Corporate Governance

Approach to Corporate Governance

Duskin ensures the implementation of all of the principles contained in the Corporate Governance Code. For additional information, please refer to the Corporate Governance Report on our website.

https://www.duskin.co.jp/sus/governance/corporate/pdf/governance.pdf (Japanese version only)

Initiatives to Strengthen Corporate Governance

We are working to strengthen corporate governance, as we believe it to be one of the most important issues for management. In 2017 we created a Directors Evaluation Committee and introduced an Operating Officer System in 2018. With the aim of ensuring the independence of the Directors Evaluation Committee and maintaining its effectiveness, we mandated that only independent directors be members and made the committee an advisory body to the Board of Directors.

Taking into account amendments to laws and changing society, we will continue to work toward further improvements in corporate governance.

2003	Quality Assurance Committee (now Sustainability Committee) organized
2003	Compliance Promotion Committee (now Compliance Committee) established
2006	Management philosophy included in the Articles of Incorporation
	A basic policy for the Internal Control System established
	Risk Management Committee established
	Duskin stock listed on the first section of Tokyo Stock Exchange and Osaka Securities Exchange* *The cash equity markets of Tokyo Stock Exchange and Osaka Securities Exchange were integrated on July 16, 2013.
2007	The Directors' retirement benefit program terminated
2008	The number of Outside Audit and Supervisory Board Members increased from two to three
2013	Participates in Electronic Voting Platform
2014	The number of Outside Directors increased from one to two
2015	Outside Directors and Audit and Supervisory Board Members Council established
	The number of Outside Directors increased from two to three
	Posting of shareholders' meeting notice on the web (earlier than distributing printed version) started
2016	Analyzation and evaluation of the effectiveness of the B 2016 oard of Directors started
2017	A share-based remuneration-type stock option program established
	Directors Evaluation and Nomination System introduced
	Directors Evaluation Committee organized
2018	Operating Officer System introduced
	The number of Directors decreased from not more than 15 to not more than 12
	Independent Outside Directors account for at least one third of all Directors
2019	Advisory body function of the Directors Evaluation Committee switched to the Board of Directors instead of to the President
2020	Succession Plan to train and develop next-generation management launched
2020	Operations restructured into groups; COO and CFO designated
2021	Share-based remuneration-type stock options replaced with a restricted stock remuneration plan
2021	Hybrid virtual shareholders' meeting (a meeting in which online participants do not have voting rights) held

Five Key Characteristics of Corporate Governance

1	Ratio of Outside Directors on the Board of Directors 33%	◆Of the nine board members, three are Outside Directors. ◆The ratio of Outside Directors on the Board of Directors remained at 33%, as it was in FY2019.
2	Ratio of women on the Board of Directors 22%	◆Of the nine board members, two are women. ◆Duskin is offering greater opportunities for women, who are essential to our business growth. One of our efforts is to increase board diversity with the appointment of more female Directors.
3	Board of Directors attendance rate 100%	◆All Directors, including Outside Directors are expected to attend every Board of Directors meeting and actively engage in discussions on the management and execution of the company's business. ◆This attendance rate reflects the average attendance rate for the 19 Board of Directors meetings since the general meeting of shareholders held in June 2020.
4	Establishment of a Directors Evaluation Committee	◆To ensure the effectiveness and transparency of appointments to and evaluations of the Board of Directors, Duskin established the Directors Evaluation Committee, which is composed only of independent directors and functions as an advisory board to the Board of Directors.
5	Building a structure that allows Board members to comprehensively deliberate on important matters	◆The Operating Officer System expedites the execution of company business by delegating decision-making authority for matters concerning a particular division to the officer in charge of that division. Delegating authority in this way enables the Board of Directors to focus on deliberating on important agenda items and on supervising the execution of company business.

Basic Policy

Upholding Founder Seiichi Suzuki's philosophy of Prayerful Management, we are committed to each of our business operations to Sow the Seeds of Joy for people and communities. Our interpretation of corporate governance is for all of our employees to incorporate his earnest wish, as reflected in the philosophy, in our everyday activities.

Duskin positions the strengthening of corporate governance as one of its highest priorities to build a stronger relationship with stakeholders, increase corporate value over the medium- to long-term, and achieve sustainable growth. Duskin is further bolstering its structure, organization and systems to ensure transparent and sound management. Duskin also places compliance at the center of all our corporate activities to continuously improve our corporate value.

Corporate Governance Structure

Duskin corporate governance uses an audit and supervisory board system. We have introduced the Operating Officer System to streamline the Board of Directors' decision-making process and strengthen its supervision of company business. To ensure the system’s effectiveness, we have also set up the Directors Evaluation and Nomination System. Additionally, to ensure that the process of determining the remuneration of individual directors is objective and transparent, we have established the Directors Evaluation Committee as an advisory body to the Board of Directors. At the Board of Directors, Directors monitor and supervise other Directors’ performance. The Audit and Supervisory Board consists of independent outside Audit and Supervisory Board Members capable of objectively conducting audits and internal fulltime Audit and Supervisory Board Members, who are well acquainted with our business operations and have skills needed to gather information. Under this system, the Audit and Supervisory Board Members, internal and outside, perform accurate audits. We consider this structure highly effective as it supports customer-oriented management while ensuring sound and efficient business operations. This system also enables us to swiftly and precisely respond to changes in the business environment.

Corporate Governance Structure (as of April 2021)

Corporate governance structure

Enlarge the image.

Board of Directors

Chaired by Teruji Yamamura, President & CEO

Directors are selected by taking into account the diversity of the board as a whole in terms of abilities, experience, gender and other characteristics. This is for the purpose of enabling the Board to make accurate management decisions in a wide range of business fields while maintaining the soundness, efficiency and effectiveness of the management. The number of Directors is limited to 12. This enables the Board of Directors to focus on making important management decisions and monitoring the execution of business to swiftly and precisely respond to changes in our business environment.

Meeting Attendance by Board Members and Audit & Supervisory Board Members

■Board of Directors ●Audit & Supervisory Board ★Chair ○Member △Observers
Name	Title	Attendance in FY2020	Sustainability Committee	Compliance Committee	Outside Directors and Audit & Supervisory Board Members Council	Directors Evaluation Committee	Risk Management Committee
Teruji Yamamura	President & CEO	■19/19	○
Kazushi Sumimoto	Director & COO	■19/19	○
Tetsuya Wada	Director & COO	■19/19	○	○
Naoto Miyata	Director & CFO	■19/19		★
Taku Suzuki	Director and Operating Officer	■19/19
Hiroyuki Okubo	Director and Operating Officer	■19/19	○
Tomoya Yoshizumi	Outside Director	■19/19			★	★
Nobuko Sekiguchi	Outside Director	■19/19	○	○	○	○
Yukiko Tsujimoto	Outside Director	■14/14	○	○	○
Takashi Yoshida	Audit & Supervisory Board Member	■19/19 ●12/12		○			△
Hideyuki Naito	Audit & Supervisory Board Member	■19/19 ●12/12	○
Takaaki Oda	Outside Audit & Supervisory Board Members	■18/19 ●12/12			○	○
Sachiko Kawanishi	Outside Audit & Supervisory Board Members	■19/19 ●12/12			○
Kyoichiro Arakawa	Outside Audit & Supervisory Board Members	■19/19 ●12/12			○

Note: Board meeting attendance for Nobuko Sekiguchi reflects attendance after her appointment on June 23, 2020.

Budget Meeting: Chaired by Teruji Yamamura, Representative Director, President and CEO

Main function: monitor budget progress for each business division, identify the discrepancies between forecasts and actual results and discuss measures to be taken
The Budget Meeting is held to monitor budget progress for each business division, identify the discrepancies between forecasts and actual results and discuss measures to be taken, as well as to share information on such issues.

Advisory Bodies

Outside Directors and Audit and Supervisory Board Members Council: Chaired by Tomoya Yoshizumi, Outside Director

Main function: make recommendations for increasing corporate value over the medium to long term Duskin has an Outside Directors and Audit and Supervisory Board Members Council, which is an advisory council for the Board of Directors. Its purpose is to provide beneficial views for ensuring effective corporate governance, while enabling Outside Directors to gather information without affecting their independence. This makes it possible to monitor and supervise Duskin's management from a transparent, fair and objective viewpoint.

Directors Evaluation Committee: Chaired by Tomoya Yoshizumi, Outside Director

Main function: provide necessary advice in response to consultations from the Board of Directors in selecting candidates for Directors and Operating Officers and in determining their remuneration The Directors Evaluation Committee was established as an advisory body for the President and CEO to consider Director and Operating Officer candidates and their remuneration, which requires the approval of the Board of Directors. As of April 2019, this committee, which had been an advisory body for the President and CEO, was changed to an advisory body for the Board of Directors to improve the effectiveness of the Directors Evaluation and Nomination System. The committee now consists of only independent directors, resulting in greater transparency and objectivity.

Sustainability Committee: Chaired by Minoru Okada, Operating Officer

Main function: determine medium-term framework and annual action plans regarding sustainability and deliberate on how to address unresolved sustainability issues To achieve corporate growth and contribute to building a sustainable society, we have the Sustainability Committee, which is an advisory council for the Board of Directors. The purpose of the committee is to determine priority issues and the scope of action for ESG and SDGs to implement CSV strategy across the Duskin Group.

Membership in Committees and Meetings
Name		2020 Achievements
Board of Directors	9 Directors (3 Outside Directors) Observers: 5 Audit & Supervisory Board Members (3 Outside Audit & Supervisory Board Members)	19
Audit & Supervisory Board	5 Audit & Supervisory Board Members (3 Outside Audit & Supervisory Board Members)	12
Sustainability Committee	6 Operating Officers (5 are also Directors), 2 Outside Directors, 1 Standing Audit & Supervisory Board Member	1
Risk Management Committee	1 Operating Officer, 8 from corporate office departments, and 3 from business divisions Observer: 1 Audit & Supervisory Board Member	2
Compliance Committee	7 Operating Officers (2 are also Directors), 2 Outside Directors, 1 Standing Audit & Supervisory Board Member, 1 labor union chair, 1 attorney	2
Outside Directors and Audit & Supervisory Board Members Council	3 Outside Directors, 3 Outside Audit & Supervisory Board Members	7
Directors Evaluation Committee	2 Outside Directors, 1 Outside Audit & Supervisory Board Member	4
Business Strategy Meeting	13 Operating Officers, 3 Outside Directors, 5 Audit & Supervisory Board Members (3 Outside Audit & Supervisory Board Members)	1
Operating Officers Board	13 Operating Officers Observers: 2 Standing Audit & Supervisory Board Members	12
Budget Meeting	7 Operating Officers (6 are also Directors), 2 Standing Audit & Supervisory Board Members	10

Business Execution

Operating Officers' Board: Chaired by Teruji Yamamura, Representative Director, President and CEO

Main function: deliberate important matters related to business execution
For the President and CEO to conduct business operations based on the basic management policy established at the Board of Directors meetings, Duskin has an Operating Officers' Board, a deliberative body to examine important business matters.

Investment Assessment Committee: Chaired by Naoto Miyata, Director and CFO

Main function: Raise the quality of plant, equipment and similar investments, and monitor the effectiveness of these investments after they are implemented
The Investment Assessment Committee was established to raise the quality of investments in new business development as well as plants and equipment, and to monitor the effectiveness of these investments. The committee meets to deliberate as needed.

Evaluation of the Effectiveness of the Board of Directors

Summary: Duskin analyzes and evaluates the effectiveness of the entire Board of Directors annually in order to achieve medium- and long-term sustainable growth and stronger corporate value.
The FY2020 analysis and evaluation process and results and FY2021 plan are as follows:

1.Third party expert — Analysis and evaluation process Target and Period: 15 meetings of the Board of Directors held between April 2020 and December 2020

2.Outside Directors & Audit & Supervisory Board Members Council — Analysis and evaluation process Target and Period: 15 meetings of the Board of Directors held between April 2020 and December 2020

FY2020 issues		FY2020 initiatives
1	Increase effectiveness of supervisory functions and broaden discussions on strategies for enhancing corporate value	(ⅰ) • Clarified Directors' responsibilities to supervise their business areas • Appointed a Chief Operating Officer (COO) for the Direct Selling Group and for the Food Group • Appointed Chief Financial Officer (CFO) (ⅱ) Directors in charge attended important business division meetings and supervised the divisions and the entire value chain. In addition, Outside Directors continued to attend product and service development meetings and provide feedback. (ⅲ) The Investment Assessment Committee, which was established in the previous fiscal year, conducted preliminary research and evaluation of investment proposals prior to deliberating on at Board of Directors meetings.
2	Further broaden discussions aimed at optimizing business portfolios on a companywide level	(ⅰ) Reviewed new companies and new businesses launched in the previous fiscal year or earlier and deliberated on future initiative for these businesses (ⅱ) Based on a portfolio assessment by business, deliberated on optimizing business portfolios on a companywide level
3	Deepen the discussions of organizational functions and the role of Operating Officers that respond to changes in the business environment and strategies	(ⅰ) Revaluated the compensation and benefits system and revised the compensation structure for Operating Officers to strengthen the link between Operating Officer performance and compensation (ⅱ) Launched Succession Plan and started periodic training • Started education program to train managerial personnel • Set up personnel talent pool, and raised the transparency of the Director and Operating Officer selection process by, for example, revising nomination form format

FY2021 initiatives
Issues	Plans
Conduct a thorough debate about strategies to enhance corporate value and increase effectiveness of supervisory function	1.Further strengthen the Board of Directors' supervisory function in order to implement clearer growth strategy, optimize the business portfolio and ensure steady progress on executing key strategiesp 2.Supervise how and in which domains Duskin utilizes its strengths to respond to a changing social environment while advancing Digital Transformation and strengthening the entire value chain 3.Accelerate the pace of evaluating, selecting and training future management personnel, including Board of Directors members, and reflect the results in the company's management structure

Election Policies for the Board of Directors

Selection Standards

Duskin selects candidates for election as Directors from among individuals who fulfill the criteria of possessing the character, knowledge and integrity to serve as a Director and who have no health issues that would interfere with performing the duties of a Director.

◆Internal Director candidates

The Representative Director requests recommendations from the current Directors and Audit & Supervisory Board Members.
The Representative Director selects a person who can have a positive effect on the organization's vitality and continuously execute medium- to long-term strategies of Duskin Group.
The Board of Directors makes final selections after thorough discussions, with advice from the Directors Evaluation Committee.

◆Outside Director candidates

●Duskin selects individuals who can maintain independence and have no special financial relationship with Duskin Group.
●These individuals must also have a business career and professional knowledge needed for enabling the Board of Directors to perform its supervisory and advisory functions.
●These individuals must also be able to provide useful advice from a multifaceted perspective in order to maintain the transparency and soundness of management and the fairness of procedures.

The Board of Directors makes final selection among candidates who meet the aforementioned criteria.

Under the provisions of Article 427, Paragraph 1 of the Companies Act, Duskin has contracts with Outside Directors that limit their liability as provided in Article 423, Paragraph 1 of this act. The maximum liability under the contracts is the amount as provided in laws and ordinances.

Reasons for selections of Outside Directors

Name	Reasons for election
Tomoya Yoshizumi	Extensive experience and insight in corporate management as a Member of the Board and Corporate Vice President at Ajinomoto Co., Inc., where he was engaged in strategic production planning, the Medium-Term Management Plan and implementing M&A strategies for the Ajinomoto Group. Mr. Yoshizumi supervised business operations from April 2011 in North America as General Manager, North America Division and President of Ajinomoto North America, Inc. Mr. Yoshizumi was appointed an Outside Director because he is expected to provide Duskin with advice based on his past experience and expertise from the perspective of overall management supervision and raising corporate value in the medium- and long-term.
Nobuko Sekiguchi	After working as a management consultant, Ms. Sekiguchi joined Capcom, where she served as a Managing Corporate Officer responsible for corporate planning that included preparing the Med-Term Plan, managing the annual budget, working on organizational reforms, and M&A. She held a leading role in reforming Capcom’s personnel system. Ms. Sekiguchi was appointed an Outside Director because she is expected to provide Duskin with advice based on her past experience and expertise from the perspective of overall management supervision and raising corporate value in the medium- and long-term.
Yukiko Tsujimoto	As a Director at Procter & Gamble Japan, Ms. Tsujimoto has a wealth of experience and insight in corporate management. As part of her tenure at the company, Ms. Tsujimoto has been responsible for overseeing brand marketing and communications, as well as serving as brand publicity leader for the Asian region. Ms. Tsujimoto was appointed an Outside Director because she is expected to provide Duskin with advice based on her past experience and expertise from the perspective of overall management supervision and raising corporate value in the medium- and long-term.

Note: All three are independent directors.

Standards for Independence of Outside Directors and Outside Audit & Supervisory Board Members

To ensure the independence of an Outside Director or Outside Audit & Supervisory Board Member, Duskin selects a member in accordance with our own selection criteria as well as the independence standards of the Enforcement Rules for Securities Listing Regulations of the Tokyo Stock Exchange.

When selecting the candidates, Duskin confirms that they comply with all items of the criteria. Then, the Board of Directors makes the final decision.

Directors' Remuneration

Duskin positions Directors' remuneration as an important issue for our corporate governance. To raise Directors' motivation to achieve medium- and long-term sustainable growth and enhance corporate value, Duskin established the Directors Evaluation and Nomination System. With this system, their contributions and capabilities are determined and reflected in their remuneration.

The methods used in calculating Director remuneration and actual remuneration in FY2020 are as follows.

Process and calculation methods of Director remuneration and actual remuneration
Items	Methods applied in FY2020
Items	Directors	Outside Directors	Audit and Supervisory Board Members
Decision-making process	●The determination of remuneration by the Board of Directors is based on officer remuneration survey data provided by an external research organization comparing Duskin to companies of a similar size and companies in similar business sectors and with similar operations. ●The Board of Directors makes the final decisions, taking into consideration the advice of the Directors Evaluation Committee, after thorough discussions.	●A certain amount is set as base compensation and bonuses for Outside Directors, after taking into account their backgrounds and other matters.	●Compensation is determined within the amount resolved at the general shareholders' meeting.
Remuneration	●The remuneration consists of basic compensation (fixed compensation), a performance-based bonus (short-term incentive) and share-based-remuneration-type stock options* (medium- to- long-term incentive). * This is to allocate share acquisition rights in an amount not exceeding 50 million yen per year in lieu of a portion of basic remuneration.	●A certain amount is set as base compensation and bonuses for Outside Directors, after taking into account their backgrounds and other matters.	●Remuneration for each Audit and Supervisory Board Member is determined based on discussions with those members.

Compensation is determined within the amount resolved at the general shareholders' meeting.

Actual remuneration (FY2020) (thousands of yen)

Category	Total Remuneration	Type of remuneration			Members
Category	Total Remuneration	Basic remuneration	Bonus	Stock option	Members
Directors	206,549	157,727	20,800	28,022	9
Note: The numbers above include three Directors who retired as of the 58th Ordinary General Meeting of Shareholders on June 23, 2020.
Outside Directors	23,300	18,600	4,700	-	4
Note: The numbers above include one Outside Director and one Audit and Supervisory Board Member, both of whom retired as of the 58th Ordinary General Meeting of Shareholders on June 23, 2020.
Standing Audit & Supervisory Board Members	50,550	46,350	4,200	-	3
Outside Audit & Supervisory Board Members	30,000	25,200	4,800	-	3

Note: The numbers above include one Audit and Supervisory Board Member who retired as of the 58th Ordinary General Meeting of Shareholders on June 23, 2020.

Internal Control

Duskin Group places the pursuit of the Economy and Morals in Unity at the heart of our business management. We have formulated the following Code of Conduct Statement to serve as a compass for the realization of our management philosophy as well as Duskin Code of Conduct to define concrete standards of conduct for our business operations.

Code of Conduct Statement: Aiming to be a trustworthy and reliable company

1 We always think of customers in everything we do.
2 We observe the law in all that we do.
3 We are ethical in all our actions.
4 We take pride in everything we do.

Training Directors and Audit and Supervisory Board Members and deepening their knowledge of Duskin

Starting in FY2020, Duskin has been preparing a succession plan and putting in place an executive-class training plan. Duskin provides periodic training that Directors and Audit and Supervisory Board Members need in order to perform their decision-making and executing duties, and training that operating officers need in order to perform their business duties. When appointing Outside Directors, the President and CEO explains the candidates about Duskin's management philosophy. After confirming their agreement on the philosophy, the President and CEO further explains Duskin's business strategy and business operations. In addition, to help them deepen their knowledge of Duskin, the company provides them opportunities to visit major business sites, training facilities and plants.

Successor Development Plan

Duskin formulated its succession plan in FY2019 to foster next-generation management and successors to our chief executives. We have created an educational program to train those with the appropriate qualities, as well as a selection process for executive officers and candidates for director positions. We launched these operations in FY2020 and regularly share information and report to the Board of Directors on the progress. The President & CEO conducts monthly individual meetings with all Operating Officers. Quantitative assessments of their performances and improvements are made every six months in line with the Directors Evaluation and Nomination System, with the opportunity used to provide further guidance as well as to review their capabilities and performance with them.

Policy Related to Acquisition and Holding of Cross-Shareholdings

The policy for cross-shareholdings is to hold a suitable number of shares only when there is a legitimate reason for owning these shares. Investments in stocks for which there is no legitimate reason for ownership are reduced or eliminated. Every year, the Duskin Board of Directors determines if the ownership of each cross-shareholding is proper or not. Decisions are based on the need for each cross-shareholding regarding business activities, such as business alliances, maintaining and strengthening business relationships, Duskin's cost of capital, share price movements and other factors.

Constructive Dialogue with Investors, Analysts and Shareholders

Duskin conducts a variety of investor relations (IR) and shareholder relations (SR) activities for the purposes of earning trust in the company's management, receiving a proper evaluation of the company, and achieving sustained business growth and medium- to long-term growth in corporate value. Our senior management and Directors protectively respond to the requests of individual or institutional investors to meet with them.

Information, evaluation and opinions gained through IR and SR activities are reported at meetings of the Board of Directors twice each year. In addition, reports as deemed necessary are made by the IR Section to an Operating Officer in charge, then from the Operating Officer to the Board of Directors to reflect this information in the management.

We strive to improve our IR tools, including our website, that are useful for individual investors and shareholders in making investment decisions. Duskin discloses the financial results, business strategies, ESG information, news and other topics of interest.

Initiatives

Duskin holds financial results briefings for institutional investors and analysts twice a year (once when 1H results are announced and once when full-year results are announced). Duskin visits institutional investors and analysts to have active dialogue with them.
The company has postponed briefings due to the spread of the novel coronavirus from February 2020 and meet with them over the phone.

Duskin held its first round-table conference for shareholders on November 14, 2019, with 102 individuals out of 1,419 applicants taking part. In addition to Operating Officers and President & CEO speaking on Duskin's business and history, the meeting provided an opportunity for participants to exchange opinions while enjoying our Mister Donut and other items of our Food Group.
There are no plans at present to hold such events during the current fiscal year.