ESG

Response to Implementation of the Corporate Governance Code

Appointment of Senior Management; Nomination of Director Candidates

When nominating directors who are not already members of the Audit and Supervisory Committee, the representative director—the individual in a Japanese company who has the company seal and represents it in transactions—will submit the proposed names and, to ensure transparency, explain to the independent outside director members of the Audit and Supervisory Committee the reasons for having selected, and suitability of, nominees. Directors shall be nominated by the Board of Directors, which will take into consideration the opinions of outside directors. When nominating directors who are members of the Audit and Supervisory Committee, the representative director will submit a list of proposed names and, after they have been approved by the Audit and Supervisory Committee, the Board of Directors shall decide the new board members.

For the policies and procedures involved in nominating director candidates, please refer to the Corporate Governance Report.

The Independence Standards for Outside Directors ➡ https://www.group.dentsu.com/en/about-us/governance/isod.html

Self-evaluation of Board of Directors, Effectiveness

To consistently increase the effectiveness of the Board of Directors, Dentsu conducts a questionnaire survey of all directors. The questionnaire covers the Board of Directors’ effectiveness and appropriateness in supervising management and self-evaluations of the directors regarding the status of their operations. The Company also interviews outside directors. The Board of Directors secretariat reports the results of these evaluations to the Board of Directors, thereby analyzing and evaluating the overall efficacy of the Board of Directors. In fiscal 2016, this analysis and evaluation indicated that the composition, operation and content of deliberations of the Board of Directors was generally appropriate. It noted that deliberations were conducted sufficiently through the spirited exchange of opinions and confirmed that the Board of Directors remained effective and appropriate in its supervision of operations. At the same time, this analysis and evaluation elicited certain issues with regard to putting in place measures to promote understanding of agenda items, regular reporting concerning the state of progress on important strategies, the enhancement of measures and monitoring to ensure thorough compliance with corporate ethics, and the feedback of questions and opinions from investors. The Company will strive to make improvements in these areas, further enhancing the effectiveness and appropriateness of management oversight by the Board of Directors.

Questionnaire items

1. Board of Directors composition and operation
2. Management strategy and business strategy
3. Corporate ethics and risk management
4. Operating performance monitoring and evaluation; remuneration of the management team
5. Organizational and business restructuring
6. Dialogue with shareholders and other stakeholders
7. Self-evaluation of individual directors

Training Directors and Executive Officers

Through ongoing training, opportunities will be made available for directors and executive officers to gain the knowledge necessary to properly carry out their work and responsibilities. Currently, when directors (excluding outside directors) and executive officers assume their roles, the Company provides them with lectures, given by in-house and outside experts, with respect to the Company’s strategies in areas including management, business, finance, laws, and regulations. This enables them to acquire and update the knowledge they require to fulfill their responsibilities. They also have opportunities to find, through discussions, issues to be addressed by the Company and their solutions. Moreover, after becoming directors or auditors, they have opportunities to hold monthly study seminars to obtain the latest information regarding best practices for megatrend issues, with emphasis on the positioning of the environmental, social, and governmental criteria in the Corporate Governance Code. When new outside directors assume their offices, they are provided with an explanation of the business, organizational structure, and other related Company matters. Then, periodically, they are updated regarding issues currently being addressed by the Company.

Remuneration

Policies, Procedures for Senior Management; Directors’ Remuneration

Internal directors who are not members of the Audit and Supervisory Committee have a performance-linked framework for remuneration. It is designed to ensure that the medium-term management plan goals are achieved, the focus is on the mid- to long-term profit of shareholders, and the motivation to maximize the corporate value of the Company remains high. The index used to evaluate business performance is the Company’s consolidated operating profit, while the total amount of bonuses varies according to the degree to which budgetary goals have been achieved. Performance-linked bonuses, meanwhile, account for 40% of the Company’s total remuneration. Remuneration of outside directors who are not Audit and Supervisory Committee members consists solely of a fixed monthly amount that takes into account their duties. The total amount of fixed monthly compensation and performance-linked bonuses for directors who are not Audit and Supervisory Committee members is within the scope of remuneration approved at the 167th Ordinary General Meeting of Shareholders (within ¥1.2 billion per year).

The amount of remuneration of each director who is not a member of the Audit and Supervisory Committee (as well as of each executive officer) is determined by a resolution of the Board of Directors within the above limit of remuneration, and must be approved at the same General Meeting of Shareholders. In order to ensure transparency, the suggested remuneration is explained to committee members, and the final decision is made by shareholders after they have taken into consideration the opinions of the Audit and Supervisory Committee members. Remuneration for directors who are members of the Audit and Supervisory Committee consists solely of a fixed monthly salary. The gross amount is within the remuneration limit approved at the 167th Ordinary General Meeting of Shareholders (within ¥150 million per year). The amount of remuneration for each director who is a member of the Audit and Supervisory Committee is determined through consultations conducted by the committee directors. The amount is within the above remuneration limit, as approved at the same Ordinary General Meeting of Shareholders.