The Company appoints two Senior Audit & Supervisory Board members selected from among those with advanced auditing capabilities who are familiar with the Company’s operations. In addition, the Company also appoints Audit & Supervisory Board member with knowledge and experience in finance and accounting to monitor the governance system of the Panasonic Energy Group and its operations, and to ensure an efficient and organizational audit system. Under an independent appointment system that allows them to exercise their auditing functions solely in accordance with their discretionary judgment, rather than by majority vote, Audit & Supervisory Board members attend Board of Directors meetings to express their opinions, conduct regular on-site inspections, including field inspections and interviews with employees and other relevant personnel, and audit daily management activities, including the execution of duties by directors. In addition, Audit & Supervisory Board meetings are held regularly among Audit & Supervisory Board members to formulate audit policies and exchange information, and the Audit & Supervisory Board members also cooperate with the internal auditing departments and accounting auditors by regularly exchanging information.

The Company has established a Management Meeting, consisting of executive officers, as a preliminary body to the Board of Directors, which makes practical decisions and enables more in-depth discussions at subsequent meetings of the Board of Directors.

The Company has twelve executive officers, each of whom holds deep knowledge and experience in their respective fields. The Management Meeting meets twice a month in principle to make decisions based on prompt and appropriate discussions and reports on matters related to the overall management of the Company, and to establish and strengthen the Company’s governance by clarifying the process and scope of decision-making in the Company.

Furthermore, we have established the Nomination and Compensation Advisory Committee to strengthen objectivity and transparency in the appointment, dismissal, and compensation of directors and executive officers. In addition, we have established an ERM Committee to identify, assess, and formulate measures to address cross-organizational risks at the Panasonic Energy Group. Furthermore, we established an ESG Committee, which is responsible for formulating an overall plan for ESG, monitoring progress, assessing progress, and reporting and making recommendations to the Board of Directors.

Based on the Corporate Governance Code Supplemental Principle 4-11 (3), each director and Audit & Supervisory Board member conducted a self-evaluation of the operation of the Board of Directors in fiscal 2023. The self-evaluation included the following questions: (1) Is the current composition of the Board of Directors appropriate for effective discussions, (2) Has the Board of Directors sufficiently demonstrated its supervisory function, (3) Are issues of importance to the Company set as agenda items for Board of Directors meetings, (4) With regard to agenda items, are issues and points to be discussed and examined clearly defined, and are possible risks and their analysis properly explained at Board of Directors meetings, and (5) Are medium- to long-term strategies adequately discussed at Board of Directors meetings? The evaluation was an anonymous survey, and each evaluation item was rated on a 5-point scale, with a comment section.

As a result of the self-evaluation, there were opinions that the Board of Directors needs to further improve its effectiveness. We are therefore creating opportunities to discuss an important management foundation that supports our business expansion, such as SCM reform, human resources strategy, and IT; enhancing deliberations by using summary sheets that organize arguments based on prior discussions at management meetings; and establishing and operating a mechanism to make decisions based on an appropriate understanding and assessment of major risks in transactions and contracts.
These initiatives have resulted in the effective operation of the Board of Directors and strengthened corporate governance.

The remuneration system for executive officers consists of fixed based salary and performance-based remuneration as an incentive linked to short term and mid-long term business results.Performance-based remuneration is determined based on the degree of achievement against financial targets, such as operating cash flow and EBITDA, and non-financial targets, such as KPIs in the function for which the executive officer is responsible and environmental contribution from an environmental, social and governance (ESG) perspective.

By incorporating environmental contributions, serious accidents, and compliance as ESG perspectives in our non-financial targets, we are working to enhance corporate value not only from a financial perspective but also from a non-financial perspective.

The Company’s Board of Directors has formulated the “Basic Policy for the Establishment of Internal Control Systems” which stipulates the following: ensuring the adequacy of business operations and reporting systems in the Group, ensuring the legality and efficiency of the execution of duties by directors, risk management, and ensuring the independence and effectiveness of corporate auditors.

Based on each of these basic policies, the Company establishes and operate various regulations, committees, etc., provides education, conducts on-site inspections and audits including those of subsidiaries, and operates a fraud prevention and early detection hotline, as well as a transaction and contract risk management system. By establishing these internal control systems, we continuously strive for effective governance, sound and efficient business operations, and a stronger management foundation.