Daio Paper works toward strengthening its corporate governance based on the Corporate Governance Guidelines established in October 2015, with the aim of becoming a company that is trusted by our shareholders and other stakeholders.

Basic Policy on Corporate Governance

The Daio Paper Group will ensure that the Group sustains steady growth, increases corporate value over the medium to long term, and conducts business activities in harmony with the global environment. We regard the enhancement of corporate governance as one of the most important management issues as we strive to contribute to the development of a lively lifestyle, culture, and industry for the society as a full-range papermaking company group that is trusted by all stakeholders including shareholders, business partners, employees, and residents of local communities.

Corporate Governance Structure

Roles of the Board of Directors

The roles of the Board of Directors are to oversee the performance of duties by the management and the formulation of management strategy, etc. to ensure the fairness and transparency of management, and to make decisions on the execution of important business matters in accordance with laws and regulations of the Articles of Incorporation.
In addition, the Board of Directors delegates authority to lower-level meetings, such as management meetings, and to the Directors and Officers in charge of each business operation. Accordingly, the Board of Directors also oversees the status of such meetings and the performance of duties by the Directors and Officers, etc.
Outside Directors, employing their various experiences and knowledge, oversee business execution by the Board of Directors and each Director, and monitor conflicts of interest between the Company and each Director from the viewpoint of stakeholders, in order to ensure the sustainable growth of the Group and increase its corporate value over the medium to long term.

Evaluation of the Effectiveness of the Board of Directors

Since 2016, Daio Paper Corporation has been evaluating the effectiveness of the Board of Directors annually, with the aim of regularly examining whether the Board of Directors is functioning properly, and continuously identify issues and implement measures for improvement based on the results thereof.
In 2018, continuing from the previous year, with the cooperation of an external organization, the Company conducted a self-evaluation targeted at all Directors and Audit & Supervisory Board Members regarding the composition and operation of the Board of Directors, and using the results of the questionnaire collected and tabulated by the external organization, carried out analysis and evaluation.
An overview of the evaluation results is as follows.

1.Overview of the evaluation results

The Company has confirmed that its Board of Directors is largely functioning properly in terms of its composition, operation, strategy and execution, monitoring of business performance, support system for Directors and Audit & Supervisory Board Members, training for officers, dialogue with shareholders (investors), Directors’ self-initiated execution of business, development plan and remuneration for the management team; and its effectiveness is sufficiently ensured.

2.Efforts to address issues identified in the effectiveness evaluation of the Board of Directors for the previous year

The effectiveness evaluation of the Board of Directors for FY2017 identified the issue of further acquisition of knowledge necessary for execution of duties. The Company endeavored to enhance the knowledge of its officers to enable more focused and effective deliberation on agenda items at Board meetings through holding workshops instructed by external experts and providing e-learning programs aimed at officers, etc. The Company will continue to make efforts to provide its officers means to further expand their range of knowledge.

3.Points evaluated as requiring further improvement

There were comments on this year’s questionnaire that the Board of Directors needs to further enhance discussions on the Company’s development plan to nurture future executive leadership candidates and an appropriate remuneration system with incentive pay linked to medium- and long-term performance. Therefore, we will recognize and share these issues and hold discussions going forward. The Company will continue to work to enhance the effectiveness of the Board of Directors by examining and implementing improvement measures for issues identified in the effectiveness evaluation of the Board of Directors.

Roles of the Audit & Supervisory Board (Members)

The Audit & Supervisory Board comprises five members, including three Outside Audit & Supervisory Board Members. It investigates the condition of the internal control system through business audits and accounting audits, in close cooperation with the internal audit division and Accounting Auditor, based on an audit plan determined by the Audit & Supervisory Board, in order to strengthen and enhance its management check function.

Audit Framework

1. Audit by Audit & Supervisory Board Members

Audit & Supervisory Board Members attend Board of Directors meetings and other major meetings, and investigate the status of the Company’s operations and financial standing, in order to audit the legality and appropriateness of the performance of duties by Directors. Outside Audit & Supervisory Board Members are appointed from among certified public accountants and lawyers who have expertise in corporate accounting and corporate laws as well as high-level insights and experience of corporate management, and they audit decision-making by the Board of Directors and the performance of duties by Directors from an objective and fair position.

2. Internal Audit

To ensure that the corporate governance framework of the entire Group is in order, the Internal Audit Department conducts on-site field audits and paper audits, etc. for each of the Company’s operating departments, as well as domestic and overseas Group companies. These are conducted from the viewpoint of operational execution process, compliance, and risk management, etc., based on the annual audit plan approved by the Board of Directors.

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