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 exercise their rights appropriately, the Company shall promptly disclose the Japanese and English versions of the convocation notice electronically on the Company’s website after the Board of Directors resolves to convene the meeting, and shall send the convocation notice at least three weeks prior to the date of the meeting. In addition, the Company 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.

In addition, 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 with a medium-term level of 1.0 to 1.5 times Net Debt/EBITDA ratio.
Our dividend policy is to gradually increase the dividend payout ratio to 35% of basic adjusted net income per share, and in terms of investments for growth across the entire Group, we will aim for organic growth by investing in new technologies, solution development, and innovation, as well as growth by expanding capabilities and scale in areas such as Customer Transformation & Technology through strategic investment.
In addition to these efforts, we will continue to reduce non-trading assets including the number of cross-shareholdings, and when large-scale asset sales occur or in any similar situations, we will consider shareholder returns by 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 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 distribute individual questionnaires to directors once a year to confirm whether or not there have been any transactions with directors of the Company or its consolidated subsidiaries or their close relatives, and the Company appropriately disclose 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 Company has positioned 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.

• Dentsu Group Code of Conduct

2. Addressing issues surrounding sustainability

The Group recognizes sustainability issues including social and environmental matters as one of the core themes in management, and the Group shall establish a Sustainable Business Board to work on the issues in question with participation by our top management team. Under the leadership of the Sustainable Business Board, the Group will dedicate itself to integrating sustainability at the heart of its growth strategy, culture, and operations with the mission of delivering shared value for the Group and society.
Specifically, the Group will implement the “2030 Sustainability Strategy” with a focus on three core ambitions: Sustainable World, Fair and Open Society, and Digital for Good. These ambitions represent areas where the Dentsu Group is uniquely positioned to add value, based on its culture, capabilities, and global ecosystem of clients and partners.

3. Whistleblowing system

As part of the 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 Company has established a Compliance Line to reach the Company’s specialized department or an external law firm, which is available to the executives and employees of the Company and its subsidiaries and affiliates in Japan.
In addition, the Company has established a consultation desk for sexual harassment and power harassment, which is separate from the Compliance Line. For overseas business, the Company has also established the Speak Up system, a whistle-blowing system with both internal and external independent contact points, which is available to executives and employees of overseas group companies.
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.

4. 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 the corporate philosophy. 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 President and Chief Executive Officer 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 thirteen (13) (15 or less as stipulated in the Articles of Incorporation), and five (5), one-third or more of the members shall be independent outside directors. The term of office for directors who are not members of the Audit and Supervisory Committee shall expire at the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within one year after assuming office, and the term of office for directors who are members of the Audit and Supervisory Committee shall expire at the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within two years after assuming office.

Moreover, 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.

3. Nomination Advisory Committee and Compensation Advisory Committee

The Company shall establish Nomination Advisory Committee and Compensation Advisory Committee as advisory bodies in order to further enhance the corporate governance structure and strengthen the independence, objectivity and accountability of the Board of Directors' functions in determining the nomination and compensation of directors and executive officers. Each of these committees shall consist of three or more directors or external experts appointed by resolution of the Board of Directors. The majority of the members of each committee shall be independent outside directors, and the chairperson shall be selected by resolution of the Board of Directors from among the members who are independent outside directors, thereby ensuring the independence. The Nomination Committee shall deliberate on matters concerning the nomination, succession plan of directors and executive officers from the perspectives of diversity including gender, skills, and other factors. The Compensation Committee shall deliberate on matters concerning the determination of compensation for individual directors who are not members of the Audit and Supervisory Committee and executive officers. Both Committees make reports to the Board of Directors.

4. Criteria and procedures for the election and dismissal of candidates for directors and executive officers

The Company has determined the following policy regarding the nomination of executive officers (including inside directors who are not members of the Audit and Supervisory Committee and who concurrently serve as executive officers).

• (ⅰ)
  Appoint persons who shall contribute to the sustainable growth and medium- to long-term enhancement of the corporate value of the Company in an appropriate manner.
• (ⅱ)
  Establish a management team that quickly innovates the Company's innovation, selecting its members from a group of candidates with knowledge, experience, and ability in management, while seeking to achieve a balance between diversity and expertise.

The selection and appointment of candidates for directors shall be based primarily on the following criteria as stipulated in the Rules of Board of Directors.

Criteria for the selection and appointment of candidates for inside directors who are not members of the Audit and Supervisory Committee

• (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 who is not a member of the Audit and Supervisory Committee.

Criteria for the selection and appointment of candidates for inside directors who are members of the Audit and Supervisory Committee

• (ⅰ)
  Ability to correctly understand the duties of an inside director who is an Audit and Supervisory Committee member from a legal and managerial perspective.
• (ⅱ)
  Ability to make judgements from a company-wide perspective.
• (ⅲ)
  Excellent problem solving and leadership skills.
• (ⅳ)
  Personality and insight appropriate for an inside director who is an Audit and Supervisory Committee member.

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

With respect to the procedure for nominating candidates for directors who are not Audit and Supervisory Committee members, from the viewpoint of ensuring objectivity and transparency, the Board of Directors shall consult the Nomination Committee on the proposed candidates for directors, and the Board of Directors shall decide on the candidates based on the report made to the Board of Directors after deliberation by the Committee.

With regard to the procedure for nominating candidates for directors who are members of the Audit and Supervisory Committee, the Board of Directors shall consult the Nomination Committee on the proposed candidates for directors, and the Board of Directors shall decide on the candidates after obtaining the consent of the Audit and Supervisory Committee, based on the report made by the Committee to the Board of Directors after deliberation.
The reasons for the nomination of each candidate for directors are stated in the reference document for the General Meeting of Shareholders pertaining to the proposal for the election of the relevant director.

In regard to the procedure for selecting and appointing executive officers, the Board of Directors shall, in the view of ensuring objectivity and transparency, consult the Nomination Committee regarding the proposed selection and appointment of executive officers. Then, based on the report on the deliberation made by the Committee to the Board of Directors after deliberation, the Board of Directors shall select and appoint the executive officers with its resolution.

In cases where it is recognized that a director or 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.

5. Scope of delegation to management

As a company with an audit and supervisory committee, the Company shall build a swift and highly effective business execution system by delegating authority from the Board of Directors to the executive officers for some of the important business execution, while strengthening the supervisory function of the Board of Directors for business execution.

Specifically, under the Board of Directors, the Company has established the Group Executive Management Committee, which is composed of representative directors and executive officers, including executive directors, to deliberate on important matters of the Company other than those to be resolved by the Board of Directors, to resolve important management matters for the entire Group, and to deliberate on in advance matters to be resolved by the Board of Directors.

In addition, the Company has established the Dentsu Japan Network Board (established within Dentsu Japan Network, an in-house company), which deliberates on important matters related to the domestic business of Group companies, and the Dentsu International Board, which deliberates on important matters related to the overseas business of Group companies. As a result, the Company has divided its business execution structure into domestic and overseas business divisions and delegated responsibility for earnings and authority to each.

6. Role of outside directors

Five (5), one-third or more of the thirteen (13) directors of the Company shall be independent outside directors- who meet the independence standards established by the Company.
Outside directors are expected 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

7. Composition of the Audit and Supervisory Committee, etc.

The Company has adopted the structure of a company with an audit and supervisory committee and appointed six (6) directors (five (5) of whom are outside directors) who are members of Audit and Supervisory Committee in order to improve the effectiveness of auditing and supervision by Audit and Supervisory Committee members who have voting rights at the Board of Directors meetings, and to improve the effectiveness of internal control by conducting audits using its audit department.

The five outside directors who are members of the Audit and Supervisory Committee are all independent directors who meet the Company's criteria for independence, and are expected to fulfill the supervisory function of the Board of Directors with respect to the execution of business operations, taking advantage of their extensive experience in their respective fields.
In addition, the Audit and Supervisory Committee shall request reports from the accounting auditor and the internal audit department on their respective audit methods and results, and shall exchange information individually to promote mutual cooperation, as appropriate. The Audit and Supervisory Committee may also request the internal audit department to report on the status of development and operation of internal controls.

In addition, the Company shall appoint assistants to the Audit and Supervisory Committee members and set up the secretariat of the Audit and Supervisory Committee, and shall ensure that the employees who perform such duties are independent of the directors who are not Audit and Supervisory Committee members.

8. 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.

9. 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

10. 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 CEO, CFO, and other senior management.

11. Compensation for directors and executive Officers

The Company has determined the following policy for the compensation of senior management members and directors.

• (ⅰ)
  Implement a globally competitive compensation system and compensation levels.
• (ⅱ)
  The compensation system shall reflect management performance and results. Ensure an appropriate balance between fixed compensation and variable compensation.

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 professional organizations.
The compensation system for executive officers shall be established in the aim of clarifying the linkage between compensation and business performance and corporate value, and thereby of increasing the motivation of the Company's officers to contribute to the sustainable growth of the Company and the enhancement of corporate value over the medium and long terms.
The compensation of individual directors shall be calculated based on the calculation formulas stipulated in the Rules for Directors' Compensation and the Rules for Directors' Stock Compensation, which the Company established with the approval of the Board of Directors, and shall be determined for each fiscal year in accordance with the following procedures.

The amounts of compensations for the directors who are not members of the Audit and Supervisory Committee (including the compensations for those concurrently serving as executive officers) are determined by the Board of Directors within the range of compensation resolved at the General Meeting of Shareholders and based on the amount of compensation for each individual director disclosed to the Board. In order to secure objectivity and transparency, the Board of Directors shall decide on the above-said amount after consulting the Compensation Committee on the proposed amount of compensation and based on the report on the deliberation that the Committee makes to the Board. The amounts of compensations for those who are members of the Audit and Supervisory Committee shall be determined upon consultation among the directors who are members of the Audit and Supervisory Committee within the range of compensation resolved at the General Meeting of Shareholders.

The amount of compensation for each executive officer (excluding those who concurrently service as directors) is determined by the Board of Directors based on the amount of compensation for each individual executive officer disclosed to the Board. In order to secure objectivity and transparency, the Board of Directors shall decide on the above-said amount after consulting the Compensation Committee on the proposed compensations and based on the report on the deliberation that the Committee makes to the Board.

12. Development of the CEO’s successors and related decisions

The Company has determined the following policy regarding succession planning.

• (ⅰ)
  To develop succession plans for the important posts among the Company's executive directors and executive officers.
• (ⅱ)
  To define the important posts as the following four positions: CEO, COO (domestic business), COO (international business), and CFO.
• (ⅲ)
  To propose a plan with, in principle, three candidates for each position to enable comparisons for the important posts.

The CEO shall recognize that the development of his or her successors is one of his or her most important responsibilities. The CEO shall also foster the development of executive officers as his or her potential successor not only by setting performance targets, but also by assigning missions to them according to their respective responsibilities and having them involved in management including by having them attend the Group Management Meeting and other important meetings.

The candidates of successors shall be determined by the Board of Directors after, in order to secure objectivity and transparency, consulting the Nomination Advisory Committee on the proposed candidates and based on the report on the deliberation to be made by the Committee to the Board.

13. Policy concerning training for directors and executive officers

The Company shall provide directors and executive officers 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.

Currently, directors (excluding outside directors) and executive officers, upon their appointment, receive training provided by internal and external experts on the Company's management, business, financial and other strategies, as well as related important matters and laws and regulations, to acquire and update the knowledge necessary for the performance of duties. In addition, discussions are held on the identification of the Company’s issues and solutions for them. In addition, the Company holds regular study sessions for the directors (excluding outside directors) and the executive officers after they assume their positions for the purpose of providing them with opportunities to obtain the latest information on best practices for various issues in megatrends.

When a new outside director is appointed, the Company shall explain the Company's business and organizational structure, etc., to him or her and also provide him or her with necessary information on business issues, etc., on a regular basis following his or her appointment.
The Company shall review the content of the training as necessary.

14. 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

Through its investor relations activities, the Company discloses a range of information, from management strategies and financial information to non-financial information, to its shareholders and investors in a timely and appropriate manner. By continuously engaging in constructive dialogue with its shareholders and investors, the Company strive to contribute to the enhancement of its corporate value over the medium and long term.

Specifically, the CEO, CFO, and officers in charge of investor relations and disclosure conduct a range of activities, including regular briefings for analysts and institutional investors, roadshows for domestic and overseas investors, individual meetings via telephone and video conference, and extensive information disclosure on its website. In order to ensure the effective functioning of these activities, the Company has established the Group IR Office as a specialized department, which works closely with the Group Strategy Office, Group FR/FP&A Office, Group Corporate Secretary Office, and other related departments. In addition, the Company has established two Group IR Offices, one in Tokyo and one in London, to facilitate dialogues with analysts, investors, and shareholders in Japan and overseas.

Opinions and requests obtained through the investor relations activities, etc. are periodically reported to the Group Executive Management Meeting and the Board of Directors, and are utilized in discussions aimed at improving corporate value.

In order to properly manage insider information, the Company has established an Information Management Committee and a "quiet period" during which the Company refrains from communications regarding financial information.

In addition, the Company periodically conducts surveys to identify its substantial shareholders to gain a better understanding of its shareholder structure.

• Disclosure Policy

2. Formulation and announcement of management strategies and plans

Based on an understanding of its own cost of capital, the Company formulates and discloses a medium-term management plan towards attaining 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.