Overview of Corporate Governance

The Oiles Group positions corporate governance as a top priority and strives to continually strengthen the rationale, soundness, and transparency of its governance system and organization through flexible decision-making and delegation of authority in response to changes in the market and taking the necessary actions to develop our corporate Group and enhance its corporate value.
We also recognize the importance of actively disclosing appropriate information to investors in a timely manner to ensure transparency.

The Company adopted a corporate system with an Audit and Supervisory Committee consisting of 9 directors (four of whom are independent outside directors) as of June 30, 2024. The Board of Directors makes decisions on key management matters and oversees the conduct of operations by directors. The Audit and Supervisory Committee consists of three members: one director who is a full-time Audit and Supervisory Committee member and two outside directors who are Audit and Supervisory Committee members. The Audit and Supervisory Committee receives timely reports on the status of accounting audits from the accounting auditor and the Committee works closely with the Internal Audit Department, which is responsible for internal control. We employ an operating officer system in order to clearly delineate the conduct of operations and supervision/oversight and to augment the functioning of the Board of Directors through speedier and more efficient decision-making on management strategies. The current structure consists of nine directors and seven operating officers, including two concurrently serving as directors.

As of April 2023, we split the Bearing Division into the General Bearing Division and Automotive Bearing Division in order to promote swift decision-making and clarify business responsibilities, and we created a Production Division to enhance our production system. In addition, we have clarified the roles and responsibilities of directors and executive departments by assigning operating officers to be in charge of divisions. We have enhanced the supervisory capabilities of the Board of Directors and we are promoting agile management by enhancing management’s supervisory capabilities, delegating authority to conduct business to operating officers, and appointing directors who are Audit and Supervisory Committee members with voting rights at Board of Directors meetings.

The table below indicates the areas of expertise and experience required for the Board of Directors to consider the management policies and strategies of the Oiles Group to contribute to continuous growth and improve medium- to long-term corporate value.

The Board of Directors, consisting of nine directors, meets at least once a month in principle (twice in the month when financial results are announced). As the highest level of management decision-making, the Board of Directors makes decisions on matters stipulated by laws, regulations, and the Articles of Incorporation as well as major operations of the Company. The conduct of operations is delegated to operating officers by resolutions of the Board of Directors, but the Board of Directors receives reports on the conduct of operations from operating officers and the Board supervises the performance of duties by operating officers. In specific terms, the Board specifically discusses matters related to medium-term management strategies, Group management, organizational and personnel matters, returning profits to shareholders, and other matters that contribute to the Group's growth strategy.

The Audit and Supervisory Committee consists of three members: one director who is a full-time Audit and Supervisory Committee member and two outside directors who are Audit and Supervisory Committee members. The Audit and Supervisory Committee receives timely reports on the status of accounting audits from the accounting auditor and the Committee works closely with the Internal Audit Department, which is responsible for internal control. In addition, Audit and Supervisory Committee members attend meetings of the Board of Directors and other important meetings and conduct strict audits, such as inspecting important documents, to audit the decision-making process of directors and the conduct of operations by directors.

The Management Meeting is held in principle every month to discuss important matters related to the execution of business, with directors and executive officers in attendance.

In October 2018, the company adopted a voluntary Nominating Committee and Compensation Committee system.
We established a voluntary Nominating Committee with a majority of independent outside directors to ensure the independence, objectivity, and transparency of nomination procedures of directors and operating officers. The Board of Directors determines directors and operating officers after undergoing a consultation and reporting process with the Nominating Committee (candidates for directors are submitted in proposals at general meetings of shareholders).

In addition, to ensure the effectiveness of the compensation system for directors and operating officers, a voluntary Compensation Committee is being established, with a majority of independent outside directors. As a result, the composition of compensation, policies, etc., are determined by the Board of Directors after consulting and reporting to the Compensation Committee. In fiscal 2023, the Nominating Committee four times, and the Compensation Committee three times. They are operating as intended.

• Nominating Committee

  Chairperson: Yasuji Omura (independent outside director)
  Members: Yoshikazu Sakairi(President), Rika Miyagawa (independent outside director), Tatsuhiro Maeda (independent outside director)

• Compensation Committee

  Chairperson: Yasuji Omura (independent outside director)
  Members: Yoshikazu Sakairi (President), Rika Miyagawa (independent outside director), Tatsuhiro Maeda (independent outside director)

This body discusses important CSR (ESG) issues such as environmental measures, and is chaired by the president and attended by all directors. The meeting is held in principle twice a year (first and second half).

Our compensation for directors is decided based on the following policy.

1. The reason why the Board of Directors deemed that individual director compensation for the current fiscal year followed the policy on and the method of deciding individual compensation for directors

   In the Board of Directors meeting held on June 27, 2024, a resolution on the Policy on Deciding Individual Compensation for Directors was passed. The Board of Directors has confirmed that the method of determining individual director compensation and that compensation for the current fiscal year are in alignment with the policy decided by the Board. The Board has determined that the report by the Compensation Committee has been respected and that compensation is in line with that policy.

2. Overview of Policies

   a) Basic policy
   Compensation for directors (excluding those who are members of the Audit and Supervisory Committee) shall be based on shareholder profit in order to fully function as an incentive to sustainably increase corporate value. The Company's basic policy is that the compensation for each director (excluding those who are members of the Audit and Supervisory Committee) shall be determined within the range approved at the General Meeting of Shareholders and that an appropriate level of compensation shall be set for each director (excluding those who are members of the Audit and Supervisory Committee) based on his or her position and responsibilities. In specific terms, compensation for directors (excluding those who are members of the Audit and Supervisory Committee and other directors who are outside directors (hereinafter referred to as "non-executive directors" in this policy)) shall consist of fixed compensation, performance-based compensation (bonuses), and performance-based stock compensation. Compensation for non-executive directors shall, in light of their duties, be fixed compensation only.

   b) Policy for determining fixed individual compensation
   Fixed compensation for directors (excluding those who are members of the Audit and Supervisory Committee) is paid on the same day as employee salaries as monthly compensation from the first to the last day of each month, according to director regulations, and is based on a comprehensive consideration of factors including individual ability, motivation to and level of involvement in achieving plans, achievements, contribution to business performance, and roles to take on in the future.

   c) Policy for deciding performance-based compensation, non-monetary compensation, and the method for calculating sums or figures
   Profit attributable to owners of parent is used as the key indicator for performance-based compensation for directors (excluding non-executive directors) in order to reflect performance during each consolidated accounting period, and bonuses reflecting duties and performance are paid within one week of the day that the Ordinary General Meeting of Shareholders concludes.
   Non-monetary compensation shall be given to directors (excluding non-executive directors and including operating officers) separate from fixed compensation and performance-linked compensation (bonuses) via a Board Benefit Trust (BBT) that aims to increase motivation to contribute to improving medium- to long-term performance and increasing corporate value. The consolidated operating profit as defined in the Medium-Term Management Plan shall serve as an indicator to ensure that recipients contribute to improving medium- to long-term business performance. Stock compensation is determined by assigning points to recipients in consideration of factors such as the recipient’s position and achievement of indices in each fiscal year based on regulations on stock compensation for officers. In principle, recipients receive company shares when they resign.

   d) Policy on determining the ratio of the amount of fixed compensation, performance-linked compensation, or non-monetary compensation with respect to the amount of compensation for each director (excluding those who are members of the Audit and Supervisory Committee)
   The ratio of types of compensation for directors (excluding non-executive directors) is considered by the Compensation Committee based on a benchmark of other companies of a similar size in related industries. Performance-based compensation is weighted more for individuals in higher positions. The Board of Directors shall consult with the Compensation Committee and, after receiving its report, entrust the President with the determination of individual compensation for directors (excluding those who are Audit and Supervisory Committee members). Having been entrusted to make that determination, the President shall respect the report of the Compensation Committee and determine individual compensation for each director (excluding those who are members of the Audit and Supervisory Committee) within the range of the ratio of compensation by type indicated in that report.
   The standard ratio of compensation for directors (excluding non-executive directors) is usually 65:25:10
   (fixed compensation:performance-based compensation (bonuses):non-monetary compensation (Board Benefit Trust)).
   Non-executive directors shall receive only fixed compensation as described in 1. above.

   e) Items for determining individual director compensation
   Compensation for directors (excluding those who are members of the Audit and Supervisory Committee) is determined by the President, who has been entrusted to make that determination by a resolution of the Board of Directors. That authority shall consist of the amount of each director's fixed remuneration and the allocation of a bonus based on the performance of the business that he or she is in charge of. The President shall respect the report from the Compensation Committee and the President shall, within the scope of matters pertaining to the compensation for directors (excluding those who are members of the Audit and Supervisory Committee) as resolved at the General Meeting of Shareholders, determine the compensation for directors (excluding those who are members of the Audit and Supervisory Committee) based on the Policy on Deciding Individual Compensation for Directors. Performance-based stock compensation shall be in accordance with the regulations on stock compensation for officers.