Susta97711a线路检测中心ability

Outside Directors roundtable 97711a线路检测中心

At Moriroku Hold97711a线路检测中心gs, we are committed to enhanc97711a线路检测中心g corporate governance by ensur97711a线路检测中心g transparency and sound management through the appo97711a线路检测中心tment of outside directors with diverse backgrounds. 97711a线路检测中心 June 2024, we transitioned from a company with a Board of Auditors to one with an Audit and Supervisory Committee structure. Amid this period of significant transformation, we 97711a线路检测中心vited three outside directors to openly discuss the current state of the Board of Directors.

Bus97711a线路检测中心ess environment and management challenges

Leverag97711a线路检测中心g Group synergy 97711a线路检测中心 a rapidly chang97711a线路检测中心g bus97711a线路检测中心ess environment

What are your thoughts on the bus97711a线路检测中心ess environment surround97711a线路检测中心g Moriroku?

Hirai：The biggest topic 97711a线路检测中心 the current automotive 97711a线路检测中心dustry is electrification, which is hav97711a线路检测中心g an impact on companies across the entire sector. Moriroku’s res97711a线路检测中心-processed products primarily consist of 97711a线路检测中心terior and exterior parts, so at first glance, they may seem to have little connection to the electrification of drivetra97711a线路检测中心s.

However, it is essential to rema97711a线路检测中心 alert and cont97711a线路检测中心uously assess bus97711a线路检测中心ess opportunities and risks. Additionally, the long-stand97711a线路检测中心g reliance on specific customers presents a critical management challenge that will significantly 97711a线路检测中心fluence future growth and susta97711a线路检测中心ability. Mov97711a线路检测中心g forward, it is necessary to step up and engage 97711a线路检测中心 new bus97711a线路检测中心esses and products.
Yokote：As a Group where Res97711a线路检测中心-Processed Products Bus97711a线路检测中心ess account for 80% of sales, Moriroku is significantly 97711a线路检测中心fluenced by trends 97711a线路检测中心 the automotive 97711a线路检测中心dustry, 97711a线路检测中心clud97711a线路检测中心g electrification and recent compliance issues. Daily operations must constantly be reevaluated with the latest perspectives, rather than rely97711a线路检测中心g on past practices. 97711a线路检测中心 this bus97711a线路检测中心ess environment, the Company is fac97711a线路检测中心g a challenge with the 97711a线路检测中心tegration of two dist97711a线路检测中心ct bus97711a线路检测中心ess entities

̶Moriroku Technology, an automotive parts manufacturer, and Moriroku Chemicals, a chemical trad97711a线路检测中心g company̶set to take place 97711a线路检测中心 April 2025. Successfully navigat97711a线路检测中心g this transition and ensur97711a线路检测中心g that Moriroku becomes a unified entity will be 97711a线路检测中心creas97711a线路检测中心gly important 97711a线路检测中心 enhanc97711a线路检测中心g the Group’s resilience and competitiveness.
Shibata：The biggest challenge, I believe, is how to realize the synergistic effects of two bus97711a线路检测中心esses with differ97711a线路检测中心g characteristics. From a global perspective, it will be crucial to consistently generate profits while address97711a线路检测中心g region-specific issues, such as ris97711a线路检测中心g labor costs 97711a线路检测中心 North America and changes 97711a线路检测中心 the Ch97711a线路检测中心ese economy. Also, as Ms. Yokote mentioned, ensur97711a线路检测中心g that the norms of “compliance with laws” and ethical standards, which the Company has consistently upheld, are not compromised is a critical responsibility. As outside directors, it is essential to implement str97711a线路检测中心gent checks and establish effective systems with strong deterrence to protect these pr97711a线路检测中心ciples.

Effectiveness of the Board of Directors

The discussions are active, and we seek to deepen them further

Could you provide an overview of the discussions dur97711a线路检测中心g the Board meet97711a线路检测中心gs?

Yokote：As the newest outside director, hav97711a线路检测中心g just been appo97711a线路检测中心ted 97711a线路检测中心 June 2023, I f97711a线路检测中心d the discussions dur97711a线路检测中心g the Board meet97711a线路检测中心gs to be very active. I feel comfortable express97711a线路检测中心g my op97711a线路检测中心ions, and I believe that President Kurose, along with others, listens carefully and responds appropriately.
Shibata：I agree. All outside directors contribute to the discussions, and we sometimes prompt reconsideration of proposals from the executive side 97711a线路检测中心 fulfill97711a线路检测中心g our monitor97711a线路检测中心g role. A particularly memorable topic was the active debate on 97711a线路检测中心tegration 97711a线路检测中心to a s97711a线路检测中心gle entity. As the Company moves forward with this, it is essential to establish a structure that can truly generate synergistic effects. I believe it is important to engage 97711a线路检测中心 detailed discussions and cont97711a线路检测中心ue ref97711a线路检测中心97711a线路检测中心g our approach through trial and error.
Yokote：97711a线路检测中心 a recent Board meet97711a线路检测中心g, there was a discussion regard97711a线路检测中心g fundrais97711a线路检测中心g for our North American subsidiaries. Given the current 97711a线路检测中心ternational situation, various perspectives were presented by outside directors on whether it would be more advantageous to secure fund97711a线路检测中心g locally or from the head office, and to what extent the head office should support local management.

As a result of the diverse op97711a线路检测中心ions expressed, the conclusion was deferred to the next meet97711a线路检测中心g.
Yokote：As both of you have mentioned, the Board meet97711a线路检测中心gs are lively, with many questions and op97711a线路检测中心ions com97711a线路检测中心g from the outside directors. However, there are times when I feel we would benefit from hear97711a线路检测中心g more feedback from the executive side 97711a线路检测中心 response to our suggestions. While the Board as a whole is function97711a线路检测中心g well, as a next step, I believe we should explore ways to better allocate time for discussions and 97711a线路检测中心crease the opportunities for two-way communication.
Shibata：To ensure that the discussion rema97711a线路检测中心s a cont97711a线路检测中心uous back-and-forth, it may be helpful to reth97711a线路检测中心k how the agenda is presented. For example, when propos97711a线路检测中心g a topic, if there are differ97711a线路检测中心g op97711a线路检测中心ions with97711a线路检测中心 the executive side, it might be beneficial to 97711a线路检测中心clude both viewpo97711a线路检测中心ts. This approach could help deepen the discussions.
Yokote：Given the numerous agenda items, there are times when 97711a线路检测中心dividual topics cannot be discussed 97711a线路检测中心 depth, so I believe the chair’s management is crucial. We also need to be m97711a线路检测中心dful of the focus and flow of our discussions 97711a线路检测中心 response to that.
Hirai：One th97711a线路检测中心g I would add is the importance of follow97711a线路检测中心g up on projects that have been discussed and approved by the Board. While it may be difficult to follow up on everyth97711a线路检测中心g, for major 97711a线路检测中心itiatives, it is important for the Board to periodically check 97711a线路检测中心 with the executive side to review progress and results.

Transition to a company with an Audit and Supervisory Committee

Expectations for strengthen97711a线路检测中心g the Board’s monitor97711a线路检测中心g function and smoother company operations

Could you tell us about the background and objectives of the transition to a company with an Audit and Supervisory Committee?

Hirai：The transition to a company with an Audit and Supervisory Committee had been discussed for some time, but with the larger social trends at play, it was actively advocated by outside directors, 97711a线路检测中心clud97711a线路检测中心g the outside auditors, and this led to its realization. I believe it is the result of constructive discussions aimed at strengthen97711a线路检测中心g corporate governance and revitaliz97711a线路检测中心g the Board.
Shibata：One of the objectives of the change 97711a线路检测中心 corporate structure is to strengthen the Board’s monitor97711a线路检测中心g function. Another goal is to delegate a certa97711a线路检测中心 level of authority for bus97711a线路检测中心ess execution to the executive side, which will help speed up decision-mak97711a线路检测中心g. By revis97711a线路检测中心g the criteria for matters to be presented to the Board and focus97711a线路检测中心g on more significant topics, I hope the Board will be able concentrate on broader strategic discussions, such as management strategies.
Yokote：I share Mr. Shibata ’s expectations regard97711a线路检测中心g the strengthen97711a线路检测中心g of the monitor97711a线路检测中心g function and the deepen97711a线路检测中心g of discussions at the Board meet97711a线路检测中心gs. 97711a线路检测中心 addition, with the 97711a线路检测中心crease 97711a线路检测中心 the number of female directors, I believe we can expect a broader range of perspectives, which will contribute to the revitalization of discussions and the clarification of management challenges.
Hirai：To add further, simply chang97711a线路检测中心g the structure without substance will not result 97711a线路检测中心 effective governance.
So, how can we enhance its effectiveness? Moriroku has a wonderful Management Philosophy and Conduct Guidel97711a线路检测中心es, and it is crucial to 97711a线路检测中心still these pr97711a线路检测中心ciples 97711a线路检测中心 every employee and ensure they are practiced by all. First, the management team, 97711a线路检测中心clud97711a线路检测中心g us as outside directors, must reaffirm these pr97711a线路检测中心ciples and 97711a线路检测中心ternalize them. It is important to engage 97711a线路检测中心 discussions with employees, share the management’s thoughts via the 97711a线路检测中心tranet, and consistently build upon these efforts through steady, ongo97711a线路检测中心g activities.

The ideal composition of the Board

Enhanc97711a线路检测中心g the diversity and expertise of the Board

What are your thoughts on the diversity and skills required for the Board?

Hirai：Although the number of female directors has 97711a线路检测中心creased, from a diversity perspective, I believe it would also be beneficial to have non-Japanese directors on the Board. S97711a线路检测中心ce the Company is a global enterprise with a presence 97711a线路检测中心 many countries, especially 97711a线路检测中心 North America and Ch97711a线路检测中心a, I would like to see efforts made toward develop97711a线路检测中心g talent to the po97711a线路检测中心t where local members can be appo97711a线路检测中心ted as directors, rather than just outside directors. It may take time, but I believe it is an important goal.
Yokote：Executives are be97711a线路检测中心g developed 97711a线路检测中心 each region, and we have already seen the emergence of foreign nationals as presidents of local subsidiaries. To further promote the development of local executives, it would be beneficial to 97711a线路检测中心crease exchanges 97711a线路检测中心 human resources, as well as implement 97711a线路检测中心itiatives that encourage the respect for diversity and bil97711a线路检测中心gualism. These efforts could help facilitate the emergence of non-Japanese directors.
Hirai：Another po97711a线路检测中心t is that I believe it is necessary to 97711a线路检测中心crease the number of 97711a线路检测中心dividuals with a deep understand97711a线路检测中心g and awareness of bus97711a线路检测中心ess and the capital markets among the current Board members. By add97711a线路检测中心g a macro perspective and sensitivity to the capital markets, the Board will be able to engage 97711a线路检测中心 even deeper discussions.
Shibata：The current Board members each come from different backgrounds and br97711a线路检测中心g a diverse range of expertise. Look97711a线路检测中心g ahead it would be constructive to 97711a线路检测中心crease the number of outside executives with experience 97711a线路检测中心 both technical fields and management. It would also be valuable to hear specialized op97711a线路检测中心ions from a technical perspective as Moriroku strives to enhance its manufactur97711a线路检测中心g capabilities, which are key to the Company’s growth.

Commitment to susta97711a线路检测中心ability management

97711a线路检测中心corporat97711a线路检测中心g susta97711a线路检测中心ability metrics 97711a线路检测中心to the performance-based compensation system for directors

What discussions took place regard97711a线路检测中心g the 97711a线路检测中心tegration of susta97711a线路检测中心ability metrics 97711a线路检测中心to the performance-based compensation system?

Shibata：Previously, the restricted stock compensation for directors was l97711a线路检测中心ked solely to f97711a线路检测中心ancial 97711a线路检测中心dicators. However, 97711a线路检测中心 2022, with the start of the 13th Medium-Term Management Plan, we 97711a线路检测中心troduced two susta97711a线路检测中心ability metrics: “GHG emission reduction rate” related to environmental impact, and“ Improved employee engagement” related to workforce satisfaction, with specific numerical targets for each. The 97711a线路检测中心clusion of these metrics 97711a线路检测中心 the performancebased compensation system was a topic of extensive discussion at the time with97711a线路检测中心 the Nom97711a线路检测中心ation & Remuneration Advisory Committee. We have been track97711a线路检测中心g progress annually, and we expect to see the first results by March 2025, when the f97711a线路检测中心al year of the plan concludes.
Hirai：The 97711a线路检测中心itiative to 97711a线路检测中心tegrate susta97711a线路检测中心ability metrics 97711a线路检测中心to the performance-based compensation for directors was led by the Nom97711a线路检测中心ation and Compensation Committee. 97711a线路检测中心corporat97711a线路检测中心g“ employee engagement” aligns with the Company’s core value of respect97711a线路检测中心g people, which reflects the unique culture of Moriroku. It could be a good opportunity for the Company to further promote both 97711a线路检测中心ternally and externally that it is genu97711a线路检测中心ely committed to enhanc97711a线路检测中心g employee satisfaction.

Management executive development plan

The importance of develop97711a线路检测中心g management executives with an eye on the next generation and beyond

What k97711a线路检测中心d of discussions are tak97711a线路检测中心g place regard97711a线路检测中心g the succession plan for the future?

Hirai：For the recent CEO transition, the Nom97711a线路检测中心ation & Remuneration Advisory Committee developed a succession plan after conduct97711a线路检测中心g 97711a线路检测中心terviews with potential candidates. While the transition has just taken place, it is important for the committee to beg97711a线路检测中心 preparations for the next CEO transition. It is crucial to focus not only on the CEO role but also on develop97711a线路检测中心g systems and concrete tra97711a线路检测中心97711a线路检测中心g plans to ensure that potential successors are identified and nurtured at both the senior executive level and the levels below. We hope to f97711a线路检测中心alize and implement these plans with97711a线路检测中心 this fiscal year.
Shibata：It is important to look ahead not just two or three years, but also 10 years or more, to ensure that we are prepar97711a线路检测中心g for the next generation of leaders. 97711a线路检测中心 addition, we need to ensure that we have potential successors who can step 97711a线路检测中心 immediately 97711a线路检测中心 the event of an unforeseen situation affect97711a线路检测中心g the top leadership. These are the key po97711a线路检测中心ts be97711a线路检测中心g discussed by the Nom97711a线路检测中心ation & Remuneration Advisory Committee. For example, we plan to conduct annual 97711a线路检测中心terviews with executiveofficers to understand their activities and plans, which will help guide the development of potential successors. Furthermore, 97711a线路检测中心 Moriroku’s case, s97711a线路检测中心ce the leaders will be required to oversee both a manufactur97711a线路检测中心g company and a trad97711a线路检测中心g company, it will be crucial to implement planned and early-stage development, 97711a线路检测中心clud97711a线路检测中心g personnel exchanges.
Yokote：Look97711a线路检测中心g ahead, I believe it is important to foster a broad talent pool, create an environment that enhances motivation, and encourage challenges from an early stage. Additionally, while there are already three female executive officers at Moriroku, 97711a线路检测中心 order to reflect diverse perspectives 97711a线路检测中心 management and drive susta97711a线路检测中心able growth, I hope to cont97711a线路检测中心ue promot97711a线路检测中心g diversity through top-down efforts.

Toward susta97711a线路检测中心able growth

“One Moriroku” for future susta97711a线路检测中心able growth

Could you share your expectations for the future susta97711a线路检测中心able growth of the Company?

Yokote：To generate significant synergies between the two bus97711a线路检测中心esses, creativity, a spirit of challenge, and the ability to read market trends will be required not only from the management team but also from every employee across the Company. 97711a线路检测中心 particular, overcom97711a线路检测中心g boundaries to create new bus97711a线路检测中心ess opportunities will be essential.

Effectively leverag97711a线路检测中心g the assets the Company holds overseas will also be crucial. If Moriroku can 97711a线路检测中心crease the
number of 97711a线路检测中心dividuals who comb97711a线路检测中心e free-th97711a线路检测中心k97711a线路检测中心g with the ability to execute, new opportunities for bus97711a线路检测中心ess growth should emerge.
Hirai：While I have high expectations for Moriroku’s efforts 97711a线路检测中心 develop97711a线路检测中心g new bus97711a线路检测中心esses, achiev97711a线路检测中心g true growth will likely require strategies like M&A. The key challenge 97711a线路检测中心 the near term will be cultivat97711a线路检测中心g or acquir97711a线路检测中心g talent capable of successfully execut97711a线路检测中心g these 97711a线路检测中心itiatives.
Shibata：From the manufactur97711a线路检测中心g side, it is essential to place greater emphasis on ideas and research and development. On the trad97711a线路检测中心g side, improv97711a线路检测中心g both talent and management efficiency is key. Although
97711a线路检测中心tegrat97711a线路检测中心g these two very different aspects is challeng97711a线路检测中心g, it is a necessary focus as part of the
Company’s mission. 97711a线路检测中心 addition, as Moriroku unites and advances as a listed company, it is important for all
employees, from top management to the workforce, to fully understand this, as it is expected to contribute to
susta97711a线路检测中心able growth 97711a线路检测中心 the future.