Recurrence Prevention Initiatives (mindset and behavior reform)

Regarding the current case related to Tokyo 2020 Olympic and Paralympic Games, the Group has established the dentsu Japan Reform Committee on May 15, 2023 and has been working to reform mindset and behavior. As of December 18, 2024, all 17 initiatives to prevent recurrence that have been promoted under the dentsu Japan Reform Committee since May 2023 have been completed.

From January 2025, dentsu has been promoting the Mindset and Behavior Reform Project to further develop our existing efforts with the aim of establishing an organizational culture that prioritizes integrity and ensures a high level of compliance.

Policy on Recurrence Prevention
Mindset and Behavior Reform for recurrence prevention
Mindset and Behavior Reform Initiatives until 2024
dentsu Japan Mindset and Behavior Reform Project
Employee surveys
Monitoring evaluation by the outside committee members (currently the outside advisors)
Reference: Investigation Report by the Investigation and Review Committee
Reference: ESG Briefing
Reference: News Releases

Policy on Recurrence Prevention

The policies on recurrence prevention that has been in place since the creation of the dentsu Japan Reform Committee 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.

Among the above, some of the activities have been completed by the end of 2024, but others have required continued efforts, and we will continue to work on these.

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

Mindset and Behavior Reform by 2024

dentsu Japan Reform Committee Members

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, Implementing 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	Implementing 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)

The committee is chaired by Hiroshi Igarashi, President and Global CEO, and in order to obtain an external perspective, three attorneys have also participated as outside members. Since the committee was established in May 2023, it has held 40 discussions and has confirmed the steady progress in the initiatives of the Mindset and Behavior Reform. The content and progress of initiatives of Mindset and Behavior Reform are also regularly reported to the Board of Directors

Specific initiatives to prevent recurrence (Completed by December 2024)

(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 (Completed by December 2024)

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

(as of December 18, 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. After the introduction of Speak Up@dentsu, dentsu Japan received 75 consultations in FY2024. We will continue to promote the window and importance of the consultation service and create an environment that facilitates consultation.

Initiatives for development and operation of business guidelines

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 FY2024, there were 309 consultations regarding the Sports Business Guidelines, 340 consultations regarding the Public Affairs Business Guidelines, and 34 consultations regarding the Guidelines for the Prevention of Unfair Bidding, etc.
The January 2025 revision of the Basic Policy and Guidelines for Public Affairs Business newly established a database for forms such as estimates.

Reference to the previous status of progress.

dentsu Japan Mindset Behavior Reform Project

From January 2025, the new structure will be led by the COO of dentsu Japan, with the Chief Branding/Culture Officer of dentsu Japan as the sub-leader, and the department in charge of dentsu Corporate One Inc., which supports the business sites of each dentsu Japan company, as a member. The dentsu Japan Mindset and Behavior Reform Project aims to promote an organizational culture that prioritizes integrity and ensures a high level of compliance. We will report on the specific initiatives of the project at a later date.

Project Promotion structure

Member		Responsibility
Leader	Yoshimasa Watahiki COO, dentsu Japan	Drafting the initiatives, Reporting the progress to the committee
Sub-leader	Yuko Yoshiba Chief Branding/Culture Officer, dentsu Japan	Drafting the initiatives, Reporting the progress to the committee, Operating the committee
Support	Tadashi Nagae Global Corporate Secretary & Deputy Global General Counsel, dentsu	Promotion Support
Member	Dentsu Corporate One Inc. Legal Office Compliance Office Branding Office Business/Management Planning Office	Promotion of initiatives collaboration with the onsite teams
Outside Advisor	Toshihiko Itami, Attorney-at-Law	Monitoring Advisory
Outside Advisor	Genta Yoshino, Attorney-at-Law	Monitoring Advisory
Outside Advisor	Yasuo Daito, Attorney-at-Law	Monitoring Advisory

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

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

The overview of the survey results are as follows:

Overall, scores increased steadily from the first survey to the fourth, including awareness and understanding of the mindset and behavior reform. In particular, the items that showed the greatest increase were “reference to integrity (recognition and understanding)”, “specific understanding of integrity”, and “establishment of organizational culture”
“Balancing integrity and results” and other items have remained largely unchanged since the first survey, and further support is needed to ensure that business sites do not hesitate when prioritizing integrity in their work
Continued efforts are needed to establish an organizational culture that prioritizes integrity

Monitoring evaluation by the outside committee members (currently the outside advisors)

The monitoring evaluation of the Mindset and Behavior Reform by the three outside members (currently the outside advisors) is as follows (as of December 10, 2024)

●Mr. Itami
The Sharing Meetings and other activities have led to a concrete understanding that integrity is the top priority in business operations, which suggests a change in the organizational culture. On the other hand, compared to the dJ Mindset and Behavior Reform Survey conducted one year ago, the indicator “I think it is more important to produce business results and profits” deteriorated slightly, while the indicator “I think I can balance integrity and results” remained almost unchanged. Some employees understand the need to prioritize integrity in their work, but in reality, they are still deeply rooted in their desire to focus on profits and results, and have yet to change their mindset and behavior. It is necessary to continue efforts to disseminate the integrity-first philosophy through support in the work process.

●Mr. Yoshino
I commend you for taking seriously the problems pointed out by outside experts and vigorously implementing a number of measures. These measures include the introduction of new systems and institutional reforms, but we ask that you repeat the verification process to ensure that these systems do not become merely a formality and that they are effective in preventing recurrence.

●Mr. Daito
It is commendable that the results of the dJ Mindset and Behavior Reform Survey indicate that understanding of the importance of integrity has spread to a considerable degree. On the other hand, the survey also revealed that front-line workers are struggling to balance integrity and business performance. Therefore, in addition to the overall survey, I would like to see dJ continue its efforts to identify and resolve the specific concerns of front-line workers through targeted questionnaires and interviews.

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

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