Basic Policy on Corporate Governance

We believe that continually improving corporate value through our corporate activities and contributing to the development of a rich food culture will fulfill the expectations of all our stakeholders, including shareholders, business partners and employees.

 

For this reason, the Company regards continuous strengthening of corporate governance as the most important management issue, which also forms the basis for ensuring the soundness, transparency and efficiency of its management, and has introduced the audit and supervisory committee and the internal audit system. While striving for effective communication between management and execution, we aim to further improve management transparency and efficiency.

Lacto Japan has established the Basic Policy on Corporate Governance based on the principles of the Corporate Governance Code of Japan.

(1) The Company's internal control system has been resolved by the Board of Directors as follows.

1. The Group recognizes that compliance with laws and regulations is a prerequisite for all kinds of corporate activities and not only complies with laws and regulations but also acts in accordance with its corporate philosophy and social norms and ethics as a corporate citizen.
2. We have established the Group’s Compliance Regulations as a code of conduct to ensure that the Group’s directors, employees, etc. comply with laws and regulations and the Articles of Incorporation and take actions based on social norms. As a guideline for the strengthening of compliance, we carry out educational and awareness-raising activities.
3. To ensure thorough compliance among the Group’s officers and employees, Lacto Japan’s Human Resources and General Affairs Department supervises compliance initiatives across divisions and engages in educational and communication activities.
4. To establish the compliance system, the Group has prescribed policies at Lacto Japan’s Executive Committee meetings, and based on these policies, the Human Resources and General Affairs Department develops the Group’s regulations and manuals and provides education regarding the compliance system. Moreover, if a major compliance violation occurs, it is investigated and reported in the Executive Committee and measures to prevent any recurrence are discussed and determined.
5. The Group has set up the Internal Audit Office under the direct control of the Managing Director of the Company. It investigates whether the Group's internal control system is functioning and operating effectively, and monitors the implementation status of development policies and plans. In addition, in order to check whether directors, employees, etc. are performing their duties appropriately without violating laws and regulations, the Articles of Incorporation, and internal regulations, the Internal Audit Office conducts operational audits, and the audit details are reported to the Managing Director and the Board of Directors of the Company.
6. The Group has established a system to block relationships with antisocial forces that threaten social order and sound corporate activities and to clearly reject unreasonable demands. Furthermore, we work closely with the police and other external specialist organizations to systematically respond to antisocial forces with a resolute attitude.
7. The Group has created and aims to effectively operate the Whistleblowing System in order to rapidly detect and correct behavior that violates laws and regulations, social norms, etc.

(2) System concerning storage and management of information relating to the execution of directors’ dutiesRecords regarding decision-making at important meetings such as Board of Directors’ meetings and important documents and information (including electromagnetic records) relating to the execution of directors’ duties are appropriately stored and managed in accordance with laws and regulations, the Document Management Regulations and the Information Security Regulations. Moreover, in regard to the management of information, we have prescribed an information security policy and a basic policy regarding the Act on the Protection of Personal Information.

 

(3) Regulations and systems related to management of risk of loss in the Group

1. In regard to risks related to the execution of the Group’s business activities, the risk management system based on cooperation in the Group plays a fundamental role, led by the Company’s Corporate Strategy & Planning Department.
2. Each company in the Group establishes and distributes regulations, guidelines and manuals as required to prevent and avoid the risk of losses.
3. If risks materialize and significant damage is expected to occur, a Risk Management Headquarters will be established under the direction of the Company’s Managing Director, and efforts will be made to address and minimize risks.

 

(4) System to ensure that the execution of duties by the Group’s directors, etc. is efficiently carried out

1. Based on the provisions of the Regulations of the Board of Directors, the Organizational Regulations, and the Regulations on Administrative Authority, the Company prescribes criteria regarding resolutions and matters to be reported at meetings of the Board of Directors, segregation of organizational duties, and decision-making authority corresponding to the degree of importance of cases, and ensures the efficiency of business execution by directors.
2. The Board of Directors shall be operated based on the Regulations of the Board of Directors and shall hold meetings at least once a month, as a rule. The members of the Board of Directors shall communicate well with each other, mutually supervise business execution, and receive expert advice from legal advisors and audit firms as necessary.
3. The Company will formulate a basic policy, etc. on the management of subsidiaries in order to contribute to the appropriate and efficient operation of the Group's management while respecting the autonomy and independence of the management of subsidiaries.

 

(5) System to ensure appropriateness of operations in the Group

1. Business execution of each company in the Group shall conform to social norms such as laws and regulations and be conducted based on defined decision-making rules.
2. The Company will manage and guide business execution at each company in the Group based on the management policy of each company in the Group and internal regulations such as the Affiliated Company Management Regulations.
3. Specifically, the Company’s Corporate Strategy & Planning Department shall play a supervisory role, and in regard to individual cases, each division or department in the Company with a high degree of relevance shall provide administration, guidance and advice, dispatch officers and employees as required, and ensure the appropriateness of operations.
4. The Internal Audit Office will audit the appropriateness of the operations of each company in the Group.

 

(6) Matters regarding applicable employees when it is necessary to appoint employees to assist the duties of the Audit and Supervisory Committee

For the time being, we have received a report from the Audit and Supervisory Committee that the policy is not to appoint employees who should assist the duties of the Audit and Supervisory Committee (referred to as “Assistants to the Audit and Supervisory Committee” hereafter.) However, if requested by the Audit and Supervisory Committee, Assistants to the Audit and Supervisory Committee shall be appointed.

 

(7) Matters regarding ensuring the independence of employees in the previous clause from directors (excluding directors who are Audit and Supervisory Committee members) and the effectiveness of instructions by the Audit and Supervisory Committee to applicable employees.

Assistants to the Audit and Supervisory Committee shall not receive commands and orders from directors (excluding directors who are Audit and Supervisory Committee members) or the heads of their divisions or departments regarding applicable work.

 

(8) System for the Group’s directors (excluding directors who are members of the Company’s Audit and Supervisory Committee,) employees, etc. to report to the Company’s Audit and Supervisory Committee and other systems regarding reports to the Audit and Supervisory Committee.

In addition to statutory matters, directors, employees, etc. will circulate to corporate auditors important documents relating to the execution of duties by directors, including matters to be resolved and reported at important meetings. They will also immediately report to corporate auditors matters that are likely to have a significant impact on the company.

 

(9) System regarding reports to the Company’s corporate auditors
The Group’s directors, employees, etc. shall promptly provide appropriate reports when the Company's Audit and Supervisory Committee has requested reports regarding matters concerning business execution.

 

(10)  System to ensure that persons who have reported to the Audit and Supervisory Committee are not subjected to disadvantageous treatment for having made such reports.

The Group’s directors, employees, etc. shall not be treated disadvantageously because they have reported to the Company’s Audit and Supervisory Committee, and this policy shall be communicated to the Group’s directors, employees, etc.

 

(11)  Matters regarding policies relating to the treatment of expenses or liabilities incurred in the execution of duties by Audit and Supervisory Committee members such as procedures for prepayment or reimbursement of such expenses

When Audit and Supervisory Committee members make requests to the Company for prepayment, etc. of expenses related to the execution of such duties, the expenses or liabilities relating to such requests shall be promptly processed after deliberation in the responsible department, except when such expenses or liabilities are clearly not necessary for the applicable execution of duties by the Audit and Supervisory Committee members concerned.

 

(12) Other systems to ensure that audits by Audit and Supervisory Committee members are effectively carried out.

1. To enhance the audit function of the Audit and Supervisory Committee, we will consider not only expertise but also independence when appointing outside directors who are Audit and Supervisory Committee members.
2. The Audit and Supervisory Committee will hold regular meetings to exchange information and opinions with the accounting auditor, the Internal Audit Office, the Group’s corporate auditors, etc. and cooperate closely with them.
3. The Audit and Supervisory Committee will regularly hold meetings with the representative director to audit the execution of directors’ duties and develop the audit system.
4. The Audit and Supervisory Committee will cooperate with outside experts such as lawyers and certified public accountants (CPAs) as required when performing duties.