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, 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 February 19, 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
As of December 1, 2023

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

A survey targeting all dentsu Japan employees was conducted in November 2023, and a second survey targeting approximately 5,000 employees through a sample survey was conducted in February 2024.

The overviews of the results of the surveys;

Each score steadily increased from the first to the second
Scores for "recognition of the reform" and "understanding of the reform" also increased from the first round.
The items whose scores particularly improved were "reference to integrity" (recognition and understanding) and "specific understanding of integrity.
On the other hand, awareness/understanding of the consultation system declined slightly from the first to the second session. 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 April 30, 2024)

●Mr. Itami
There is nearly full awareness of the dJ mindset and behavior reform as a whole, and understanding of the nature of operations that prioritize integrity is deepening, indicating the effectiveness of the reform. However, while the level of understanding as a whole has increased, it is still far from sufficient, and it is necessary to continue to implement various measures to promote awareness of the reform and integrity. As understanding of integrity has deepened, hesitation and anxiety in business operations have increased. In order to attend to the concerns and anxieties of employees and find solutions together, the roles of dJ compliance officers, managers, and supervisors who guide and advise employees are extremely important. We will continue to closely monitor the degree of awareness of the mindset and behavior reform.

●Mr. Yoshino
In addition to the introduction of systems and institutional reforms, it is notable that, more fundamentally, the company is making steady progress in the mindset and behavior reform, with each executive and employee recognizing, understanding, and accepting the importance of the reforms before taking action. The questions and concerns voiced by executives and employees are an indication of their willingness to work on the reforms, and therefore, the supervisors, teams, and management should discuss and provide direction in search of appropriate and reasonable solutions to each of the real issues that lie ahead in order to motivate everyone to change their mindset and behavior. There are not many instances where there is only one absolute right answer. It is important to have a process in which everyone can share their understanding of integrity and seek a common direction. I hope that the dJ Reform Committee will take the lead in putting this process into practice.

●Mr. Daito
I commend management's tireless efforts to ensure that the series of reforms are genuine, and that this is becoming increasingly evident to employees at all levels of the organization. The fact that many employees have voiced their concerns about the balance between integrity and dentsu's unique identity is evidence of this. The series of reforms is moving from the awareness phase to the implementation phase. While there is no doubt that each level of the company is experiencing growing pains, I hope that while exchanging a broad range of opinions, the management team will continue laying out a roadmap for reform while middle management proposes concrete measures, and the front line works together to implement these reforms.

Reference to the monitoring evaluation
As of December 1, 2023

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 2023

Latest Presentation and Conference Materials