these stakeholders.
The board and the management should exercise their leadership in establishing a corporate culture
where the rights and positions of stakeholders are respected and sound business ethics are ensured.

In order to ensure sustainable growth and corporate value creation over the mid to long term,in awareness of the necessity to maintain appropriate and favorable working relationships with
important stakeholders other than shareholders, such as its various external partners andcommunities and other entities that constitute irreplaceable assets, the Company actively
participates in group-wide CSR activities aimed at the promotion of sustainability and diversity.
Moreover, under the leadership of the Board and Corporate Management, each individualoﬃcer and employee of the Company is encouraged to act in accordance with the “Bridgestone
Essence” [the statement of the Company Principles] in order to create a corporate culture inwhich the rights and interests of stakeholders are respected and the highest levels of businessethics are realized.

Principle 2.1 Business Principles as the Foundation of Corporate Value Creation Over
the Mid- to Long-Term
Guided by their position concerning social responsibility, companies should undertake theirbusinesses in order to create value for all stakeholders while increasing corporate value over the midto long-term. To this end, companies should draft and maintain business principles that will become
the basis for such activities.

The Company has encapsulated its corporate philosophy as the Bridgestone Essence which it
takes as the foundation of all corporate activity. Taking the founder’s corporate creed of “Serving
Society with Superior Quality” as its unchanging mission, all oﬃcers and employees of theCompany are encouraged to embody the four corporate foundations encapsulated within the
Essence: “Seĳitsu-Kyocho” [Integrity and Teamwork], “Shinshu-Dokuso” [Creative Pioneering],“Genbutsu-Genba” [Decision-Making Based on Veriﬁed On-Site Observations] and “Jukuryo-Danko”[Decisive Action after Thorough Planning] in their everyday activities.
Moreover, in order to achieve value creation beneﬁcial to all stakeholders and enhance thecreation of corporate value on the long-term the Company has introduced a global CSR initiative
known as “Our Way to Serve” which is based upon the Bridgestone Essence and incorporates the9Mission Statements on Safety, Quality and the Environment in order to serve as the foundation in
the formulation and implementation of the Company’s strategic mid-term business plans and as
a guide to the ongoing enhancement of management structure and processes.

Principle 2.2 Code of Conduct
Companies should draft and implement a code of conduct for employees in order to express theirvalues with respect to appropriate cooperation with and serving the interests of stakeholders andcarrying out sound and ethical business activities. The board should be responsible for drafting andrevising the code of conduct, and should ensure its compliance broadly across the organization,
including the front line of domestic and global operations.

To fulﬁl its responsibilities to all its stakeholders, the Company has updated its Corporate
Philosophy. The Company has revised its Corporate Philosophy to include its Mission Statements on
Safety, Quality and the Environment and established a global corporate social responsibility (CSR)
structure entitled “Our Way to Serve.” The Corporate Philosophy and CSR structure form the core ofbusiness throughout the group, and are augmented by newly established global policies including
the Global Sustainable Procurement Policy, the Global Human Rights Policy, and the Bridgestone
Code of Conduct. The Company is currently actively promoting the dissemination andimplementation of this Philosophy and CSR structure throughout its global operations.
As a management policy “Our Way to Serve” identiﬁes three areas of Mobility, People and theEnvironment as well as six management fundamentals to be prioritized by the Company as it
seeks to assume its responsibilities and, in close collaboration with its stakeholders, realize evergreater contributions to society and the world.
Using examples of ethical and compliance issues that could confront employees in the courseof their actual jobs, the “Bridgestone Code of Conduct”(https://www.bridgestone.com/responsibilities/code/) explains in clear and easy to understandlanguage how problematic situations should be approached and provides illustrations of speciﬁc
actions that should be taken and those that would be inappropriate. The Company continues torigorously promote the implementation of both “Our Way to Serve” and the “Bridgestone Code of
Conduct” throughout its operations globally by such means as including CSR and complianceenhancements as goals in future mid-term business plans.
More information regarding CSR and Compliance is available on the corporate website:
https://www.bridgestone.com/responsibilities/index.html

Supplementary Principle 2.2.1
The board should review regularly (or where appropriate) whether or not the code of conduct isbeing widely implemented. The review should focus on the substantive assessment of whether thecompany’s corporate culture truly embraces the intent and spirit of the code of conduct, and not solely
on the form of implementation and compliance.

10

The Board of Directors is regularly apprised of the Company’s CSR and compliance plans andtheir implementation and formally monitors and evaluates their progress.

Principle 2.3 Sustainability Issues, Including Social and Environmental Matters
Companies should take appropriate measures to address sustainability issues, including social andenvironmental matters.

In accordance with its mission of “Serving Society with Superior Quality” the Company considers it
important that it not only generates proﬁts, but also contributes to society as a whole. As the global
leader in the industry, the Company strives to achieve ongoing growth as a business while taking
responsibility for the future and contributing to the development of a sustainable society. Based uponthis approach, the Company seeks not only to act in compliance with the rules and social norms thatform the basis of a corporation’s foundation but by applying its strengths and distinctiveness as agroup, and through the application of advanced technologies and innovation, also contribute to theenhancement of mobility, life, work and recreation.
More information regarding this approach to CSR is available on the corporate website:
https://www.bridgestone.com/responsibilities/index.html

Supplementary Principle 2.3.1
With the recognition that dealing with sustainability issues is an important element of risk
management, the board should take appropriate actions to this end. Given the increasing demand andinterest with respect to sustainability issues in recent years, the board should consider addressingthese matters positively and proactively.

The Company realizes that sustainability, including human rights, safety, and responsible
procurement, are critical issues for its survival as a business. Having identiﬁed these issues as
management fundamentals within its revised CSR policy, the Company has been actively engaged
in their promotion on a global basis.
In February 2018 the Company instituted a “Global Sustainability Procurement Policy”(https://www.bridgestone.com/responsibilities/procurement/index.html) guided by the
procurement management fundamental.
Existing CSR guidelines on procurement concern human rights, environment, and quality.
These have been enhanced to include improving conservation and rights protection as well as
traceability and resilience (the ability to adapt to change). This policy requires that sustainableprocurement practices be followed in the purchase of all materials and services, and applies tosuppliers globally. Since the establishment of this policy, the Company group has continued its
eﬀorts to communicate with suppliers around the world in order to promote a better
understanding of the procurement policy.
More information regarding other speciﬁc actions and initiatives is available on the Company
website: https://www.bridgestone.com/responsibilities/index.html
11

The Company intends to continue to engage in activities related to these core issues
throughout its organization as it endeavors to respond to the expectations and demands of its
stakeholders.

Principle 2.4 Ensuring Diversity, Including Active Participation of Women
Companies should recognize that the existence of diverse perspectives and values reﬂecting avariety of experiences, skills and characteristics is a strength that supports their sustainable growth.
As such, companies should promote diversity of personnel, including the active participation of women.

In April 2018, the Company instituted the “Bridgestone Group Global Human Rights Policy”(https://www.bridgestone.com/responsibilities/human_rights/index.html), one of the purposes ofwhich is to provide a workplace environment wherein people expressing diﬀerent values andindividuality may work and grow. This policy puts a system in place in which the Company respects
diﬀerences in cultures and customs, enables employees at diﬀerent life stages to feel secure in theirwork, and nurtures and develops each individual’s abilities.
As a concrete example of these eﬀorts, the Company has introduced policies aimed at promoting
career advancement and employment opportunities for women including childcare, nursing supportand ﬂexible working arrangements for employees whose partner has been relocated.

Principle 2.5 Whistleblowing
Companies should establish an appropriate framework for whistleblowing such that employees canreport illegal or inappropriate behavior, disclosures, or any other serious concerns without fear of
suﬀering from disadvantageous treatment. Also, the framework should allow for an objective
assessment and appropriate response to the reported issues, and the board should be responsible forboth establishing this framework, and ensuring and monitoring its enforcement.

The Company has established Compliance Hotlines (known as the “BridgeLine”) for all groupcompanies and has established Cartel Related Activity Reporting Hotlines and Bribery andrelated Activity Reporting Hotlines for domestic group companies. The Company has promoted
the usage of these Hotlines through awareness campaigns, both online using the corporate
intranet and throughout facilities by informational posters. Hotline usage rates and the issues
thereby identiﬁed are reported to the Board of Directors and the Audit Committee on a regularbasis.

12

Supplementary Principle 2.5.1
As a part of establishing a framework for whistleblowing, companies should establish a point ofcontact that is independent of the management (for example, a panel consisting of outside directors3).
In addition, rules should be established to secure the conﬁdentiality of the information provider andprohibit any disadvantageous treatment.
³ Outside director: A director who satisﬁes certain requirements such as not holding speciﬁc positions, including the position of executive
director, in the company or its subsidiaries (Article 2, Paragraph 15 of the Companies Act). Furthermore, matters such as not holding a speciﬁc
position in the parent company or other subsidiaries and not having speciﬁc kinship ties with controlling shareholders will be also required foroutside directors after the 2014 amendments to the Companies Act.

The Company has established Compliance Hotlines (the “BridgeLine”) for all group companies,
as well as Cartel Related Activity Reporting Hotlines and Bribery and related Activity Reporting
Hotlines for domestic group companies, as a framework to enable whistleblowing. The Hotlines
for Compliance, Cartel Related Activity Reporting and Bribery and related Activity Reporting
operated independently of the Company by external lawyers. The Company has also createdformal rules and guidelines to ensure the fair treatment and privacy protection of all employees
using these hotlines or acting otherwise as whistleblowers.

Principle 2.6 Roles of Corporate Pension Funds as Asset Owners
Because the management of corporate pension funds impacts stable asset formation for employees
and companies’ own ﬁnancial standing, companies should take and disclose measures to improve
human resources and operational practices, such as the recruitment or assignment of qualiﬁed
persons, in order to increase the investment management expertise of corporate pension funds(including stewardship activities such as monitoring the asset managers of corporate pension funds),
thus making sure that corporate pension funds perform their roles as asset owners. Companies should
ensure that conﬂicts of interest which could arise between pension fund beneﬁciaries and companies
are appropriately managed.

Bridgestone Corporate Pension Fund appoints fund management organizations based upon an
evaluation of their stewardship record. The exercise of voting rights is left entirely to thediscretion of the organization appointed to manage the Fund. The Company supports the Fund byappointing qualiﬁed personnel from either within or outside the Company to serve as oﬃcers of
the Fund, and has established a Pension Fund Oversight Council staﬀed by appropriately
qualiﬁed personnel to monitor the management of the Fund.

13

Section 3: Ensuring Appropriate Information Disclosure and Transparency

General Principle 3
Companies should appropriately make information disclosure in compliance with the relevant laws
and regulations, but should also strive to actively provide information beyond that required by law. This
includes both ﬁnancial information, such as ﬁnancial standing and operating results, and non-ﬁnancial
information, such as business strategies and business issues, risk and governance.
The board should recognize that disclosed information will serve as the basis for constructive
dialogue with shareholders, and therefore ensure that such information, particularly non-ﬁnancial
information, is accurate, clear and useful.

The Company, in addition to making appropriate disclosures of ﬁnancial information including
ﬁnancial standing and operating results and non-ﬁnancial information including businessstrategies, issues, risk and corporate governance in compliance with relevant laws andregulations, in order to promote the transparency and impartiality of its decision making
processes and eﬀective corporate governance also strives to disclose information deemed
appropriate even in the absence of legal obligations to do so.
The Company intends to continue to enhance the disclosure of information with the highest
possible levels of accuracy and usability on its corporate website.

Principle 3.1 Full Disclosure
In addition to making information disclosure in compliance with relevant laws and regulations,companies should disclose and proactively provide the information listed below (along with thedisclosures speciﬁed by the principles of the Code) in order to enhance transparency and fairness indecision-making and ensure eﬀective corporate governance:i) Company objectives (e.g., business principles), business strategies and business plans;ii) Basic views and guidelines on corporate governance based on each of the principles of the Code;iii) Board policies and procedures in determining the remuneration of the senior management anddirectors;iv) Board policies and procedures in the appointment/dismissal of the senior management and thenomination of directors; andv) Explanations with respect to the individual appointments/dismissal and nominations based on iv).

i) The Company provides access to the Bridgestone Essence and its mid-term business plan(“Mid-term Management Plan”) on the corporate website as follows.
“the Bridgestone Essence”:
https://www.bridgestone.com/corporate/philosophy/index.html“Mid-term Management Plan”:
https://www.bridgestone.com/corporate/library/mid_term/index.html
14ii) The company outlines its basic approach and policies for promoting corporate governancebased on each principle of the Corporate Governance Code in the ﬁrst paragraph on page 7 of
the Annual Report for 2017 as shown on the corporate website as follows:
https://www.bridgestone.com/corporate/library/annual_report/iii) The Compensation Committee’s policies and procedures in determining the remuneration ofmembers of senior management and Directors are detailed in the following attachment.
iv) 1. Nominating Policy for the candidates for appointment to the Board
When nominating candidates for Board membership, the Company considers thecharacter and judgment of each individual, their experience and expertise and their level ofdedication and commitment to performing the duties expected of a member of the Board.
(1) Members of the Board other than Outside Directors
The Company takes into account the following:• The candidate’s scope of knowledge and experience regarding the business and its
operations.
• The level of the candidate’s ability to formulate business plans and targets based
upon an insightful understanding of the changing business environment.
(2) Outside Directors
The Company takes into account the following:• The candidate’s expertise, experience and ability to make judgments from an
independent perspective.
• The candidate’s absence of connections with the Company that would undermine
their independence from the Company (speciﬁcally, their ability to meet the conditions
for independence as set out in the Company’s criteria on outside directors’
independence).
The Nominating Committee will choose candidates in an appropriate manner inaccordance with fair and transparent guidelines and policies for the election and dismissalof the Members of the Board.
2. Nominating Policy for Executive Oﬃcers
When nominating Executive Oﬃcers, the Company considers if the candidate possesses
the depth and scope of experience and expertise relevant to the business and the ability to
implement business plans and meet performance targets based upon an insightful
understanding of the changing business environment.
The Nominating Committee in accordance with the succession plan of the Representative
Executive Oﬃcer submits proposals as appropriate for election and dismissal to the Boardof Directors.
The Nominating Committee also deliberates the validity of proposals for the election anddismissal of candidates for positions as Executive Oﬃcers other than Representative
Executive Oﬃcers.
v) The Company states the reason for nomination, summary of career to date and a list ofimportant posts concurrently served in other corporations or organizations for each candidate
for nomination to Board membership in the convocation notice and reference documents for15the Annual General Shareholdersˇ Meeting, Business Report and Corporate Annual Report.
The current appointment/dismissal status of Executive Oﬃcers is outlined in the annual
Business Report and Corporate Annual Report.

Supplementary Principle 3.1.1
These disclosures, including disclosures in compliance with relevant laws and regulations, should
add value for investors, and the board should ensure that information is not boiler-plate or lacking indetail.

The Company makes every eﬀort to ensure that information is disclosed in a manner which isboth easily understandable and of beneﬁt to stakeholders.

Supplementary Principle 3.1.2
Bearing in mind the number of foreign shareholders, companies should, to the extent reasonable,
take steps for providing English language disclosures.

In light of the trend toward increased corporate share ownership by overseas investors, theCompany prepares an English version of its Annual Report, which it makes publicly available on
the corporate website. In addition, the Company also provides English translations of its
consolidated ﬁnancial statement, reference documents and notice of Annual General
Shareholders’ Meeting on its corporate website. The Company also provides English translationsof the transcripts of quarterly ﬁnancial performance meetings for analysts on the corporatewebsite.

Principle 3.2 External Auditors
External auditors and companies should recognize the responsibility that external auditors owe
toward shareholders and investors, and take appropriate steps to secure the proper execution of audits.

In recognition of the responsibility of External Accounting Auditors to perform appropriate
accounting audits on behalf of shareholders and investors, the Company acts in compliance withthe following Supplementary Principles as indicated below.

16Supplementary Principle 3.2.1
The audit committee should, at minimum, ensure the following:i) Establish standards for the appropriate selection of external auditor candidates and proper
evaluation of external auditors; andii) Verify whether external auditors possess necessary independence and expertise to fulﬁll their
responsibilities.

i) The Audit Committee has established standards for the appointment and evaluation ofExternal Accounting Auditors.
ii) The Audit Committee, in accordance with these standards, (1) monitors the External
Accounting Auditor’s performance of its duties, (2) monitors the content and compensation for
non-auditing duties entrusted to the External Accounting Auditors by the Audit Committee, and(3) receives reports regarding the quality management systems of the External Accounting
Auditors in order to verify their impartiality and professional qualiﬁcations.

Supplementary Principle 3.2.2
The board and the audit committee should, at minimum, ensure the following:i) Give adequate time to ensure high quality audits;ii) Ensure that external auditors have access, such as via interviews, to the senior management
including the CEO and the CFO;iii) Ensure adequate coordination between external auditors and each member of the audit
committee (including attendance at the audit committee), the internal audit department andoutside directors other than the members of the audit committee; andiv) Ensure that the company is constituted in the way that it can adequately respond to any
misconduct, inadequacies or concerns identiﬁed by the external auditors.

i) The Audit Committee requires that the External Accounting Auditor allocates suﬃcient time toperform their audits and, by means of receiving reports by the External Accounting Auditor on
their audit plans, implementing the agreement procedures for determining the compensationof the External Accounting Auditor, and verifying audit reports by the External Accounting
Auditor, ensures that suﬃcient time is devoted to performing audits and that audits are
performed at the high quality levels required.
ii) In the event that the External Accounting Auditor requests time to meet with the CEO, COO andor CFO such arrangements and scheduling are made.
iii) 1. Audit Committee
Adequate coordination between the External Accounting Auditor and members of the Audit
Committee is achieved through audit reports by the External Accounting Auditor at Audit
Committee meetings, regular meetings between the External Accounting Auditor andmembers of the Audit Committee outside of Audit Committee meetings, and the attendance17

of Audit Committee members at site visits and audit reviews held by the External
Accounting Auditor.
2. Internal Audit Division /Independent Directors
Adequate coordination with the Internal Audit Division is achieved by their participation
as observers in Audit Committee meetings where External Accounting Auditors share
information regarding the audit plan and ﬁndings, and with other Independent Directors
who do not serve on the Audit Committee via information provided by the Audit Committee.
iv) In the event the External Accounting Auditor uncovers fraudulent activity and calls forappropriate countermeasures, or indicates problems or other issues, the Company will inaccordance with the nature of the situation indicated instigate investigation by the Audit
Committee, order reports from executive departments, provide directors with advice,warnings and or injunctions, report to the Board of Directors and undertake all measuresnecessary to identify the cause, rectify and prevent recurrence of the issue identiﬁed.

18

Section 4: Responsibilities of the Board
General Principle 4
Given its ﬁduciary responsibility and accountability to shareholders, in order to promote sustainablecorporate growth and the increase of corporate value over the mid-to long-term and enhance earnings
power and capital eﬃciency, the board should appropriately fulﬁll its roles and responsibilities,
including:(1) Setting the broad direction of corporate strategy;(2) Establishing an environment where appropriate risk-taking by the senior management is
supported; and(3) Carrying out eﬀective oversight of directors and the management (including shikkoyaku⁴ andso-called shikkoyakuin⁵) from an independent and objective standpoint.
Such roles and responsibilities should be equally and appropriately fulﬁlled regardless of the formof corporate organization – i.e., Company with Kansayaku Board (where a part of these roles andresponsibilities are performed by kansayaku and the kansayaku board), Company with Three
Committees (Nomination, Audit and Remuneration) or Company with Supervisory Committee.
⁴ Shikkoyaku: According to the Companies Act, Companies with Three Committees (Nomination, Audit and Remuneration) must appoint one ormore shikkoyaku from directors or non-directors by a resolution of the board and delegate business administration to shikkoyaku. Also, authority
to make certain kinds of business decisions may be delegated to shikkoyaku.
⁵ Shikkoyakuin: There are cases where a Company with Kansayaku Board or a Company with Supervisory Committee creates positions with thetitle of “shikkoyakuin” for persons who are delegated by the board a certain range of discretion regarding business administration. Unlike
shikkoyaku in Companies with Three Committees (Nomination, Audit and Remuneration), shikkoyakuin is not a statutory position.

The Board fulﬁlls its responsibility to promote sustainable corporate growth and enhance
corporate value over the mid to long term by the following means:(1) By focusing upon matters related to fundamental policies such as the “Bridgestone Essence”(the Corporate Philosophy), and upon issues related to the sustained growth and long term
value enhancement of the corporation, such as the formulation of mid to long term businessstrategies, sustainable corporate growth and related issues, the Board seeks to maintain aseparation between supervisory and executive functions.
(2) In order to facilitate the timely and eﬀective decision making required to implement thepolicies and strategies approved by the Board, the Board delegates a certain degree ofauthority to the executive.
(3) In addition to the establishment of the statutory and discretionary committees, the Board iscomprised on a majority of independent directors in order to ensure both the objectivity andeﬀectiveness of its supervisory function.

19

Principle 4.1 Roles and Responsibilities of the Board (1)The board should view the establishment of corporate goals (business principles, etc.) and thesetting of strategic direction as one major aspect of its roles and responsibilities. It should engage inconstructive discussion with respect to speciﬁc business strategies and business plans, and ensurethat major operational decisions are based on the company’s strategic direction.

To fulﬁll the corporate mission of “Serving Society with Superior Quality,” the Company has
established “The Bridgestone Essence (Corporate Philosophy),” which is one of the key
components of the Bridgestone Essence Framework, and underpinned by four foundations:“Seĳitsu-Kyocho [Integrity and Teamwork];” “Shinshu-Dokuso [Creative Pioneering];”“Genbutsu-Genba [Decision-Making Based on Veriﬁed, On-Site Observations];” and “Jukuryo-Danko[Decisive Action after Thorough Planning].” Other components of the framework include theSafety Mission Statement, the Quality Mission Statement, and the Environmental Mission
Statement. The Bridgestone Essence Framework and the global corporate social responsibility(CSR) structure, known as “Our Way to Serve,” are the core of business throughout the group andis supported by a number of newly established global policies including the Global Sustainable
Procurement Policy, the Global Human Rights Policy, and the Bridgestone Code of Conduct. With
its updated and reinforced corporate governance structure, the Company group will continue topursue its ultimate goal of becoming “a truly global company” and achieving “Dan-Totsu (absoluteand clear leadership) in all aspects of our business.”
To achieve the goals outlined above, the Board focuses its deliberations upon critical issues
related to the sustained growth and long term value enhancement of the corporation, such as thecorporate philosophy framework and formulation of the Mid-term Policy and the monitoring of
their achievement. In order to implement the most important strategic decisions of the Board
with group-wide implications the Company has established a Global Executive Committee(“Global EXCO”) comprised of key executives from across the global organization which
determines and oversees implementation of such policies and strategies.

Supplementary Principle 4.1.1
The board should clearly specify its own decisions as well as both the scope and content of thematters delegated to the management, and disclose a brief summary thereof.

The Company, in accordance with its Articles of Incorporation and applicable laws, stipulates in
the Regulations of the Board of Directors that the Board of Directors is the highest decisionmaking body within the Company. The Board has made continuous improvements in order tofocus more on deliberations concerning business strategy. Currently the Board determines:
1. the formulation of fundamental management policy;
2. the formulation of group business strategy (Mid-term Policy, signiﬁcant business changes
from the standpoint of group global operations, investment policy, issuance or guarantee
20

of substantial amounts of borrowings and debenture bond issues, debt guarantees,others);3. issues involving personnel matters concerning directors and corporate oﬃcers;
4. issues involving internal control systems; and5. other matters as required by laws and regulations, or by the Articles of Incorporation.
By delegating authority for the determination of other issues to the operating divisions, theCompany seeks to implement decision making in a timely manner.

Supplementary Principle 4.1.2
Recognizing that a mid-term business plan (chuuki keiei keikaku) is a commitment to shareholders,the board and the senior management should do their best to achieve the plan. Should the company failto deliver on its mid-term business plan, the reasons underlying the failure of achievement as well as
the company’s actions should be fully analyzed, an appropriate explanation should be given to
shareholders, and analytic ﬁndings should be reﬂected in a plan for the ensuing years.

The Company has positioned its mid-term strategic plan (“Mid-term Management Plan”) as a tool
for business reform and innovation, and it formulates a Mid-term Policy that establishes
fundamental principles for mid-to-long-term group global operations. Based on this policy, theCompany revises the Mid-term Management Plan annually. The Company fully assesses anddeliberates on changes in the business environment and achievement of the targets set forth
therein, ensures the Mid-term Policy and Mid-term Management Plan reﬂect the future direction of
the Company and its mid-to-long-term business strategy, and implements decisions accordingly.
Information regarding the above are appropriately explained in ﬁnancial performancemeetings, meetings with investors, and other opportunities.

Supplementary Principle 4.1.3
Based on the company objectives (business principles, etc.) and speciﬁc business strategies, theboard should proactively engage in the establishment and implementation of a succession plan for the
CEO and other top executives and appropriately oversee the systematic development of succession
candidates, deploying suﬃcient time and resources.

Bridgestone adopted the “Company with Nominating Committee, etc.” model of corporate
governance in March 2016. The Board has subsequently delegated to the Nominating Committee,
which is composed solely of independent directors, the authority to formulate and present
proposals regarding the appointment of Representative Executive Oﬃcers.
The Nominating Committee determines the selection process and qualiﬁcations required ofpotential successors to the position of Representative Executive Oﬃcer, assesses theRepresentative Executive Oﬃcer’s own succession planning, identiﬁes and evaluates candidates
through a process of ongoing discussions of the future strategic directions of the Company withexecutive oﬃcers and corporate oﬃcers, and reports periodically to the Board as required.
21

Principle 4.2 Roles and Responsibilities of the Board (2)The board should view the establishment of an environment that supports appropriate risk-taking by
the senior management as a major aspect of its roles and responsibilities. It should welcome proposals
from the management based on healthy entrepreneurship, fully examine such proposals from an
independent and objective standpoint with the aim of securing accountability, and support timely anddecisive decision-making by the senior management when approved plans are implemented.
Also, the remuneration of the management should include incentives such that it reﬂects mid- tolong-term business results and potential risks, as well as promotes healthy entrepreneurship.

The Company has established and continues to enhance systems and processes necessary forthe promotion and achievement of technological and business model innovation and related
activities entailing appropriate risk taking. In accordance with this, key business policies aredeveloped after thorough deliberation by the Board of Directors – which is composed of amajority of independent directors thus reﬂecting the interests of both shareholders and society
at large – and then implemented by Representative Executive Oﬃcers and Executive Oﬃcers.
The Company remunerates executives including Representative Executive Oﬃcers andExecutive Oﬃcers in part using a Performance Share Unit Plan which is a variable remuneration
linked to and for the purpose of achieving mid-term goals and incentivizing the creation of
long-term corporate value.

Supplementary Principle 4.2.1
The compensation committee should design management remuneration systems such that they
operate as a healthy incentive to generate sustainable growth, and determine actual remuneration
amounts appropriately through objective and transparent procedures. The proportion of management
remuneration linked to mid- to long-term results and the balance of cash and stock should be set
appropriately.

Remuneration for management is comprised of a ﬁxed monthly payment, an annual
performance-based bonus payment, and a Performance Share Unit Plan in which additional
compensation in the form of stock is tied to the degree of achievement of mid-term performancegoals and which is designed to provide management with an incentive to improve the long-termvalue of the Company. The design of the compensation system and speciﬁc remuneration
amounts are deliberated and determined by the Compensation Committee, which is composed
solely of independent directors, based upon consideration of executive compensation survey andother data.

22

Principle 4.3 Roles and Responsibilities of the Board (3)The board should view the eﬀective oversight of the management and directors from an independentand objective standpoint as a major aspect of its roles and responsibilities. It should appropriately
evaluate company performance and reﬂect the evaluation in its assessment of the senior management.
In addition, the board should engage in oversight activities in order to ensure timely and accurate
information disclosure, and should establish appropriate internal control and risk management systems.
Also, the board should appropriately deal with any conﬂict of interests that may arise between thecompany and its related parties, including the management and controlling shareholders.

The Board of Directors evaluates the Company’s performance and reﬂects this evaluation in its
assessment and compensation of management. The Board of Directors also monitors quarterly
ﬁnancial performance and other important performance indicators, and ensures the accurate
and timely disclosure of corporate performance information.
Regarding internal control systems including risk management systems, the Board of
Directors delegates to Representative Executive Oﬃcers the establishment of internal control
systems in accordance with the policies determined by the Board of Directors, and monitors suchexecution by receiving regular reports on the levels of achievement. Through such activities, theBoard of Directors promotes further improvements of the systems.
Moreover, the Company requires that any potential conﬂict of interest trades by management
be approved in advance by the Board. Although the Company does not have a controllingshareholder, it requires that any deals involving an entity holding 5% or more of the Company’s
stock on a voting rights basis be approved in advance by the Board of Directors and that all
directors submit an annual report to the Board regarding whether or not they have participated inany such deals and the nature of any deals in which they were involved.

Supplementary Principle 4.3.1
The board should ensure that the appointment and dismissal of the senior management are based onhighly transparent and fair procedures via an appropriate evaluation of the company’s business results.

Appointments and dismissals of senior management are determined by the Board of Directors
after consideration by the Nominating Committee, which is comprised entirely of independent
directors, upon the basis of the respective individual’s performance and suitability.

Supplementary Principle 4.3.2
Because the appointment/dismissal of the CEO is the most important strategic decision for acompany, the board should appoint a qualiﬁed CEO through objective, timely, and transparent
procedures, deploying suﬃcient time and resources.

23

The Company transitioned to the “Company with Nominating Committee etc.” Model in March2016. The Board has determined that one function of the Nominating Committee, which iscomposed solely of independent directors, is developing proposals regarding the appointment ofRepresentative Executive Oﬃcers.
The Nominating Committee identiﬁes and evaluates adequate successor candidates for
Representative Executive Oﬃcers through sharing management strategy and exchanging
opinions with executive oﬃcers and corporate oﬃcers, and submits a proposal to the Board
regarding the appointment of Representative Executive Oﬃcers.
The Board of Directors subsequently thoroughly deliberates such proposals and makes ﬁnal
decisions at a Board meeting at which the majority of Board members are independent directors.

Supplementary Principle 4.3.3
The board should establish objective, timely, and transparent procedures such that a CEO is
dismissed when it is determined, via an appropriate evaluation of the company’s business results, that
the CEO is not adequately fulﬁlling the CEO’s responsibilities.

Subsequent to adopting the “Company with Nominating Committee etc.” Model in March 2016,
in addition to the proposal of motions for the dismissal of Representative Executive Oﬃcers by aboard member, motions for dismissal may also be proposed by the Nomination, Audit orCompensation Committees as shown in the following diagram. Should such a motion be proposed
it would be deliberated upon by the board, which is made up of a majority of independent
directors.

Member of Board

Article 366 of Companies Act andInternal Rules on the Board of Directors

Member of
Nominating Committee

Nominating Committee

Member of
Audit Committee
Member ofCompensation Committee

Calling ofCommittee(Internal Rulesof Each Committee)

Audit Committee
Compensation Committee

Board of Directors
Calling of
the Board(Article 417 ofCompanies Act)

8 of 11 directors are
independent direstors

Supplementary Principle 4.3.4
The establishment of eﬀective internal control and proactive risk management systems forcompliance and ﬁnancial reporting has the potential of supporting sound risk-taking. The board should
place priority on the appropriate establishment of such systems and the oversight of whether theyeﬀectively operate, and should not limit itself to the examination of compliance with respect to speciﬁcbusiness operations.

The Board of Directors reviewed the policies for internal control systems including risk
management systems and, on March 23, 2018, determined the updated policies.
24The Board of Directors also delegates to Representative Executive Oﬃcers the establishmentof internal control systems in accordance with the policies determined by the Board of Directors,
and monitors such execution by receiving regular reports on the levels of achievement.

Principle 4.4 Roles and Responsibilities of the Member ofthe Audit Committee and the Audit Committee
The audit committee should bear in mind their ﬁduciary responsibilities to shareholders and makedecisions from an independent and objective standpoint when executing their roles and responsibilities
including the audit of the performance of directors’ duties, appointment and dismissal of external
auditors and the determination of auditor remuneration.
Although so-called “defensive functions,” such as business and accounting audits, are part of theroles and responsibilities expected of the member of the audit committee and the audit committee, inorder to fully perform their duties, it would not be appropriate for the member of the audit committee
and the audit committee to interpret the scope of their function too narrowly, and they should
positively and proactively exercise their rights and express their views at board meetings and to the
management.

The Audit Policy set out annually by the Audit Committee states that it should perform its
duties from an independent and unbiased perspective and contribute to the sound developmentof the Company. In accordance with this policy the Audit Committee supervises the performanceof directors, sets the compensation for and appoints and dismisses External Accounting Auditors.
Additionally, the Audit Committee actively collects information and voices its opinion atmeetings of the Board of Directors in accordance not only with issues of legality but also in
regards to the adequacy of policies and deliberations.

Supplementary Principle 4.4.1
Given that more than half of the Audit Committee must be composed of outside director and that thesystem needed to execute the duties must be decided in board of directors in accordance with theCompanies Act, the audit committee should, from the perspective of fully executing its roles andresponsibilities, increase its eﬀectiveness through an organizational combination of the independenceof the former and the information gathering power of the latter. In addition, the member of audit
committee or the audit committee should secure cooperation with outside directors who are not themember of audit committee so that such directors can strengthen their capacity to collect information
without having their independence jeopardized.

The Company, as a “Company with Nominating Committee, etc.” in accordance with theCompanies Act of Japan, has established an Audit Committee comprised of a majority of
independent directors. In addition, in order to enhance the Audit Committee’s capacity to collectinformation, two of the committee members are currently full-time appointees who attend
25

important corporate meetings in addition to Board Meetings, receive regular reports fromexecutives, attend meetings held in operating divisions and actively engage in the collection of
information within the company. In order to assist the Audit Committee the Company has
appointed a full-time executive oﬃcer in charge of audits who is in charge of the Auditing
Department established to support the Audit Committee. Information gathered by the full-time
audit committee members, along with that gathered by the executive oﬃcer in charge of audits,
is reported to the Audit Committee in order to enhance the eﬀectiveness of audits by promoting
the objectivity and impartiality of their deliberations.
Moreover, in addition to the regular reports on Audit Committee activities to the Board of
Directors, access to information by independent directors not serving on the Audit Committee isprovided through committees and other meetings comprised exclusively of independent
directors.

Principle 4.5 Fiduciary Responsibilities of Directors
With due attention to their ﬁduciary responsibilities to shareholders, the directors and the
management of companies should secure the appropriate cooperation with stakeholders and act in theinterest of the company and the common interests of its shareholders.

There are currently eight Independent Directors serving on the Board. Each Independent
Director actively participates in Board and committee meetings and promotes the considerationof shareholder and stakeholder interests. All Directors and Executive Oﬃcers act in the interestof the Company and its shareholders in accordance with the business policies and strategicplans determined by the Board.

Principle 4.6 Business Execution and Oversight of the Management
In order to ensure eﬀective, independent and objective oversight of the management by the board,
companies should consider utilizing directors who are neither involved in business execution nor haveclose ties with the management.

Among the eleven directors currently serving on the Board, nine are non-executive directors
including eight who qualify as Independent Non-Executive Directors.

26

Principle 4.7 Roles and Responsibilities of Independent Directors
Companies should make eﬀective use of independent directors 6 , taking into consideration the
expectations listed below with respect to their roles and responsibilities:i) Provision of advice on business policies and business improvement based on their knowledge andexperience with the aim to promote sustainable corporate growth and increase corporate value
over the mid- to long-term;ii) Monitoring of the management through important decision-making at the board including theappointment and dismissal of the senior management;iii) Monitoring of conﬂicts of interest between the company and the management or controllingshareholders; andiv) Appropriately representing the views of minority shareholders and other stakeholders in theboardroom from a standpoint independent of the management and controlling shareholders.
6 Independent director: The listing rules of securities exchanges provide that the outside directors, as deﬁned in the Companies Act, areindependent directors where they satisfy independence criteria of securities exchanges and the company determines that they do not have thepossibility of conﬂicts of interest with its shareholders.

In addition to the establishment of a Governance Committee as an advisory committee to theBoard of Directors comprised entirely of Independent Directors, the Company strives to promote
the role of Independent Directors by the following means:i) The Company strengthens its corporate governance by nominating independent directors witha wealth of experience and expertise from a wide variety of diﬀerent backgrounds anddisciplines to deliberate management policies and strategies at the Board level.
ii) Executive oﬃcers are nominated and dismissed by the Board in accordance with thedeterminations of the Nominating Committee which is comprised exclusively of Independent
Directors.
iii) In accordance with the Regulations of the Board of Directors the Company requires that any
outside transactions by executive oﬃcers and Directors including Independent Directors that
may constitute a potential conﬂict of interest with the Company be approved in advance by the
Board and subsequently monitored. Although the Company does not have a controllingshareholder, it requires that any transactions involving an entity holding 5% or more of theCompany’s stock on a voting rights basis be approved of in advance by the Board of Directors
and that all directors submit a report to the Board on an annual basis regarding whether or
not they have been involved in any such transactions.
iv) In order to ensure the objectivity of external directors the Company has established its own
Independence Standard. Currently eight Independent Directors serve on the Board of which alleight meet the conditions set forth under this standard for independence thereby ensuringthat they objectively represent the interests of shareholders and other stakeholders and haveno conﬂicts of interest with general shareholders.

27Principle 4.8 Eﬀective Use of Independent Directors
Independent directors should fulﬁll their roles and responsibilities with the aim of contributing tosustainable growth of companies and increasing corporate value over the mid- to long-term. Companies
should therefore appoint at least two independent directors that suﬃciently have such qualities.
Irrespective of the above, if a company believes it needs to appoint at least one-third of directors as
independent directors based on a broad consideration of factors such as the industry, company size,
business characteristics, organizational structure and circumstances surrounding the company, it should
appoint a suﬃcient number of independent directors.

Currently, eight members of the board qualify as Independent Directors.

Supplementary Principle 4.8.1
In order to actively contribute to discussions at the board, independent directors should endeavor toexchange information and develop a shared awareness among themselves from an independent andobjective standpoint. Regular meetings consisting solely of independent directors (executive sessions)would be one way of achieving this.

As a “Company with Nominating Committee, etc.”, Independent Directors comprise the majorityof both the Company’s Board of Directors and, Audit Committee, while the Nominating,Compensation and other discretionary committees are comprised entirely of Independent
Directors thus enabling a higher level of information exchange and opportunities to shareawareness between independent directors.

Supplementary Principle 4.8.2
Independent directors should endeavor to establish a framework for communicating with the
management and for cooperating with the member of the audit committee or the audit committee by,for example, appointing the lead independent director from among themselves.

Meetings are held on a regular basis between Independent Directors and members ofcorporate management in order to ensure a suﬃcient degree of information exchange.

Principle 4.9 Independence Standards and Qualiﬁcation for
Independent Directors
Boards should establish and disclose independence standards aimed at securing eﬀective independence
of independent directors, taking into consideration the independence criteria set by securities exchanges.
The nominating committee should endeavor to select independent director candidates who are expected tocontribute to frank, active and constructive discussions at board meetings.

28

The Company has established its own Standards of Independence entitled the “Guidelines fordetermining whether outside directors are suﬃciently independent” which has been ﬁled with theTokyo Stock Exchange and made publicly available on the corporate website:
https://www.bridgestone.com/corporate/library/corporate_governance/pdf/Guidelines_for_Determi
ning_Whether_Outside_Directors_are_Suﬃciently_Independent.pdf
To further enhance corporate governance, the Nominating Committee selects candidates withextensive experience and who are expertly qualiﬁed in a wide variety of diverse backgrounds anddisciplines for Board membership.

Principle 4.10 Use of Optional Approach
In adopting the most appropriate organizational structure (as stipulated by the Companies Act) thatis suitable for a company’s speciﬁc characteristics, companies should employ optional approaches, asnecessary, to further enhance governance functions.

The company has adopted the governance model of the “Company with Nominating Committee,etc.” and, in addition to the mandatory committees required within this model, has established
Governance and Compliance Committees to serve as advisory committees to the Board in orderto further enhance the input from Independent Directors.

Supplementary Principle 4.10.1
If the organizational structure of a company is either Company with Kansayaku Board or Company
with Supervisory Committee and independent directors do not compose a majority of the board, inorder to strengthen the independence, objectivity and accountability of board functions on the mattersof nomination and remuneration of the senior management and directors, the company should seek
appropriate involvement and advice from independent directors in the examination of such importantmatters as nominations and remuneration by establishing independent advisory committees under theboard, such as an optional nomination committee and an optional remuneration committee, to which
independent directors make signiﬁcant contributions.

This principle does not apply to the Company since it has adopted the “Company with
Nominating Committee, etc.” model of corporate governance.

29

Principle 4.11 Preconditions for Board and Audit Committee EﬀectivenessThe board should be well balanced in knowledge, experience and skills in order to fulﬁll its roles andresponsibilities, and it should be constituted in a manner to achieve both diversity, including gender andinternational experience, and appropriate size. In addition, persons with appropriate experience andskills as well as necessary knowledge on ﬁnance, accounting, and the law should be appointed as themember of the audit committee. In particular, at least one person who has suﬃcient expertise on
ﬁnance and accounting should be appointed as the member of the audit committee.
The board should endeavor to improve its function by analyzing and evaluating eﬀectiveness of theboard as a whole.

The Board of Directors is currently comprised of two internal directors concurrently serving as
Representative Executive Oﬃcers, one non-executive internal director (non-independent), andeight Independent Directors. In order to achieve a balance in terms of expertise, experience,
gender and perspective, and to maintain a board composition capable of realizing the Mission
and strategy of the Company, board members are nominated in order to maintain a balanced
portfolio across a comprehensive range of professional and academic ﬁelds including
management, ﬁnance, accounting and law.
The background and expertise of independent directors are summarized in Section 5 (Oﬃcers)
and Section 6 (Corporate Governance) Item 2 (Independent Directors) in the Company’s Annual
Securities Report (as required by the Financial Instruments and Exchange Law of Japan).
https://www.bridgestone.co.jp/ir/library/securities/pdf/100.pdf
The Board of Directors engages in the ongoing analysis and evaluation of the eﬀectiveness ofthe board’s deliberations – including those of the advisory committees – as part of its eﬀorts tofurther strengthen and promote eﬀective corporate governance.

Supplementary Principle 4.11.1
The nominating committee should have a view on the appropriate balance between knowledge,
experience and skills of the board as a whole, and also on diversity and appropriate board size.
Consistent with its view, the board should establish policies and procedures for nominating directors
and disclose them along with its view.

The Nominating Committee by selecting internal directors who serve as representative
executive oﬃcers, non-executive internal directors who serve as full-time members of the Audit
Committee, and Independent Directors with extensive experience and expertise from a wide
variety of disciplines and ﬁelds, seeks to maintain diversity and, at the same time, overall balancein board membership composition. Additionally, it is the basic policy of the Company that theBoard should be of suﬃcient size so as to enable adequate debate and deliberation.
The policies and procedures for nominating directors are set out in principle 3-1 (iv).

30Supplementary Principle 4.11.2
Outside directors and other directors should devote suﬃcient time and eﬀort required toappropriately fulﬁll their respective roles and responsibilities. Therefore, where directors also serve as
directors, kansayaku or the management at other companies, such positions should be limited to areasonable number and disclosed each year.

As disclosed in the Annual Business Report and reference documents distributed at the Annual
General Shareholders’ Meeting, the attendance rate for all external directors during 2018 washigh thus facilitating both active and objective deliberations at all board meetings.
As part of the process for considering candidates for nomination to the board their concurrent
commitments to other companies and organizations, including board memberships, are reviewed
and taken into consideration. Other commitments for all directors are reviewed annually andreported in the Annual Business Report.

Supplementary Principle 4.11.3
Each year the board should analyze and evaluate its eﬀectiveness as a whole, taking into
consideration the relevant matters, including the self-evaluations of each director. A summary of theresults should be disclosed.

In order to strengthen its corporate governance and promote the speed of business execution
the Company has regularly reviewed its governance performance and continually implements
reforms to its governance systems and processes (as a part of this process the Company
introduced Independent Directors in 2010, and between 2013 and 2014 established Nominating,Compensation, Governance and Compliance committees as advisory committees to the board,and adopted the “Company with Nominating Committee, etc.” model of corporate governance in2016).
Building upon these enhancements the scope for the evaluation of Board eﬀectiveness has
been taken to include not only the Board and the committees required under the “Company with
Nominating Committee, etc.” Model (Nominating, Auditing and Compensation Committees) but
also the advisory committees (Governance and Compliance Committees). With the objective ofstrengthening corporate governance, the entire scope of board functions (the Board and all ﬁve
committees – both legally required and advisory) is subject to annual evaluation in a process
which involves a review of all board deliberations and their outcomes and self-evaluations of all
directors. The following diagram illustrates the structure and scope of this evaluation process.

31

Diagram of Board Evaluation Scope
General Meeting of Shareholders
Board of Directors (11) (includes 8 outside directors)
Inquiry

Audit Committee

ReportAdvisory Committee to theBoard of Directors
Governance Committee
Compliance Committee

Compensation Committee

Management OversightOperational execution
Executive Oﬃcers (8)(including three foreign members)

Corporate Oﬃcer responsible
for Internal Auditing
Internal Auditing Oﬃce

Internal
Audit

Accounting
audit

Representative Executive Oﬃcers (3)COO

Global EXCO
Executive Oﬃcers and Corporate Oﬃcers (12)(including six foreign members)

CEO

Independent Auditors

Nominating Committee

Vice Chair
Other policy management meetings
Oﬃcer Nomination andCompensation Meeting

SBUs (Strategic Business Unit)
Domestic / overseas groupcompanies & internal companies
CEO

GBS
Support (Global Business Support)

COO

Internal Control Systems

The Board evaluation process requires the Board and each Committee to complete a formal
self-evaluation process the results of which are then submitted to the Board where the overall
eﬀectiveness of the Board’s operation and governance performance level is evaluated. The preceding
diagram illustrates the overall schedule and procedure of this evaluation process.
As a result of this Board evaluation it has been determined that decision-making ensurestransparency and that the oversight functions of the Board are being carried out through timely reports
to the Board for deliberation, productive discussions among members of the Board, active
deliberations at Board meetings taking the various perspectives of external independent directors into
account and the ongoing eﬀorts of the legally- required and advisory committees to create anorganization of global awareness.
Also, in 2018 the Board revised the planning process for the mid-term management plan anddelegated some of its managerial authority to executive management resulting in the enhanced speedof business execution. Concurrently, information sharing between the Board and the operating
divisions, including the communication of priority issues related to business execution and reporting byRepresentative Executive Oﬃcers regarding deliberations of the Global EXCO has been further
improved, and the Board is able to put even greater focus on deliberations concerning management
strategy. From now on the Board, in eﬀorts to improve the Company ever further, is addressing theenhancement of governance and continuous improvement of all the functions of the Board of Directors.

32

Principle 4.12 Active Board Deliberations
The board should endeavor to foster a climate where free, open and constructive discussions andexchanges of views take place, including the raising of concerns by outside directors.

The Company provides preliminary brieﬁng sessions for independent directors pertaining to all
items tabled on the Board agenda and, where necessary, holds special joint brieﬁng meetings on
issues of importance in order to promote full understanding among independent directors of all
business and related issues salient to items for deliberation or reporting and thus promoterigorous debate and deliberation among all directors at Board meetings.

Supplementary Principle 4.12.1
The board should ensure the following in relation to the operation of board meetings and shouldattempt to make deliberations active:i) Materials for board meetings are distributed suﬃciently in advance of the meeting date;ii) In addition to board materials and as necessary, suﬃcient information is provided to directors by
the company (where appropriate, the information should be organized and/or analyzed topromote easy understanding);iii) The schedule of board meetings for the current year and anticipated agenda items are determinedin advance;iv) The number of agenda items and the frequency of board meetings are set appropriately; andv) Suﬃcient time for deliberations

The Company endeavors to promote open and comprehensive deliberations by the Board of
Directors by the following means:i) As stipulated in internal regulations, material relating to Board agenda items must be
delivered to Directors at least two days in advance.
ii) The Corporate Planning Division implements preliminary brieﬁng sessions on Board agenda
items for independent directors and responds to all questions and requests for additional
information arising therefrom. In addition, when deemed necessary, special joint brieﬁng
meetings on issues pertinent to Board agenda items or concerns are held in order to further
enhance the information available to Board members.
iii) The annual schedule of the Board of Directors and the regular agenda items to be deliberated
at each meeting are determined by the end of the previous year after coordination andconsultation in advance with all Board members.
iv) The Company sets guidelines deﬁning issues that must be submitted to the Board of
Directors and plans the agenda and frequency of Board meetings accordingly.
v) The Company allocates time for deliberation for each Board meeting, based upon the timerequired to deliberate similar agenda in the past where appropriate. In cases where
deliberations cannot be concluded within the allocated time frame, they will continue until
such time as they can be concluded satisfactorily.
33

Principle 4.13 Information Gathering and Support Structure
In order to fulﬁll their roles and responsibilities, directors should proactively collect information, andas necessary, request the company to provide them with additional information.
Also, companies should establish a support structure for directors, including providing suﬃcient staﬀ.
The board should verify whether information requested by directors is provided smoothly.

Board members obtain information through regular executive reports to the Board andCommittees and are able to request any additional information they may deem necessary for the
fulﬁllment of their roles and responsibilities. The Board and relative Committees actively monitor
the quality and speed of responses to these requests for additional information.
In addition, in order to promptly and fully respond to requests for support and informationfrom Independent Directors the Company provides administrative and clerical support via thecorporate planning division and internal auditing oﬃce.

Supplementary Principle 4.13.1
Directors, including outside directors, should request the company to provide them with additional
information, where deemed necessary from the perspective of contributing to transparent, fair, timely
and decisive decision-making. In addition, the member of the audit committee, including the outside
directors, should collect information appropriately, including the use of their statutory investigation
power.

Directors may at any time request additional information from the Corporate Planning Division
and all executive and operating divisions are required to respond promptly to all such requests.
In addition, members of the Audit Committee share among themselves information which they
may have gained independently or through the support of the internal auditing oﬃce.

Supplementary Principle 4.13.2
Directors should consider consulting with external specialists at company expense, where they deem
it necessary.

The company provides Directors with access at corporate expense to external experts
including consultants and lawyers at their request.

34

Supplementary Principle 4.13.3
Companies should ensure coordination between the internal audit department and directors. In
addition, companies should take measures to adequately provide necessary information to outside
directors. One example would be the appointment of an individual who is responsible for communicatingand handling requests within the company such that the requests for information about the company byoutside directors are appropriately processed.

In order to promote coordination between the internal auditing oﬃce and directors theCompany appoints a full-time executive oﬃcer in charge of auditing in order to support the Audit
Committee. In addition, in order to promptly and fully respond to requests for support andinformation from Independent Directors the Company provides administrative and clericalsupport via the corporate planning division.

Principle 4.14 Director Training
New and incumbent directors should deepen their understanding of their roles and responsibilities asa critical governance body at a company, and should endeavor to acquire and update necessary
knowledge and skills. Accordingly, companies should provide and arrange training opportunities
suitable to each director along with ﬁnancial support for associated expenses. The board should verify
whether such opportunities and support are appropriately provided.

Directors are given brieﬁngs regarding their responsibilities, corporate policies andprocedures, and provided opportunities to enhance understanding of their roles andresponsibilities through training sessions, and factory and facility visits at the Company’s
expense. The Board of Directors formally reviews the eﬀectiveness of these training activities onan annual basis.

Supplementary Principle 4.14.1
Directors, including outside directors, should be given the opportunity when assuming their position
to acquire necessary knowledge on the company’s business, ﬁnances, organization and other matters,
and fully understand the roles and responsibilities, including legal liabilities, expected of them.
Incumbent directors should also be given a continuing opportunity to renew and update such knowledge
as necessary.

The Company provides newly appointed Members of the Board and Executive Oﬃcers with
brieﬁngs regarding the Company’s mid-term business plan, business operations, responsibilities
and rights of board members and other relevant policies and procedures before appointment. In
addition to training sessions for Members of the Board and Executive Oﬃcers held once every
two months, opportunities to visit the company factories and facilities are also provided.
35

Supplementary Principle 4.14.2
Companies should disclose their training policy for directors.

In order to enable directors to fully exercise their supervisory function the Company provides
newly appointed directors with detailed brieﬁngs regarding the Company’s midterm plan,
operations, the responsibilities of directors as set forth within the Corporate Regulations for
Directors and other relevant regulations. Subsequent to their appointment, all directors areinvited to participate in regular training sessions covering a variety of topics chosen to promote
their understanding of issues with relevance to the company’s activities. Independent Directors
also participate in regular site visits to factories and corporate facilities in order to promote theirunderstanding of the environment and issues facing the Company. Additional training sessions
may be held at the request of directors on an ad hoc basis regarding topics deemed relevant.

36Section 5: Dialogue with Shareholders
General Principle 5
In order to contribute to sustainable growth and the increase of corporate value over the mid- tolong-term, companies should engage in constructive dialogue with shareholders even outside thegeneral shareholder meeting.
During such dialogue, senior management and directors, including outside directors, should listen to theviews of shareholders and pay due attention to their interests and concerns, clearly explain business
policies to shareholders in an understandable manner so as to gain their support, and work for developing
a balanced understanding of the positions of shareholders and other stakeholders and acting accordingly.

In order to achieve sustainable growth and enhance corporate value over the mid to long term,
the Company considers that it is important to consider the opinions and expectations ofshareholders when formulating business policies.
The Company has therefore established a specialist department to manage IR (Investor
Relations) which, by facilitating discussions with shareholders and investors by both individualand ﬁnancial performance meetings for analysts, aims to promote better understanding of theCompany’s business strategy and establish a system whereby it can respond appropriately to theopinions and expectations voiced by shareholders.

Principle 5.1 Policy for Constructive Dialogue with Shareholders
Companies should, positively and to the extent reasonable, respond to the requests from shareholders toengage in dialogue (management meetings) so as to support sustainable growth and increase corporate
value over the mid- to long-term. The board should establish, approve and disclose policies concerning themeasures and organizational structures aimed at promoting constructive dialogue with shareholders.

The Company has established a department speciﬁcally to respond to requests for individual
meetings with shareholders. The Company not only holds ﬁnancial performance meetings foranalysts and discussions with investors but also oﬀers plant visits and a range of opportunities
to promote dialogue with shareholders. The corporate policy for promoting dialogue withshareholders is as follows:
The Company proactively engages in dialogue with shareholders and investors in order toachieve sustainable business growth and enhance corporate value over the mid to long term.
In order to promote constructive engagement with shareholders and investors in addition to
engaging in the fair and impartial disclosure of information in accordance with Japan’s Financial
Instruments and Exchange Act and the regulations of stock exchanges where the Company’s
shares are listed, it is the basic policy of the Company that, even in the absence of such legal
requirements, information considered by the Company to be of relevance to shareholders and37

In this manner the Company seeks to promote the understanding of its performance andoperations in order that its corporate value be accurately assessed.
The Company has established a dedicated IR unit reporting directly to the CFO to manage
relations with shareholders and investor dialogue. Coordinating on an ongoing basis with the
Corporate Planning, General Aﬀairs, Finance, Legal, Public Relations, and Sales departments the
IR Unit serves to promote constructive dialogue with shareholders by disclosing not only ﬁnancial
data but also information of a non-ﬁnancial nature.
In addition to regular communication with domestic and overseas investors in order topromote their understanding of business strategies, ﬁnancial conditions, and operations, theCompany also conducts quarterly press meetings regarding its ﬁnancial results for institutional
investors, and also organizes small meetings and factory visits. Additional opportunities whereby
the CEO and CFO visit investors within Japan and overseas in order to facilitate directcommunication are also being organized. Communication with individual shareholders is also
being promoted by the release of materials related to quarterly ﬁnancial performance meetings
and audio recordings of those meetings including questions and answer periods, and press
releases on the corporate website.
Information from shareholders obtained through these activities are compiled into reports
which are reviewed and discussed at internal meetings held at relevant departments,
transmitted to executive management and reported to the Board.
In addition to IR activities the Company also engages in Shareholder Relations (SR) activities
whereby representatives of the Company will visit shareholders in order to explain the
Company’s business policies, approach towards and structure of governance, and corporate
proposals for the Annual General Shareholders’ Meeting.
However, the Company does not engage in shareholder and or investor dialogue in periods
preceding earnings announcements in order to avoid the risks related to insider information andhas established rules and procedures for the internal management of potential insider
information.

Supplementary Principle 5.1.1
Taking the requests and interests of shareholders into consideration, to the extent reasonable, thesenior management and directors, including outside directors, should have a basic position to engage indialogue (management meetings) with shareholders.

The IR department is responsible for facilitating dialogue with shareholders. In cases where it isdeemed necessary members of the Board of Directors including the CEO and/or CFO may
participate in meetings with shareholders depending upon the nature of requests, objectives andcontent of the topics to be discussed.

38

Supplementary Principle 5.1.2
At minimum, policies for promoting constructive dialogue with shareholders should include thefollowing:i) Appointing a member of the management or a director who is responsible for overseeing andensuring that constructive dialogue takes place, including the matters stated in items ii) to v)
below;ii) Measures to ensure positive cooperation between internal departments such as investor relations,
corporate planning, general aﬀairs, corporate ﬁnance, accounting and legal aﬀairs with the aim ofsupporting dialogue;iii) Measures to promote opportunities for dialogue aside from individual meetings (e.g., generalinvestor meetings and other IR activities);iv) Measures to appropriately and eﬀectively relay shareholder views and concerns learned throughdialogue to the senior management and the board; andv) Measures to control insider information when engaging in dialogue

The Company policy for the promotion of constructive dialogue with shareholders is outlined
above in Principle 5-1.

Supplementary Principle 5.1.3
Companies should endeavor to identify their shareholder ownership structure as necessary, and it isdesirable for shareholders to cooperate as much as possible in this process.

The Company conducts regular surveys twice yearly to determine shareholder composition.
The information thus obtained is used for IR activities both overseas and domestically.

Principle 5.2 Establishing and Disclosing Business Strategies and Business Plans
When establishing and disclosing business strategies and business plans, companies should articulate
their earnings plans and capital policies, and present targets for proﬁtability and capital eﬃciency after
accurately identifying the company’s cost of capital. Also, companies should provide explanations that areclear and logical to shareholders with respect to the allocation of management resources, such as
reviewing their business portfolio and investments in ﬁxed assets, R&D, and human resources, andspeciﬁc measures that will be taken in order to achieve their plans and targets.

The Company formulates a mid-term business plan and, through ﬁnancial performancemeetings, meetings with investors and other opportunities, provides explanations on mid tolong-term policy and strategy, in addition to targets for return on equity (ROE), return on assets(ROA), and ratio of operating proﬁt on sales which it discloses along with reports on progress todate regarding priority issues. The priority issues are (1) Cultivating global corporate culture, (2)Developing human resources capable of global management, and (3) Upgrading the global
management structure, and details regarding the measures being taken to manage them.
39

[Attachment] Principle 3.1 iii)
A. Policy for setting directors’ and executive oﬃcers’ remuneration
The Company has adopted “Principles for Remuneration Setting,” with four elements: to attract
and cultivate superior talent, to support a competitive remuneration level, to provide motivation
for the execution of business strategies, and to provide motivation for enhancing shareholder
value. Based on these principles, the Company sets the remuneration for directors and executiveoﬃcers in accordance with their respective business size and performance, commensurate with
their tasks and responsibilities, and also in consideration of the remuneration levels of othermajor global companies in Japan which are selected considering their sales, overseas sales ratio
and operating proﬁt ratio as appropriate comparators.
a. Remuneration for directors• Remuneration for directors who are concurrently oﬃcers is comprised of ﬁxed payments
and variable payments. Fixed payments are composed of base reward for businessexecution, an allowance for directors commensurate with their tasks andresponsibilities, and an allowance for executive oﬃcers commensurate with their tasks
and responsibilities. Variable payments are composed of bonuses vary depending on the
Company’s performance, and a Performance Share Unit Plan.
• Remuneration for directors who are not oﬃcers is comprised of ﬁxed payments by basereward and allowance for directors. This remuneration system takes into considerationthat they contribute to mid- to long-term business results and corporate value bymonitoring business operation at the positions separated from business operation.
Directors who are not oﬃcers are independent directors, and internal directors who
perform audits and other duties on the performance of oﬃcers and directors.
b. Remuneration for executive oﬃcers• Remuneration for executive oﬃcers is comprised of ﬁxed payments and variable
payments. Fixed payments are comprised of base reward for business execution and anallowance for executive oﬃcers. Variable payments are composed of bonuses varydepending on the Company’s performance, bonuses vary depending on the performanceby their business responsibilities, and the Performance Share Unit Plan.
*The Company has discontinued stock-compensation-type stock options, and has newly
initiated a performance-based stock compensation plan named Performance Share Unit
Plan (“PSU”) since March 2018. The Company expects that initiating the PSU, in which thenumber of stocks issued as remuneration vary depending on the Company’s
performance, contributes to incentivizing and motivating directors and oﬃcers who are
authorized to perform business operation to achieve mid-term goals and improve
long-term corporate value. The PSU would also contribute to sharing risk and rewards ofthe change in stock price between shareholders and directors and oﬃcers by holding
shares while being in oﬃce.

40

*Percentages of each remuneration type for directors who are concurrently oﬃcers (in casewhere the performance-based remunerations were in the range of base amount) are in
the following. If a director or oﬃcer is concurrently a director or oﬃcer of a subsidiaryand remunerated from the subsidiary, there may be a case that the following percentage
is not applied.
Fixed Remuneration:
Monthly remunerations (Base payment, and additional payment for directors and oﬃcers):
30%-44%
Variable Remuneration:
Short-term incentives (group-wide performance-based bonus, performance-based bonus
in its responsible area): 29-38%
Long-term incentives (performance-based stock compensation plan): 26-32%
B. Process for setting directors’ and executive oﬃcers’ remuneration• The Compensation Committee determines directors’ and executive oﬃcers’ individual
remuneration. The committee consists of only outside directors. The committee determines thepolicies on directors’ and executive oﬃcers’ remuneration. Based on the policies, the committee
deliberates on remuneration including composition grades and levels. The committee alsodeliberates the remuneration of directors’ and executive oﬃcers’ paid by group subsidiarycorporations in the case where they concurrently serve as executives in group subsidiarycorporations.

41