Recurrence Prevention Initiatives (mindset and behavior reform)

Regarding the current case related to the Tokyo 2020 Olympic and Paralympic Games, the Group has established the dentsu Japan Reform Committee.

Dentsu is promoting the mindset and behavior reform in the Japan region as well as formulating a recurrence prevention policy and promoting various initiatives with the aim of fulfilling its responsibility to all stakeholders by reforming its approach to work.

dentsu Japan Reform Committee Members
Policy on Recurrence Prevention
Mindset and Behavior Reform for recurrence prevention
Specific measures to prevent recurrence
Progress of the recurrence prevention initiatives
Reference: Investigation Report by the Investigation and Review Committee
Reference: ESG Briefing 2023
Reference: News Releases

dentsu Japan Reform Committee Members

Committee members are as follows.

Member		Responsibility
Chair	Hiroshi Igarashi Representative Executive Officer, President & Global CEO, dentsu	Project lead, Reporting to the Board of Directors
Vice-chair	Arinobu Soga Representative Executive Officer, Executive Vice President, Global Chief Governance Officer & Global Chief Financial Officer, dentsu	Assisting the Chair, Implementating the reform
Outside Member	Toshihiko Itami, Attorney-at-Law	Advisory
Outside Member	Genta Yoshino, Attorney-at-Law	Advisory
Outside Member	Yasuo Daito, Attorney-at-Law	Advisory
Member	Tadashi Nagae Global Corporate Secretary & Deputy Global General Counsel, dentsu	Implementating the reform
Leader	Takeshi Sano CEO, dentsu Japan	Drafting the initiatives, Reporting the progress to the committee
Leader/ Secretariat Head	Yoshimasa Watahiki COO, dentsu Japan	Drafting the initiatives, Reporting the progress to the committee, Operating the committee

(as of January 1, 2024)

In addition to internal members, three outside attorneys are participating in the Committee as advisors.
Mr. Itami, who used to be a member of the Investigation and Review Committee, is advising the Committee with the aim of ensuring the effectiveness and consistency of this reform.
The members regularly report to the Board of Directors on the details of the discussions held in the Committee.

Policy on Recurrence Prevention

The policies on recurrence prevention based on the mindset and behavior reform are as follows.

(i)
Establish a system to reflect the knowledge gained from analyzing past cases in our business operations by reviewing business processes to ensure fair transactions, formulating and revising guidelines for the sports domain and public sector (sports business guidelines and public sector guidelines), where the aforementioned case originated, introducing information management measures to prevent conflicts of interest with the organizations to which employees are seconded, etc.
(ii)
Reexamine established policies and internal reporting systems and improve the effectiveness of internal controls. In particular, strengthen the checking and monitoring functions by establishing an executive meeting body and a person in charge of governance to promote compliance for each project per organizational unit.
(iii)
Once again conduct company-wide compliance education, involving everyone from management to those in charge of practical operations, in order to raise compliance awareness. Additionally, ensure the enrichment of the content and continuity of efforts by implementing Antimonopoly Act compliance training, establishing a consultation service, and clarifying the organization in charge of compliance within dentsu Japan.
(iv)
Ensure that all employees are familiar with the Dentsu Group Code of Conduct in order to define and realize an appropriate corporate culture and strengthen company-wide activities to foster such a corporate culture. Additionally, review the personnel system to ensure governance is functioning appropriately.

Mindset and Behavior Reform for recurrence prevention

● Policy: To raise awareness of social responsibilities and improve transparency, as well as clarify the rules and processes that must be followed

● Pillars of countermeasures / objectives

(1)
Establishment of an organizational culture that ensures proper corporate activities
Objectives
- Establishing an organizational culture where integrity is prioritized
- Sharing attitudes to learn from failure
- Creation of an organizational culture under the lead of the management team
- Creation of a personnel system to implement the desired organizational culture
(2)
Strengthening of the risk management system and legal/compliance functions
Objectives
- Appropriate management of whistleblowing systems, and establishment of mechanisms to detect signs of violations
- Systematization of various trainings and ensuring their completion by all management members and employees
- Adding requirements for understanding and experience in corporate tasks as a condition for promotion to management positions
(3)
Introduction of business processes that ensure fair and transparent transactions
Objectives
- Clarify processes to minimize various risks while fulfilling social responsibilities in the execution of each business operation
- Monitoring of business performance by a team of experts

●KGIs and KPIs to measure the progress

Three KGI (Key Goal Indicators) have been set to measure the progress of the reform.
Although there are factors that are difficult to quantify, such as the improvement of the organizational culture, we intend to make a comprehensive assessment with the help of external perspectives as well.
The first KGI is the evaluation on the reform by employees. Progress will be tracked through periodic employee surveys.
The second is a monitoring evaluation by the advisory group. The three outside members of the Reform Committee will make a comprehensive assessment of the progress being made.
The third KGI is an evaluation by external stakeholders, including business partners and consumers. The goal is to improve their views of the Group.

In addition, specific fact-based indicators as KPIs as shown below, such as the progress of the 17 initiatives, the details of the employee survey, and the number of whistle-blowing cases, will also be tracked.

Specific measures to prevent recurrence

(1)
Establishment of an organizational culture that ensures proper corporate activities
- Ensure familiarity with the Dentsu Group Code of Conduct
- Further commitment and implementation of corporate culture reform by the dentsu Japan Chief Culture Officer
- Promote dialogue between management and employees to discuss proper corporate activities
- Take strict disciplinary measures against those involved in this case
- Further optimizations and revisions of the personnel system
- Clarification of personnel requirements for leaders and reflection in promotions and evaluations
(2)
Strengthening of our risk management system and legal/compliance functions
- Improve the whistleblowing process and implement whistleblowing platforms
- Systemize compliance areas and further enhance compliance measures
- Expand the legal and compliance organizations
- Strengthen monitoring function via internal audits
- Implement flexible risk management within the dentsu Japan Risk Committee
- Establish a compliance manager (tentative name) in each organization responsible for business execution
- Further consider restoration of corporate order through a disciplinary system
(3)
Introduction of business processes that ensure fair and transparent transactions
- Fielding of external advisors (experts)
- Development and operation of business guidelines (public business guidelines, sports business guidelines, guidelines for the prevention of fraudulent bidding, etc.)
- Establishment and operation of rules for secondment when there is a conflict of interest.
- Appointment of dedicated personnel for transaction management (procurement/purchasing)

Progress of the recurrence prevention initiatives

The progress of the initiatives of the Mindset and Behavior Reform is as follows.

(as of July 1, 2024)

Initiatives of the improvement of the whistleblowing process and the renewal of the platform

The introduction of Speak Up@dentsu, a common global platform, is completed, and a contact point is now available for those outside the company. In the four months following the introduction of Speak Up@dentsu, dentsu Japan received 15 consultations in FY2023. We will continue to promote the window and importance of the consultation service and create an environment that facilitates consultation.

Initiatives of the development of the Sports

Each guideline has been completed (Guidelines for Sports Business, Basic Policy and Guidelines for Public Affairs Business, and Guidelines for the Prevention of Unfair Bidding, etc.). In FY2023, there were 193 consultations regarding the Sports Business Guidelines, 365 consultations regarding the Public Affairs Business Guidelines, and 19 consultations regarding the Guidelines for the Prevention of Unfair Bidding, etc.

Reference to the previous status of progress.

Employee survey（the first survey was conducted in November 2023, the second was in February 2024 and the third was in May 2024）

The first survey targeting all dentsu Japan employees was conducted in November 2023, and the second and the third survey were conducted in February and in May 2024 by targeting approximately 5,000 employees through a sample survey.

The overviews of the results of the surveys;

Awareness and understanding of the mindset and behavior reform steadily increased from the first survey to the third one
The items whose scores particularly improved were "reference to integrity" (recognition and understanding) and "specific understanding of integrity".
To deal with daily basis tasks with the highest priority on integrity, providing more support is needed to avoid any confusion
On the other hand, the scores for awareness and understanding of the consultation system have been sluggish, and there remains room for the improvement of internal publicity

The monitoring evaluation of the Mindset and Behavior Reform by the three outside members is as follows (as of September 2024)

●Mr. Itami
Mindset and Behavior Reform is steadily having an effect, with the amount of conversation about compliance increasing and the environment becoming more conducive to consultation, and it can be said that a corporate culture based on integrity is beginning to take root. As well as promoting various measures to reform mindset and behavior and deepening understanding so that they can be applied to day-to-day work, etc., it is also important to continue to move forward at a fast pace with a cycle of seeking solutions on their own when they are unsure about how to carry out their work, consulting as appropriate, presenting appropriate solutions, and monitoring and accumulating these solutions and sharing them. While also keeping a close eye on the upcoming survey on Mindset and Behavior Reform, we will continue to pay close attention to the effectiveness of various measures and the degree of penetration of Mindset and Behavior Reform.

●Mr. Yoshino
The introduction of various measures to support Mindset and Behavior Reform is steadily progressing, and this can be evaluated as a positive development. Although it appears that understanding of integrity is not progressing as quickly as it should, it is also a problem that understanding is progressing but not being accompanied by action. In the future, I want them to focus on efforts shifted to the effective operation of the measures that have been introduced. I believe that understanding of integrity will deepen further through taking action based on effective measures when carrying out the work at hand.

●Mr. Daito
As a corporate culture that prioritizes integrity becomes more widespread, it seems that more and more employees are wondering how they should act in order to pursue business results while prioritizing integrity. In order to respond to the concerns of such employees, dentsu has introduced initiatives such as having multiple executives and employees from various positions introduce their opinions on typical “concerns” and how they would think about them. In this way, the company's united approach to promoting integrity is highly commendable.

Reference to the monitoring evaluation

Reference: Investigation Report by the Investigation and Review Committee

The details of the Investigation Report by the Investigation and Review Committee consisting of three outside experts are as follows.

Investigation Report by the Investigation and Review Committee

Reference: ESG Briefing 2024

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