Corporate Governance | Governance | Sustainability | GUNZE LIMITED

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Corporate Governance

Policy and Basic Approach The Gunze Group recognizes that legal and regulatory compliance is essential for meeting our basic management policy of sustainably boosting corporate value.Accordingly, we strive for swift decision-making and timely and appropriate disclosure of corporate information so that we can respond appropriately to the social and economic environment.
We therefore consider improving shareholder value, by enhancing the transparency of our management, to be one of our most important management objectives. To achieve this, the Gunze Group seeks to build sound relationships with our each stakeholder and strengthen and upgrade our internal control functions as a way to enhance our corporate governance.

System The Gunze Group is a company with a Board of Corporate Auditors, where the Board of Corporate Auditors comprises four Corporate Auditors, two of whom are outside Corporate Auditors (as of June 25, 2024). The Corporate Auditors attend the Board of Directors and other important meetings, conduct onsite audits of business and management divisions, and inspect domestic and overseas subsidiaries, while performing other duties, in order to fulfill their management supervisory function.
The current management structure comprises nine Directors (of whom two are women), including three outside Directors. Moreover, the Company has introduced a corporate officer system to facilitate accelerated business decisions and to strengthen the business execution system, and has appointed 13 corporate officers, including six who also serve as Directors. To clarify management responsibilities and to establish a management framework that can respond more quickly to changes in the business environment, the term of office for Directors and corporate officers is set at one year.

History of Governance Enhancements

Initiatives to Enhance Corporate Governance To accelerate business decisions and to strengthen the management supervision function, the Gunze Group introduced a corporate officer system and reduced the number of Directors in FY2005.
Having clarified the management responsibilities of Directors, we revised their term of office in 2006 from two years to one year with the goal of establishing a management framework that can respond more quickly to changes in the business environment.
At the same time, we began appointing outside Directors in an effort to ensure the transparency of management.
In addition, we have striven to enhance our corporate governance by having the Board of Directors make a final decision on nominating candidates for Director positions following History of Governance Enhancements deliberations by the Nomination/Remuneration Committee.
The Nomination/Remuneration Committee was established in FY2019 as an advisory committee to the Board of Directors, comprises the Representative Directors and outside Directors, and is chaired by an outside Director. Moreover, in 2015 we formulated the Gunze Corporate Governance Guidelines as the basic policy for corporate governance by the Gunze Group. We revised these Guidelines in 2021.

History of Governance Enhancements

	Initiative Details
Fiscal 2005	Introduced a corporate officer system and reduced the number of Directors
Fiscal 2006	Reduced the term of office for Directors from two years to one year
Fiscal 2006	Began appointing outside Directors and female Directors
Fiscal 2015	Formulated the Gunze Corporate Governance Guidelines
Fiscal 2018	Moved to a structure with two female Directors
Fiscal 2019	Established the Nomination/Remuneration Committee (chaired by an outside Director as an advisory committee to the Board of Directors)
Fiscal 2019	Ratio of outside Directors exceeds one-third of the Board
Fiscal 2021	Published the skill matrix for Directors and Corporate Auditors

Overview of the conference and committee

Board of Directors

As entrusted by the Company’s shareholders, the Board of Directors assumes the responsibility for realizing efficient and effective corporate governance for the sake of all shareholders, achieving sustained growth for the Gunze Group as a result of realizing this level of corporate governance, and striving to maximize corporate value in the long term.
To fulfill its responsibilities, the Board of Directors executes oversight functions over overall management practices in order to ensure fairness and transparency.
The Board also nominates, evaluates, and determines remuneration for the President and other executives, while assessing important risks facing the Gunze Group and drawing up counteractions. The Board also makes important operational decisions to ensure the best possible decision-making for the Company.
As a general rule, the Board of Directors meets once per month (held 13 times in FY2024), during which it makes decisions on important matters related to business execution and matters stipulated by laws, regulations, and the Articles of Incorporation. It also supervises the status of the execution of duties by Directors.

Discussions at the Board of Directors

In addition to matters stipulated by laws, regulations, and the Articles of Incorporation, quarterly settlements, the next fiscal year’s policies, operating budgets, and other individual matters are discussed as important business matters, and reports and information from each executive division are shared in a timely and appropriate manner.
Outside Directors and other officers proactively ask questions, raise issues, and hold discussions from a variety of perspectives.
During FY2024, particularly vigorous discussions took place regarding the Company’s direction from a medium- to long- term perspective, formulation of the Medium-term Management Plan VISION 2030 stage2, and how the Board of Directors should operate.
Additionally, proposals and reports regarding individual matters were made and deliberated on, including the construction of a new building (factory building) in the engineering plastics field, the introduction of surgical support robots in the medical business, structural reforms in the electronic components field, business transfers in the mechatronics field, and structural reforms in the apparel business.

Assessment of Board of Directors’ effectiveness

At the Gunze Group, all Directors and Corporate Auditors conduct an annual assessment on the effectiveness of the Board of Directors as well as their own performance as Company officers and submit their results to the Board of Directors. Based on the aggregate results, the Board of Directors analyzes and evaluates its overall effectiveness each year. Since FY2019, the Board of Directors has been conducting self-evaluations and analyses with advice from an external organization. In March 2025, all Directors and Corporate Auditors who comprise the Board of Directors responded to a survey conducted by the Company. As they responded directly to an external organization, they were assured anonymity in their responses.
Based on a report and advice from the external organization on the aggregate results, a report was made to the Board of Directors, and the results were evaluated and discussed. Generally positive evaluations were obtained from the survey in terms of composition, operations, agenda items, execution of individual roles, and mutual supervision, among others. Taking into consideration the changes in the evaluation results following the employment of the external organization and comparisons with the previous year’s evaluation and external data, we believe that the effectiveness of the Board of Directors as a whole is ensured with stability.
Going forward, we will implement measures to address the identified issues and continue our efforts to further enhance the effectiveness of the Board of Directors.

FY2024 meeting results

	Times held	Number of agenda items	Number of reports	Attendance (Internal Officers)	Attendance (Outside Officers)
Board of Directors	13	32	53	100%	100%

Main agenda items and reports	Number
Management strategies (including Medium-term Management Plan)	10
Financial results / financial affairs	16
Organization and personnel	15
Governance	11
Individual matters	22
Other	11

Analysis and evaluation process

Board of Corporate Auditors

In principle, the Board of Corporate Auditors meets regularly prior to meetings of the Board of Directors and also convenes as necessary for extraordinary meetings. It receives reports, deliberates, and makes resolutions on important matters pertaining to audits, in accordance with laws and regulations, the Company’s Articles of Incorporation, and the Board of Corporate Auditors Regulations.

FY2024 meeting results

	Times held	Number of agenda items	Number of reports	Attendance (Internal Officers)	Attendance (Outside Officers)
Board of Corporate Auditors	15	20	26	100%	100%

Activities of Corporate Auditors

The main activities of the Audit & Supervisory Board members are as follows. The main activities carried out by the full-time and part-time Audit & Supervisory Board members are marked with a ● or ○.

Activities	umber of times, etc.	Job assignments
Activities	umber of times, etc.	Full-time	External part-time	Part-time
Attendance, expressing of opinions at Board of Directors’ meetings	13 times	●	●	●
Attendance, exchanging of opinions at meetings of outside Directors (reporting sessions on initiatives from head office and business divisions)	9 times	●	●	●
Attendance, expressing of opinions at other important meetings (Executive Committee meetings, budget meetings, business group head meetings, risk management and other committee meetings)	39 times	●		○
Viewing, verification of important documents (approval documents, such as requests for approval, important contracts)	As needed	●		○
Individual meetings and exchanging of opinions with Directors (including one exchange of opinions with outside Directors)	18 times	●	○	○
Individual interviews with corporate officers and senior employees, hearings on business execution status, and exchanges of opinions	99 times	●	○	○
Visits to and surveys of major offices and affiliated companies	28 entities	●	○	○
Attending inventory inspections at major business sites and affiliated companies	3 entities	●
Investigation, monitoring, and verification of the development and operational status of the internal control system through the above activities, and collection of voluntary inspection forms from departments and offices	Voluntary inspection 44 entities	●	○	○
Cooperation with subsidiary auditors (Group auditors’ liaison meetings, individual communications)	Liaison meetings 2 times	●	○	●
Cooperation with internal audit divisions (meetings to confirm audit plans, receive regular reports, etc.)	10 times	●	○	●
Cooperation with independent accounting auditors (meetings relating to audits and reviews, etc.)	12 times	●	○	○

●:Responsibility
○:Partial responsibility

Director and Corporate Auditor Appointments

Regarding the nomination of Director and Corporate Auditor candidates and the appointment of senior management, the Nomination/Remuneration Committee deliberates on each matter based on the selection criteria stipulated by the Board of Directors, after which the Board of Directors makes a final decision. When appointing Directors, given that the Gunze Group operates its functional solutions, medical, apparel, and lifestyle creations businesses in a diversified and global manner, the Board of Directors as a whole must ensure appropriate and prompt decision-making and oversight of execution for these business activities. To achieve this, our fundamental policy is to form a well-balanced Board of Directors consisting of a balanced mix of Directors, considering diversity including gender and internationality. This includes Directors appointed from within the Company with knowledge, experience, and skills in each business field, as well as in finance and accounting, technology development and research, sales and marketing, legal affairs, and human resources; and multiple outside Directors who can provide active advice and proposals from a fair and objective standpoint, leveraging their management experience at other companies and their specialized knowledge and experiences from outside the Company. Appointments are decided by the Board of Directors, following deliberation by the Nomination/Remuneration Committee.
When appointing Corporate Auditors, our basic policy is to form the Board of Corporate Auditors with individuals capable of expressing fair opinions from a professional perspective and independent standpoint, including at least one person possessing appropriate expertise in finance and accounting. Appointments are decided by the Board of Directors, following deliberation by the Nomination/Remuneration Committee and with the consent of the Board of Corporate Auditors.
With regard to executive directors, such as Representative Directors, and Corporate Officers who are members of senior management, if the Nomination/Remuneration Committee finds, as a result of its annual review, that their performance meets the criteria for dismissal established by the Board of Directors, the Committee may recommend dismissal to the Board of Directors. If the Board of Directors, after verifying the review results, concludes that the criteria for dismissal are met, the relevant individuals shall not be nominated as Director candidates, and shall be dismissed from their respective positions as Representative Director or Executive Corporate Officer.

• A circle indicates the main skills possessed by each person. (As of June 25, 2025)

Composition of the Board of Directors board_of_directors

Director and Corporate Auditor Training

Immediately after taking up their posts, newly appointed Directors of the Company, including independent outside Directors, are required to participate in training programs offered by the Director in charge of legal affairs and compliance or external attorneys at law. They are also to be informed about management strategies, financial positions, and other important matters by the President or Director(s) in charge of executing business operations or other executives named by the President.
To fulfill their respective roles, the Directors and Corporate Auditors are required to proactively collect information regarding financial positions, legal and regulatory compliance, corporate governance, and other matters. They must also continuously strive to improve their knowledge and skills. Expenses required for participating in external training and seminars are borne by the Company as claimed.

Nomination/Remuneration Committee

The Company established the Nomination/Remuneration Committee as an advisory body to the Board of Directors.
Comprising two Representative Directors and three outside Directors, and chaired by an outside Director, this Committee serves to ensure independence, transparency, and objectivity in decision-making procedures in the nomination of candidates for Director and Corporate Auditor, appointing senior management, and determining remuneration for Directors. In FY2024, the Committee deliberated on the appointment and dismissal of Directors, Corporate Auditors, and Corporate Officers, as well as remuneration for Directors and Corporate Auditors. It also confirmed and exchanged opinions on the state of training/development of senior management candidates, including candidates for Chief Executive Officer (CEO). In FY2022, we revised the executive remuneration system to increase the percentage of performance-linked compensation. After conducting a multifaceted examination, including consideration of the consistency between the content of individual compensation based on the revised system and the decision-making policy, the Committee reported its findings to the Board of Directors.

Nomination/Remuneration Committee Deliberations and decisions

・Appointment and dismissal of Directors and Corporate Auditors (matters to be resolved by the General Meeting of Shareholders), and appointment and dismissal of Corporate Officers
・Appointment and dismissal of Representative Directors and Directors with titles
・Succession planning (including training/development)
・Limits of Director compensation (matters to be resolved by the General Meeting of Shareholders)
・Director compensation, etc. (including individual amounts)
・Other important matters of business management relating to nomination and remuneration

FY2024 Nomination/Remuneration Committee deliberations

・Appointment and dismissal of Directors
・Appointment and dismissal of Representative Directors and Directors with titles
・Appointment and dismissal of Corporate Officers
・Revisions to Director compensation (including reduction measures)
・Director bonuses and stock compensation
・Training/development of senior management candidates

Succession Plan Under the recognition that the development of a successor for the President is an important matter for management, following deliberations by the Nomination/Remuneration Committee, the Board of Directors formulates a succession plan that specifies qualifications for the post of president and a candidate development policy, and provides final approval for the plan.
The Board of Directors shares this president succession plan among all members of the Board, periodically confirms the development status of senior management with the potential to succeed the President made by the Nomination/Remuneration Committee, and determines a candidate for succeeding the President in accordance with the succession plan when the current President steps down from this post.

Executive Remuneration System

Performance-linked bonuses Bonuses are paid to Directors as performance-linked bonuses at a fixed time each year.
The performance indicator selected as the basis for calculating the performance-linked bonuses is the Gunze Value Added (GVA) for each fiscal year. The reason for selecting this performance indicator is that it is linked to the Gunze Group’s business performance and shareholder interests, and we determined that it is the most appropriate indicator for raising awareness of improving business performance each fiscal year. The amount of the performance-linked bonus is calculated by multiplying each individual executive’s monthly remuneration by the executive bonus coefficient established for each position and the performance-linked coefficient corresponding to the increase/decrease in GVA relative to performance forecasts.
The actual GVA for the fiscal year under review was a deficit of 0.9 billion yen (a deficit of 1.6 billion yen in the previous fiscal year).

Performance-linked stock compensation To raise awareness of the need to improve corporate value over the medium to long term, Directors (excluding outside Directors) are paid restricted stock at a fixed time each year as performance-linked stock compensation.
The performance indicators selected as the basis for calculating the amount of performance-linked stock remuneration are a relative evaluation of Total Shareholders Return (TSR) and TOPIX for each fiscal year, as well as an evaluation based on the degree of achievement of company-wide CO₂ emissions reduction target.
The reason for selecting this performance indicator is that it was judged to be the most appropriate indicator for further promoting the sharing of shareholder value with shareholders, raising awareness of contributions to improving the corporate value of the Gunze Group, and for promoting business activities that reduce the environmental burden.
The TSR growth rate (compared to the end of FY2021) used for payment in the fiscal year under review was 155.41% (TOPIX growth rate: 149.56%), and the company-wide CO₂ emissions reduction rate (compared to FY2013) was 33.0% (target: 27.0%).

Officer Remuneration

Remuneration type	Total amount of remuneration (millions of yen)	Total amount of remuneration by type (millions of yen)			Number of eligible officers
Remuneration type	Total amount of remuneration (millions of yen)	Fixed compensation	Performance-linked bonuses	Performance-linked stock compensation	Number of eligible officers
Directors (excluding outside Directors)	138	72	27	38	8
Corporate Auditors (excluding outside Corporate Auditors)	24	24	-	-	2
Outside Directors	21	21	-	-	3
Outside Corporate Auditors	14	14	-	-	2

(Note)
The number of eligible officers includes two outside Corporate Auditors who retired at the conclusion of the Ordinary General Meeting of Shareholders held in June 2024.

KPI of the executive remuneration system

Remuneration type	KPI (performance indicators)
Bonus	Reflect the GVA for each fiscal year
Stock compensation	Reflect relative evaluation of TSR (Total Shareholders’ Return) and TOPIX for each fiscal year Reflect degree of achievement of Company-wide CO₂ reduction goals as ESG evaluation indices

Compensation ratio (%)

	Fixed compensation	Performance-linked bonuses	Performance-linked stock compensation	Total
Representative Director & President	50.0	30.0	20.0	100.0
Directors (excluding outside Directors)	62.0	24.0	14.0	100.0
Corporate Auditors (excluding outside Corporate Auditors)	100.0	-	-	100.0
Outside Directors	100.0	-	-	100.0
Outside Corporate Auditors	100.0	-	-	100.0

(Note)
For Directors, the ratio includes remuneration based on the execution of duties.

Business Execution System

Corporate Officers’ meeting

	Times held	Number of agenda items	Attendance
Corporate Officers’ Meeting	16	54	99%

Main agenda items	Items submitted for discussion/reported
Business strategy	14
Budgeting and financial reporting	19
Finance	7
Organization and human resources	6
Governance and risk management	3
Medium-term Management Plan	2
Individual projects	3

The Executive Committee was established to deliberate and decide on important matters relating to management control and business execution across the entire Gunze Group, based on the fundamental management policies determined by the Board of Directors.
It also serves to deliberate and decide on the comprehensive coordination of departmental activities and particularly important individual controls. Its members consist of the President and Directors or Corporate Officers who oversee and are responsible for each functional department and business segment.
In FY2024, the Committee met 16 times and discussed and decided upon 54 proposals (FY2023: 17 times, 56 proposals).

Business group head meetings

	Number of reports	Attendance (Internal Officers)
Business group head meetings	12	100%

Business group head meetings aim to ensure efficient execution of business within the Gunze Group and achieve business management objectives. Discussions focus on three key areas:

(1) thorough dissemination of management policies and important matters,
(2) strengthening the operational framework for management participation and internal controls, and
(3) efficient execution of business through coordination and control of business group operations.

In addition to submitting monthly reports in the prescribed format, in-person meetings are held at least quarterly with the President, Directors and/or Corporate Officers who oversee and are responsible for each functional department and business segment, as well as the functional department heads and business group heads. In January of each year, the responsible departments explain their annual business policy and budget formulation guidelines to ensure thorough understanding. In other months, each business division reports on the latest status of its business management, future outlook, and important operational matters, enabling progress management toward achieving business goals.

Executive meetings

	Times held	Number of agenda items	Attendance
Executive meetings	8	10	90%

Cases	Number of themes
Management policy and Medium-term Management Plan	4
Reports on current status and key initiatives of each business unit	2
Reports on current status and key initiatives of each functional department	2
Status of efforts to address individual issues	2

Executive meetings provide an opportunity for outside Directors and Corporate Auditors to actively exchange opinions on issues they face at any time, thereby deepening their understanding of the business.
Meetings cover topics such as the Medium-term Management Plan, the current status and key initiatives of each business and functional department, and the state of company-wide efforts to address social issues.
In FY2024, eight meetings were held, with Q&A sessions and discussions on ten themes.

Internal Systems Concerning Timely-Disclosure of Corporate Information

Important facts decided or occurring in each division are centrally collected by the Information Officer without delay. With regard to “decided matters” and “financial information,” the Information Officer discusses the need for disclosure with the relevant parties and then discloses them at the time a resolution is made by the body that actually decides on the execution of the Company’s operations, such as a General Meeting of Shareholders or by resolution of the Board of Directors. With regard to “incidents,” the Information Officer promptly discusses them with management, including the top management, as soon as he or she becomes aware of their occurrence and puts in place a system for their timely and appropriate disclosure.
In the case of important company information, the disclosure of which has been decided, the information officer will immediately issue instructions to the information disclosure officer, who will process disclosures in a timely and appropriate manner in accordance with the Timely Disclosure Rules and the Guidebook for the Timely Disclosure of Corporate Information.

Outside Executive Roundtable Discussion

Initiatives regarding cross-shareholdings

To Financial Capital Strategy