Corporate Governance Policy

1. General Meeting of Shareholders

Recognizing that the General Meeting of Shareholders is the highest decision-making body and a forum for constructive dialogue with shareholders, the Company shall operate the General Meeting of Shareholders based on the basic policy of providing shareholders with detailed and easy-to-understand explanations. In addition, to enable its shareholders to secure sufficient time to consider the proposals of the General Meeting of Shareholders, the Company shall promptly provide reference materials for the meeting electronically on the Company’s website, and will also post English translations thereof on the Company’s website, after the Board of Directors resolves to convene the meeting, and shall establish an environment where all shareholders, including those who do not attend the General Meeting of Shareholders, can exercise their voting rights appropriately by using the platform for electronic exercise of voting rights.
With respect to the cases where institutional investors, etc., who hold shares in the name of trust banks, etc., wish to exercise their voting rights, etc., at the General Meeting of Shareholders in advance, the Company shall establish a procedure in consultation with trust banks, etc. in advance, taking into account the issues of having to confirm that they are the Company’s beneficial shareholders and avoid duplication of voting rights exercise.

2. Ensuring equal treatment of shareholders

In addition to substantially securing the rights of all shareholders, including minority shareholders and foreign shareholders, the Company shall disclose information on management strategies and the status of financial and business performance to shareholders, investors, and others in a timely and appropriate manner through investor relations activities, and enhance dialogue with shareholders, investors, and others.

3. Analysis of negative votes

The results of the exercise of voting rights at the General Meeting of Shareholders are analyzed by the department in charge of the General Meeting of Shareholders after the General Meeting of Shareholders every year, and the results are shared with divisions in charge of investor relations and other related departments and senior management, as well as reported to the Board of Directors. In regard to the Company’s proposals that have received a significant number of negative votes, the Board of Directors deliberates on solutions based on the causing factors and other elements.

4. Capital policy

The Company's basic capital policy (i.e., ideas and measures for optimal capital structure) is to maintain a sound balance sheet and disciplined capital allocation.
Our basic dividend policy is to maintain the dividend payout ratio to 35% of basic adjusted net income per share.
In terms of investments for growth, we will aim for a return to organic growth by prioritizing internal investment. On the other hand, for investment such as acquisitions, we will selectively and strictly conduct such investment　that are consistent with our business strategy, taking into account factors such as our financial situation.
In addition to these efforts, we will continue to reduce non-operating assets including the number of cross-shareholdings, and when large-scale asset sales occur or in any similar situations, we will consider shareholder returns after comprehensively taking into account various factors including the financial plan, and we will aim to increase capital efficiency and improve ROE, etc. over the medium to long term.

5. Cross-Shareholdings

With regard to so-called "cross-shareholdings,", the Company’s will examine the significance of holding such shares from the standpoint of whether the benefit of holding such shares exceed the Company’s estimated cost of capital in relation to the acquisition price, and whether the holding of the shares contributes to maintaining and strengthening business relationships with investees and promoting joint businesses, and if such shares are deemed to have little significance, the Company will basically reduce the number of shares to be held. Based on this basic policy, the Board of Directors shall annually examine the appropriateness of holding all stocks held by the Company for policy purposes, economic rationality, etc., from a medium to long-term perspective for each individual stock, and verify the appropriateness of holding such stocks, and disclose the details of such examination in the Corporate Governance Report, etc.

With respect to the exercise of voting rights for cross-shareholdings, in order to ensure appropriate exercise, the Company shall make a comprehensive judgment on each agenda item from the perspective of improving the medium- to long-term corporate value of the company issuing the relevant shares and increasing the medium- to long-term economic benefits of the Company and its group companies. In regard to major cross- shareholdings, the status of the exercise of voting rights shall be reported to the Board of Directors. In particular, the Company shall carefully examine and decide whether to approve or disapprove the below proposals and other proposals that may damage the corporate value and shareholder value of the Company and its subsidiaries and affiliates, regardless of whether they are proposed by the issuing company or its shareholders.

• (ⅰ)
  Appointment of directors and corporate auditor who are responsible for the occurrence of serious violations of laws and regulations as well as of misconduct
• (ⅱ)
  Introduction of takeover defense measures
• (ⅲ)
  Mergers and other organizational restructuring
• (ⅳ)
  Transfer of important assets

In the event that a shareholder who holds shares of the Company as cross-shareholdings (hereinafter referred to as a “Cross-Shareholder”) expresses an intention to sell or otherwise dispose of such shares, the Company shall not engage in any act to hinder such sale or otherwise dispose of such shares, such as suggesting a reduction in the transaction. In addition, the Company shall fully examine the economic rationality of the transaction with the Cross-Shareholder and shall not conduct any transaction that would be detrimental to the common interests of the Company or its shareholders.

6. Related party transactions

With respect to transactions with its directors or executive officers (in this clause, hereinafter referred to as “Officers”) that conflict with the interests of the Company and competitive transactions as defined in the Companies Act, the Company shall explain the details of such transactions at a meeting of the Board of Directors and obtain the approval of the Board of Directors. Then, after obtaining the approval, the Company shall continue reporting on the status of the said transactions, and rigorously operate and monitor the transactions.
In addition, even for transactions that do not fall under the above, the Company distributes individual questionnaires to Officers once a year to confirm whether or not there have been any transactions between the Company or its consolidated subsidiaries and Officers or their close relatives, and the Company appropriately discloses transactions with major shareholders and other related parties in accordance with the Companies Act, the Financial Instruments and Exchange Act, other applicable laws and regulations, and the regulations of the Tokyo Stock Exchange.

1. Code of Conduct/Conflict of Interest

The Group has positioned to establish an organizational culture that places the highest priority on integrity, as well as corporate governance, respect for human rights, improvement of the working environment, environmental conservation, fair business practices, resolution of consumer issues, and contribution to community development as priority areas, and has positioned the fulfillment of its social responsibility as a voluntary effort to resolve social issues and realize a sustainable society with all stakeholders in mind. In addition, the “Dentsu Code of Conduct” stipulates that management and employees shall protect the interests of stakeholders and engage in business activities with high ethical standards, and the Group will work to promote awareness and understanding of the Dentsu Code of Conduct.

• “Dentsu Group Code of Conduct”

2. Addressing issues surrounding sustainability

The Group considers sustainability to be a core management theme and a prerequisite for realizing the Group’s Purpose: an invitation to the never before.
In conjunction with the shift to a global management structure, the Group established its new Materiality and updated the 2030 Sustainability Strategy accordingly. Progress towards this strategy is monitored and evaluated by the Group Sustainability Committee, which is directly under the Group Management Board.
The Group has appointed a Global Chief Sustainability Officer and is promoting this sustainability strategy as one dentsu.

3. Ensuring Diversity

The Group shall respect diversity, and with the Group’s strength of diversity in mind, the Group shall foster an inclusive corporate culture that provides equal opportunities for all individuals to achieve their highest potential while taking pride in being themselves, regardless of gender, nationality, age, sexual orientation, presence or absence of disabilities, years of service, and whether or not they are mid-career employees. Also, for promotion to management positions etc., the Group shall promote talented and diverse personnel according to such policy.

4. Whistleblowing system

As a whistle-blowing system, the Group shall establish proper internal and external consultation desks for the whistleblowing of legal violations and other compliance matters and shall operate such consultation desks appropriately.
The Group shall establish "Speak Up@dentsu" as a Group common reporting platform.
In addition, the Group shall establish the “Compliance Line” in Japan with the Group’s specialized department or an external law firm as the contact point and a consultation desk for sexual harassment and power harassment separate from the Compliance Line.

The internal rules stipulate that, under these systems, the names and affiliations of the whistle-blowers shall be kept strictly confidential and that the whistle-blowers shall not be subjected to any disadvantage in terms of personnel treatment because of their reporting.

5. Fulfilling the function of asset owners of corporate pension plans

Many of the Company’s employees (excluding its contract employees and temporary staff) are seconded from other companies, and are covered by the pension plans of the respective companies from which they are seconded.
Furthermore, the Company has introduced a defined contribution pension plan for its directly employed employees. Since the management of corporate pension contributions affects the stable asset formation of employees, the Company has established the relevant corporate pension organization staffed by personnel that have acquired the qualifications of a corporate pension manager, etc. and outsource the relevant administrative work such as monitoring the investment institution to a group company that conducts appropriate administrative work such as monitoring the investment institution while regularly receiving appropriate advice from outside experts.

1. Board of Directors

The Board of Directors’ primary role and responsibility, as understood by the Company, is to provide strategic direction in line with - its Purpose and Vision. To this end, the Board of Directors formulates important management policies including management strategy, the Medium-term Management Plan, basic policy for sustainability initiatives, and basic policy for our business portfolio and delegates much of its authority for business execution to the Representative Executive Officers and other members of the management team, encouraging them to make swift and decisive management decisions. In addition, recognizing its fiduciary duty to its shareholders and, in accordance with laws and regulations and the Articles of Incorporation, the Board of Directors shall appropriately exercise its supervisory function over overall management, including the execution of strategies regarding the above-mentioned management policy and allocation of management resources, in order to enhance corporate value.

2. Composition of the Board of Directors and term of office of directors

Composition of the Board of Directors and term of office of directors
The number of directors on the Board of Directors of the Company shall be fifteen (15) or less, and the majority of the members shall be independent outside directors. The term of office shall expire at the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within one year after their assuming office.
The Board of Directors shall take into consideration the balance of experience, knowledge and ability, as well as diversity, including in terms of gender, internationality, work experience and age of its members and shall include persons with management experience at other companies as independent outside directors.
The Chairperson of the Board of Directors shall be selected from directors who are not also executive officers.

3. Nominating Committee

The Nominating Committee shall formulate criteria regarding the nomination of directors and independence standards for outside directors, and determine the contents of proposal for the selection, election, and dismissal of directors to be submitted to the General Meeting of Shareholders as well as the contents of the reports for items consulted by the Board of Directors concerning the selection, election, and dismissal of executive officers and other related matters.
The Nominating Committee shall consist of three (3) or more members and the majority of the members shall be independent outside directors.
The chairperson shall be selected from among independent outside directors.

4. Audit Committee

The Audit Committee shall audit the execution of duties by directors and executive officers, prepare audit reports, determine contents of proposals regarding the election, dismissal, and refusal of reelection of accounting auditors to be submitted to the General Meeting of Shareholders, and other job duties set forth in laws, regulations, and the articles of incorporation.
The Audit Committee shall consist of three (3) or more members and the majority of the members shall be independent outside directors.
The chairperson shall be selected from among independent outside directors.
The Audit Committee shall ask the accounting auditors and internal audit division for reporting on respective audit approaches and results based on necessity, exchange information individually in a timely manner, and coordinate with each other. Moreover, the Audit Committee may ask the internal audit division for reporting on the establishment and operation status of internal control as well.

5. Compensation Committee

The Compensation Committee shall formulate a policy for the determination of compensation of directors and executive officers and determine the details of compensation, etc. for individual directors and executive officers.
The Compensation Committee shall consist of three (3) or more members and the majority of the members shall be independent outside directors. The chairperson shall be selected from among independent outside directors.

6. Finance Committee

The Finance Committee ensures financial governance, reviews financial indicators from the shareholder perspective, and monitors the execution of activities toward targeted financial indicators. The committee also finalizes the response to inquiries from the Board of Directors from the perspective of the fiscal and investment disciplines. The committee consists of three independent outside directors and is chaired by an independent outside director.

7. Executive Officers

Executive officers shall determine and execute the operations delegated by resolutions of the Board of Directors meetings.

8. Criteria and Procedures for the Nomination and Dismissal of Candidates for Directors and Executive Officers

The Company has set following criteria regarding the nomination of directors.

<Criteria for the Selection and Appointment of Candidates for Inside Directors>

• (ⅰ)
  Ability to make judgments from a company-wide perspective.
• (ⅱ)
  Expertise in the Company's business.
• (ⅲ)
  Excellent ability to make business decisions and execute business operations.
• (ⅳ)
  Excellent leadership, determination, foresight, and planning skills.
• (ⅴ)
  Personality and insight appropriate for an inside director.

<Criteria for the Selection and Appointment of Candidates for Outside Directors>

• (ⅰ)
  Extensive experience in management, or professional career with expertise in law, accounting, finance, etc.
• (ⅱ)
  Ability to maintain independence from the Company's representative directors.
• (ⅲ)
  Personality and insight appropriate for an outside director.

In addition, the criteria for the appointment of executive officers (including inside directors who concurrently serve as executive officers) are set forth below.

• (ⅰ)
  Ability to make judgments from a company-wide perspective.
• (ⅱ)
  Expertise in the business of the Company and the Group.
• (ⅲ)
  Excellent ability to make business decisions and execute business operations.
• (ⅳ)
  Excellent leadership, determination, foresight, and planning skills
• (ⅴ)
  Personality and insight appropriate for an executive officer

Candidates for the Board of Directors shall be determined by the Nominating Committee.

In addition, from the viewpoint of ensuring objectivity and transparency, the Board of Directors shall consult the Nominating Committee on proposed candidates for executive officers and executive officers shall be determined based on the Committee's report to the Board of Directors after deliberation.

In cases where it is recognized that an executive officer is not fully performing his/her functions, the Board of Directors shall, in the view of ensuring objectivity and transparency, consult the Nomination Committee on a proposal for dismissal. Then, based on the report on the deliberation made by the Committee, the Board of Directors shall carry out the dismissal procedure.

9. Development of the successors of President & Global CEO, etc. and related decisions

The Company has determined the following policy regarding succession planning

• (ⅰ)
  To develop succession plans for the important posts such as President & Global CEO (also a Representative Executive Officer), Global Chief Governance Officer, and Global CFO
• (ⅱ)
  To propose a plan with, in principle, three candidates for each position to enable comparisons for the important posts.

The President & Global CEO, who is also a Representative Executive Officer, shall recognize that the development of his or her successor is one of his or her most important responsibilities. The CEO shall foster the development of executive officers as his or her potential successors not only by setting performance targets for them, but also by assigning missions to them according to their respective responsibilities and having them involved in management including by having them attend important meetings, including those of the Board of Directors.

The candidates of successors shall be determined by the Board of Directors after, with the view of ensuring objectivity and transparency, consulting the Nominating Committee on the proposed candidates and based on the report made by the Committee to the Board after deliberation.

10. Scope of delegation to management

The Company forms the Group Management Team including executive officers, which directly governs four business regions worldwide (Japan, the Americas, EMEA and APAC).
The Company shall build a swift and highly effective business execution system by delegating authority from the Board of Directors to the Group Management Team including executive officers for most of the important business execution, while strengthening the supervisory function of the Board of Directors for business execution.

11. Role of independent outside directors

The Company expects outside directors to contribute to the enhancement of corporate governance by invigorating discussions at meetings of the Board of Directors including by raising questions and expressing opinions, and to promote appropriate decision-making by the Board of Directors including by expressing opinions from their respective professional perspectives. In addition, one of their roles is to verify and evaluate the results of management and the performance of the management team in light of the management strategies determined by the Board of Directors, and from the perspective of shareholders' interests, to determine the pros and cons of entrusting management to the management team and to express their opinions.

The criteria for the independence of outside directors established by the Company are shown in the link below.

• Independence Standards for Outside Directors

12. Concurrent positions as an officer of another listed company

When a director concurrently serves as an officer of another listed company, he or she may do so with the approval of the Board of Directors and following the prescribed procedure only to the extent that it is reasonable to ensure that he or she can secure the time and efforts necessary to properly fulfill his or her roles and responsibilities as a director of the Company. The status of important concurrent positions shall be disclosed in the reference documents for the General Meeting of Shareholders and business reports in accordance with laws and regulations.

13. Internal control

The Board of Directors shall establish a basic policy on the internal control system to ensure prompt business operations under appropriate control, and shall supervise the operation of the compliance system, the system to improve the efficiency of business operations, the risk management system, and the appropriateness of financial reporting.

• Basic Policy for Internal Control

14. Accounting auditors

In order to ensure the reliability of information disclosure and its responsibility to shareholders and investors, the Company shall secure sufficient audit time for accounting auditors to conduct high-quality audits, collaboration with the internal audit department and directors who are members of the Audit and Supervisory Committee, and the accounting auditors’ access to the Global CEO, Global CFO, and other senior management.

15. Basic policy on determination of compensation for directors and executive officers

In a business domain where marketing, technology and consulting are increasingly converging, we aim to evolve into a company that embodies “an invitation to the never before.” and creates social impact by generating innovative ideas and solutions through outstanding creativity and technology.
To empower the executives who drive our success, our executive compensation is designed based on the following objectives and principles. We will continuously review and update our programs as our business transforms so that they reflect who we are and where we are going.

• (1)
  Attract and retain outstanding talent by providing attractive total rewards and environment

  • (ⅰ)
    Competitive pay
  • (ⅱ)
    Career growth opportunities
• (2)
  Achieve the Group’s strategic goals by maximizing the performance of the globally integrated management team

  • (ⅲ)
    Pay for performance
  • (ⅳ)
    Challenging goals
• (3)
  Strengthen alignment with interests of shareholders and all other stakeholders

  • (ⅴ)
    Creating value for society
  • (ⅵ)
    Accountability

With respect to the compensation system and the level of compensation, the Company shall, in each fiscal year, verify the appropriate system and level of compensation in accordance with objective and transparent procedures, comprehensively taking into account corporate value, corporate scale, compensation level, etc., by referring to the compensation market survey data provided by external consulting firm.

16. Policy concerning training for directors

The Company shall provide directors with opportunities to acquire knowledge essential to the execution of their duties and to continue their education so that they can adequately fulfill their roles and responsibilities.
As for newly appointed outside directors, the Company shall explain the Company's business, organizational structure, and contents and progress of the medium-term management plan, etc., to them and also provide them with necessary information on business issues, etc., on a regular basis following their appointment.

17. Evaluation of the effectiveness of the Board of Directors

In order to continuously enhance the effectiveness of the Board of Directors, the Company conducts an evaluation of the effectiveness and appropriateness of management supervision by the Board of Directors by all directors, and conduct an analysis and evaluation by a third-party organization.
Based on the reports on the results it receives from the Secretariat of the Board of Directors, the Board of Directors shall analyze and evaluate the effectiveness of the Board of Directors as a whole and improve issues to maintain and increase the effectiveness of the Board of Directors.
An outline of the evaluation of the effectiveness of the Board of Directors shall be disclosed in the Corporate Governance Report and other documents.

1. Basic policy concerning dialogue with shareholders

The Company has established a Disclosure Policy, and through its investor relations activities, the Company shall strive to disclose a wide range of information, from management strategies and financial information to non-financial information, to its shareholders investors, securities analysts and other concerned parties in a timely and appropriate manner. By continuously engaging in constructive dialogue with them, the Company will strive to enhance its corporate value over the medium and long term.
Opinions and requests obtained through direct dialogue with the management team and investor relations activities are periodically reported to the Board of Directors and the management team, and are utilized in efforts to improve corporate management and corporate value.

• Disclosure Policy
• Dialogue with Shareholders and investors

2. Formulation and announcement of management strategies and plans

Based on an understanding of its own cost of capital, the Company shall, after ascertaining its cost of capital, formulate and disclose a medium-term management plan aiming for sustainable growth based on its management philosophy, and explain it in an easy-to-understand manner at financial results briefings and the General Meeting of Shareholders.
Furthermore, the Company shall analyze the progress of the plan every year and flexibly revise it, including plans for the allocation of management resources, such as new business investments, capital investments, investments in human capital, and decisions on the relevance of maintaining/continuing each business in the Group, as necessary. The soundness, fairness, and efficiency of the execution status is verified and supervised by the Board of Directors. These matters shall be explained in an easy-to-understand manner at financial results briefings and the General Meeting of Shareholders.