We have adopted an organizational framework with Audit & Supervisory Board Members (or the Audit & Supervisory Board), focusing on the enhancement of functions of the Board of Directors and the Audit & Supervisory Board, as part of endeavors to bolster corporate governance. In addition, in order to ensure independence and objectivity with regard to the appointment and remuneration of the senior management and Members of the Board of Directors, we have established “the Executive Appointment Meeting”, a majority of whose members are outside directors and chaired by an outside director, and “the Executive Compensation Meeting” which is comprised of outside directors.
Regarding business execution, we have adopted the Corporate Officer System to improve management efficiency and expedite the decision-making process. Furthermore, important matters regarding business execution are deliberated and determined at Management Meetings and other meetings chaired by Representative Directors and Corporate Officers in charge etc., depending on the importance and content of the management issues. Overall, we strive for optimal business operations in consideration of mutual supervisory functions.

Corporate Governance Structure

Board of Directors

The Board of Directors should be appropriate in size and organization to improve transparency in management and supervision and to ensure accurate and quick decision-making.
We nominate candidates for Member of the Board of Directors by taking into consideration the balance of their knowledge, experience, and capability, as well as diversity, so that the Board of Directors as a whole can make technical and comprehensive management decisions. In addition, we nominate candidates for Independent Outside Director from those who have high level of expertise in corporate management on the premise that they satisfy the standards for Independent Directors set out by Tokyo Stock Exchange, with a basic policy of at least one third of Members of the Board of Directors being Outside Directors (currently, three of the six Members of the Board of Directors are Outside Directors, including one female Member of the Board of Directors). The term of office for Members of the Board of Directors is set at one year to maintain clarity of the responsibilities of management and to ensure we can respond quickly to changes in the business environment.
The meeting of the Board of Directors is held once every month in principle, with the attendance of Members of the Board of Directors and Audit & Supervisory Board Members, to decide on important management issues and to supervise the status of the execution of duties by Directors. In order for Members of the Board of Directors and Audit & Supervisory Board Members to appropriately fulfill their roles and responsibilities, the attendance rate at the meeting of the Board of Directors is, in principle, set at 75% or more. Taking into account the time required to be devoted on duties as our Member of the Board of Directors or Audit & Supervisory Board Member, we set a limit on the number of companies its Members of the Board of Directors and Audit & Supervisory Board Members are allowed to concurrently serve as officers or in other capacity (appointment as officers of listed companies, etc.) at up to, in principle, four companies not including us.

• Positions, Assignments or Important Concurrent holding of Positions are as of April 1, 2024.
• Director Kiyoaki Idemitsu was unable to attend meetings of the Board of Directors from July to December 2023 due to illness treatment.

Audit & Supervisory Board

From the perspective of strengthening audit functions, the Audit & Supervisory Board is composed of two independent Outside Audit & Supervisory Board Members　(including one female Audit & Supervisory Board Member) along with two Full-time Audit & Supervisory Board Members who have expert knowledge on our business operations and who are highly skilled in collecting auditing information. These Outside and Full-time Audit & Supervisory Board Members work together to achieve high auditing efficiency. The Audit & Supervisory Board, which has regular meetings, cooperates with the Internal Audit Department to ensure organized and efficient auditing, and cooperates with the Accounting Auditors to enhance the effect of auditing and improve management supervision.

• Positions, Assignments or Important Concurrent holding of Positions are as of April 1, 2024.

Skill Matrix of Members of the Board of Directors and Audit & Supervisory Board Members

With the corporate vision of “Dedicated to the Fight Against Disease and Pain,” we aim to become a global specialty pharma by upholding four growth strategies of “maximizing product value,” “strengthening pipelines and accelerating global development,” “realizing own marketing operations in US/Europe” and “expanding business domains,” and focusing on a stronger management base by introducing DX and providing personnel training. Through business activities, we also contribute to public health, improve our corporate value, and continue in our efforts to realize a sustainable society.
Under this vision, our corporate governance structure has an Audit &Supervisory Board, which accelerates delegation of authority to executing departments and enhances supervision and auditing by independent Outside Directors. The Board of Directors maintains a skill matrix, which specifies the required skills related to business or management experience for the Internal Directors and the fields in which advice is expected for the Outside Directors and the Audit & Supervisory Board Members.

• Skill certification standard: Internal Members of the Board of Directors: Experience in the pharmaceutical industry and in managerial positions; Outside Directors and Audit & Supervisory Board Members: Fields in which they are expected to give supervision, auditing, and advice
• The skill matrix was created for the Directors and the Audit & Supervisory Board Members and was created after the General Meeting of Shareholders, the Board of Directors Meeting and the Audit & Supervisory Board Meeting held on June 20, 2024.

Executive Appointment Meeting

The Executive Appointment Meeting consists of four members, including three Outside Directors and Representative Director & CEO, and is chaired by an Outside Director. All members attend the Executive Appointment Meeting to ensure the transparency and objectivity of appointment of candidates for Members of Board of Directors, Audit & Supervisory Board Members, and senior management, and to discuss the policies for the succession planning to the chief executive officer and senior management, and those of our corporate governance. Furthermore, if the chairperson determines that a matter should be discussed only by outside directors, Representative Director, Chairman of the Board and CEO does not participate in the discussion. Executive appointments to be submitted to the Board of Directors are discussed at Executive Appointment Meeting, and submitted and approved at the Board of Directors.
The Executive Appointment Meeting started full-scale discussions in January 2023 on the changes in representative directors, including the change in the president on April 1, 2024. Over the course of approximately one year before agenda items were proposed to the Board of Directors, we reviewed the development status of management human resources, discussed the ideal president and management structure after the change in the president based on mid- and long-term management strategies, narrowed down the candidates, and held meetings only with outside directors. In these processes, outside directors were independently and objectively involved.

Executive Compensation Meeting

The Executive Compensation Meeting consists of three Outside Directors. All members attend the Meetings to ensure transparency and objectivity of the amount of remuneration for each Member of the Board of Directors and the calculation methods thereof and deliberations are held on the appropriateness and future form of the executive remuneration system. Remuneration of Members of the Board of Directors is proposed to and determined by the Board of Directors after being examined at the Executive Compensation Meeting.

We implement all the principles of the Corporate Governance Code stipulated by the Tokyo Stock Exchange. We continue to improve the efficiency, soundness and transparency, etc. of the management, and to develop our system to be more suitable for our business operations, through an annual evaluation of the effectiveness of the Board of Directors.

Please refer to the “Corporate Governance Report” below for details on our corporate governance situation.

We have established an internal system in accordance with the basic views on Internal Control System set forth by the Board of Directors. The Internal Audit Department performs audits to ensure compliance, make efforts to identify internal control issues early, and maintain and improve the appropriateness of organizational management. In addition, the status of development and operation of the Internal Control System is regularly reported to the Board of Directors to ensure continual improvement of organizational operations.
We are also fully aware of the need to take a firm attitude against anti-social forces and organizations that threaten the order and safety of society.

Operational Management Structure

Regarding the issues to be discussed by the Board of Directors and the important business items and others responsible for related departments discuss them at the Management Meeting, etc., from many perspectives to ensure and enhance efficient and appropriate decision-making and business execution. The Corporate Officers are appointed for efficient management and quick decision-making, including delegation of authority.
The Management Meeting and other important meetings below are attended by the Audit & Supervisory Board Members. The meeting minutes are recorded and subject to audit.

The Management Meeting

The Management Meeting is chaired by the Representative Director, President & COO and consists of the Representative Director & Chairman, the Corporate Officers responsible for individual departments, and responsible personnel of related departments appointed by the Chair. The Full-time Audit & Supervisory Board Members observe the Meeting.
At the Management Meetings, the important issues to be discussed by the Board of Directors are examined, important management issues are discussed, and decision-making in regard to corporate management policies/strategies and other important information is shared.

The Sustainability Strategy Meeting

The Sustainability Strategy Meeting is chaired by the Representative Director & Executive Vice President responsible for sustainability and consists of the Representative Director, President & COO responsible sustainable management, the Executive Directors, and responsible personnel of related departments. The Full-time Audit & Advisory Board Members observe the Meeting.
The Sustainability Strategy Meeting aims to obtain trust and support from the stakeholders and discuss and examine the direction of sustainability activities, thereby contributing to realize a sustainable society.

The Group Compliance Committee

The Group Compliance Committee is chaired by the Corporate Officer responsible for and dedicated to compliance and consists of the Executive Directors or Division Directors responsible for promoting division compliance, and responsible personnel of related departments. The Full-time Audit & Supervisory Board Members observe the Committee.
The Group Compliance Committee examines compliance issues, plans and conducts training, examines reports, etc. from subsidiaries, and enhances compliance.

The Risk Management Committee

The Risk Management Committee is chaired by the Representative Director & Executive Vice President responsible for corporate risk management and consists of the Executive Directors or the Division Directors responsible for division risk management. The Full-time Audit & Supervisory Board Members observe the Committee.
The Risk Management Committee discusses and examines the policy and annual action plans, etc. to establish and operate the risk management system of Ono Group as a whole.