Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Respect for Human Rights

Corporate Governance

Our Approach

Our Approach

The SUBARU Group puts people first and engages in people-oriented manufacturing. Based on the belief that respect for therights and characteristics of individuals is an important management issue for SUBARU, the SUBARU Group established its
Human Rights Policy in April 2020. In this policy, the Group respects the human rights stipulated in international norms such as
the Universal Declaration of Human Rights (UDHR), International Bill on Human Rights, and the ILO Declaration on
Fundamental Principles and Rights at Work. It also applies to SUBARU CORPORATION and all its subsidiaries, as well as tobusiness partners, and other stakeholders. The policy states that we do not tolerate any discrimination based on race, age,sex, gender identification or expression, sexual orientation, national origin, ethnicity, religion, creed, profession, disability,
family relations, or any other status protected by applicable law.
This policy was formulated with full consideration to stakeholders’ expectations, incorporating discussions with outside
experts and overseas subsidiaries. It was officially established after approval by the second meeting of the CSR Committee for
FYE March 2020 and reported to the Board of Directors in March 2020. This policy is run globally and appropriately, being
ready to address future environmental changes. If a company commits an act where human rights issues arise, it not only
results in loss of trust from customers but also damages brand image, significantly affecting the business foundation.
Therefore, SUBARU recognizes respecting human rights as a risk related to its industry and business operations.

SUBARU has articulated the vision “Delivering happiness to all” and works on the enhancement of corporate
governance as one of the top priorities of management, in order to gain the satisfaction and trust of all its stakeholders
by achieving sustainable growth and improving its corporate value in the medium and long term.
<Vision>Delivering happiness to all<Value statement>“Enjoyment and Peace of Mind”<Corporate statement> We aim to be a compelling company with a strong market presence built upon our customer-first principle.
SUBARU clearly separates the function of decision making and the oversight of corporate management from that of theexecution of business operations, and aims to realize effective corporate management by expediting decision making.
In addition, SUBARU seeks to ensure proper decision making and the oversight of corporate management and theexecution of business operations, as well as enhance its risk management system and compliance system through themonitoring of its management and operations and advice provided by outside officers. We also implement proper andtimely disclosure of information in order to improve the transparency of management.
For other corporate governance information, please visit:*Renamed in FYE March 2022 from the CSR Committee.

https://www.subaru.co.jp/en/csr/governance/corporate/

Management System

Board of Directors
Submission/
reportingInstruction/
approval

Instruction/

Executive Management approval
Board Meeting
Committees
Submission/

Human Rights
Task Team

Review

reporting ofimportantmatters

Sustainability Committee
Chair: President andRepresentative Director
Reporting

We have appointed the Representative Director, President and CEO
as a director who is responsible for leading the process of developing
the policy and assigning resources as needed for its implementationand continued improvement. Specifically, we formed the Human
Rights Task Team comprised of management personnel including
the General Manager from the Human Resources Department, IR
Department, Sustainability Promotion Department, Risk Management
and Compliance Office, and Global Purchasing Planning Department.
The human rights issues and initiatives discussed within the team are
regularly reported and deliberated upon in the Sustainability
Committee, chaired by the Representative Director, President andCEO. The details and outcomes are then submitted and reported to
the Board of Directors, where they are monitored for their impact on
the SUBARU Group’s business and appropriately addressed.

Corporate Governance Structure
SUBARU has chosen a structure with a board of corporate auditors. The Board of Directors and the Board of Corporate Auditors
decide, supervise, and audit the execution of important business.
This structure also enables us to achieve more sound and efficient business operations through increased effectiveness ofmanagement monitoring, by involving highly independent outside directors and outside corporate auditors. At SUBARU, in orderto enhance the practical governance structure based on our present organizational design, we have established two voluntary
meetings: the Executive Nomination Meeting and the Executive Compensation Meeting.
In regard to the business operation system, SUBARU has established the Executive Management Board Meeting as a preliminary
consultation body to conduct deliberations on company-wide management strategies and the execution of important businessbefore their presentation at the Board of Directors Meeting. In addition, SUBARU has adopted a vice president system and delegates
directors‘ business execution authority to vice presidents. By doing this, SUBARU clearly separates the function of decision making
and the oversight of corporate management from that of the execution of business operations, expediting decision making.
General Meeting of Shareholders
Electionanddismissal

Executive Nomination Meeting*Executive Compensation Meeting*Directors: 5* The Executive Nomination Meeting andExecutiveCompensation Meeting eachconsist of threeoutside directors and twointernal directors.

Outside directors: 3
Appointment,
dismissaland oversight

Reporting

Submission and reporting

Auditing
ReportingExecutive Management Board Meeting

Collaboration

Chairman: President and CEO
ReportingTransfer of authority
and oversight

Auditing
Accounting auditing
ReportingInternal audit units

Internal
auditing

Submission and reportingof important matters

Corporate operations
departments at HQ
Automotive Business Unit

Executive
Meeting

Aerospace Company

Executive
Meeting

Group Companies

Submission/
reporting ofimportantmatters

Corporate
Governance Meeting
Sustainability Committee
Social Contribution
Committee

Policy instruction
and approvalof plans, etc.

Environmental Committee

Plan proposal
andreporting, etc.

Risk Management andCompliance Committee

Business operations execution functions

58 Integrated Report 2023

Auditing

Corporate auditors: 2

Proposal and reporting

Board of Directors: 8

Vice Presidents

https://www.subaru.co.jp/en/csr/social/human_rights.html

Board of Corporate Auditors: 4

Reporting

Collaboration

Human Rights Policy

Election and dismissal

Outside corporate auditors: 2

Accounting auditors

The SUBARU Group carries out human rights due diligence in accordance with the procedures stipulated in the United Nations
Guiding Principles on Business and Human Rights. “Promoting initiatives to respect human rights based on the Human Rights
Policy and communicating the policy throughout the entire supply chain” has been set as a key performance indicator (KPI) underCompliance within the SUBARU Group’s Six Priority Areas for CSR. Together with our business partners, we are actively
undertaking efforts in this regard.
From FYE March 2021 to FYE March 2022, with cooperation from LRQA Sustainability Co., Ltd. (formerly Lloyd’s Register
Japan K.K.), we identified and conducted impact assessments for human rights risks in the domains of human resources andprocurement, identifying particularly key risks for the SUBARU Group. We have also formulated measures to address each ofthese risks. These are agreed upon by the Sustainability Committee and reported to the Board of Directors.
In FYE March 2023, we put into action measures to mitigate risks, while concurrently monitoring the progress and challenges
through the Human Rights Task Team. This procedure includes presenting reports to the Sustainability Committee and the Boardof Directors, thus establishing a plan-do-check-act (PDCA) cycle.

ReportingDecision making
and oversight functions

Collaboration

Human Rights Due Diligence

Electionanddismissal

Integrated Report 2023

59

Value Creation Story

Commentary on Strategy

Corporate Data

Foundations Supporting Value Creation

Message from the Chairman of the Board of Directors
Board of Directors and Board of Corporate Auditors
Board of Directors

Organization

Board of Corporate Auditors

Chairman

Chairman of Board of Directors

Standing Corporate Auditor

Composition

Directors: 5,
Outside directors: 3

Standing Corporate Auditors: 2,
Outside Corporate Auditors: 2

Role/
responsibility

The Board of Directors ensures fairness and transparency by
performing the oversight function for overall management and makes
the best decisions possible for the Company through appointment,
evaluation and resolution regarding the compensation of its CEO andother management team members, the assessment of material risks
faced by the Company and the development of measures to deal withsuch risks, and decisions on the execution of important business of theCompany. The Board takes these actions in the interest of effective
corporate governance, as well as sustainable growth and improvementof corporate value over the medium to long term.

The Board of Corporate Auditors, as an independent organization
entrusted by shareholders, is responsible for ensuring the soundand sustainable growth of SUBARU and establishing a high-quality
corporate governance system that can be trusted by society by
performing audits of the execution of duties by directors, passing
resolutions on the contents of proposal items regarding theappointment and dismissal, or non-reappointment, of accounting
auditors that are to be submitted to the General Meeting of
Shareholders, and performing business audits, accounting audits
and other matters prescribed by laws and regulations.

Meetings held in
FYE March 2023

13 times*

12 times*In addition to the number of times Board of Directors’ meetings were held as stated in the table above, there was one written resolution that was deemed equivalent toa Board of Directors’ meeting in accordance with Article 370 of the Companies Act and the Articles of Incorporation of the Company.

Number of Board of Directors’ Meetings Held and Attendance Rate
Category
Number of meetings held
Attendance rate

2018

2019

(FY)

2020

2021

2022

16

13

12

13

13

98.4%

100.0%

100.0%

100.0%

100.0%

Note: In addition to the number of Board of Directors’ meetings shown in the above table, there was one written resolution passed in FYE March 2019, two in FYE March 2020, andone in FYE March 2021-2023 that were deemed equivalent to a Board of Directors’ meeting, pursuant to Article 370 of the Companies Act and the Articles of Incorporation.
Attendance rates for newly appointed directors are calculated based on the number of Board of Directors’ meetings held after their appointment.

Following the resolution made during the Board of Directors’ meeting held in June 2023, I
have now assumed the position of Chairman for the Board of Directors as well as for the
Executive Nomination Meeting and Executive Compensation Meeting. Over the past five
years, as Representative Director, President, and CEO, I have been focused on key missions
to enhance the value of the SUBARU brand, namely corporate culture reforms, quality
enhancement, and evolution of the SUBARU Difference. As Chairman, I look forward toincorporating specific insights and fresh perspectives provided by our outside directors into
our management practices, further elevating our corporate governance to new heights.
Tomomi Nakamura
I consider the features of the Board of Directors’ meetings that I have attended to be the
Chairman of Board of Directors
high quality of proposals put forth by the executive team, the depth of understanding fromthose providing advice and oversight, and the seamless nature of discussions andcommunication, marked by mutual respect between both sides. This has resulted in therealization of a monitoring-focused Board that specializes in oversight. In the evaluation of the effectiveness of the Board conducted
in 2022, our outside directors also provided a favorable assessment of the current Board style, which prioritizes the monitoring
function. Nevertheless, despite social gatherings of management personnel* and plant visits to bridge the information gap between
inside and outside Board members, we acknowledge that challenges persist. To further enhance the effectiveness of the Board, we
will continue to drive initiatives aimed at resolving this issue. As outside directors deepen their understanding of the automotive
industry's latest trends and SUBARU's unique business characteristics, they will be better positioned to offer more comprehensive
insights and advice, drawing from their own experience and knowledge. Consequently, we anticipate that the Board of Directors will
become an even more effective forum for lively discussions than ever before.
In March 2023, we announced new executive personnel, including the replacement of the CEO, marking a significant change
in management structure, the first since the disclosure of the CEO succession plan in 2020. First, in July 2022, as the CEO at thattime, I proposed the fundamental principles regarding CEO transition at the Executive Nomination Meeting. Subsequently, we
held these meetings on an almost monthly basis, engaging in in-depth discussions and involving the outside directors extensively
in anticipation of the CEO transition to ensure the selection of candidates based on impartiality, objectivity and transparency.
Going forward, with our new management structure, we will continue to carefully assess the direction of global governancereform trends and progressively strengthen the effectiveness of SUBARU’s distinctive corporate governance, leveraging theinsights of our outside directors, aimed at fostering sustainable growth.
* Events for the exchange of opinions on important topics for SUBARU, held by directors and corporate auditors but not requiring resolution

Executive Nomination and Executive Compensation Meetings

Activities for Strengthening Corporate Governance

Organization

Executive Nomination Meeting

Executive Compensation Meeting

Chairman

Chairman of Board of Directors

Chairman of Board of Directors

Composition

Independent Outside Directors: 3, Directors: 2

Independent Outside Directors: 3, Directors: 2

Role/
responsibility

To ensure the fairness and transparency of decisions on
executive appointment, and based on ample deliberation by its
membership, a majority of which is independent outside
directors, this committee submits proposals to the Board of
Directors regarding policies for the composition of the Board of
Directors, the appointment or dismissal of the CEO and othertop management members, and the nomination of candidates
for directors and corporate auditors. It also determines andmakes proposals for appointment, dismissal, and nomination forthe same.

To ensure objectivity and transparency in decisions oncompensation for directors, the Executive Compensation
Meeting, as a voluntary committee and on the basis ofdelegation by the Board of Directors, determines individualcompensation amounts per director and other issues after ample
deliberation. Where matters concern the executive
compensation system in general, such as its revision, the Boardof Directors deliberates on proposals approved by the Executive
Compensation Meeting and decides on them by resolution.

7 times

4 times

The Executive Nomination Meeting discussed mattersconcerning the submission of reports on the executive structure
and appointments, the division of duties of executives, and theappointment of representatives of major subsidiaries.

The Executive Compensation Meeting submitted revised policy
drafts for determining director compensation systems and detailsof compensation for individual directors, while deciding on
performance-linked compensation for directors (except foroutside directors) and corporate vice presidents based on
evaluations and the amount of compensation claims in respect ofrestricted stock compensation for each individual recipient.

Meetings held in
FYE March 2023

Items deliberated
in FYE March
2023

Board of Directors(Independence)

Executive
Nomination Meeting

Executive
Compensation Meeting(Independence)(Independence)

2010

Independent
outside directors

Independent
outside directors

3 out of 8
37.5%

3 out of 5
60.0%

3 out of 5
60.0%

2012

2013

2014

2015

2016

2017

2018

2019

2020

Increasingtransparencyofmanagement

2022

2023

2003 Reduced length of director terms from two years to one year
2007 Abolished executive officer retirement bonus system
Established Corporate Governance Guidelines
Abolished senior advisor system
Independent outside directors: 1

Strengtheningofoversight
functions2

3
Ratio of outside directors: one third or more
Female director

Independent outside corporate auditors: 1

2

3

2

Female director
2004 Established Executive Nomination Meeting
Objective andtransparent
procedures

2004 Established Executive Compensation Meeting
Outside directors participating: 2

3
Ratio of outside directors: one half or more

(Gender Diversity)

2 out of 4
50.0%

Femaledirectors
Femaleofficers

3 out of 12
25.0%

1 out of 8
12.5%

Initiatives toenhance corporate
value overthe medium tolong term

Appropriate functionof theBoard of Directors

Added
non-financial
evaluation(employeesatisfaction,
qualitativeevaluation)

Introduced restricted stockcompensation plan
(ROE, quantitative evaluation)

Reduction of cross-shareholdings
60 issues 32 issues 30 issues 18 issues 10 issues 4 issues

60 Integrated Report 2023

2021

1999 Adopted a corporate vice president system

Board of Directors/
Board of Corporate Auditors
Femalecorporate auditors

Independent
outside directors

2011

2 issues

Start of evaluation of the effectiveness of the Board of Directors

Integrated Report 2023

61

Value Creation Story

Directors, Auditors, and Executive Officers

Foundations Supporting Value Creation

Corporate Data

(As of June 21, 2023)

Directors of the Board(As of October 1, 2023)

Executive Officers * Concurrently serve as a Director(Number of years in office as adirector/number of shares owned)

Atsushi Osaki

Fumiaki Hayata

Tomomi Nakamura

Representative Director,
President and CEO

Representative Director,
Deputy President

Director, Chairman

2 years / 23,422 shares

2 years / 10,256 shares

Katsuyuki Mizuma

Tetsuo Fujinuki

Director, Executive Vice President,
CFO and CRMO

Director, Senior Vice President, CTO

5 years / 40,733 shares

Chairman

Tomomi Nakamura*—President

Atsushi Osaki*

CEO (Chief Executive Officer)
Aerospace Company

Deputy President

Fumiaki Hayata*

Secretarial Office, Human Resources Department, Sales, Marketing

Executive Vice President

Katsuyuki Mizuma*

CFO (Chief Financial Officer), CRMO (Chief Risk Management Officer)
Finance & Accounting Department

Executive Vice President

Tetsuo Fujinuki*

CTO (Chief Technology Officer)
Engineering Division, Technical Research Center, CTO Strategy Office

Executive Vice President

Tomoaki Emori

Chief General Manager of Corporate Planning Division

Senior Vice President

Shoichiro Tozuka

Company President of Aerospace Company

Senior Vice President

Tatsuro Kobayashi

General Manager of Human Resources Department

Senior Vice President

Jinya Shoji

Chief General Manager of Overseas Sales & Marketing Division 2

Senior Vice President

Osamu Eriguchi

CQO (Chief Quality Officer)
Chief General Manager of Quality Assurance Division, General Manager of Quality Assurance Management OfficeSenior Vice President

Tamotsu Inui

Chief General Manager of Purchasing Division

Senior Vice President

Kazuhiro Abe

CIO (Chief Information Officer)
Chief General Manager of IT Strategy Division

Senior Vice President

Shinsuke Toda

Senior General Manager of Overseas Sales & Marketing Division 2
and Corporate Planning Division

Senior Vice President

Hiroshi Watahiki

Chief General Manager of Engineering Division and Technical Research Center
Senior General Manager of Purchasing Division

Senior Vice President

Tadashi Yoshida

Chief General Manager of Overseas Sales & Marketing Division 1
Chairman of SOA*1, SCI*2, NASI*3

Senior Vice President

Ryota Fukumizu

President of SIA*4

Vice President

Yasushi Nagae

General Manager of Investor Relations Department and General Administration Department,
Corporate Communications Department and Sustainability Promotion Department

Vice President

Tatsuya Okuno

Chief General Manager of Customer Service Division

Vice President

Shinichi Murata

General Manager of Risk Management & Compliance Office
Risk Management Group, External Relations Department, Intellectual Property Department

Vice President

Kazuki Uejima

Chief General Manager of Product & Portfolio Planning Division

Vice President

Ikuo Watanabe

Chief General Manager of Monozukuri Division and Gunma Plant

Vice President

Akihiro Kato

Chief General Manager of Japan Sales & Marketing Division

Vice President

Katsufumi Nakazawa

Chief General Manager of Parts & Accessories Division

Newly appointed / 11,403 shares

2 years / 15,894 shares

Yasuyuki Abe

Miwako Doi

Fuminao Hachiuma

Independent Outside Director

Independent Outside Director

4 years / 5,200 shares

3 years / 400 shares

Independent Outside Director
Newly appointed / 0 shares

Corporate Auditors(Number of years in office as anauditor/number of shares owned)

Yoichi Kato

Hiromi Tsutsumi

Yuri Furusawa

Yasumasa Masuda

Vice President

Kosuke Kawai

Standing Corporate
AuditorStanding Corporate
AuditorIndependent Outside
Corporate Auditor

2 years / 11,129 shares

3 years / 19,056 shares

1 years / 300 shares

Independent Outside
Corporate Auditor
Newly appointed / 0 shares

General Manager of Cost Innovation Promotion Office,Senior General Manager of Corporate Planning Division

Vice President

Yoshihiro Saito

Company Vice President of Aerospace Company

Vice President

Yoichi Hori

General Manager of CTO Strategy Office, Senior General Manager of Corporate Planning
Division, General Manager of Corporate Planning Department

Please visit the Subaru website for details on profiles.

https://www.subaru.co.jp/en/outline/profile.html

62 Integrated Report 2023

Commentary on Strategy*1 Subaru of America, Inc.
*2 Subaru Canada, Inc.
*3 North American Subaru, Inc.
*4 Subaru of Indiana Automotive, Inc.

Integrated Report 2023

63

Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation(As of June 21, 2023)

Directors/Auditors
Reasonsforselection

Experience, insight,
and leadership required
for making important
strategic decisions

Promotion of business strategies foraccelerating responses to major transformation

Strengthening of management
infrastructure that supports the Company’ssustainable growth

Definitionofexperience

Experience of serving as
top management of alisted company

Experience and track record as an officer
in charge of each business division

Knowledge, experience, and competency as an officer
in charge of a field or employee with experience inhighly specialized operations

Promotion of business strategies

GenderTotal yearsof service

Representative Director,
President (CEO)Male

2 years

Fumiaki Hayata

Representative Director,
Deputy President

Male

2 years

Tomomi Nakamura

Director, ChairmanMale

5 years

Katsuyuki Mizuma

Director, Executive Vice
President (CFO, CRMO)

Male

2 years

Tetsuo Fujinuki

Director, Executive Vice
President (CTO)

Male

Newly
appointed

Yasuyuki Abe

Independent Outside
Directors

Male

4 years

Miwako Doi

Independent Outside
Directors

Female3 years

Fuminao Hachiuma

Independent Outside
Directors

Male

Newly
appointed

Yoichi Kato

Standing Corporate AuditorMale

2 years

Hiromi Tsutsumi

Standing Corporate Auditor

Female3 years

Yuri Furusawa

Independent Outside
Corporate Auditor

Female1 yearYasumasa Masuda

Independent Outside
Corporate Auditor

Male

Newly
appointed

Name

Title at the Company

Atsushi Osaki

Directors

Corporate
Auditors

Corporate Data

Board ofDirectors*

Board ofCorporate
Auditors*

Executive
Executive
Nomination Compensation
Meeting*
Meeting*

Business management(executive experience)

Technology/
development

Manufacturing/purchase

Sale/
marketingGlobalStrengthening of management infrastructure

IT/digital

Business
administration/
financial/accounting

Legal affairs/
compliance/risk management

Human
capital/labor

Requiredskills*andindicate attendance of the chairman and other members, respectively
Note: The list above does not cover the entire scope of knowledge held by the Directors and Corporate Auditors.

Approach to the CEO Succession Plan
SUBARU recognizes that decision making regarding top management changes (e.g., the CEO) and successor selection may have a
critical influence on corporate value. Therefore, in order to ensure a successful succession at the right timing, we invest substantial
time and resources to carefully develop and implement succession plans.
In order to hand over the business to the right person, the Board of Directors, as part of its essential duties, develops succession
plans that can convince all stakeholder groups. To ensure objectivity and transparency in the process for deciding on thereplacement and selection of the CEO, the Board of Directors appropriately supervises the preparation of proposals by the current
CEO through discussions at the Executive Nomination Meeting.
To be able to implement succession plans appropriately, the CEO begins to prepare for selection and development of theirsuccessor candidates independently upon assuming office. Key processes for this purpose include providing information on
candidates to outside directors on an ongoing basis, particularly by enabling the directors to monitor the candidates in person
continuously in day-to-day business settings, as a measure to ensure appropriate and timely evaluation and selection down the road.
The Board of Directors and Executive Nomination Meeting meet on a regular basis to review the list of essential qualities andskills required of the CEO, which may include removing and adding items, in consideration of perception of current trends, changes
in the business environment surrounding the company, and the future direction of the Group’s business strategies.
To ensure the objectivity of the successor selection process and increase the effectiveness of its supervision by the Board of

64 Integrated Report 2023

Directors and Executive Nomination Meeting, it is important to have effective selection criteria in place, particularly for use byoutside directors. To this end, SUBARU discloses two sets of criteria: “Abilities required of the SUBARU Group’s CEO” and “Five key
qualities required of the SUBARU Group’s CEO.” These criteria serve as a guide for evaluating candidates in light of quality,competency, experience, track record, specialized expertise, personality, and other factors, which have been discussed and decided
on by the Board of Directors and Executive Nomination Meeting.
Abilities required of the SUBARU Group’s CEO
The SUBARU Group’s CEO must be able to: properly understand the business environment surrounding SUBARU, its corporate
culture and philosophy, business growth stages, and medium- to long-term management strategies and challenges; facilitate
collaboration appropriately with various stakeholders; and lead all executives and employees to work together to maximize
corporate value.
Five key qualities required of the SUBARU Group’s CEO
1. Integrity
2. Broad perspective
3. Character
4. Tireless spirit or revolutionary leadership skills
5. Person of action

Integrated Report 2023

65

Value Creation Story

Executive Officer Training
Category

Nomination Criteria

 UBARU provides its directors and corporate auditors with information and knowledge regarding its business activities that is necessary forSthem to fulfill their responsibilities to oversee and audit management directors and corporate auditors on an ongoing basis with information

Directors
Refresher courses focusing on information regarding the Companies Act and other laws and regulations related to corporate governanceCorporate
auditors

 articipation in seminars and programs hosted by government agencies, Japan Federation of Economic Organizations, Japan Association ofP
Corporate Directors, Japan Audit & Supervisory Board Members Association, etc.
Policy UBARU provides its outside officers on an ongoing basis with information relating to the Company’s corporate statement, corporate culture,Sbusiness environment, and other matters, mainly through arranging appropriate opportunities, such as operations briefings from businessdivisions and factory tours, as well as creating an environment for officers to share information and exchange opinions more easily.

Outsidedirectors-O pportunities for discussions with and briefings from responsible vice presidents about the corporate statement, corporate culture, businessenvironment, and the performance, situation and issues of each business division/department

Outsidecorporate
auditors- Inspection tours at manufacturing/R&D/distribution sites

Name- Discussions with directors and corporate auditors on management issuesT he outside directors are expected to perform a monitoring function independent from the
management team and provide appropriate advice on management on the basis of a wide range of
sophisticated knowledge.
T he outside corporate auditors are expected to perform a management oversight function independent
from the management team and undertake their role of auditing from the viewpoint of legality andappropriateness on the basis of broad and advanced knowledge.
S UBARU has established criteria for independence of outside officers in addition to the criteria for
independence established by the Tokyo Stock Exchange, and appoints outside directors and outside
corporate auditors who meet those criteria.

Yasuyuki Abe

Independent
Officer
Status*Reasons for Appointing

Meeting
Attendance(FYE March 2023)○

As representative director and senior managing executive officer of Sumitomo
Corporation, Mr. Yasuyuki Abe has been involved in management in both asupervisory and executional capacity, possesses extensive experience andknowledge in business management, and has an advanced understanding of theIT field. Mr. Abe has served three years as an independent outside corporate
auditor for the Company since June 2016. During his tenure, he has supervised
the execution of duties conducted by directors, as well as understood the true
nature of the problems facing the Company and offered his frank opinions to senior
management in a timely and appropriate manner. In June 2019, Mr. Abe was also
appointed to the position of independent outside director and has been providing
beneficial advice to the Company’s management. In light of this, the Company
has appointed Mr. Abe with the expectation that he will appropriately perform theduties when he assumes office as an outside corporate director of the Company.

Attended
13 of 13
meetings

Outside Director, HOYA
Corporation○

As a researcher and supervisor in the field of information technology at Toshiba
Corporation, Ms. Miwako Doi has accumulated vast experience and made many
achievements in this field over many years. In addition, she has held successive
positions, mainly in government committees, owing to her high level of expertiseand extensive experience and knowledge. In June 2020, Ms. Doi was appointed
to the position of independent outside director and has been providing beneficial
advice to the Company’s management for the generation of new innovation. In
light of this, the Company has appointed Ms. Doi with the expectation that she willappropriately perform the duties when she assumes office as an outside corporate
director of the Company.

Attended
13 of 13
meetings

Auditor, National Institute ofInformation and Communications
Technology (NICT) (part-time)
Executive Vice President, Tohoku
University (part-time)
Executive Director, Nara Instituteof Science and Technology (parttime)
Outside Director, Isetan Mitsukoshi
Holdings Ltd.
Outside Director, NGK Spark PlugCo., Ltd.

○Mr. Fuminao Hachiuma has abundant experience and knowledge acquired throughhis involvement in management in a broad range of fields including overseas
business at Ajinomoto Co., Inc. and its group companies as well as promotion of
Newly
strengthening of corporate governance and management reform of J-OIL MILLS,
appointed
INC. as Representative Director and President. In light of this, the Company has
appointed Mr. Hachiuma with the expectation that he will appropriately perform theduties when he assumes office as an outside corporate director of the Company.

Outside Director, Seven & i Holdings
Co., Ltd.
Outside Audit & Supervisory Board
Member, YKK AP Inc.

○

Ms. Yuri Furusawa has held key positions in the Ministry of Land, Infrastructure,
Transport and Tourism, and has been involved in the promotion of work styleAttendedreform, active participation by women and diversity in the Cabinet Secretariat,
Outside Audit & Supervisory Board
10 of 10
as well as in the overseas business development in the private sector, giving her
Member, Kubota Corporation
meetings*2
a broad perspective and a high level of insight. In light of this, the Company has
appointed Ms. Furusawa with the expectation that she will appropriately perform theduties when she assumes office as an outside corporate auditor of the Company.

○

Mr. Yasumasa Masuda has experience in corporate planning and served as CFO
at Astellas Pharma Inc. and has deep insight in overall management with focus on
financial and accounting. He has also served as Independent Non-Executive at
Deloitte Tohmatsu LLC and Outside Director and Chairman of the Audit Committee
Newly
at Olympus Corporation, giving him a broad perspective and a high level of insight. appointed
In light of this, the Company has appointed Mr. Masuda with the expectation that
he will appropriately perform the duties when he assumes office as an outside
corporate auditor of the Company.

- Social gatherings with directors and corporate auditors- Participation in company-wide business events, such as improvement activity debriefing sessions
 UBARU gives vice presidents similar opportunities as those given to directors and corporate auditors, for the purpose of developing humanS
resources to lead its management in the future.

Participation in external programs aimed at fostering the mindset required for executive management and motivating self-improvement actionsL ectures by invited experts in specific topics to share and increase literacy in the related field(legal affairs, compliance, IT, the SDGs, media response, etc.)

Vice Presidents

OutsideDirectors
Miwako Doi

Strategy-building camps for all vice presidents
Recommendation and support for participation in appropriate external seminars and programs* Expenses to be incurred for offering the above training to directors and corporate auditors, including outside officers and vice presidents are borne by the company.

Fuminao
Hachiuma

Category
All executives(including
outside officers)
Outsidedirectors
Outsidecorporate
auditors

Corporate Data

Reasons for Appointing the Outside Officers and Major Activities

The following programs are provided to outside Board members at the time of appointment and subsequently to keep them updated:

PolicyFoundations Supporting Value Creation

Outside Directors/Outside Corporate Auditors
Training Policy/ Major Ongoing Programs

PolicyCommentary on Strategy

Programs Provided in FYE March 2023
Newly appointed directors and vice presidents participated in external seminar programsHeld a total of three classroom lectures by invited experts on management issues
Operations briefings offered by vice presidents and others, and related discussions
Held a total of four discussions with directors and corporate auditors on management issues
Outside directors and outside corporate auditors participated in external presentations and exhibits about future technologies and quality solutions

Yuri Furusawa

OutsideCorporate
Auditors
Yasumasa
MasudaSignificant Concurrent Positions(As of June 30, 2023)

Outside Director, Chairman of the
Audit Committee, Olympus
Corporation*1 Independent officers: Outside directors and outside corporate auditors with no risk of a conflict of interest with general shareholders as stipulated by the stock exchange.
*2 Corporate Auditor Yuri Furusawa was elected and appointed at the 91st Ordinary General Meeting of Shareholders held on June 22, 2022.

66 Integrated Report 2023

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67

Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Message from Outside Directors

In mid-June, I had the opportunity to participate in the reception of the Keidanren
Women’s Executive Network for the first time. Approximately 130 female executives frommember companies attended the event and I received positive remarks about SUBARU’sdistinctive qualities. While maintaining uniqueness can be challenging, it is importantthat SUBARU continues to pursue the SUBARU Difference through collaborative researchwith Gunma University*, especially amid moves toward electrification. I think it would be
wonderful to capitalize on SUBARU’s uniqueness in finding a balance between environmental
preservation and technological innovation, two seemingly conflicting elements.
Japanese people traditionally have taken an approach of making adequate
preparations and dealing with situations within their expectations. Nevertheless, inthe current environment where unexpected events such as the pandemic, the Ukraine
invasion, and economic security issues, have become increasingly common, relying solely
on such traditional coping methods may prove inadequate. Ensuring diversity, including
active women’s participation, is crucial for creating an organizational structure capableof responding to unexpected events. In a forum on women’s careers held in March 2023,
as well as during dialogues with female employees in Bifuka and Tochigi, we received awealth of vibrant input. This has instilled a sense of optimism about SUBARU’s future, and I
am looking forward with great expectations.

Contributions, future challenges,
and expectations as an outside director

Yasuyuki Abe
Outside Director
June 2016 A
 ppointed Outside Corporate Auditor
June 2019 R
 etired as Outside Corporate Auditor
June 2019 Appointed Outside Director

As an outside director, I believe it is crucial to properly understand what is happening within
the company in a limited timeframe, communicate various insights to the executive team, andthereby contribute to further enhancing corporate value. To achieve this goal, I consistently
contemplate and take action on what the best course of action is at any given moment.
The most critical task of the Executive Nomination Meeting for FYE March 2023 was
the selection of the CEO’s successor. After announcement of the CEO succession plan, asa member taking part in this meeting, I spent a considerable amount of time conducting
data research on various candidates, including interviews, in order to gain a thoroughunderstanding of them. Through extensive deliberations and discussions, we ultimately
arrived at the decision regarding the CEO succession. As a result, I believe we successfully
made a well-qualified choice for the successor. Furthermore, although the Executive
Nomination Meeting and Executive Compensation Meeting are currently chaired by the
Chairman, an inside officer, they ensure a high level of transparency in their operations
as outside officers have access to any necessary documents. This aspect is also one of
SUBARU’s significant strengths, and I believe it is something we must continue in the future.
As expectations for the new management structure, the three key initiatives from our
mid-term management vision, STEP—corporate culture reforms, quality enhancement, andevolution of the SUBARU Difference—have been steadily yielding results and contributing
to the improvement of our performance. With the new management structure in place,it’s imperative that SUBARU keeps pushing forward without disrupting this substantial
momentum. The significant challenge of adapting to electrification has prompted acontemplation of the SUBARU Difference, primarily within the Engineering Division, andsubsequent strategies are now being actively implemented.
In the sustainability strategy, it is particularly important to accelerate the pace ofdiversity reform, including efforts concerning the empowerment of female employees. I
aim to steadily assess the response to these reform and transformation initiatives.
As SUBARU aims to become a brand that is different from others by enhancing
distinctiveness, I look forward to the changes that lie ahead under the leadership ofPresident Osaki and Deputy President Hayata in the new SUBARU, and I will continue tofulfill my oversight responsibilities as an outside director.

Efforts through the Executive Nomination Meetingand vision for the future of SUBARU

Miwako Doi
Outside Director
June 2020 Appointed Outside Director

68 Integrated Report 2023

Although many companies with a board of corporate auditors in place often have anominating committee as an independent mechanism, in some cases, the successor
chosen by figures such as the CEO or Chairman is directly approved without further
formalities. In order to increase transparency, SUBARU’s Chairman, who does not havespecific areas of responsibility for business execution and has a clear understanding of theCompany’s overall business, has been appointed chairman of the Executive Nomination
Meeting and Executive Compensation Meeting, and has been promoting reforms suchas the creation of a CEO succession plan. The recent CEO change followed a highly
transparent process, involving a comprehensive review of materials, including 360-degree
evaluations of candidates in the CEO succession plan. After shortlisting the candidates,interviews were conducted by outside directors, and the CEO was ultimately selected
through deliberations in the Executive Nomination Meeting. I believe it is crucial to provide
support for candidates to accumulate the requisite business experience that qualifies themfor the role of CEO, in accordance with the CEO succession plan.

* SUBARU CORPORATION and Gunma University are undertaking a joint research course titled “NextGeneration Automobile Technology Research Course.”

Expectations for SUBARU as it navigatessignificant changes

Fuminao Hachiuma
Outside Director
June 2023 Appointed Outside Director

The automotive industry is facing a significant period of upheaval, often referred to as a“once-in-a-century” transformation, in response to the demands of the carbon-neutraland digital transformation (DX) era.
While we can recognize the magnitude of this wave of change, it is a stage where
the management’s decision-making ability is challenged as there is no clear answer atthis moment.
In times like these, it is crucial to operate and act organically across departments,
requiring a compact organizational structure. Additionally, we anticipate the need for thecapability to respond flexibly by considering various scenarios from diverse and objective
perspectives, without being bound by conventional wisdom.
Over the past 40 years, I have been involved in the food industry both domesticallyand internationally. Although it differs greatly in dynamics and scale from the automotive
industry, I feel a shared purpose in contributing to safety, security, enjoyment, and even
the well-being and smiles beyond that, just like what a manufacturer aims for.
From the position of someone involved in product manufacturing, I will continue to
strive to be of support to Subaru, shining even brighter as it overcomes this era of significant
change.

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69

Value Creation Story

Effectiveness Evaluation of the Board of Directors
SUBARU’s Board of Directors (BoD) analyzes and evaluates the Board’s effectiveness in accordance with the Corporate
Governance Guidelines and considers and implements improvements to address any issues identified.
In the fiscal year ended March 31, 2023, aiming to apply the results of the evaluations toward enhancing the BoD’s functions,
the BoD confirmed efforts to address issues recognized in previous evaluations, reorganized the evaluation items on the survey
and implemented interviews with certain directors, and assessed and analyzed the reasons and underlying factors behinddifferences in the recognition of issues. The results of this process are reported below.
Methods of evaluation and analysis(1) Timing: December 2022–February 2023
(2) Methods: Self-evaluation survey created by a third-party
body; interviews(a)	Survey respondents: D irectors (9) and auditors (5) for a
total of 14 respondents(b)	Interviewees: C hair of the BoD, Representative Director
and President, and outside directors (3)for a total of 5 interviewees(3) Process(a)	Third-party body conducts anonymous self-evaluation
survey of directors and auditors(b)	Third-party body conducts interviews with the chair of
the BoD, Representative Director and President, andoutside directors(c)	Third-party body aggregates and analyzes survey
responses and interviews(d)	BoD verifies and discusses reports received fromthird-party body(4) Evaluation items on the survey(a) BoD roles and functions(b) BoD composition(c) BoD operation(d) BoD support system(e) BoD culture and communication(f) BoD risk management and internal control(g)	Executive Nomination Meeting and Executive
Compensation Meeting operation(h) Shareholder dialogue(i) Continued BoD improvements

Respondents evaluated themselves on a four-point scale in response to questions relating to the evaluation items. They
were also free to add their own thoughts on the characteristics of the BoD and points that they felt would be necessary
in enhancing the effectiveness thereof. Upon completing their responses, they then submitted their surveys directly tothe third-party body.

Commentary on Strategy

Foundations Supporting Value Creation

Future points to examine for further enhancing the effectiveness of the BoD(a) Discussing medium- to long-term management strategy (a continuing point for examination)
The BoD confirmed the need to establish common ground in approaching discussions of medium- to long-term management
strategy in the automobile industry, where constant, rapid transformation contributes to a lack of clarity and certainty, so that it can
optimally fulfill its supervisory responsibility.
(b) Further bolstering the support system for outside directors
The BoD confirmed the need to work on rolling out information via the BoD Secretariat in order to help outside directors performtheir functions more effectively than before.
(c) Further improving the effectiveness of the Executive Nomination Meeting
The BoD confirmed that it has been making solid progress through various efforts, including discussions of succession plans for the
CEO position and other posts as well as skills matrices for officers, and will strive to implement continuing initiatives and propel
further evolution.

Results of the Questionnaire
BoD roles and functions

4.0
Continued BoD improvements

BoD composition

3.0
2.0
Shareholder dialogue

BoD operation

1.0

Executive Nomination Meeting andExecutive Compensation Meeting operation

BoD risk management and internal control

BoD support system

BoD culture and communication

1=Strongly disagree; 2=Disagree; 3=Agree; 4=Strongly agree*The figure above presents this year’s results only without any comparison to the previous year’s
results, as this year’s survey used a new, reorganized set of evaluation items.

Evaluation Items
Evaluation Items

Evaluation Items

Recognition of the roles and functions of the Board of Directors

General evaluation
Based on the third-party body’s report detailing its aggregation and analysis, the BoD discussed and confirmed thefollowing points.
(a) The BoD is making solid, gradual progress on improvements by taking advantage of social gatherings of management
personnel*, enhancing discussions on the Executive Nomination Meeting, and taking other steps.
(b) Improvements have been made in efforts aimed at “enhancing the quality of discussion of medium- to long-term
management strategy” and “enhancing discussions on the establishment of a system to appropriately address newly
identified risks,” two areas for improvement that emerged in last fiscal year’s evaluation.

(a) B oD roles andfunctions(c) A united commitment to enhancing the value of the Subaru brandOutside officers share in Subaru employees’ consistent commitment to pursuing the “Evolution of the SUBARU Difference.”

70 Integrated Report 2023

Stakeholder perspectives

Reporting system
Supervision of corporate management(e) B oD culture andcommunication

Composition of the Board of Directors (diversity and expertise)

Directors and corporate auditors

Frequency, length, and time allocation of meetings

Risk management

Relevance of agenda items
Timing of proposals and discussions
Quality and quantity of documents(c) BoD operation(f) BoD risk
management and Group governanceinternal control

Timing of document distribution
Prior explanation
Content of explanations and reports

Internal control and compliance(g) E xecutive Nomination Meeting and Executive Compensation
Meeting operation
Supervision of proper disclosure of information toshareholders and investors

Discussions by the Board of Directors
Leadership by the Chair
Environment and systems for the provision of information(d) B oD support
system(h) Shareholder
dialogue

Provision of information to outside officers
Training of outside officers
Training of inside officers

Directors and business divisions
Inside and outside directors(b) BoD composition Composition of the Board of Directors (ratio of inside to outside directors)

Both inside and outside officers recognize that the roles of the BoD are to examine the execution of business and monitor the statusof various initiatives.
(b) A framework conducive to open provision of information to the BoD
Business divisions appropriately provide information to outside officers through measures such as sharing internal information,offering opportunities for visits to factories and other sites, and utilizing social gatherings of management personnel. The company
environment where outside officers can obtain access to internal materials and contact inside officers as necessary.

Diverse values

Delegation of authority to execution

Size of the Board of Directors* Events for the exchange of opinions on important topics for corporate management, held by directors and corporate auditors but not requiring resolution

Characteristics of the Subaru Corporation BoD(a) A BoD with a focus on the monitoring function

Corporate Data

Sharing the views of shareholders and investors
Enhancing dialogue with shareholders and investors(i) C ontinued BoD
improvements

Status of improvements based on the previous fiscal
year’s effectiveness evaluation

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71

Value Creation Story

Compensation for Directors

SUBARU deliberated and decided on the proposal of the Policy for Determining Details of Compensation for Individual Directors
approved by the Executive Compensation Meeting at the Board of Directors’ meeting held on March 3, 2022. To the right is thesummary of the policy.

(1) Compensation is at a level commensurate with the roles and responsibilities of directors
and is appropriate, fair, and balanced.
(2) The compensation structure is determined by giving consideration to providing
motivation for sustained improvement in corporate performance and corporate value andsecuring excellent human resources.
Specifically, for directors (excluding outside directors), compensation is composed of basic
compensation, annual performance-linked bonus, and restricted stock compensation (fornon-resident officers, phantom stock instead of restricted stock). For outside directors, theCompany pays only basic compensation in view of their roles of fulfilling monitoring andoversight functions of corporate management from an independent position. The total
amount of compensation for individual directors and the levels of each compensation item are
set for every position depending on difference in responsibility by utilizing the research datacompiled by outside specialized agencies.

2. Policy for determining the amount of monetary compensation excluding performancelinked compensation (hereinafter, the ”Fixed Monetary Compensation”), performancelinked compensation, and non-monetary compensation (including the policy for
determining the timing or conditions for granting such compensation)

director, and other factors. After an evaluation period, shares of the Company’s common stock
are granted at an amount equivalent to the number of units multiplied by a payout ratio (50% to100%) determined in accordance with achievement levels for performance indicator targets.
The maximum number of shares of the Company’s common stock to be granted as restricted
stock compensation to directors, for RS and PSUs combined, is 150,000 per year. In addition, theCompany and its directors shall enter into a restricted stock allotment agreement that includes
an overview and provisions that state (1) Company executives shall not, while they serve in theirpositions as executives and for a set period of time, transfer, create a security interest on, orotherwise dispose of the shares of the Company’s common stock that have been allotted tothem, and (2) the Company may acquire the said shares of its common stock withoutcompensation if certain events occur. If a director is a non-resident of Japan at the time sharesare granted, the Company shall grant phantom stock in place of and equivalent to the restricted
stock compensation that would have been granted, and the stock shall also be treated inaccordance with the restricted stock allotment agreement.

3. Policy for determining the proportion of the Fixed Monetary Compensation,
performance-linked compensation, and non-monetary compensation to the total
amount of compensation, etc., for individual directors

The Company has set the following as a general guideline for proportions of compensation
by type for directors (excluding outside directors) in reference to the compensation levels andcompensation mix of companies of a similar scale to the Company or industry peers obtained
through an external research company, and in consideration of factors such as the Company’s
overall salary level and social situations (performance-based compensation is a proportion of
the base amount).

(1) Policy for the Fixed Monetary Compensation
Directors receive the Fixed Monetary Compensation monthly as basic compensation. The
amount for individual directors is determined based on their positions, taking into
consideration elements such as the business environment.
(2) Policy for performance-linked compensation
For annual performance-linked bonus for directors (excluding outside directors), we have set a
compensation table based on rank and the KPI of consolidated profit before tax for the fiscal
year under review. Based on this table, cash compensation is paid at a certain time of eachyear. In addition, in order to encourage the achievement of goals in the Group’s medium- tolong-term strategy, a portion of restricted stock compensation (described in (3) below) to be
granted as non-monetary compensation will be PSUs, where the number of shares granted islinked to the degree to performance target achievement. In addition to consolidated ROE,
which is the financial indicator emphasized in our medium-term strategy, we will adopt
employee engagement as a non-financial KPI for these PSUs.
The Company will review the KPIs for annual performance-linked bonus and PSUs as needed
based on changes in the environment and reports from the Executive Compensation Meeting.
(3) Policy for non-monetary compensation
The Company grants restricted stock compensation to directors (excluding outside directors) forthe purpose of providing them an incentive for sustained improvement of the Company’s
corporate value and further value sharing with the shareholders. For restricted stockcompensation, a portion shall be provided as the fixed compensation type, with the rest as thevariable compensation type. Both of these shall be prohibited from being transferred during therecipient’s term of office, and this restriction on transfer shall be lifted upon their retirement.
For fixed compensation type restricted stock (RS) compensation, shares of the Company’scommon stock are granted at a certain time each year at an amount equivalent to a base amountdetermined in consideration of the Company’s business performance, responsibilities of eachdirector, and other factors.
For variable compensation type restricted stock compensation (PSUs), units (one unit = one
share) are granted at a certain time each year at an amount equivalent to a base amountdetermined in consideration of the Company’s business performance, responsibilities of each

Breakdown

Rate
President

Directors
otherthan thePresident

Fixed monetary compensation

45%

50%

Performance-linked compensation

45%

40%

Non-monetary compensation

25%

20%

Basic
compensation

Annualperformance-linked
compensation

The Company introduced a fixed compensation type (RS) restricted stock compensation in FYE March 2018.
With this revision, in order to encourage the achievement of the goals in the SUBARU Group’s mid-term management vision,
we have added variable compensation type (PSU) restricted stock to the compensation structure to increase the weight of stockcompensation. In addition, the KPIs for the variable compensation type (PSU) will be reviewed in conjunction with updates to the
mid-term management vision and management indicators. For this revision, consolidated ROE will be used for quantitative(financial) evaluation and employee engagement (employee satisfaction rating) will be used for qualitative (non-financial)
evaluation. Such compensation will not be paid to outside directors.

After

Policy for Determining Details of Compensation for Individual Directors
As a basic policy, compensation for directors of the Company is determined in view of thefollowing items:

Corporate Data

Foundations Supporting Value Creation

Restricted stock compensation (Medium- and long-term incentive)

Matters Concerning the Policy for Determining Details of Compensation for Individual Directors

1. Basic policy

Commentary on Strategy

Restricted stockcompensation
RS

PSU

The Company shall appropriately review the compensation level and compensation mix in
consideration of the Company’s business environment, as well as the situation of companies ofa similar scale to the Company or industry peers, and other circumstances based on reports
from the Executive Compensation Meeting.

4. Matters concerning the determination of details of compensation, etc., for individual
directors

The Executive Compensation Meeting, by a resolution of and upon delegation by the Board of
Directors, determines specific amounts of compensation, etc., of individual directors, following
sufficient deliberation by its members including outside directors. Its authorities include thedetermination of specific amounts of basic compensation, annual performance-linked bonus,
and restricted stock compensation (includes phantom stock), and their payment schedule.
With regard to revisions of the compensation system and other matters pertaining tocompensation overall, proposals approved by the Executive Compensation Meeting aredeliberated and decided on by the Board of Directors. The total amount of compensation for
individual directors and the levels of each compensation item are set depending on their
responsibilities, and whether he or she is an internal or outside director, by utilizing researchdata compiled by outside specialized agencies.
To ensure transparency and effectiveness of the executive compensation determination
process, the Executive Compensation Meeting shall, by a resolution of the Board of Directors,
be structured so that the majority of its members are outside directors, and its chairman shallbe appointed by a resolution of the Board of Directors.

Overview of Executive Compensation System
Composition of compensation
The ratio of compensation for the Representative Director, President and CEO will be set as 45% for basic compensation, 30% forannual performance-linked compensation, and 25% for restricted stock compensation (15% for variable compensation type (PSU)+ 10% for fixed compensation type (RS*)) upon achievement of the KPIs set forth in the STEP mid-term management vision.
As before, outside directors will only receive basic compensation(Reference) Compensation System for Directors (Representative Director President and CEO)
Fixed portion

Short-term incentives

Basic compensation

Annual performance-linked bonuses

45%

30%

Composition of compensation

We have set up a compensation table more closely linking compensation to annual performance the higher the rank, based on
the KPI of consolidated profit before tax for the fiscal year under review. Based on this table, cash compensation is paid at a
certain time of each year. For executive vice presidents, senior vice presidents, and vice presidents, specific amounts will be
determined after taking into consideration annual performance and level of contribution to human resource development. Suchcompensation will not be paid to outside directors.

Variable compensation type
Fixed(PSU) 15%compensation type(RS) 10%
Financial
Non-financial

Applicable performance indicator (KPI) to compensation composition

Annual performance-linked bonuses

Consolidated profit before tax

Variable compensation type (PSU) restricted stock compensation

Financial
Non-Financial

Consolidated ROE
Employee engagement indicator improvement points* In determining the specific amount of annual performance-linked bonus for executive vice presidents, senior vice presidents, and vice presidents, the Company shalltake into consideration consolidated profit before tax and level of contribution to human resource development.

Matters Concerning the Resolutions of the General Meetings of Shareholders on Compensation, etc. for
Directors and Corporate Auditors
By a resolution passed at the 85th Ordinary General Meeting of Shareholders, held in June 2016, the maximum total amount ofannual compensation, etc., for directors is 1.2 billion yen (including a maximum 200 million yen for outside directors). The
maximum total amount of monetary compensation is 200 million yen per year, within the abovementioned limitation, by aresolution passed at the 86th Ordinary General Meeting of Shareholders, held in June 2017. By a resolution passed at the 75th
Ordinary General Meeting of Shareholders, held in June 2006, the maximum total amount of annual compensation, etc., forcorporate auditors is 100 million yen.

Matters Concerning Delegation of Authority over the Details of Compensation, etc. for Individual Directors
SUBARU has voluntarily set up an Executive Compensation Meeting in order to enhance the effective governance structure
based on the existing organizational design. By resolution delegated from the Board of Directors, the Executive Compensation
Meeting, of which independent outside directors are a majority of its members, determines specific compensation amounts, etc.
of individual directors following sufficient deliberation. Its authorities include the determination of specific amounts of basic
compensation, annual performance-linked bonuses, and restricted stock compensation, as well as their payment schedule. For
restricted stock compensation, the number of shares allotted to individual directors is determined by the resolution of the Boardof Directors based on decisions of the Executive Compensation Meeting. In regard to revisions of the compensation system andother matters pertaining to compensation overall, proposals approved by the Executive Compensation Meeting are deliberated
and decided on by the Board of Directors.

Total Compensation for Directors and Corporate Auditors for FYE March 2023

* Restricted stock

Annual performance-linked bonuses (Short-term incentive)

Mid-and long-term incentives

Restricted stock compensation

Total Compensation (Millions of yen)
Category

NumberBasic Compensation (Paid in
fixed monthly installments)

Short-term Performancelinked Compensation

Restricted Stock Compensation
PSU

RS

Directors(of which, outside
directors)

9

293

147

23

58

521

(3)

(38)

( ̶)

(̶)

(̶)

(38)

Corporate auditors(of which, outside
corporate auditors)

5

85

̶

̶

̶

85

(3)

(29)

( ̶)

(̶)

(̶)

(29)

* The restricted stock compensation in the above table includes the amount of phantom stock expense recorded for grants to non-residents.

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Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Cross-Shareholding

Auditing

Policy for Cross-Shareholding
SUBARU holds listed stocks as cross-shareholdings and engages in dialogues with the companies in question. Each year,
SUBARU’s Board of Directors quantitatively measures and compares benefits from holding, using dividend yield, and the capital
cost involved, using weighted average cost of capital (WACC), in order to verify each. The Company will maintain these holdings
only if it deems, based on the results of this verification, that the shares will contribute to its medium- to long-term management
and business strategies in a qualitative manner.

Auditing by Corporate Auditors
SUBARU has formulated internal rules to ensure the effectiveness of corporate auditors’ audits (e.g., Standards for Corporate
Auditor’s Audit) and developed a whistleblowing system. In this way, the Company established a framework where the corporate
auditors can gather information from directors and employees as needed in case of matters that may cause significant damages to
the Company, significant violation of laws/the Articles of Incorporation, or other significant compliance matters. In addition, theframework ensures smooth performance of corporate auditors’ duties by assigning employees independent from directors to
support duties of corporate auditors and making them known to all employees.

Verification Details for Cross-Shareholding
Based on the above policy, SUBARU has steadily reduced the number of listed stocks held as cross-shareholding. As a result, 60
issues held at the end of March 2015 decreased to 2 issues at the end of March 2021. We consider these two issues to be essential
to hold at this time for the following reasons, but we will continue to hold dialogue with these companies at least once a year, andthe Board of Directors will evaluate and scrutinize these issues annually to determine whether they should be held or not.
Investment Stocks Held for Purposes other than Pure Investment
IssuesThe Gunma Bank, Ltd.
Mizuho Financial Group, Inc.

Number ofsharesAmount reported on thebalance sheet (Millions of yen)

As of March 31, 2023

Purpose of holding, impact of holding, and reason for increase in number of shares

2,850,468

1,263

The Gunma Bank, a local bank of the area where the Company’s main factory resides, is supporting not only SUBARU but
also local supplier sites in Japan and abroad through its financial services. As the bank has been the Company’s importantpartner, the Company will continue to hold the bank’s shares to promote fair and smooth financial transactions.

372,097

699

The Mizuho Financial Group firms have been supporting SUBARU with financial transactions and other services. In
particular, the Mizuho Bank has long been the Company’s most important financial partner, providing support in a broad
area of management. The Company will continue to hold the group’s shares to promote fair and smooth transactions.

Criteria for Exercising Voting Rights for Cross-Shareholding
With regard to the exercise of voting rights for listed stocks held as cross-shareholding, the Board of Directors deliberates on anddetermines the criteria for exercise with evaluation items such as whether the company is consistently exhibiting poor performance,
whether a sufficient number of independent outside directors are in place and if management is supervised appropriately, andwhether there are any corporate governance issues present. Although these are our general principles, we hold dialogues at least
once a year with companies whose stock we hold to avoid making blanket decisions. Accordingly, we exercise our voting rights
appropriately in light of the performance, management policies, and medium- to long-term management plans of the companies inquestion, as well as from the perspectives of corporate value enhancement, corporate governance, and social responsibility. In
addition, we will continue to verify whether or not our criteria for exercise of voting rights warrant review.

Internal Control
Management System
With the aim of increasing the effectiveness of internal controls and risk management, the Internal Audit Department was madeindependent of the Risk Management Group (overseen by the Chief Risk Management Officer (CRMO)) to ensure a higher levelof independence of internal audit units in the organization and to enhance the effectiveness of internal controls.
Internal Control System
In accordance with the Companies Act and the Ordinance for Enforcement of the Companies Act, SUBARU’s Board of Directors
has adopted a basic policy on putting in place systems that ensure that the performance of duties by directors is in conformity
with laws and regulations and with the Articles of Incorporation, and other systems prescribed in the ordinance of the Ministry ofJustice as being necessary to ensure the appropriate operations of the Company and the corporate group consisting of theCompany and its subsidiaries. The Board of Directors maintains and operates this basic policy, reviewing it as needed.

Internal Control System Related to Financial Reporting
Regarding internal control reporting systems pursuant to the Financial Instruments and Exchange Act, the evaluation of theinternal control system related to financial reporting is dated the final day of the consolidated accounting period and isconducted in accordance with generally accepted assessment standards for internal control over financial reporting.
The President and Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) evaluated the status of the developmentof the internal control system related to financial reporting as of March 31, 2023 and affirmed that it has been established properly
and functions effectively, and issued an internal control report audited by the accounting auditors to that effect.

Securities Report and Financial Report are published in the Investor Relations section of the SUBARU website.

https://www.subaru.co.jp/ir/library/securities-reports.html (Japanese version only)
https://www.subaru.co.jp/en/ir/library/financial-reports.html

74 Integrated Report 2023

Specific matters studied in FYE March 2023
Matters for resolution
Audit policy, audit plan and division of audit duties, consent to agenda items for the General Meeting of Shareholders (appointmentof corporate auditors), evaluation and selection/dismissal of the accounting auditors, consent to the audit fee for the accounting
auditors, preparation of the audit report, etc. for the current fiscal year
Matters for reporting
Report on the results and findings of site visits to Company offices and affiliated companies
Sharing of information from standing corporate auditors to outside corporate auditors on important company matters,
including via the Executive Management Board Meeting and the Executive MeetingStatus reporting from responsible departments on risk management issues that arise internally or within the industry from a
preventive audit perspective
Individual opinions raised by the Board of Corporate Auditors are presented to relevant officers and others as appropriate togain reference opinions for forming decisions on the execution of business.
Main Initiatives
1) Confirming management monitoring and execution
In accordance with audit plans by corporate auditors, each corporate auditor attends important meetings, including those of the Board of
Directors, Executive Management Board Meeting, and Risk Management and Compliance Committee. When in attendance, they monitor
management decision-making processes, seek explanations as necessary, and actively express their opinions. Through exchanges of opinionswith directors, vice presidents, and others, as well as site visits to major business establishments and Group companies, corporate auditors also
confirmed the status of business execution including the maintenance and operation of internal controls, with a focus on priority audit items.
We also ensure the effectiveness of audits by utilizing remote methods, such as online meetings, as necessary and appropriate.
2) Meetings with departments related to internal controls
Corporate auditors receive regular monthly reports from the Legal Department and the Risk Management and Compliance Office oncompliance concerns including the operation of the whistleblowing system, and receive regular reports from human resource departments on
the status of issues such as disciplinary cases and industrial accidents.
In addition, corporate auditors receive reports from the departments in charge of managing subsidiaries on the status of governance andinternal controls for subsidiaries as appropriate.
3) Cooperation in the three-party audit system
Corporate auditors hold regular audit report meetings with internal audit units, receive reports on all internal audit results, and exchange
information and opinions on internal control issues, which are reflected in audits by corporate auditors.
Corporate auditors also receive quarterly reports from the accounting auditors on the status of accounting audits and exchange opinions withthem as necessary so as to ensure effective and efficient audits, thereby establishing close mutual cooperation in the three-party audit system.
As part of these exchanges, corporate auditors harness opportunities provided by quarterly reports to engage with the accounting auditorsfrom the beginning of the fiscal year with respect to Key Audit Matters (KAMs), including candidate matters, about concepts such as thesuitability of audit targets and the state of audit actions.
In addition, corporate auditors of the Company hold meetings to exchange opinions and share information with corporate auditors of Group
companies as appropriate, and also seek to collaborate with these corporate auditors by requesting their attendance at site visits of theirrespective Group companies.
Based on the findings confirmed through the above audit activities, we capture a range of opportunities to engage with the businessexecution side, including exchanges of opinions with all corporate auditors, the chair of the Board of Directors, and the representative
directors, and at Group company presidents’ meetings. Through these activities, we share information and provide necessary advice
and recommendations for the resolution of important management issues, including the strengthening of Group governance.
Internal Auditing
The Internal Audit Department (15 members) has been established and reports directly to the President. This organization evaluates
the state of the development and operation of internal controls with regard to business execution at SUBARU and its Group
companies in Japan and overseas from an independent and objective standpoint, providing advice and proposals for improvement.
As an initiative to ensure effective internal audits, the Internal Audit Department systematically conducts audits of businessexecution in accordance with an annual business audit plan prepared at the beginning of each fiscal year, taking into consideration
the risks and internal control status of the entire Group. Audit reports on business execution are distributed to all directors,
corporate auditors, and relevant departments at the same time as reports are directly made to the President at a monthly reporting
meeting. In parallel with this, reports are also made at semi-annual meetings of the Board of Directors and quarterly at joint
meetings consisting of all vice presidents.
SUBARU’s Internal Audit Department and corporate auditors work together to strengthen audit functions, as described in 3.3)
“Cooperation in the three-party audit system” above. In addition, we strive to strengthen audit functions by sharing information withthe accounting auditors on audit plans and audit results on a quarterly basis. Furthermore, the Internal Audit Department regularly
exchanges information with Group companies that have their own internal audit units, working toward greater cooperation.
The Internal Audit Department carries out a yearly evaluation of its own activities and periodically undergoes an evaluation by
external experts to confirm that the audit operations are being performed appropriately.
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Value Creation Story

Commentary on Strategy

Corporate Data

Foundations Supporting Value Creation

Compliance

Our Approach

Breakdown of Compliance Hotline Consultations and Trends Over Time
2019

2020

2021

2022

2023

At SUBARU, compliance is positioned as one of our most important management issues in our Corporate Governance
Guidelines. All officers and employees of the SUBARU Group are deeply ingrained with the commitment to adhere to
the Compliance Manual, laws, internal regulations, and social ethics and norms, making it an integral part of their
behavior at all levels. In the unlikely event of a violation of set standards, not only could the Company incur damages inaccordance with legal regulations, but such incidents could erode the trust and confidence of customers, business
partners, clients, shareholders, and broader society. By creating and operating a compliance system/organization, andcarrying out activities such as providing different kinds of training, each employee has a strong awareness that thoroughGroup-wide compliance forms the foundation of SUBARU’s management and behaves in accordance with this.

Suspected violation or violation

22

14

19

26

24

Labor-related grievances and requests

59

60

65

67

59

Interpersonal relationship grievances and requests

111

136

143

111

178

Management System
The SUBARU Group has established the Risk Management and Compliance Committee, a company-wide organization
designed to promote compliance. This committee deliberates, discusses, decides, and exchanges information on importantmatters related to risk management. We also employ a PDCA cycle, with each department creating its own complianceprogram each fiscal year to enhance compliance. This involves consistent, structured independent actions for legal compliancemanagement and to foster employee compliance awareness, as well as subsequent verification of compliance status.

Compliance System

AuditorEstablish
Internal audit
Results report

Report extremely important,highly urgent compliance issues

Board ofDirectors

CEO

Report important matters(e.g., deliberations/decisions)

7

6

9

10

9

Total

199

216

236

214

270

Training
In enforcing thorough compliance, we believe that initiatives in which the entire SUBARU Group acts in concert arenecessary. We conduct compliance training, training for legal affairs in practical business, and other programs for all
Group employees in Japan organized by our Legal Department, Risk Management and Compliance Office, and humanresource and education departments.
In particular, approximately 30,000 SUBARU and Group companies in Japan have participated in video-based online
training programs, which was introduced to adapt to work format changes due to the COVID-19 pandemic, thereby
raising compliance awareness across a wide range of individuals. In addition, to promote the understanding of key laws
and regulations, the Legal Department leads training for legal affairs in practical business for SUBARU and Group
companies in Japan. In FYE March 2023, we conducted such training within eight programs covering topics that
included security trade controls, the Act on the Protection of Personal Information, and the Subcontract Act. In addition,
to complement compliance enlightenment training, study groups are held at each department and affiliated company
based on their compliance program, covering important laws and regulations related to their work. These include
export controls, the Act on the Protection of Personal Information, the Antimonopoly Act, the Political Funds Control
Act, and harassment prevention.

Bribery Prevention

Risk Management and Compliance Committee members
Administrative work

At SUBARU and its Group companies in Japan, we consider the prevention of bribery in the connection to ourbusinesses as an important issue, and work to ensure the following approach is rigorously permeated.

Report important matters<Secretariat>
Risk Management and Compliance Office rohibition of providing, offering, or promising improper entertainment, gifts, favors, or other economic benefits toPpublic officials or persons in similar positions, whether in Japan or abroad(Risk Management and Compliance Oversight Department)
Discussion/cooperation

Discussion/reporting concerning scandals
Report compliance situation

Chief Risk Management Officer<Meeting of persons in charge of risk management>
Persons in charge of risk management
Conduct internal
audit

Others<Risk Management and Compliance Committee>
Risk Management and Compliance Committee Chair (CRMO)

Audit
Department/Internal Audit(FYE March)

Discussion/cooperation

Each division, department, and in-house company
Affiliated companies

Compliance Hotline
When regular or temporary employees of SUBARU and its Group companies in Japan detect a problem related tocompliance in the Group, they can consult with our Internal Reporting Desk by using the Compliance Hotline.
There were 270 consultations in FYE March 2023, the details of which are outlined in the table on the next page.
Through initiatives to fully embed this system, SUBARU has improved awareness of compliance and fostered an
atmosphere where employees can consult even about trivial matters. This has resulted in an increasing trend in thenumber of consultations over the previous five years. It is also contributing to the reform of corporate culture as achannel for addressing and resolving workplace issues.

 rohibition of providing or receiving an amount in excess of socially accepted norms in dealings with business partners
Pand customers who do not constitute public officials or similar persons
 rohibition of receipt of personal gain as a result of using information obtained in the course of business, establishingPboundaries between public and private life
Under the monitoring system for bribery prevention, SUBARU collects information to ascertain the presence of cases that
may constitute compliance violations through company-wide fact-finding investigations. It also strives to detect cases early via
business audits conducted by internal audit departments. Furthermore, SUBARU has established a system to report high-riskcases to the Risk Management and Compliance Committee and the Board of Directors, in an effort to strengthen oversight.
In FYE March 2023, there were no fines, penalties, or settlement payments related to violations of anti-corruption laws
and regulations within the Group, and no individuals were subject to disciplinary dismissals for such violations.

Tax Policy
The SUBARU Group is able to conduct its business operations thanks to support from society, and it strongly recognizes theimportance of returning profits to society. The SUBARU Group considers fulfilling its tax obligations to be an essential element of this.
The SUBARU Group strives to ensure compliance with the tax laws and regulations of each country and jurisdiction, pursuant
to the international rules and standards set out by international organizations, thereby fulfilling its societal obligations throughappropriate tax payments, while aiming for sustainable growth through sound business activities.
For Other Compliance Information
Please refer to our website for details about Corporate Governance Guidelines and Tax Policy

https://www.subaru.co.jp/en/csr/governance/compliance.html

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