1. Management philosophy and management policy, corporate governance

1.    Management philosophy and management policy

Under the motto of “Fueki Ryuko” Continuity and Change (The constant pursuit of novelty brings visibility to what essentially remains eternally unchanged.), the management philosophy of the entire Group, the KADOKAWA Group advocates a “global media mix” as its fundamental strategy, which combines the stable creation of intellectual property (IP), consisting of a variety of portfolios through books, live-action films, animation, games and user generated content (UGC) platforms, along with the rollout on a global scale.

We have been working to strengthen our management base and revenue base by strategically advancing digital transformation (using data and digital technology to innovate products, services, and business models based on customer needs and social needs, as well as business operations and corporate culture) in every area, including development, production, advertising, logistics and marketing operations regarding intellectual property.

The KADOKAWA Group is committed to growing into the world’s leading media publisher by advancing the Group’s multi-layered capabilities to develop diverse media through the promotion of digital transformation strategies, supported by its outstanding capacity to generate IP and IT capabilities.

Moreover, the education business, a new business domain, has been growing rapidly, indicated by the fact that the number of students in N High School and S High School, as of May 2021, rose to the highest level among correspondence schools in Japan.  These schools have been providing bidirectional educational services developed by DWANGO Co., Ltd. Going forward, while continuing to expand this business, the Group aims to become a leading company in the EdTech domain.


2.    Basic views on corporate governance

KADOKAWA CORPORATION (the “Company”) positions the enhancement of corporate governance as a necessary condition for the implementation of its management philosophy and the realization of its management policy, and ultimately for the continuous development of the Group. With the aim of increasing management transparency towards shareholders and earning the trust of business partners, clients and society as a whole, we are continuously working to strengthen corporate governance.
Moreover, we believe that ensuring sound and transparent management, establishing a management system capable of adapting to a changing management environment, publicly announcing a clear management strategy and detailed business results, disclosing the status of progress toward their achievement in a timely manner, and clearly defining managerial responsibility contribute to the enhancement of corporate governance.


3.    Corporate governance system

3.1   Business execution system and auditing/supervisory system of the Company and reasons for adopting the systems

The Company has adopted Audit & Supervisory Board system based on the judgment that the system ensures flexible managerial decision-making based on sufficient checking functions, and appropriate business execution and management supervision.
Several Outside Directors are brought on board to secure soundness and transparency in management. Together with Audit & Supervisory Board Members,they oversee the execution of duties by Executive Directors to enhance soundness and transparency in management. Moreover, the term for Directors is one year for the purpose of clearly defining managerial responsibilities and ensuring prompt response to changes in management environment.
The Board of Directors holds regular meetings once a month, in principle, and extraordinary meetings as necessary for the agenda regarding statutory matters, decision-making on important managerial matters and overseeing the status of the Company’s execution of business operations and the status of subsidiaries’ management.  There are currently 12 members of the Board Directors (8 Directors and 4 Outside Directors): Mr. Takeshi Natsuno (President), Mr. Naohisa Yamashita (Director), Mr. Tsuguhiko Kadokawa (Chairman of the Board), Mr. Masaki Matsubara (Vice Chairman of the Board), Mr. Yoichi Yasumoto (Director), Ms. Noriko Kase (Director), Mr. Nobuo Kawakami (Director), Ms. Cindy Chou (Director), Mr. Hiroo Unoura (Outside Director), Mr. Tomoyuki Moriizumi (Outside Director), Mr. Koji Funatsu (Outside Director) and Ms. Ruth Marie Jarman (Outside Director). The Board is chaired by President & Representative Director.

The Audit & Supervisory Board conducts audits based on audit plans.  Moreover, the Audit & Supervisory Board Members attend meetings of the Board Directors and conduct audits of the status of execution of duties by Directors.  There are currently 4 Audit & Supervisory Board Members (2 Audit & Supervisory Board Members and 2 Outside Audit & Supervisory Board Members): Mr. Yasuaki Takayama (Audit & Supervisory Board Member), Mr. Akira Watanabe (Audit & Supervisory Board Member), Mr. Akira Watanabe (Outside Audit & Supervisory Board Member) and Ms. Maoko Kikuchi (Outside Audit & Supervisory Board Member).  The Company elected these Audit & Supervisory Board Members, including the Outside Audit & Supervisory Board Members, because they are professionals in finance or law, for the purpose of enhancing audits.

3.2   Business execution system and auditing system of subsidiaries

Subsidiaries of the Company adopt system with Board of Directors, in principle.
The Company governs its subsidiaries by putting in place a mechanism for ensuring that it exercises shareholder rights regarding appointment (or dismissal) of Directors and Audit & Supervisory Board Members of the subsidiaries and takes part in important decision-making of the subsidiaries. On usual times, the Company tracks and oversees the status of subsidiaries’ business operations through various meetings, etc.

3.3   Nomination and Evaluation Remuneration Committee

The Company establishes Nomination and Evaluation Remuneration Committee as a voluntary committee.  The purpose of the Committee is to increase transparency of the Company’s Board of Directors and enhance corporate governance.
The roles of Nomination and Evaluation Remuneration Committee are (i) determination of remuneration for the Company’s Directors, (ii) making recommendations regarding candidates for Directors and Audit & Supervisory Board Members and (iii) review of a succession plan for the Company’s CEO.
The majority of members of Nomination and Evaluation Remuneration Committee is Outside Directors. There are currently 7 members (4 Outside Directors and 3 Directors).  An Outside Director chairs the Committee to ensure objectivity and transparency.

Nomination and Evaluation Remuneration Committee (as of October 11, 2021)
Chairperson:
Mr. Hiroo Unoura (Outside Director)
Member:
Mr. Tomoyuki Moriizumi (Outside Director), Mr. Koji Funatsu (Outside Director), Ms. Ruth Marie Jarman (Outside Director)
Mr. Takeshi Natsuno (President), Mr. Naohisa Yamashita (Director), Mr. Tsuguhiko Kadokawa (Chairman of the Board)


3.4   Corporate governance structure


Corporate Governance Structure

・Outline of liability limitation agreement

In accordance with the provisions of Article 427, Paragraph 1 of the Companies Act, the Company and each Outside Director and Outside Audit and Supervisory Board Member have signed a liability limitation agreement that limits the liability for compensation for damages provided for in Article 423, Paragraph 1 of the Act. The maximum liability for compensation for damage of each Outside Director and Outside Audit and Supervisory Board Member shall be the minimum amount provided for in the laws and regulations.

・Outline, etc. of details of directors’ and officers’ liability insurance

The Company has entered into a directors’ and officers’ liability insurance contract with an insurance company pursuant to the provisions of Article 430-3, Paragraph 1 of the Companies Act. The insurance covers Directors, Audit and Supervisory Board Members, Executive Officers and employees with supervisory authority of the Company and its subsidiaries. The insured persons do not incur premiums. The insurance compensates for damages including legal expenses and compensation for damages, etc. that insured persons should incur as a result of a third-party lawsuit, a shareholder representative lawsuit, or corporate litigation, etc. against them. However, the insurance does not compensate for damages, etc. resulting from criminal acts, etc. by an insured person so that the appropriateness of the duties executed by the insured person is not compromised.

・Number of Directors

The Company’s Article of Incorporation stipulates that the Company may have no more than 12 Directors.

・Requirements for resolution regarding appointment of Directors

As requirements for a resolution of a General Meeting of Shareholders for the election of Directors, the Company’s Articles of Incorporation stipulate that shareholders holding one-third (1/3) or more of the voting rights of shareholders who are entitled to exercise voting rights shall attend the General Meeting of Shareholders, that the resolution shall be adopted by a majority of votes of the shareholders in attendance at the Meeting, and that the resolution shall not be by cumulative voting.

・Matters for resolution of General Meeting of Shareholders that the Board of Directors can resolve and reasons for the foregoing

a. The Company’s Articles of Incorporation stipulate that a decision on the distribution of surplus and other matters specified in each Item of Article 459, Paragraph 1 of the Companies Act shall be made by a resolution of the Board of Directors, not by a resolution of shareholder's meetings, unless otherwise specified by laws and regulations. The purpose of this provision is to return profit to shareholders in a flexible manner.

b. The Company’s Articles of Incorporation stipulate that it may pay interim dividends to shareholders with the record date of September 30 each year, upon a resolution by the Board of Directors. The purpose of this provision is to return profit to shareholders in a flexible manner.

c. Pursuant to the provisions of Article 426, Paragraph 1 of the Companies Act, the Company’s Articles of Incorporation stipulate that it may, by resolution of the Board of Directors, exempt any Director (including former Director) and Audit and Supervisory Board Member (including former Audit and Supervisory Board Member) from liabilities to the extent provided for by laws and regulations for damages caused by the neglects of duties by the Director or the Audit and Supervisory Board Member. The purpose of this provision is to ensure that Directors and Audit and Supervisory Board Members can positively execute their duties.

・Changes made to requirements for special resolution by General Meeting of Shareholders and reasons for the foregoing

Regarding requirements for a special resolution of the General Meeting of Shareholders provided for in Article 309, Paragraph 2 of the Companies Act, the Company’s Articles of Incorporation stipulate that shareholders holding one-third (1/3) or more of the voting rights of shareholders who are entitled to exercise voting rights shall attend the General Meeting of Shareholders and that the resolution shall be adopted by two-third (2/3) or more votes of the shareholders in attendance at the Meeting. The purpose of this provision is to ensure that the Meeting proceeds smoothly by relaxing the quorum for special resolutions at General Meeting of Shareholders.