Benesse’s corporate governance system ensures management decision-making is transparent and fast. Although Benesse has adopted the corporate auditor corporate governance model, the Company has also incorporated elements of the “company with committees system” such as the Nomination and Compensation Committee and the Group Company Executive Nomination Committee as advisory bodies to the Board of Directors. This has resulted in a unique corporate governance system incorporating the benefits of both systems. In addition, Benesse has bolstered management oversight, with an emphasis on the roles of Independent Directors and Outside Corporate Auditors. On October 1, 2009, the Benesse Group shifted to a holding company structure. By separating Group management and oversight functions from business execution functions, the Group has clarified the roles and responsibilities of the holding company and the operating companies, with the aim of further increasing the speed and transparency of management.

• MANAGEMENT STRUCTURE

  Benesse puts particular emphasis on the role of Independent Directors in the Board of Directors. Three of the seven directors are independent directors. In appointing multiple independent directors on an ongoing basis, Benesse seeks to foster vibrant debate unbiased by internal affairs and conditions, and to strengthen management oversight functions. Since the transition to a holding company structure, Benesse has been experimenting in creating additional venues for sharing information about the status of Group management and discussing management policy outside of the Board of Directors. Benesse uses the corporate auditor corporate governance model. Of the four corporate auditors, two are outside auditors. In the Board of Corporate Auditors as well, the role of outside auditors is emphasized to increase the Board’s independence. Following the shift to a holding company structure, Benesse continues to work to enhance management oversight functions.

• ENSURING TRANSPARENCY IN DECISION-MAKING

  Based on the holding company structure, Benesse has created mechanisms for collecting, sharing and controlling information related to management of the Group as a whole, with the aims of realizing overall Group management policy and long-term vision and achieving overall management targets.

  The consolidated subsidiaries of Benesse Holdings operates in five business domains: Domestic Education, Overseas Education, Lifestyle, Senior/Nursing Care, and Language/Global Leadership Training, and those operating companies that do not fall into any of these domains are categorized as Others. Management oversight is conducted for the entire Group through these business domains. For each of the five domains, Benesse has established an SBC (Strategic Business Unit Committee) to deliberate and report on important matters and to conduct decision-making and performance reporting. For each major company in the Others category, Benesse has established a CMC (Company Management Committee) to deliberate on important matters. The President, Executive Vice Presidents, Chief Officers, and Corporate Auditors of Benesse Holdings attend the meetings of these committees to give their opinions and select especially important issues for deliberation at the Board of Directors at Benesse Holdings. This system ensures the independence of management in each domain and at each company, and maintains the transparency and fairness of decision-making processes.

  The holding company has also established the Group Growth Strategy Meeting, the Human Resources Committee, the Risk and Compliance Committee and the Business Investment Committee.

• BOARD OF DIRECTORS

  The Board of Directors has a maximum of ten members. Headed by the Company’s Chairman and meeting in principle every month, the Board of Directors is responsible for management decision-making on important matters and monitoring business execution by operating companies.

  Two committees serve as advisory bodies to the Board of Directors: The Nomination and Compensation Committee, and the Group Company Executive Nomination Committee.

  The Nomination and Compensation Committee, comprising three outside directors, the Chairman and the President, was established to select candidates for the posts of Director and President and examine proposals for dismissals, as well as to deliberate evaluation and remuneration systems, reporting to the Board of Directors. The committee ensures that clear reasons are given for the selection and dismissal of candidates and that performance evaluations are conducted in a transparent and objective manner. The Board of Directors leaves decisions regarding remuneration to individual directors to the discretion of the Committee. The Committee can also make recommendations on personnel affairs for managers in Group companies to the Group Company Executive Nomination Committee.

• The Group Company Executive Nomination Committee comprises the President, Executive Vice Presidents, CHO (Chief Human Officer) and GC (Group Controller). The Committee selects candidates for Benesse’s Chief Officer roles — CFO (Chief Financial Officer), CHO, CRO (Chief Risk Management Officer), GC, CMO (Chief Marketing Officer), and CKO (Chief KIBAN Officer, in charge of Company-wide business infrastructure) — as well as candidates for president of consolidated subsidiaries directly managed by the holding company. The Committee also examines proposals for dismissals, and indicates standards for remuneration for these positions, and exercises final approval over other proposals for executives of consolidated subsidiaries. The Committee considers plans for cultivating candidates, as well as assignments and transfers that will help foster future managers.

  In order to conduct impartial activities, members of each committee are not permitted to participate when they themselves are the subject of deliberation.

• BOARD OF CORPORATE AUDITORS AND AUDIT SYSTEM

  In principle, the Board of Corporate Auditors meets every month. In accordance with corporate audit guidelines, and with an emphasis on preventative audits, Benesse’s audit policy is designed to ensure that the Board of Corporate Auditors fulfills its responsibility of creating a robust and trusted corporate governance system based on a shared understanding of key management issues with senior management. Currently there are no dedicated staff members assigned to the Corporate Auditors; each auditor regularly exchanges opinions with senior management, participates in meetings of the Board of Directors, the SBC, the Group Company Executive Nomination Committee, the Risk and Compliance Committee, and other important management meetings, actively listens to business reports from responsible persons at the operating companies, and conducts surveys of operational status.

  Internal audits are conducted according to the annual audit plan. Led by the Internal Audit Department of Benesse Corporation, audits are conducted for operating companies, with findings, evaluations and recommendations reported to senior management and the Corporate Auditors.

As a Group with businesses in the Domestic Education, Overseas Education, Lifestyle, Senior/ Nursing Care and Language/Global Leadership Training business domains, the Benesse Group not only has to comply with all related laws and regulations, but also it has to achieve the highest standards of corporate ethics. Accordingly, we believe it is vital that all of our employees understand the importance of sincerity. To realize this aim, we have formulated the Benesse Group Code of Conduct, and we are striving to ensure the rules enshrined in the code are established and instilled across the Group.

• BENESSE GROUP CODE OF CONDUCT

  In January 2005, Benesse marked its 50th anniversary by formulating and publicizing the Benesse Group Code of Conduct. In April 2008, the Company partially revised this code and extended the scope of its enforcement beyond domestic Group companies to include all Group companies, including those overseas. Putting clear emphasis on customers and consumers, the Benesse Group Code of Conduct explains in detail areas that our people should focus on with respect to stakeholders of the Benesse Group, as well as in protecting personal information, promoting environmental management, and conducting business activities in general. In order to ensure that all the Benesse Group’s senior managers and employees adhere to the provisions of the code, thorough compliance management is conducted.

  In October 2010, as we mark the first anniversary of our shift to a holding company structure, we will revise the Benesse Group Code of Conduct to the Benesse Group Conduct Guidelines, which will express our shared values and commitment as a group. Each group company will formulate its own conduct guidelines, based on the Benesse Group Conduct Guidelines but tailored to the business of the individual group company. These individual conduct guidelines will be observed in addition to the Benesse Group Code of Conduct.

• THE INTERNAL WHISTLEBLOWER SYSTEM

  Since 1999, the Benesse Group has operated an internal whistleblower system called the Ethics Line. This line was set up to give employees a means of reporting violations of standards and codes of corporate conduct — an obligation of all our employees. To avoid any potential disadvantage to whistleblowers, reports can be made anonymously and confidentially. In 2005, we also launched a Group Ethics Compliance Line via a thirdparty organization to provide a contact point for employees at Group companies. From March 2009 this line was also made available to employees at Group companies overseas. In May 2007, aiming to further enhance this framework, we established a new Corporate Auditor Hotline. Both are similar in that any employee can use them to report inappropriate behavior that violates, or could potentially violate, the Benesse Group Code of Conduct. However, the Corporate Auditor Hotline was set up specifically for employees to provide information that could relate to Directors and other senior managers of Benesse Holdings, and issues that involve the management of the entire Benesse Group.

  In cases involving Group management where the Benesse Group brand could incur significant damage, this allows more effective and rapid responses by ensuring information is reported directly to the Company’s Corporate Auditors, who are independent of other senior management.

• RISK MANAGEMENT FRAMEWORK

  Based on the Benesse Group Risk Management Rules, which applies to the entire Group, Benesse has created a clear, uncomplicated response structure for transmitting information to senior management quickly in times of crisis. In order to ensure the effectiveness of these rules and understanding throughout the Group, managers are given crisis simulation training in which they go through the steps of communication and response. This training is led by an outside party, and conducted at regular intervals.