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Corporate Governance System

Corporate Governance Structure

Overview of Corporate Governance System

In addition to the General Meeting of Shareholders, the Board of Directors, and the Audit & Supervisory Board defined in the Corporation Law, Akebono has established important conference bodies such as the Management Council and the Board of Executive Officers in order to build a mechanism for improving the efficiency of management through sufficient advance deliberation of important management issues. Furthermore, to complement the functions of the Board of Directors and strengthen the transparency and soundness of management, the Company has established the Director Nomination Advisory Committee and the Director Compensation Advisory Committee as voluntary bodies.

Board of Directors

The Board of Directors shall determine important matters and supervise the execution of duties in accordance with laws and regulations, the articles of incorporation, "Provisions for the Board of Directors", and other internal company rules. The Board of Directors is chaired by Representative Director and President, and consists of two internal directors and three outside directors who have detailed knowledge of our operations, to establish a management monitoring system. All directors, including the Representative Directors, as well as Audit & Supervisory Board members attend the Board of Directors meeting. As a general rule, regular meetings of the Board of Directors are held once a month, and extraordinary meetings are held as needed.

Audit & Supervisory Board

The Audit & Supervisory Board shall audit the appropriateness of the directors' execution of duties in accordance with the "Board of Auditors Regulations", etc. The Audit & Supervisory Board is composed of a standing Audit & Supervisory Board member who serves as chairperson, two internal auditors who have detailed knowledge of our operations (the former General Manager of the Accounting Department as well as the former General Manager of the Legal & Intellectual Property Department, who also has a background in R&D), and two outside Audit & Supervisory Board members who have experience as a university professor and a certified public accountant. These appointments ensure audits from a more independent position with professional perspective, which works to strengthen the Audit & Supervisory Board's management auditing function. As a general rule, regular meetings of the Audit & Supervisory Board are held once a month, and extraordinary meetings are held as necessary.

Management Council

The Management Council discusses matters related to important management policies as well as management plans based on management policies, and discusses, determines, or approves matters that require preliminary deliberation among other important matters to be discussed at the Board of Directors. However, the matters determined at the Management Council shall be escalated to the Board of Directors and approved. The chairperson, who is appointed by the President, shall construct the Management Council of executive officers at the rank of executive vice president or higher and CFO, and the standing Audit & Supervisory Board members may attend the meeting and express his/her opinions. As a general rule, meetings are held at least once a month, and extraordinary meetings are held as necessary.

Board of Executive Officers

The Board of Executive Officers shall report and explain the status of the execution of the duties of the Executive Officer in charge pursuant to the provisions of the "Regulations for Executive Officers", share among executive officers the matters approved by the Board of Directors, discuss and confirm matters necessary for the execution of duties, share information on important matters related to management, and report the progress of matters approved by the Board of Directors or the Management Council.
The chairperson, who is appointed by the President, shall construct the Board of Executive Officers of the representative directors, all executive officers, as well as persons who have been appointed by the chairperson, and Audit & Supervisory Board members may attend the meeting and express their opinions. As a general rule, meetings are held at least once a month, and extraordinary meetings are held as necessary.

Director Nomination Advisory Committee

The Director Nomination Advisory Committee shall formulate selection criteria for directors, Audit & Supervisory Board members, and executive officers, including outside members, nominate candidates, and conduct appropriate deliberation in the selection and development plans of successor candidates such as for Chief Executive Officer, together with reporting to the Board of Directors.
The Committee is composed of 5 members in total, consisting of 2 internal directors and 3 outside directors. The Chairperson will be elected by mutual vote among the members of the Committee. As a general rule, meetings are held once every six months, and extraordinary meetings are held as necessary.

Director Compensation Advisory Committee

The Director Compensation Advisory Committee shall verify the settings of the compensation structure of directors (including executive officers), compensation standards, the process of compensation determination (including evaluation criteria and allocation) among other settings, together with reporting to the Board of Directors.
The Committee is composed of 5 members in total, consisting of 2 internal directors and 3 outside directors. The Chairperson will be elected by mutual vote among the members of the Committee. As a general rule, meetings are held once every six months, and extraordinary meetings are held as necessary.

Outline of Akebono's Corporate Governance Structure

Type of governance model A company with an Audit & Supervisory Board
Executive Officer System Yes
Director's term stipulated by the articles of incorporation 2 years
Chairman of the Board President
Number of acting directors 5
Of whom, outside directors 3
Of whom, those registered as independent directors 2
Number of Audit & Supervisory Board members 4
Of whom, outside members 2
Of whom, those registered as independent auditors 2
Board of Directors' advisory organs (voluntary) Director Nomination Advisory Committee, Director Compensation Advisory Committee
Independent auditor Deloitte Touche Tohmatsu

Cooperation among Audit & Supervisory Board Members, the Independent Auditor, and the Audit Department

The Audit & Supervisory Board members and the Audit & Supervisory Board receive appropriate explanations about audit content from the independent auditor, and provide cooperation, such as witnessing the audits of the independent auditor, if necessary. In addition, they have regular meetings with the independent auditor as regards the audit system, the audit plan, and the audit implementation status.

The Audit & Supervisory Board Members and the Audit Department comprise a mutually complementary system in order to enhance the effectiveness of each audit. They cooperate in conducting the pre-adjustment of the fiscal year’s activities policy, in arranging the monthly report meeting, and in the mutual distribution of the audit report, together with conducting joint audits. Furthermore, the Audit Department and the independent auditor formulate audit plans related to assessments of internal control over financial reporting. The results of these audit plans are discussed at meetings held from time to time on a regular basis, as necessary.

Why the Current Corporate Governance System was Selected

Akebono established the following corporate mission: "Through 'Friction and Vibration, their Control and Analysis,' we are determined to protect, grow and support every individual life". Under this corporate mission, creating new values through monozukuri (value-added manufacturing) with Akebono's corporate goals, "Customer needs first", "Technology realignment", and "Establishing a global network", we believe that it is important to maintain and promote healthy and friendly relationship with all stakeholders including customers, shareholders, suppliers, our associates, and regional community in order to achieve sustainable growth and development.

In line with this conviction, Akebono has recognized that the strengthening of corporate governance is an issue of the utmost importance, and having judged that it is suitable to take the form of a company with an Audit & Supervisory Board, we have established a governance structure consisting of such bodies as the Board of Directors as well as Audit & Supervisory Board members and the Audit & Supervisory Board.

The Board of Directors determines important matters and supervises the execution of duties in accordance with laws and regulations, the articles of incorporation, "Provisions for the Board of Directors", and other internal company rules, but it also strengthens its management monitoring function by making three out of five directors outside directors who possess various experiences and skills. The Audit & Supervisory Board audits the appropriateness of the directors' execution of duties in accordance with the "Board of Auditors Regulations", etc., but it also ensures audits from a more independent position to strengthen its management auditing function by making two out of four of the Audit & Supervisory Board members outside Audit & Supervisory Board members.