Co-Creation
CorporateGovernance

Co-Creation Corporate Governance

MARUI GROUP Corporate Governance Guidelines
www.0101maruigroup.co.jp/pdf/cgg_20180625_en.pdf
Corporate Governance Reportwww.0101maruigroup.co.jp/pdf/cgr_en.pdf

Corporate Governance for Co-Creating Corporate ValueMARUI GROUP conducts co-creation sustainability
management to co-create the happiness of all
stakeholders with the aim of improving its corporate value
over the medium-to-long term. Strengthening corporate
governance through co-creation sustainability
management is crucial to MARUI GROUP in its quest toachieve harmony between the interests of all stakeholders.
As a Company with Company Auditor(s), as
described in the Companies Act of Japan, MARUIGROUP has in place its Board of Directors and Audit &Supervisory Board. In addition, the Company hasDirectors

Audit &Supervisory Board Members

7

External(Independent)

established the Management Committee, the highest
decision-making body; the Nominating andCompensation Committee; seven committees thatmanage risks pertaining to environmental, social, andgovernance (ESG) issues, among others; and theCompliance Promotion Board, which oversees thesecommittees. Following the expiration of the term offormer external director Koichiro Horiuchi (appointed inJune 2008), the Company appointed one new external
director in June 2018.

4

Executive Officers

External(Independent)

3

Nominating andCompensation
Committee Members

16

3

2

The major agenda items discussed by the Board of Directors in the fiscal year ended March 31, 2018, are detailed in thetable below. In addition to resolutions and reports, time was allocated for free and open discussion and exchanges of
opinion regarding issues pointed out by external directors and ESG and other themes related to long-term improvementsin corporate value.
Resolutions and Reports

First Quarter32• Progress of growth investments• Abolition of takeover defense measures• Distribution of shareholders• Audit plans for Audit & Supervisory Board
Second Quarter • Cross-shareholdings and sales policies• Fund procurement policies

Third Quarter

External(Independent)

FemaleAgenda Items Discussed by the Board of Directors • Revision of MARUI GROUP Code of Conduct• Establishment of Groupwide policies• Progress of official Groupwide project teams• Establishment of securities business• Progress of Co-Creation Management
Academy (CMA)Fourth Quarter • Participation in Japan Deep Learning
Association• Revision of human resource systems
related to spouses
EXAMPLE• Results of evaluations of the effectiveness ofthe Board of Directors• Performance-linked bonuses for directors• Initiatives with external experts•R evision of human resource systems• Review of Ordinary•R evision of labor agreements (change in sysGeneral Meeting oftems related to LGBT community and childcare) Shareholders• Reports from Compliance Promotion Board• Overview of co-creation sustainability
explanatory forum• New businesses• Policies for Management Committee andother committees• Fund procurement policies• Anime business services• Acquisition of certification from Science
Based Targets for greenhouse gas targets• Corporate governanceinitiatives

Transcript of Board of Directors’ Discussion

Ordinary General Meeting of Shareholders
Appoint / Dismiss

Appoint / Dismiss
Coordinate

Audit &Supervisory Board

Appoint / Dismiss
Select / Discharge

Audit

Board of Directors
ReportNominating andCompensation
Committee

ManagementCommittee

DirectPresident

ReportReportCompliance Promotion Board
Chairman: Representative Director,Representative Executive Officer
Members: 14 (including 3 directors and 2 Audit & Supervisory Board members)
ReportPublic Relations IR Committee
Chairman: PresidentInternal Control Committee
Chairman: Senior Managing Executive Officer
Environment CSR Promotion Committee
Chairman: Managing Executive Officer
Personal Information Protection Promotion Committee Chairman: Managing Executive Officer
Information Security Committee
Chairman: Managing Executive Officer
Safety Control Committee
Chairman: Senior Executive Officer
Insider Trading Prevention Committee
Chairman: Senior Managing Executive Officer

Members: 9Members: 14
Members: 10Members: 9Members: 9Members: 13
Members: 6

Report / Participate

Legal AdvisorAudit Department• Executive in charge of audits• Executive in charge of internal control

Consult

General Affairs Department• Executive in charge of legal affairs• Executive in charge of personal
information protection

Committee Membershipwww.0101maruigroup.co.jp/pdf/committee_members_en.pdf

90

Audit
Internal
Notification
SystemHead Office
Divisions
ReportConsult

Group Companies
Stores / Specialty Stores / Offices

Communicate

Coordinate

Audit

Accounting Auditor

Committees

MARUI GROUP Code of Conduct

ReportDiscussion Themes• Preparation for Ordinary
General Meeting ofShareholders• Evaluation of the Board ofDirectors

The following is an abridged transcript of a discussion by theBoard of Directors regarding MARUI GROUP’s potential entry
into the securities business prior to it being put to resolution.
   
Kato: The main point of this business is the purchase of investment trusts with credit cards. Generally, it is not possible to purchase investment trusts with credit cards. However, I learned
that trusts can be purchased using credit cards if it is for cumulative investments through a securities company. I thus sought tocommercialize this scheme.
Muroi: Financial inclusion has significant strategic and social
meaning. I therefore think we should go through with this business. It is my understanding, though, that Tsumitate NISA offers
only very limited investment trust fees. We will need to rigorously
control fixed and variable costs after formulating business plans.

Okajima: Promoting EPOS cards is not the purpose of this business. Marketing and public relations activities will therefore need
to be geared toward making finance a more familiar concept.
Organization structures will also be important, and you will probably have to recruit specialized talent from outside of theCompany; these people must share MARUI GROUP’s principles.
Aoi: That is definitely important. The candidates we are considering now do not just boast specialized knowledge; they also
share our vision of creating an asset building culture that facilitates financial inclusion of younger generations and everyone
else.
Okajima: Long-term investment is a business that requires
long-term commitment and bears the risk of damaging a company’sreputation. Exit conditions should probably be defined aheadof time.
Kato: We will consider such conditions as we formulate businessplans.
Muroi: Investors consider the social meaning of businesses aswell as whether investments will harm corporate value. Most of
the industry thinks that Tsumitate NISA is not profitable. We will
therefore need to be able to explain our business based on anoverarching scenario that includes its synergies with otherbusinesses.
Aoi: That is the reason we are so committed to investment using
credit cards. This scheme allows us to explain how we expect
earnings from the securities business itself as well as fromimproved LTV for the Group.

91

Co-CreationCorporateGovernanceInitiatives for Reinforcing Corporate Governancewww.0101maruigroup.co.jp/en/sustainability/theme04/governance.html

Evaluations of the Board of Directors’ Effectiveness The Company has been performing annual evaluations of
the Board of Directors’ effectiveness since the fiscal year
ended March 31, 2016, with the aim of improving theeffectiveness of the Board of Directors. In these evaluations, all directors and Audit & Supervisory Board members complete a self-evaluation survey of theeffectiveness of the Board of Directors with regard tosuch aspects as the scale and composition of the Boardof Directors, operating procedures, decision-making processes, and roles and responsibilities. Based on theresults of this survey, information on the current evaluation of the Board of Directors and the issues it faces areshared and constructive discussions are held in order toformulate measures for the future.

Initiatives in the Fiscal Year Ended March 31, 2018
Compensation systems: In light of the upcoming conclusion of the first period to which medium-to-long-term incentives are linked in thefiscal year ending March 31, 2019, opportunities were arranged for the Board of Directors to discuss officer compensation, which is an
important element of corporate governance. Once again finding that the portion of total officer compensation accounted for by variablemedium-to-long-term incentives was low in comparison to other Japanese companies, the Board of Directors examined instances of companies utilizing pre-financial information, such as that related to ESG factors, for evaluations for performance-linked compensation. The factors to be examined when developing future officer compensation systems were identified through this process.
Succession plans: The future leader development program (CMA) was launched in April 2017, to bestow upon participants the knowledge
and understanding required of managers. Individuals that completed the initial development phase in the first iteration of the program
have been undergoing relocations between Group companies in their second year of the program. By assigning these individuals to highly
demanding divisions and positions with wide-ranging responsibilities, the Company aims to enable them to continue growing through practical application of their skills.

Results of Effectiveness Evaluation from the Fiscal Year Ended March 31, 2018
Areas Applauded
The overall evaluation of factors including the increase in the number of external directors and the start of the future leader development
program (CMA) was high and the Board of Directors was judged to be sufficiently functional.

Issues
1. L ow portion of total officer compensation accounted for by variable medium-to-long-term incentives (continuing from the fiscal year
ended March 31, 2017)
2. Incomplete state of future leader development program (CMA) aimed at discovering and cultivating manager successors over the
medium-to-long term

Response to Issue 1

Response to Issue 292

Compensation systems: Based on investigations of industry trends and the compensation systems of otherdomestic companies, the Company will develop officer compensation systems that are better linked toimprovements in medium-to-long-term corporate value for the next period for performance linkage.
Measures to be adopted include the expansion of the portion of total compensation accounted for variable
compensation as well as the utilization of ESG-related pre-financial information associated with sustainable
management alongside conventional evaluation indicators.

Succession plans: The Board of Directors will discuss matters including the overall plan for the future leaderdevelopment program (CMA), the positioning and promotion of applicants after completion of the program,and other aspects of systems for promoting ongoing development. The possibility of holding regular forums
to allow program applicants to speak with the Board of Directors and creating opportunities and frameworks
for ongoing monitoring will be examined.