Basic Approach to Corporate Governance

Basic Approach

The Lion Group’s top priorities for corporate governance are to increase management transparency, strengthen Supervisory functions, accelerate decision making and ensure compliance. By strengthening and enhancing its corporate governance system, Lion aims to increase its corporate value.

Policy

For information about Lion’s approach to corporate governance, governance initiatives and other related topics, please refer to the Basic Corporate Governance Policy.

Initiatives to Enhance Management Auditing and Supervision

Initiatives to Enhance Management Auditing and Supervision

Corporate Governance System

Organizational Structure

Lion is a company with an Audit & Supervisory Board as defined in the Companies Act, with a system of corporate governance in which the Board of Directors provides adequate oversight of management while independently operating Audit & Supervisory Board members provide appropriate auditing. To reinforce the Board of Directors’ management oversight function and speed decision making, Lion has adopted an executive officer system. In addition, to increase management transparency and further enhance corporate governance, Lion has established a Nomination Advisory Committee and Compensation Advisory Committee comprising mainly external directors and external Audit & Supervisory Board members. In addition, to reflect the opinions and advice of third parties with regard to legal compliance and management policies, we have set up an Advisory Committee consisting of external experts.

Corporate Governance System

Corporate Governance System

Directors, Board of Directors and Executive Committee, etc.

The Board of Directors is composed of 11 directors. The Board of Directors regularly meets once a month and holds extraordinary meetings as necessary. In addition to matters stipulated by laws and regulations or the Articles of Incorporation, the board determines important matters related to the business execution of the Company and supervises the business execution of directors and executive officers. Also, in addition to at the regular Board of Directors’ meetings, resolutions of the Board of Directors may be made in writing in accordance with laws and regulations. For important corporate strategies such as the basic policies of medium- to long-term management plans, a system is established that enables the Board of Directors to make appropriate decisions upon deliberation by the Senior Executive Committee.
Additionally, the Executive Committee has a system in place to discuss and examine, from various angles, measures related to job execution that directly impact businesses.

Board of Directors

Audit & Supervisory Board Members and Audit & Supervisory Board

There are five Audit & Supervisory Board members, three of whom are external Audit & Supervisory Board members (independent Audit & Supervisory Board members) and two of whom are standing Audit & Supervisory Board members from within the Company. Two of the external Audit & Supervisory Board members and one of the standing Audit & Supervisory Board members possesses knowledge regarding finance and accounting. In addition, one dedicated staff person is designated to assist the Audit & Supervisory Board members. The Audit & Supervisory Board regularly meets once every two months and holds extraordinary meetings as necessary.
Each Audit & Supervisory Board member attends meetings of the Board of Directors and other important meetings, conducts interviews with directors regarding the status of the execution of their duties (including the status of the execution of the duties of directors pertaining to the development and operation of internal control over financial reporting), performs site visits to Lion’s headquarters and major offices and plants, and conducts audits of subsidiaries in accordance with the Audit & Supervisory Board members’ standards, audit policy, audit plans and other stipulations of the Audit & Supervisory Board. The Audit & Supervisory Board exchanges information, opinions and views from a risk approach standpoint and facilitates coordination upon receiving audit reports from accounting auditors and from the Auditing Office, which is the Company’s internal auditing division. Moreover, regular meetings to exchange information, opinions and views are conducted with the representative directors three times a year.

Audit & Supervisory Boards

Nomination Advisory Committee

The Board of Directors consults the Nomination Advisory Committee regarding the necessary qualities, reasons for selection or dismissal and related processes for nominating directors, Audit & Supervisory Board members and executive officers as well as for hiring individuals who have previously served in these roles as consultants. The committee considers the matters in question and provides a response to the Board of Directors (or, for matters regarding Audit & Supervisory Board members, to the Audit & Supervisory Board). The committee also exchanges opinions on the development of future Group presidents. The committee comprises external directors and external Audit & Supervisory Board members as well as a representative director designated by the chairman of the Board of Directors. The members of the committee select from among themselves the committee chairperson, who must be an external director or external Audit & Supervisory Board member.

Nomination Advisory Committee

Compensation Advisory Committee

The Board of Directors consults the Compensation Advisory Committee regarding such matters as the compensation system, compensation levels and bonus calculation methods for directors and Audit & Supervisory Board members. The committee considers the matters in question and provides a response to the Board of Directors (or, for matters regarding Audit & Supervisory Board members, to the Audit & Supervisory Board). The committee comprises external directors and external Audit & Supervisory Board members. The members of the committee select from among themselves the committee chairperson.

Compensation Advisory Committee

Advisory Committee

The Advisory Committee comprises outside experts other than the external directors and external Audit & Supervisory Board members who possess extensive knowledge and insight. The committee considers the appropriateness and other aspects of Lion’s management policies and measures. The committee serves to reflect objective opinions from a wide range of perspectives in management. In principle, the committee meets twice a year. The chairperson of the Board of Directors reports a summary of the committee’s advice to the Board of Directors.

Advisory Committee

Accounting Audits

Lion has formed an audit agreement with Ernst & Young ShinNihon LLC, based on which the latter provides accounting audits as well as audits of Lion’s internal control reports based on the Companies Act and Financial Instruments and Exchange Act.

Internal Audits

The Auditing Office implements audits across the Lion Group, examining operations from the perspectives of legality, fairness, efficiency and risk management in order to establish a foundation for sound business activities. The Auditing Office exchanges information closely with the Audit & Supervisory Board Members, striving to reinforce coordination. Audit results and the status of improvements are regularly reported to the President, directors with related responsibilities and the Executive Committee. A summary of the audit results is reported to the Board of Directors twice a year.

Corporate Governance Report

For details about Lion’s corporate governance, please refer to the Corporate Governance Report submitted to the Tokyo Stock Exchange.

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