About Board of Directors and Auditors | Sustainability

Board of Directors, Auditors and Executive Officers

Criteria for Selection and Independence

The selection criteria for candidate internal directors

To have character and knowledge suitable to be director.
To have sufficient experiences and knowledge useful to the oversight of the business of our company and its relevant companies. To have excellent capacity for business management judgment and business operation.
To be able to bear responsibilities for basic policies, strategic planning and business operation of our company and its group companies and be accountable for the board of directors.

The election criteria for candidate external directors

To have character and knowledge suitable to be director.
To agree with our company’s business philosophy and code of conducts.
To have rich experiences as management such as chief executive officer or have equivalent experiences and knowledge
To be able to make a judgment independently from our company’s management team.
To be able to attend board of directors meetings of our company most of the time.
To meet our company’s criteria of independence.

Selection of Corporate Auditors

In making the selection, one or more persons with sufficient knowledge of finance and accounting shall be appointed.

Independence criteria for outside directors

Based on the independence criteria stipulated by the Tokyo Stock Exchange and the Companies Act, the Company defines the criteria for determining the independence of outside directors at the Company as those who satisfy the requirements set forth below.

A person who is not currently, or has not been for the past 10 years, an executive director, executive officer, corporate officer, or employee (hereinafter referred to as “executive person") of the Company, its subsidiaries, parent company, or sister companies
A person who does not fall into any of the following categories at present or in the past three years

(a) A major shareholder of the Company (a person who directly or indirectly holds 10% or more of the voting rights of the Company) or an executive person of such a shareholder
(b) Partners of the Company's accounting auditor or employees engaged in the audit of the Company
(c) An executive person of the Company's major lender (a lender whose lending amount exceeds 2% of the Company's consolidated total assets)
(d) An executive person of a major business partner of the Company (a business partner whose transactions with the AEON delight Group exceed 2% of the annual consolidated sales of the said business partner)
(e) Lawyers, certified public accountants, certified tax accountants, or other consultants who receive annual remuneration exceeding 10 million yen from the AEON delight Group other than remuneration as directors.
(f) An executive person of a non-profit organization that receives more than 10 million yen in donations and more than 2% of total revenues from the AEON delight Group.
(g) Spouses or relatives up to the second degree of kinship of the above 1 and (a)-(f).

Reasons for Appointment of Outside Directors and Outside Auditors

Outside Directors

Name	Designation as Independent Officer	Reasons for Appointment
Yoshiaki Hompo	○	Yoshiaki Hompo has an extensive career and broad insight as the first Commissioner of Japan Tourism Agency and Senior Vice President of Japan Post in addition to overseas experience and administrative experience related to the Ministry of Transport. He also has experience in the area of human resource development as a specially-appointed professor at Universities. The Company judges that through such experience, he can continue to supervise management execution as a Director by contributing to improve the Company’s management and corporate governance, and play an adequate role in deciding on important matters, and has therefore selected him as an Outside Director. Mr. Hompo has no special interest in the Company, and has been appointed as an independent officer based on the judgment that his role and function of overseeing the Company from an independent standpoint are fully secured.
Keiji Yoshikawa	○	Keiji Yoshikawa has management experience as the representative executive officer and president and CEO of a company listed on the first section of the Tokyo Stock Exchange, as well as experience as the top of a global corporation based in Japan. The Company therefore judges that he is able to continue to supervise management execution as a Director by contributing to improve the Company’s management and corporate governance, not only in the Company’s domestic business but also its overseas business management, and play an adequate role in deciding on important matters, and has therefore selected him as an Outside Director. Mr. Yoshikawa has no special interest in the Company, and has been appointed as an independent officer based on the judgment that his role and function of overseeing the Company from an independent standpoint are fully secured.
Asako Takada	○	Asako Takada has insight and knowledge in the areas of organization theory and innovation, which are her research fields as a university professor. The Company judges that she is able to continue to supervise management execution as a Director by drawing on these to contribute to promote organizational culture reforms for improving the Company’s corporate value, improving the Company’s corporate governance, and promoting diversity, and play an adequate role in deciding on important matters, and has therefore selected her as an Outside Director. Ms. Takada has no special interest in the Company, and has been appointed as an independent officer based on the judgment that her role and function of overseeing the Company from an independent standpoint are fully secured.
Toshio Shimada	○	We have appointed Toshio Shimada as an outside director because we believe that his experience and knowledge of corporate management, as well as his extensive knowledge and expertise in digital technology, will enable him to contribute to our digital transformation promotion activities, supervise management execution as a director, and play a substantial role in decision-making on important matters.Mr. Shimada has no special interest in the Company and has been appointed as an independent officer based on our judgment that his role and function of supervision from an independent standpoint are sufficiently guaranteed.

Outside Auditors

Name Name	Supplementary Explanation of the Relationship	Reasons for Appointment
Takashi Kuroda		Takashi Kuroda, currently or in the past ten years, is or was an Executing Person at AEON Bank, Ltd. and AEON Financial Service Co., Ltd., subsidiaries of the Company’s parent company. Takashi Kuroda has served as the person in charge of business planning and corporate management at AEON Bank, Ltd., the core company of the AEON Group’s general finance business. He has also supervised management execution as a Director of the company. The Company judges that he will draw on the experience and knowledge acquired through his career to date to contribute to the further enhancement of the Company’s audit operations as an outside Auditor, and has selected him as an Outside Auditor. There are no special interests between Mr. Kuroda and the Company.
Tsukasa Takahashi	○	Tsukasa Takahashi has been appointed as an outside corporate auditor based on his professional knowledge as a lawyer and his extensive experience in corporate legal affairs over many years, which has enhanced the effectiveness of audits at the Company. The Company believes that its outstanding experience and insights are critical to further improving the audit function. Mr. Takahashi has no special interest in the Company and has been appointed as an independent officer based on the judgment that his role and function of auditing the Company from an independent standpoint are fully secured
Mari Ebisui	○	Mari Ebisui has carried out consulting for a large number of corporations over many years, drawing on her abundant experience and deep knowledge as a U.S. CPA and certified fraud examiner. The Company judges that she will also contribute to further enhance the Company’s audit operations from an independent standpoint using her experience as the independent outside director of a listed company and her expert knowledge and wide-ranging experience, and has selected her as an Outside Auditor. Ms. Ebisui has no special interest in the Company and has been appointed as an independent officer based on the judgment that his role and function of auditing the Company from an independent standpoint are fully secured

Policy on Determining Remuneration Amounts and Calculation Methods

The Company has resolved to adopt a policy for determining the method of calculation of remuneration for each individual director at a meeting of the Board of Directors held on February 26, 2021.

The Company's policy for determining the details of remuneration, etc. for each individual director is as follows

(a) Basic concept of the director remuneration system
The Company stipulates the compensation of the Company's directors in its regulations on director compensation as follows
1. A．The remuneration system shall be designed to strongly motivate directors to practice the Company's management philosophy, "We pursue the Creation of "Environmental Value" for our Customers and for the Local communities," and to actively work on environmental issues and social contribution, as well as to execute management strategies that contribute to improving business performance.
2. B．The remuneration system shall have a high level of transparency and fairness, and be acceptable to and supported by stakeholders (customers, shareholders, employees, etc.).
In addition, the regulations stipulate that corporate auditors shall receive the prescribed remuneration regardless of the Company's performance.
(b) Policy and process for determining remuneration, etc. of directors and corporate auditors

Remuneration for directors is determined by the Board of Directors within the range of the total amount of remuneration resolved at the Ordinary General Meeting of Shareholders, based on recommendations from the Nomination and Compensation Advisory Committee and other factors. In addition, the President, who is delegated by the Board of Directors to determine the individual remuneration of each director, prepares the amount of basic compensation for each director and an evaluation and allocation plan for performance-linked compensation based on the performance of the business for which each director is responsible, and makes decisions based on the report of the Nomination and Compensation Advisory Committee and other factors.

Remuneration for corporate auditors is determined through discussions among the corporate auditors within the range of the total amount of remuneration resolved at the Ordinary General Meeting of Shareholders. Remuneration for outside directors and corporate auditors is limited to basic compensation that is not linked to business performance due to the nature of their roles.

Remuneration for internal directors (directors who are not outside directors, hereinafter the same meaning) consists of basic compensation, performance-linked compensation, and stock options, as follows.
1. A．Basic compensation
  Basic compensation shall consist of a fixed monthly compensation paid within the standard amount set for each position, which is determined based on individual evaluations.
2. B．Performance-linked compensation
  Performance-linked compensation shall consist of the following Company and individual performance-linked compensation. The percentage of performance-linked compensation shall be 100% of the base amount upon achievement of the target set at the beginning of the fiscal year, and shall vary between 0% and 200% based on the Company's performance and each individual's evaluation during the fiscal year. Performance-linked compensation shall be paid at a specified time each year.
  1. a．Company performance-linked compensation
    Company performance-linked compensation shall be determined based on the Company's achievement rate in relation to the base amount for each position, taking into consideration the overall performance of the Company.
  2. b．Individual performance-linked compensation
    Individual performance-linked compensation shall be determined by a coefficient based on individual evaluations of departmental performance and achievement rates of management targets, in relation to the base amount for each position.
  3. c．Stock options (non-monetary compensation)
    Stock acquisition rights are allocated to directors as stock options, with the aim of increasing their motivation and ambition to continuously boost business performance and enhance corporate value by linking stock price and business performance with compensation and sharing with shareholders not only the benefits of a rise in stock price but also the risks associated with a decline in stock price.
    The number of stock acquisition rights to be granted shall be determined by the Board of Directors based on the average stock price over a certain period of time and the performance of the relevant fiscal year against the base amount for each position, following a recommendation by the Nomination and Compensation Advisory Committee.
    Stock acquisition rights are granted at a specified time in each fiscal year in accordance with the terms and conditions stipulated in the Regulations for Director and Corporate Auditor Remuneration.
(c) Target indicators and results related to performance-linked compensation
As an indicator of overall profitability, the Company uses the level of achievement of consolidated ordinary income as the main indicator for the payment of performance-linked compensation and stock options, and considers the percentage of achievement of the budget for consolidated net income and consolidated operating income, as well as the year-on-year change in each income item and the nature of the change. The consolidated operating income forecast for the fiscal year of 2022 was ¥17.0 billion and the actual consolidated operating income was ¥15.8 billion.
(d)Reasons the Board of Directors has determined that the individual director remuneration for the fiscal year of 2022 is in line with the relevant policy
Kazumasa Hamada, President, who was delegated this task by the Board of Directors, has prepared an evaluation and allocation plan for performance-linked compensation based on the amount of base compensation for each director and the performance of the business for which each director is responsible, and based on recommendations from the Nomination and Compensation Advisory Committee and other factors, we believe that the individual director compensation for the current business year is in line with the relevant policy.

Executive compensation

Executive compensation for FY2022

Classification of Officers	Total amount of compensation, etc. (Millions of yen)	Total amount of compensation by type (Millions of yen)				Number of eligible directors
Classification of Officers	Total amount of compensation, etc. (Millions of yen)	Basic remuneration	Stock options	Bonuses	Of those listed on the left, non-monetary compensation, etc.	Number of eligible directors
Directors (excluding Outside Directors)	95	53	14	27	14	5
Corporate Auditor (excluding Outside Corporate Auditors)	2	2	---	---	---	1
Outside Directors and Outside Corporate Auditors	61	61	---	---	---	8

* The total amount of non-monetary compensation to Directors (excluding Outside Directors) consisted of stock options totaling 14 million yen.