Corporate Governance

Our corporate governance recognizes our responsibility to all stakeholders and aims to achieve sustainable growth and increase corporate value over the medium to long term through efficient and sound management based on the Sumitomo Spirit with “Banji-nissei,” “Shinyo-kakujitsu,” and “Fusu-furi” as the guiding principles.

Sumitomo's business has been conducted based on the "Monjuin Shiigaki," the business principles written by Masatomo Sumitomo, the founder of the Sumitomo family about 400 years ago, and spiritual basis of the "Sumitomo Spirit," which has been deepened and developed by Sumitomo's predecessors over many generations.
In order to support sound risk-taking in response to changes in the business environment, Sumitomo Riko will strengthen its governance functions, focusing on enhancing the functions of the Board of Directors.
Based on our management strategy and management issues, we will disclose financial and non-financial information in a timely and appropriate manner to our shareholders and other stakeholders with whom we share growth opportunities and risks. We will also establish a system for management to engage in constructive dialogue with shareholders. In the governance of Sumitomo Riko, a special committee consisting solely of outside directors and outside Audit & Supervisory Boards will be established to discuss and review any important transactions or actions that may cause conflicts of interest between the parent company and minority shareholders in order to maintain a sound relationship with the parent company in consideration of the common interests of shareholders.

The composition of the Board of Directors is determined from the perspective of whether it can appropriately fulfill its management monitoring and supervisory functions based on Sumitomo Riko's business fields, business environment, and business scale.
Specifically, the Board of Directors shall appoint appropriate persons based on their expertise, independence, gender, and internationality.
The current Board of Directors consists of 8 Directors (including 3 Outside Directors) and 5 Audit & Supervisory Board Members (including 3 Outside Audit & Supervisory Board Members), and is of an appropriate size to enable substantive discussions while ensuring a balance between the number of internal and external Directors and the expertise required to cover all business fields.
The expertise and experience of each Director and Audit & Supervisory Board Member are listed below.

Position and Name	Expertise and Experience
	Management	Technology Development	Manufacturing/ MONOZUKURI	Finance/ Accounting	Legal/ Risk Management	Human Resources/ Diversity & Inclusion
Representative Director and President and CEO Kazushi Shimizu	○	○				○
Director and Senior Managing Executive Officer Shinichi Waku	○	○	○
Director and Senior Managing Executive Officer Hideo Yamane	○			○	○	○
Director and Senior Managing Executive Officer Hideyoshi Yasuda	○		○			○
Director and Managing Executive Officer Katsuhisa Yano	○	○	○
Outside Director Masaaki Iritani	○				○
Outside Director Shigeru Hanagata	○				○
Outside Director Mariko Miyagi	○					○
Audit & Supervisory Board Member Hirohisa Maeda	○			○	○
Audit & Supervisory Board Member Takanobu Nanno	○	○	○
Outside Audit & Supervisory Board Member Hakaru Hyakushima	○			○	○
Outside Audit & Supervisory Board Member Tatsuko Koike	○				○	○
Outside Audit & Supervisory Board Member Reiko Matsuda	○			○		○

Directors who execute operations shall be selected from among those who are well acquainted with Sumitomo Riko's management and business, and who are capable of performing their duties as members of Sumitomo Riko's management team to meet the expectations of shareholders.
For Outside Directors and Audit & Supervisory Board Members, Sumitomo Riko appoints persons with advanced knowledge and abundant experience, such as lawyers, certified public accountants, experienced managers, academic experts, and government officials, as well as persons with knowledge in medium-term management issues (globalization or new business development).
Since Sumitomo Riko is also a so-called "listed subsidiary," several highly independent persons shall be appointed as Outside Directors.
In order to enhance objectivity, the Nomination and Remuneration Advisory Committee, an advisory body to the Board of Directors, reports on matters to be brought up for discussion at the General Meeting of Shareholders under the criteria for the election and dismissal of directors, and the Board of Directors respects these reports.
Furthermore, to ensure transparency and fairness in the selection and dismissal process, the following criteria have been established.

Selection Criteria for Directors in General
①The Director must have a deep understanding of the "Sumitomo Spirit," the "Sumitomo Riko Group Management Philosophy," and the "S.E.C.Q.," which is the basis of the Group's business operations, and must have the qualities and abilities to contribute to the medium- to long-term and sustainable enhancement of the Group's corporate value, based on the management strategies, business characteristics, etc. of the Group.
②The director must have physical and mental health that will not significantly hinder the performance of his/her duties as a director.
③The director must possess excellent character, dignity, ethics, and integrity (sincerity, seriousness and integrity)
④The director must have experience in a leadership role, abundant practical experience, and an outstanding managerial record.
⑤The director must possess rich managerial knowledge, and have excellent leadership, objective judgment, logical thinking, insight, foresight, and communication skills.
⑥The director must not have any interests that would influence the execution of his/her duties as a director.
⑦The director must not fall under any of the disqualifications for directors as stipulated in Article 331, Paragraph 1 of the Companies Act.
⑧The director must possess the other qualities required of directors from the standpoint of corporate governance.

①The director must possess a wealth of knowledge, ability, expertise, experience, and track record in business and operations, and be able to make decisions based on a bird's-eye view of not only his or her own area of jurisdiction and responsibility but also the overall operations of the Group.

Selection Criteria for Outside Directors
①The outside director must have high level of knowledge and extensive experience, as well as knowledge of the Group's medium-term management issues, etc.
②The outside director must be able to provide appropriate advice and recommendations from an independent and objective standpoint in a fair and transparent manner to the Board of Directors in its decision-making process.
③The outside director must have the ability to monitor and supervise management from an independent and objective standpoint through the selection and dismissal of officers and other important decisions of the board of directors.
④The outside director must be able to monitor and supervise conflicts of interest between the Company and its management, controlling shareholders, etc., from an independent and objective standpoint.
⑤The outside director must have the ability to reflect the opinions, expectations, etc. of minority shareholders and other stakeholders in the Board of Directors from an independent and objective standpoint, particularly in light of the fact that the Company is a listed subsidiary.

Dismissal Criteria for Directors in General
①In the event of serious violation of laws and regulations, the Articles of Incorporation, public order and morals, or misconduct, etc.
②In the event of negligence of duty as a director or damage to the corporate value of the Company's group.
③When it becomes difficult for a director to continue his/her duties as a director due to health reasons, etc.
④If a director becomes subject to any of the disqualification grounds for directors stipulated in Article 331, Paragraph 1 of the Companies Act or other relevant laws and regulations.
⑤Other cases in which the director is not recognized as having the qualities specified in the appointment criteria.

In order to ensure transparency and fairness in the process of selecting the President, our company has defined the "ideal President" and clarified the necessary qualifications. These will be evaluated through annual reviews and updated as needed.

The Ideal Image of a President
①A person who truly embodies the Sumitomo Spirit, looks to the future, and, under a clear vision, focuses on improving the wellbeing of employees who work together with us, creates new social value by simultaneously improving both the corporate value and the public value of our Group.
②A leader who will lead the entire Sumitomo Riko Group into the future while maintaining high ethical standards, taking on challenges boldly, adapting quickly to change, and collaborating with diverse stakeholders, while preserving the sound corporate culture of the Group and being innovative and free from preconceived ideas.

At least once each year, the Board of Directors of Sumitomo Riko analyzes and evaluates the effectiveness of the Board of Directors at a Board of Directors meeting or other meetings.
Please refer to the Corporate Governance Report (*Japanese) for the results of the evaluation.

Compensation for Directors is linked to shareholder returns so that it fully functions as an incentive to sustainably increase corporate value. And in determining the compensation of individual Directors, our basic policy is to set an appropriate level based on the responsibilities of each position. Specifically, compensation for Directors (excluding Outside Directors) consists of base compensation as fixed compensation and bonuses as performance-linked compensation, etc. Outside directors are paid only base compensation as fixed compensation in order to ensure their independence.
Based on the resolution of the Board of Directors, the Chairperson of the Board (or Representative Director and President & CEO in the event of a vacancy in the office of the Chairperson of the Board) shall be delegated the authority to determine the amount of base compensation for each Director and the allocation of bonuses based on the evaluation of the performance of the businesses for which each Director (excluding Outside Directors) is responsible, and the amount thereof.
The Chairperson of the Board (or Representative Director and President & CEO in the event of a vacancy in the office of the Chairperson of the Board) shall consult with the Nomination and Remuneration Advisory Committee and obtain its report in order to exercise such authority appropriately, and shall decide these matters respecting the content of said report.