Corporate Governance

Corporate Governance System

Ⅰ. Overview of the Corporate Governance Structure

• 1. Benesse's Corporate Governance Structure

  • Overview of the Corporate Governance Structure and Reasons for Adoption

    Guided by our corporate philosophy of “Benesse = Well-Being”, our goal as the holding company for Benesse and the Benesse Group is to provide support for users of our Domestic Education, Global Education, Nursing Care and Childcare services, and Languages to improve themselves and solve problems throughout their lives. In order to contribute to a sustainable society and to continue developing soundly as a company, Benesse Holdings, Inc. (the “Company”) operates under the following management structure.

    The Board of Directors is comprised of 3 executive officers and 5 non-executive officers (including 4 outside directors), and is chaired by Katsumi Ihara, one of the outside directors. In principle, the board meets once a month to make important management decisions and oversee the execution of business of the operating companies.In principle, the board meets once a month to make important management decisions and oversee the execution of business of the operating companies. The Nomination and Compensation Committee serves as an advisory committee to the Board of Directors. The committee is chaired by an outside director, and the majority of its members are outside directors. The Nomination and Compensation Committee is currently comprised of 4 outside directors (Katsumi Ihara, Mutsuo Iwai, Yumiko Noda, and Kohey Takashima) and non-excecutive director (Hideaki Fukutake) and the Representative Director and Chairman, CEO. The committee reviews the appointment and dismissal of directors and of the Chair of the Board of Directors, and submits its opinions to the Board of Directors. The committee also makes decisions regarding individual directors’ compensation based on their responsibilities on the Board of Directors, reviews the directors’ compensation system, and submits its opinions to the Board of Directors. In order to eliminate arbitrariness, if a member of the Nomination and Compensation Committee is the subject of review, they cannot participate in the decision-making process.

    The Audit & Supervisory Board is comprised of 4 members (including 2 outside members). In principle, the board convenes once a month to receive and discuss reports on important audit related matters and to decide other matters related to the execution of duties of Audit & Supervisory Board members, such as audit policies and methods for examining the status of operations and assets.

    As a holding company, Benesse Holdings, inc. has established a Board of Directors and an Audit & Supervisory Board in order to carry out appropriate governance of the Group as a whole. More than half of the Board of Directors are outside directors, and at least one-third are independent outside directors. The company continuously appoints executive directors and multiple outside directors with a high degree of independence to ensure that the Board of Directors engages in active debate from a variety of perspectives unconstrained by internal circumstances, and improves its supervisory functions, thereby ensuring execution of its duties. In addition, effective auditing is conducted by standing auditors familiar with the company’s affairs and outside directors qualified as lawyers and certified public accountants.

  • The Benesse Group's Oversight of business execution

    Under the Company’s executive structure, as of April 1, 2021 the Representative Director and Chairman is the Chief Executive Officer (CEO) and the Representative Director and President is the Chief Operating Officer (COO). The CEO is responsible for promoting activities related to management policy and philosophy, sustainability and ESG, and for overseeing the operations of Berlitz. The COO is responsible for planning, budgeting, and achieving the business plan goals for each of the Group’s strategic business domains (except for Berlitz), based on the formulation and implementation of the medium-term management plan in accordance with the company’s management policy and philosophy.

    Supervision of the Group’s strategic business domains is carried out by its major subsidiaries. The President of Benesse Corporation supervises the education and lifestyle domains, the President of Benesse Style Care Co., Ltd. supervises the nursing care and childcare domains, and the CEO of Berlitz Corporation oversees the Berlitz operations.

    The Company also appoints people in charge of administrative divisions to assist the directors in the execution of the Group's business. They are appointed for each field, including Group growth strategies, the medium-term management plan, business planning and budgeting, business development and overseas expansion strategy, human resources, Group governance, public relations, branding, finance, accounting, IT, personal information protection, information security, and risk management and compliance. They help to advance the Group's management and administration as well as identify and solve management issues.

    Subsidiaries must consult with the Company before making any administrative decisions on important matters that could impact the Group’s management. In the case of subsidiaries which are supervised by the Presidents of Benesse Corporation and Benesse Style Care Co., Ltd., those consultations are carried out through the presidents of the companies which oversee the relevant business domains, and in the case of subsidiaries which are supervised by Berlitz Corporation, consultations are carried out through the CEO of Berlitz Corporation. The presidents of the subsidiaries which supervise the relevant business domains discuss these matters with the people in charge of the administrative divisions from the perspective of ensuring the Group’s growth and legal compliance, followed by a process of approval of the CEO or COO who is responsible for the relevant domain and a resolution by the Company’s Board of Directors.

    The Company has established a Management Council for the purpose of sharing issues and information important to the Group and for discussing key matters. The Council is chaired by the COO and attended by the Presidents of Benesse Corporation and Benesse Style Care Co., Ltd. and the heads of heir in-house business companies, people in charge of the Company’s administration, and others designated by the CEO or COO.

    In addition, the Company has established a Company Management Committee (CMC) for the purpose of reporting and discussing progress in executing business plans, KPI, and other important matters in each strategic business domain. The Committee is chaired by the COO and attended by the presidents of the companies who supervise the relevant strategic business domains and the heads of their in-house business companies, people in charge of the Company’s administration, and others designated by the CEO or COO.

  • Implementation of Internal Control System

    The Benesse Group established the basic policies of its Internal Control System and other necessary systems stipulated by the Ordinance for Enforcement of the Companies Act by a resolution passed at the Board of Directors’ meeting held in May 2006. The resolution was reviewed at the March 30, 2021 Board of Directors meeting in light of changes in the management structure effective April 1, 2021, and the revisions were approved on April 1, 2021.

    Also, the Company’s Internal Auditing Department promotes a Group-wide integrated approach to creating internal controls pertaining to financial reporting based on Japan’s Financial Instruments and Exchange Act and other such measures.

  • Implementation of Risk Management System

    In October 2010, we established the Benesse Group Principles. Rooted in the Group's corporate philosophy, the principles lay down the correct behavior for each executive officer and employee, to ensure that they perform their duties appropriately and ethically. Following the Benesse Group Principles, each operating company will observe societal rules, corporate ethical principles and laws and regulations, while continuing to create value for society. In this way, we are building a management structure to facilitate continuous growth and development.

    The Company has formulated Benesse Group Risk Management and Compliance Rules targeting the Group as a whole. In order to carry out the actions indicated in the Benesse Group Principles, each subsidiary complies with the laws and regulations and has more detailed codes of conduct and rules specific to the type and characteristics of its business, scale of business, and work environment, etc. These various rules ensure that business is conducted in an appropriate manner and that compliance is carried out thoroughly.

    The Company has established a Risk and Compliance Committee with the aim of promoting risk management and compliance for the Benesse Group as a whole. Committee members include directors in charge of business execution, people in charge of the Company’s administration, and managers at the Company’s subsidiaries which supervise strategic business domains. The Committee is chaired by the person in charge of the administrative division which oversees risk management and compliance. It collects results of risk assessments of the Company and its subsidiaries, and formulates, promotes, and manages Group-wide risk countermeasures. The Committee regularly reports the results to the COO and the Company’s Board of Directors, receives any necessary instructions which are then disseminated within the Company and its subsidiaries, and audits the status of improvements (including corrections, implementation of preventive measures, education and training, etc.). It also supports the promotion of important risk countermeasures and adds these to the next risk assessment. Applying the PDCA cycle in this way, negative information is shared and normal risk management and compliance activities are promoted.

    Since 1999, the Benesse Group has operated an internal whistleblower system, that was set up to give employees a means of reporting violations of standards and principles, and has made such reporting an obligation of all our employees. To avoid any potential disadvantage to whistleblowers, reports can be made anonymously and confidentially.

    Since 2005, we have also operated a Group Ethics Compliance line via a third party organization, to provide a contact point for employees at Group companies in Japan. In 2009 the internal reporting system was expanded to include overseas group companies, and improvements are continuously being made, including the November 2019 upgrade of our global reporting system.

  • Liability Limitation Agreements with Directors (Excluding Directors Serving Concurrently as Executive Directors) and Audit & Supervisory Board Members

    Benesse signed agreements with Non-executive Directors Hideaki Fukutake, in June 2014, and Outside Directors Katsumi Ihara, in June 2019, and Mutsuo Iwai in June 2020, and Yumiko Noda and Kohey Takashima, in June 2021 and with Audit & Supervisory Board Members Yoshinori Matsumoto and Eiichi Izumo, in June 2015, and Miyuki Ishiguro, in June 2017, and Naoto Saito, in June 2019, limiting their liability for damages. Based on these agreements, in cases where the officers act in good faith and there is no gross negligence of duty, liability for damages is limited to the higher of either ¥10 million or the minimum amount prescribed by Article 425, Paragraph 1 of the Companies Act. Furthermore, in regard to exemption of liability of Directors and Audit & Supervisory Board Members, the Company's Articles of Incorporation provide that the liability for damages of Directors and Audit & Supervisory Board Members (including former Directors and Audit & Supervisory Board Members) resulting from negligence of duty may be exempted up to the statutory limit by a resolution of the Board of Directors in accordance with Article 426 Paragraph 1 of the Companies Act of Japan. This is to ensure that Directors and Audit & Supervisory Board Members can perform their expected roles to the fullest.

• 2. Matters related to the number of directors and restrictions on qualifications, etc.

  The number of directors stipulated by the articles of incorporation is no more than 10 directors. The Articles of Incorporation stipulate that a resolution for the election of directors shall be decided by a quorum which is defined as shareholders in attendance who hold one-third or more of the total number of voting rights of shareholders who are entitled to exercise their voting rights, and not by the cumulative number of votes.

• 3. Other stipulations in the Articles of Incorporation

  As resolution on the use of capital surplus is a sophisticated business decision, the Articles of Incorporation state that the Company may determine the matters listed in each item of Article 459, Paragraph 1, of the Companies Act, including distribution of capital surplus, by the Board of Directors without a resolution by a General Meeting of Shareholders, unless otherwise stipulated by law. This makes it possible to deliver flexible returns to shareholders.

  In accordance with the permissible relaxation on quorum requirements as stipulated by the Articles of Incorporation and to ensure smooth operations of the General Meeting of Shareholders, resolutions stipulated in Article 309, Paragraph 2, of the Companies Act shall be adopted by an affirmative vote of two-thirds or more of the voting rights held by shareholders present, where a quorum of shareholders present hold shares representing one-third or more of the exercisable voting rights of the shareholders.

  

Ⅱ. Management

• Management

• Number of Outside Directors and Outside Audit & Supervisory Board Members and their Relationships with the Company

  As of June 28, 2021, four of the eight directors are outside directors and two of the four Audit & Supervisory Board members are outside Audit & Supervisory Board members.

  Kohey Takashima, one of the Company’s outside directors, is the Representative Director and President of Oisix ra daichi, which has a business relationship with the Company. Outside Audit & Supervisory Board member Eiichi Izumo has in the past been a partner of Deloitte Touche Tohmatsu LLC, with which the Company has concluded an audit agreement. Outside Audit & Supervisory Board member Miyuki Ishiguro is a partner of Nagashima Ohno & Tsunematsu, with which the Company has concluded a consulting contract. The other outside officers, namely outside directors Katsumi Ihara, Mutsuo Iwai, Yumiko Noda, are not currently, nor have they been in the past, executives or employees of another company or entity that has a special relationship of interest with the Company, either a personal relationship, capital relationship, trading relationship, or any other relationship of note.

  Kohey Takashima, an outside director, is the Representative Director and President of Oisix ra daichi Inc. which has dealings with the Benesse Group on matters including character licensing. However, in the most recent fiscal year the trading amount between Oisix ra daichi and the Benesse Group did not exceed the higher of ¥100 million yen or 2% of the Benesse Group’s consolidated net sales. Taking these dealings into account, the Company has determined that Kohey Takashima satisfies the Company’s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members. The Company has also determined that all 4 outside directors meet the Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members as listed below, and has nominated them as independent directors. Please note that the Company’s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members satisfy the independence requirements for outside directors and outside audit & supervisory board members determined by the Tokyo Stock Exchange, Inc. Outside Audit & Supervisory Board member Eiichi Izumo was a Partner at Deloitte Touche Tohmatsu LLC at the time an agreement to become an auditor at the Company was concluded. However, the aforementioned criteria were satisfied when Mr. Izumo left Deloitte Touche Tohmatsu LLC in January 2015, and notice designating him as an independent officer was also sent to Japan Exchange Group, Inc. Miyuki Ishiguro, an outside Audit & Supervisory Board member, is a Partner at Nagashima Ohno & Tsunematsu, with which the Company has concluded a consulting contract. Nagashima Ohno & Tsunematsu provides legal consultation services to the Benesse Group where necessary, but as the total value of these transactions does not exceed the higher of an average of ¥10 million in the most recent three fiscal years or 2% of the net sales or consolidated revenue of the supplier group in the preceding fiscal year, Ms. Ishiguro satisfies the aforementioned criteria and there are no issues with independence. However, Nagashima Ohno & Tsunematsu, the law firm where Ms. Ishiguro is a partner, has a policy preventing affiliated lawyers who become outside directors at other companies from being registered as independent directors. Therefore Ms. Ishiguro has not been registered as an independent officer. The Company’s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members satisfy the independence requirements for outside directors and outside auditors as specified by Japan Exchange Group, Inc.

• Reasons for appointing outside directors

  Name	Independence	Reasons for selection (Supplementary explanation on suitability criteria)
  Katsumi Ihara (Independence)		Katsumi Ihara has acquired extensive company management experience and knowledge at global corporations and as an outside director at other companies. The Company believes he will be able to draw on this experience and knowledge in his role as outside director, and as Chairman of the Board and the Nomination and Compensation Committee, can contribute to the Company’s sustainable growth, enhancing the medium-to-long term corporate value, and improving the transparency of the decision-making processes used in managing the Company . In addition, as he satisfies both the Company’s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members and the Tokyo Stock Exchange requirements for judging the independence of independent officers, the Company determines him to possess a high degree of independence and has designated him as independent officer.
  Mutsuo Iwai (Independence)		Mutsuo Iwai has acquired extensive company management experience and knowledge at global corporations. The Company believes he will be able to draw on this experience and knowledge in his role as outside director, and as a member of the Board and the Nomination and Compensation Committee, can contribute to the Company’s sustainable growth, enhancing the medium-to-long term corporate value, and improving the transparency of the decision-making processes used in managing the Company. In addition, as he satisfies both the Company’s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members and the Tokyo Stock Exchange requirements for judging the independence of independent officers, the Company determines him to possess a high degree of independence and has designated him as independent officer.
  Yumiko Noda (Independence)		Yumiko Noda has extensive management experience and expert knowledge in finance. The Company believes she will be able to draw on this experience and knowledge in her role as outside director to contribute to the Company’s sustainable growth and enhancing the medium-to-long term corporate value. In addition, as she satisfies both the Company’s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members and the Tokyo Stock Exchange requirements for judging the independence of independent officers, the Company determines her to possess a high degree of independence and has designated her as independent officer.
  Kohey Takashima (Independence)		Kohey Takashima has extensive company management experience and expert knowledge in e-commerce. The Company believes he will be able to draw on this experience and knowledge in his role as outside director to contribute to the Company’s sustainable growth and enhancing the medium-to-long term corporate value. In addition, as he satisfies both the Company’s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members and the Tokyo Stock Exchange requirements for judging the independence of independent officers, the Company determines him to possess a high degree of independence and has designated him as independent officer.

• Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members

  Benesse Holdings, Inc. (the Company) shall determine that the Company's Outside Directors, Outside Audit & Supervisory Board Members and the respective candidates for those posts possess a high degree of independence when all of the following criteria are satisfied:

  1. The individual has not served as an executive officer (Note 1) of the Company or its Group companies (hereinafter “the Benesse Group”) within the past 10 fiscal years.
  2. Individuals who have satisfied all of the following conditions (A) through (H) for the past three fiscal years:
     • (A) The individual is not an entity for which the Benesse Group is a major client*2 and does not serve as business personnel thereof.
     • (B) The individual is not a major client of the Benesse Group*3 and does not serve as business personnel thereof.
     • (C) The individual is not a major shareholder (directly or indirectly holding a voting interest of 10% or more) of the Company and does not serve as business personnel thereof.
     • (D) The individual does not serve as business personnel of an entity that is a major investee of the Benesse Group (in which the Benesse Group directly or indirectly holds a voting interest of 10% or more).
     • (E) The individual is not a consultant, accounting expert or legal expert who has received compensation in the form of a large amount of money or other assets*4, other than officer's compensation from the Benesse Group (or an individual belonging to an entity such as a corporation, association, or other group that has received such assets).
     • (F) The individual has not received a large donation or grant from the Benesse Group (Note 5) and is not an executive officer of such a recipient.
     • (G) The individual is not an independent auditor of the Benesse Group and does not belong to a corporation, association or other group that serves as an independent auditor of the Benesse Group.
     • (H) In cases where the business personnel of the Benesse Group have been appointed as outside officers of other companies, the individual does not serve as business personnel of the other company.
  3. The individual is not a relative*6 of a person who meets either of the following conditions "a." or "b."
     • An individual who does not satisfy any of the foregoing conditions (A) through (H) in (2) above for one of the past three fiscal years. However, the business personnel stipulated in conditions (A) through (D) and (F) and (H) shall refer only to key business personnel*7. Condition (E) shall apply only to persons with specialized qualifications, such as certified public accountants and lawyers. Condition (G) shall apply only to key business personnel and persons with specialized qualifications, such as certified public accountants and lawyers, in the individual's organization.
     • Key business personnel of the Benesse Group in the current fiscal year or any of the past 3 fiscal years. (Outside auditors include non-executive directors)
  Notes:

  1. Business personnel refers to the executive directors and executive officers who execute the operations of corporations and other groups, or other officers who execute the operations of corporations, etc. Business personnel also refers to employees, directors and other equivalent posts based on the Companies Act of Japan, as well as ordinary employees and others who conduct business operations.
  2. An entity for whom the Benesse Group is a major client refers to an entity that satisfies any of the following conditions:
     • (1) A supplier group that supplies products and services to the Benesse Group (an entity who belongs to the consolidated group of the direct supplier), where the supplier group's trading amount with the Benesse Group exceeds the higher of ¥100 million or 2% of the consolidated net sales of the supplier group, in the most recent fiscal year.
     • (2) A supplier group to which the Benesse Group owes liabilities, where the Benesse Group's total amount of liabilities toward the supplier group exceeds the higher of ¥100 million or 2% of the consolidated net sales of the supplier group, in the most recent fiscal year.
  3. A major client of the Benesse Group refers to an entity that satisfies any of the following conditions:
     • (1) A client group to whom the Benesse Group supplies products and services, where the Benesse Group's trading amount with the client group exceeds the higher of ¥100 million or 2% of the Benesse Group's consolidated net sales, in the most recent fiscal year.
     • (2) A client group holding liabilities owed to the Benesse Group, where the client group's total liabilities owed to the Benesse Group exceeds the higher of ¥100 million or 2% of the client group's consolidated net sales, in the most recent fiscal year.
     • (3) A financial Institutions (an entity belonging to the consolidated group to which the direct lender belongs) from which the Benesse Group has borrowed funds, where the total amount of the Benesse Group's borrowings from the financial institutions exceeds 2% of the Benesse Group's consolidated total assets in the most recent fiscal year.
  4. A large amount of money or other assets refers to a monetary compensation value the average of which over the past 3 fiscal years exceeds the higher of ¥10 million or 2% of the entity's net sales or gross income in the most recent fiscal year.
  5. An entity receiving a large charitable donation or subsidy from the Benesse Group refers to an entity receiving a charitable donation or subsidy from the Benesse Group, the average of which over the past 3 fiscal years exceeds the higher of ¥10 million or 2% of the entity's net sales or gross income in the past fiscal year.
  6. Relatives refer to spouses, relatives within the second degree of kinship and those with whom a livelihood is shared.
  7. Key business personnel refer to business personnel such as executive directors, executive officers and other officers who execute the operations of corporations, etc., as well as those who execute key operations, such as division managers.

• Appointment of Outside Officers, Functions and Roles to be Fulfilled within Benesse's Corporate Governance Structure

  In order to ensure the Board of Directors’ management supervision function, more than half of the board members are outside directors, at least one-third are independent directors, and the chair of the Board is an outside director. Moreover, by ensuring that an outside director serves as the chair of the Nomination and Compensation Committee and that outside directors make up the majority of its members, the Company is creating a structure for enhanced supervision of management.

  Going forward, Benesse will continue to make effective use of the abundant experience and insight of Outside Directors in corporate management and related areas, as well as their international experience, in the management of the Group.

  Furthermore, for its outside Audit & Supervisory Board members, the Company has appointed a qualified attorney and a certified public accountant. From their independent perspective, they will apply their abundant respective experience and insight to serve as a supervision function for management, striving to enhance their function by coordinating with other Audit & Supervisory Board members, the internal audit division, and the independent auditor.

• Cooperation by Outside Directors and Outside Audit & Supervisory Board Members on Oversight and Audits, Internal Audits, Corporate Audits and Independent Audits, and Relationship with Internal Control Departments

  Through attendance at Board of Directors’ meetings, the outside directors receive reports from internal auditing departments on the results of the previous fiscal year’s audit and the plans and progress on this fiscal year’s audit, as well as receiving reports on appropriate major issues and themes.

  Outside Audit & Supervisory Board Members cooperate with internal auditing departments and the independent auditors to enhance management oversight by exchanging opinions as necessary in addition to regularly expressing their opinions at Audit & Supervisory Board meetings.

Ⅲ. Implementation of auditing

• 1. Implementation of corporate auditing

  ＜Corporate Audit Organization, Personnel and Procedures＞

  The Company has an Audit & Supervisory Board, comprised of two standing auditors and two non-standing auditors. One of the standing auditors has considerable experience in the field of finance and accounting. Both non-standing auditors are outside auditors who are either certified public accountants or lawyers and who have considerable knowledge of finance and accounting. The non-standing auditors are outside auditors employed as either certified public accountants or lawyers.

  ＜Activities of the Audit & Supervisory Board and its Members (frequency of board meetings, main topics for consideration, individual auditors’ attendance and activities of standing corporate auditors, etc.)＞

  There is at least one meeting per month of the Audit & Supervisory board in the fiscal year. Attendance of individual members is as follows.

  Name	Record of attendance of the Audit & Supervisory board in the fiscal year
  Yoshinori Matsumoto	100%（17/17）
  Naoto Saito	100%（17/17）
  Eiichi Izumo	100%（17/17）
  Miyuki Ishiguro	94%（16/17）

  By attending important meetings including those of the Board of Directors, the Nomination and Compensation Committee, and the Management Council, and by regularly exchanging opinions with top management, members of the Audit & Supervisory Board share an awareness of key management issues. Also, by examining important financial reporting documents, they verify the execution of business and review the performance of duties by the directors. In addition, the two standing auditors and one of the non-standing auditors are also responsible for auditing major business subsidiaries, and hear business reports from the persons in charge of operating companies and actively investigate the status of operations.

  The Audit & Supervisory Board holds regular joint conferences with internal auditing departments and the independent auditors to exchange information as necessary on topics including operational reports and other matters. Through deeper mutual understanding and the active expression of opinions, it strives to expand its supervision over management.

  The Company increased the number of dedicated staffs to assist the Audit & Supervisory Board members to two, and the Group enhanced its audit system by establishing the Benesse Group Audit Committee with the addition of standing Audit & Supervisory Board members for subsidiaries, and strengthening cooperation.

  The Audit & Supervisory Board Member Hotline was set up in May 2007, specifically as an internal channel for all executive officers and employees of the Group to provide information about issues concerning directors and other senior managers of the Company. The hotline allows this information to be reported directly and even anonymously to the Company's standing Audit & Supervisory Board members. With this system, the Group aims to ensure the efficacy of its supervision functions.

  The following topics are reviewed throughout the year as the main considerations of the Audit & Supervisory Board.

  • Matters to be resolved:
    Audit policy, audit plan, division of duties, request for submission of proposals for appointment of auditors to the general meeting of shareholders, evaluation and reappointment or non-reappointment of the accounting auditor, draft audit report, etc.
  • Matters to be reported:
    Confirmation of the agenda for Board of Directors meetings, report on the status of corporate auditor activities and confirmation of the contents of internal decisions, report on the Audit & Supervisory Board Member Hotline, etc.
  • Matters to be discussed:
    Annual review of auditor activities, evaluation and reappointment or non-reappointment of the accounting auditor, draft audit reports, hearing of reports of the internal audit department’s annual audit plan and individual audit results, hearing of audit firm's annual audit plan, exchange of opinions with outside directors, etc.

  In addition to the above, standing auditors conduct audits of business establishments, including overseas offices, based on the annual audit plan.

  Domestic and overseas travel restrictions due to COVID-19 have made it difficult to conduct on-site audits, but the appropriate audits are being conducted using web conferencing and other digital tools.

• 2. Implementation of internal audit

  With regard to internal audits, the dedicated internal auditing departments (15 employees) monitor the Company and each operating company with respect to the status and operation of their internal controls and the status of their risk preparation. The departments then perform operational audits based on the assessment of risks and other factors, and report the results of the audits to the Board of Directors and the Audit & Supervisory Board. The departments respond to the "internal control and reporting systems," assessing the Company and its operating companies on their internal controls and creating assessment reports to present to the Board of Directors and Audit & Supervisory Board.

Ⅳ. Officer Compensation

• 1. Amount of Officer Compensation and Benefits (Year ended March 31, 2021)

  Officer Category	Amount of Compensation (Millions of Yen)	Amount of Compensation by Type (Millions of Yen)			Number of Eligible Officers
  		Basic Compensation	Bonuses	Restricted Stock Compensation
  Directors (excluding Outside Directors)	204	97	61	44	5
  Outside Directors	63	63	-	-	7
  Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members)	64	64	-	-	2
  Outside Audit & Supervisory Board Members	20	20	-	-	2

  Notes:

  Maximum compensation levels for fiscal 2020 for directors and Audit & Supervisory Board members were determined by a resolution of the general shareholders' meeting, as follows: ・Directors: ¥500 million annually, of which ¥70 million is for outside directors (approved at the Ordinary General Shareholders' Meeting held on June 25, 2016). There were 10 directors (including 5 outside directors) at the conclusion of the Ordinary General Shareholders’ Meeting. Within the above-mentioned maximum annual ¥500 million compensation, an annual amount of up to ¥70 million in restricted stock compensation and a maximum of 30,000 shares (approved at the Ordinary General Shareholders' Meeting held on June 24, 2017) are to be granted to directors (excluding outside directors). There were 5 eligible directors (excluding outside directors) at the conclusion of the Ordinary General Shareholders’ Meeting. ・Audit & Supervisory Board members: Maximum ¥100 million annually (approved at the Ordinary General Shareholders' Meeting held on June 25, 2011). There were 4 Audit & Supervisory Board members (including 2 outside Audit & Supervisory Board members) at the conclusion of the Ordinary General Shareholders' Meeting. Also, maximum stock option-based compensation in the form of restricted stock acquisition rights is ¥30 million annually with a maximum of 30,000 shares annually (approved at the Ordinary General Shareholders' Meeting held on June 24, 2007) There were 4 eligible Audit & Supervisory Board members (including 3 outside Audit & Supervisory Board members) at the conclusion of the Ordinary General Shareholders' Meeting. There were 10 directors and 4 auditors as of the end of the fiscal year. No new stock options have been granted to Audit & Supervisory Board members since fiscal 2008. Bonuses are paid to directors as performance-linked compensation. The performance indicators selected as the basis for the amount of performance-linked compensation, reasons for selecting those indicators, the method for calculating the amount of performance-linked compensation, and the results related to the performance indicators used in the calculation are as shown in “Basic Policy for Officers’ Compensation (excluding outside directors and other non-executive directors) 3. Details of each component (2) Bonus”. In the above table, “Performance-linked compensation” includes the amount of provision for reserve for Directors’ bonuses for FY2020. Restricted stock acquisition rights are issued to directors as non-monetary compensation. Details of the relevant restricted stock acquisition rights are shown in “Basic Policy for Officers’ Compensation (excluding outside directors and other non-executive directors) 3. Details of each component (3) restricted stock compensation”. The status of the granting of the relevant stock-based compensation is as follows. Number of shares Number of eligible officers Directors (excluding Outside Directors) 16,140 5

• 2. Total Amount of Officer Compensation

  Name (Officer Category)	Total Compensation (Millions of Yen)	Company name	Compensation by Category (Millions of Yen)
  			Basic Compensation	Performance-linked Compensation	Non-monetary Compensatio
  Tamotsu Adachi (Director)	108	Benesse Holdings, Inc.	57	33	17

  Notes:

  Only directors whose total amount of officer compensation is 100 million yen or more are listed.

• 3. Basic Policy on Determining Officer Compensation

  ＜Directors＞

  (1) Method of Determining Policy

  The Company has established a Nomination and Compensation Committee, which is chaired by an outside director, to ensure transparency, fairness, and objectivity in determining officers’ compensation. The Board of Directors advised the Committee of its policy regarding determination of compensation for each officer, and after considering the Committee’s report, the policy was approved at Board of Directors meetings held on February 5, 2021, May 11, 2021 and June 11, 2021.

  (2) Basic Policy

  The Benesse Group operates under the corporate philosophy Benesse = "Well-Being," and aims to continually raise corporate value over the medium and long term as a business group that provides constant life-long support for customers’ efforts to increase their motivation and solve issues.

  To that end, the basic policy is for compensation for officers (excluding outside directors and other non-executive directors) to function as an incentive to continually raise corporate value (as detailed below).

  (3) Compensation levels

  The Group has adopted competitive compensation levels commensurate with the roles, abilities, and responsibilities required of its directors in the course of promoting Group management. Specifically, it establishes these levels with reference to external compensation surveys and based on the median figure at domestic companies of a similar scale.

  (4) Determination of compensation for each officer

  The Nomination and Compensation Committee determines the amount of compensation for each officer based on the resolution delegated by the Board of Directors. When the compensation levels were decided, the Nomination and Compensation Committee was comprised of Katsumi Ihara, Hideaki Fukutake, Ryuji Yasuda, Mutsuo Iwai, and Daisuke Iwase as well as Tamotsu Adachi. The positions and responsibilities of Katsumi Ihara, Hideaki Fukutake, Mutsuo Iwai, and Tamotsu Adachi are as described in “（2）List of Officers”. Ryuji Yasuda and Daisuke Iwase are outside directors. The authority delegated is the approval of the amount of compensation for each director, and the reason for delegating this authority is to ensure transparency, fairness, and objectivity.

  Since each director’s compensation is decided through these procedures, the Board of Directors deems the compensation to be appropriate and in keeping with the above-mentioned determination policies.

  (5) Activities of the Nomination and Compensation Committee

  The Nomination and Compensation Committee meets 6 times a year to discuss the policy for deciding the details of compensation for each director, the amount of compensation for each director, bonus standards, bonus amounts, and the granting of restricted stock compensation. In addition, the Board of Directors also discusses the policy for deciding the details of compensation for each officer, the officer compensation system, and the granting of restricted stock compensation.

  ◆ Basic policy for officers’ compensation (excluding non-executive directors including outside directors)

  • 1. Compensation structure

    In order to incentivize the medium- and long-term rise in corporate value the Company targets, the compensation structure emphasizes not only short-term performance, but also medium- and long-term achievements. In real terms, compensation is comprised of: (1) basic compensation, (2) bonuses, and (3) restricted stock compensation. There are no director retirement benefits. The details of each of these components are detailed below.

  • 2. Proportion of each component

    Representative
    Directors

    Basic compensation （50%）	Bonuses （35%）	Restricted stockcompensation （15%）
    Set based on expectations for the role	Paid taking the Company's business performance into account	Compensation linked to stock price

    Other Directors

    Basic compensation （55%）	Bonuses （35%）	Restricted stockcompensation （10%）
    Set based on expectations for the role	Paid taking the Company's business performance into account	Compensation linked to stock price

  • 3. Details of each component

    • (1) Basic compensation

      Basic compensation is established based on expectations for the director's assigned role in each fiscal year. Basic compensation is paid monthly in 12 equal payments.

    • (2) Bonuses

      Bonuses comprise performance-linked bonuses that are awarded by taking into account the Company's business results for each fiscal year, and can fluctuate between 0%-200%. In addition, bonuses are comprised of three components: ① a portion linked to overall company performance, ② a portion linked to performance in the segment to which the director is assigned, and ③ a portion based on qualitative evaluation. The actual bonus is determined proportionally to each part based on whether the director is assigned to a segment or not, it’s operations, and other information, and on evaluation from a variety of aspects of each director’s contribution. The evaluation period for bonuses is the fiscal year, and they are paid in June of the following year.

      • ① Overall company performance-linked portion

        This part links to the degree of achievement of consolidated earnings targets (consolidated sales, consolidated operating revenue). Evaluation is based on a table stipulated by the Nomination and Compensation Committee at the beginning of the fiscal year. This indicator was selected because it is an important performance indicator for incentivizing increase in overall Group corporate value.

      • ② Segment performance-linked portion

        This part links to the degree of achievement of performance targets (including sales and operating revenue) in the segment to which the director is assigned responsibility. Evaluation is based on a table stipulated by the Nomination and Compensation Committee at the beginning of the fiscal year. This indicator was selected because it is an important performance indicator for incentivizing increase in corporate value, particularly in the segment the director to which the director is assigned responsibility.

      • ③ Qualitative evaluation portion

        This part evaluates the degree of achievement at the end of the fiscal year relative to qualitative targets set at the beginning of the year for each director for their contribution to improving the organization and brand, such as by developing successors and reforming the organizational culture. The degree of achievement (= performance) is decided through discussions on the Nomination and Compensation Committee that take account of self–appraisals by each director.

      However, in situations where it is difficult to reasonably calculate performance-linked bonuses due to considerable uncertainty as a result of the pandemic and other special factors, other indicators deemed appropriate can be used on an exceptional basis, taking the circumstances into account. For example, in addition to the performance indicators mentioned above in ① and ②, indicators of achievement of performance targets for the previous year’s consolidated results can be used.

      The consolidated forecast (consolidated sales, consolidated operating income) for the current fiscal year (FY2020) is for a YoY decrease due to the impact on business from the spread of COVID-19. Under such circumstances, in order to reasonably calculate performance-linked bonuses, results were compared to the previous year’s (FY2019) results (consolidated sales, consolidated operating income) as well as to the consolidated forecast (consolidated sales, consolidated operating income) to calculate rate of achievement of performance targets. Results related to performance indicators used in those calculations are shown below.

      	Standard value		Current fiscal year (FY2020) results (Millions yen)
      	Current fiscal year (FY2020) consolidated initial forecast (Millions yen)	Previous fiscal year (FY2019) consolidated results (Millions yen)
      consolidated sales	426,000	448,577	427,531
      consolidated operating revenue	9,300	21,266	13,089

    • (3) Restricted stock compensation

      Restricted stock compensation was introduced in FY2017 to further incentivize directors to continually improve corporate value by increasing the linkage between directors’ compensation and medium- and long-term performance, while at the same time promoting the increased sharing of corporate value with shareholders.

      Restricted stock compensation is capped at 15% of the Representative Director’s annual salary and 10% of other directors’ annual salary.

      The restricted period is set at three years, and directors are not permitted to sell or otherwise dispose of the stock during this period.

      If the Board of Directors deems that a director has committed a significant breach of the Company’s internal rules during their period of office, it can demand the repayment of share-based payments if the offence occurred during the restricted period even if the director has already left the position.

      Restricted stock compensation is granted during July and August.

    • “Basic policy for compensation for non-executive directors including outside directors”

      Compensation for non-executive directors including outside directors is comprised of basic compensation only in order to avoid obstruction of their role in supervision of management. Basic compensation is paid monthly in 12 equal payments.

  ＜Audit & Supervisory Board Members＞

  Compensation for Audit & Supervisory Board members is decided by discussion among the Audit & Supervisory Board members, and comprises basic compensation only.
  There are no plans for new allocation of stock options. Basic compensation is paid monthly in 12 equal payments.

Ⅴ. Share Holdings

• 1．Share definitions and holding conditions

  The Company defines shares held purely for investment purposes and shares held for other purposes as follows.

  Shares held purely for investment purposes are bought solely for the purpose of benefitting from movement in the share price or share-related dividends.

  Shares held for other purposes are those bought for other reasons than listed above, including as policy stock or to strengthen business partnership within the Group.

• 2．Shares held for purposes other than investment

  The verification methods used by the Board of Directors and other committees for shareholding policies and the rationality of holdings, as well as for assessing the suitability of holding each stock.

  Benesse holds shares of companies deemed necessary in order to achieve sustainable growth and raise our social and economic value, as part of our management strategies including financing and business alliances, and in order to build good relationships with business partners and local communities and ensure smooth business operations.

  The Board of Directors or a committee with corresponding functions decides whether to continue holding or sell policy stocks after a verification of the suitability of the holding, which is based on an investigation of whether each individual stock is suitable for the holding purpose and whether the benefits of holding balance out the risks and capital cost.

  The appropriateness of holding individual securities is determined on a comprehensive basis, looking at such factors as annual dividends received, valuation gain or loss on shares, net assets per share, business results, trading activity, and other economic rationality. If the holdings are not considered reasonable, the company will consider selling the securities with the understanding of the issuer.

  Also, the voting rights of strategic shareholdings are exercised taking into account on a comprehensive basis whether doing so contributes to establishing an appropriate corporate governance system and enhancing the issuer’s corporate value over the medium to long term.

  At the May 2020 Board of Directors Meeting, the suitability of each individual security holding was verified. One share position was sold in the current fiscal year (FY2020). Total number of companies and amounts on the balance sheet of equity holdings

  Total number of companies and amounts on the balance sheet of equity holdings

  	Number of companies	Balance sheet amount (Millions of yen)
  Shares in unlisted companies	19	6,280
  Shares in companies other than unlisted companies	2	1,821

  ( Companies whose number of shares increased during the current fiscal year )

  	Number of companies	Total amount on sale (Millions of yen)	Reason for increase
  Shares in unlisted companies	-	-	-
  Shares in companies other than unlisted companie	-	-	-

  ( Companies whose number of shares decreased during the current fiscal year )

  	Number of companies	Total amount on sale (Millions of yen)
  Shares in unlisted companies	1	3
  Shares in companies other than unlisted companies	-	-

  Information regarding the number of shares and value on the balance sheet for each specific investment stock and stocks deemed as policy stock.

  Each specific investment stock

  Company	FY2020	FY2019	Purpose of holding, quantitative impact of holding or reasons for increasing volume	Holding of the Company’s stock
  	No. of shares	No. of shares
  	Balance sheet amount (Millions of yen)	Balance sheet amount (Millions of yen)
  The Chugoku Bank, Ltd.	1,374,000	1,374,000	To maintain a relationship with the main bank for flexible financing with a view to future M&A, and to strengthening our relationships and networks in the local economy of Okayama Prefecture where Benesse was founded.	Yes
  	1,284	1,323
  LAC Co. Ltd.	500,000	500,000	To maintain and reinforce the joint venture for the maintenance and operation of core information systems at Benesse InfoShell Co., Ltd, and the cooperative relationship for IT and security at the Benesse Group.	No
  	536	375

  Note:

  With respect to the quantitative impact of holdings, they are not disclosed from the perspective of contractual confidentiality of individual transactions. However, the rationality for holding is determined on a comprehensive basis, taking into account annual dividends received, valuation gain or loss on shares, net assets per share, business results, trading activity, and other economic rationality. The Board of Directors considers whether it is reasonable to continue holding or to dispose of the shares.

• 3. Shares held purely for investment purposes

  	FY2020		FY2019
  	Companies	Balance sheet amount (Millions of yen)	Companies	Balance sheet amount (Millions of yen)
  Shares in unlisted companies	12	486	10	471
  Shares in companies other than unlisted companies	26	1,535	23	1,026

  	FY2020
  	Dividends received (Millions of yen)	Gain or loss on sale (Millions of yen)	Valuation gain or loss (Millions of yen)
  Shares in unlisted companies	6	-	-
  Shares in companies other than unlisted companies	36	161	893

Implementation Status of the Corporate Governance Code

The Company implements all principles of the Corporate Governance Code.

Results of Evaluation of the Effectiveness of the Board of Directors

Benesse conducts an evaluation of the effectiveness of our Board of Directors every year.
Please refer to the following PDF for an overview of the results.

• FY2020 Results of Evaluation of the Effectiveness of the Board of Directors [185KB]
• FY2019 Results of Evaluation of the Effectiveness of the Board of Directors [162KB]
• FY2018 Results of Evaluation of the Effectiveness of the Board of Directors [165KB]
• FY2017 Results of Evaluation of the Effectiveness of the Board of Directors [547KB]

Independent Officers Notification

• Independent Officers Notification (Submitted on June 2, 2021) [124KB]