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”, since our founding, Benesse Holdings, Inc. (the “Company”) and the Benesse Group have been tackling various social issues and providing support for customers to improve themselves and to solve problems throughout their lives, primarily in the areas of education, nursing care, lifestyle and parenting. In February 2023, we announced our group purpose as the basis for implementing this corporate philosophy in specific activities at our business sites. In May of the same year, we formulated the "Transformation Business Plan" in order to realize this plan and achieve sustainable profitable growth for our group. To achieve the plan, we have worked to reform our portfolio structure, invest in new growth areas, and shift human resources, as well as to reform our management system and corporate functions to enable speedier decision making.

    Furthermore, in May 2023, the Company received an MBO proposal from the founding family and EQT, a private equity investment company headquartered in Sweden, and after review by the Takeover Committee, the Board of Directors of the Company expressed its opinion in favor of the tender offer for the Company's shares and recommended that shareholders tender their shares. Such tender offer was conducted from January 30 to March 4, 2024. Upon its approval, a reverse stock split and partial amendment to the Articles of Incorporation were resolved at an extraordinary shareholders' meeting held on April 29 of the same year. Following the delisting of the Company's shares from the Tokyo Stock Exchange Prime Market on May 17 of the same year, the reverse stock split took effect on May 21 of the same year, leaving the Company with two shareholders: Bloom 1 K.K., in which EQT has a stake, and Minamigata Holdings Ltd., in which the founding family has a stake. As a result, we are now able to implement flexible and bold management measures, and are working on business operations under the following management structure in order to leverage EQT's know-how and network, create business synergies, and strive to achieve the "Transformation Business Plan".

    With regard to the institutional design, the shareholders' agreement stipulates that the total number of directors will be a maximum of seven, with Mr. Hitoshi Kobayashi (CEO and President) and Mr. Hideaki Fukutake (Chairman of the Board of Directors) initially appointed, and that the number of directors with nomination rights other than the CEO and President will be three for EQT, two for the founding family (one of whom is Mr. Hideaki Fukutake), and one director to be jointly nominated by EQT and the founding family. In addition, the Company will change from a company with a board of corporate auditors to a company with corporate auditors and will appoint two corporate auditors, with one each nominated by EQT and the founding family. Accordingly, the Company has changed from a company with a board of corporate auditors to a company with corporate auditors as of the same date, following the resolution to amend the Articles of Incorporation at the Ordinary General Meeting of Shareholders held on June 3, 2024.

    The Board of Directors consists of one executive director (Mr. Hitoshi Kobayashi) and four non-executive directors (Mr. Hideaki Fukutake, Mr. Daisuke Iwase, Mr. Masahiro Shimizu, and Mr. Tetsuro Onizuka), and selects the President (Mr. Hitoshi Kobayashi) as the representative director and the Chairman (Mr. Hideaki Fukutake) and Vice Chairman (Mr. Daisuke Iwase) from among directors without representative rights. Two new corporate auditors have been appointed: a corporate auditor (Mr. Naoto Saito), who is familiar with internal affairs and has considerable knowledge of finance and accounting, and a corporate auditor (Mr. Yoji Kudo), who is qualified as a lawyer, conduct effective audits in accordance with the Corporate Auditor Auditing Standards and with auditing policies, assignment of duties, and other relevant matters.

    Our directors and corporate auditors concurrently serve as directors and corporate auditors of Benesse Corporation and Benesse Style Care, our main subsidiaries, to ensure prompt decision-making and appropriate supervision as a group.

    

  • The Benesse Group's Oversight of business execution

    Under the holding company structure, the Company collects and shares information related to the business execution of the entire Group through the following methods, based on operating company management and administration rules, with the aim of realizing the Group’s management policy and long-term vision as well as achieving all our management numerical targets. This serves as a monitoring function.

    Our executive structure is as follows: the CEO is established as the chief executive officer of the group, and the President & CEO serves as the CEO of the company. The President and CEO will also have major subsidiaries oversee the group's strategic business domains, with the President of Benesse Corporation overseeing the education and lifestyle business domain ("domestic education business," "university and adult education business," and part of "others" in the business segment) and the President of Benesse Style Care Inc. overseeing the nursing care and childcare business domain ("nursing care and childcare business" in the business segment).

    CXOs (Chief X Officers) have been appointed in each area of expertise, including corporate strategy, finance, human resources, legal and risk management, DX, and corporate communications, etc. CXOs oversee administrative divisions in their respective areas of expertise, promote group-wide business management, and identify and resolve management issues, The CXO also assists the President and CEO by promoting collaboration among CXOs and promoting the resolution of management issues from a group-wide perspective based on his/her expertise and knowledge. In the area of operational transformation, the CXOs report directly to the President & CEO, and the head of the administrative division oversees this specialized area. These CXOs and the heads of administrative divisions under the direct control of the President and CEO ("CXOs, etc.") request necessary reports from and give instructions to subsidiaries.

    When subsidiaries make an institutional decision on important matters that may affect the management of the Group, the president of Benesse Corporation or the president of Benesse Style Care shall consult with the Company in advance through the president of the company that controls the relevant business domain for subsidiaries that are controlled by the president of Benesse Corporation or the president of Benesse Style Care. From the perspective of ensuring the growth and legality of the Benesse Group, the Company shall consider such matters to be discussed between the president of the company overseeing the relevant business domain and the CXO, etc., and then follow procedures such as CEO approval and resolution by the Board of Directors of the Company.

    We have established a Management Committee, chaired by the President and CEO and attended by the CXO and others, the President of Benesse Corporation, the President of Benesse Style Care, and the heads of the business units of these companies, as well as CEO designees, to share important Group matters and to discuss cross-cutting matters among each strategic business area and strategic business area, as well as Group-wide management issues. In addition, for the purpose of reporting the progress of business plans, KPIs, and other important matters between the Company and each strategic business area, as well as reporting and deliberating on important cross-cutting matters in each strategic business area, the Company Management Committee (CMC) is held with the person responsible for the business area in question as chairperson, with the CEO, the president of the company responsible for that strategic business area, and the business unit managers of those companies, CXOs, etc., and CEO designees in attendance.

  • Implementation of Internal Control System

    In accordance with the basic policies of the Benesse Group’s Internal Control System and the Ordinance for Enforcement of the Companies Act, a resolution was passed at the Board of Directors meeting held in May 2006 to establish the broad outline necessary for the establishment of the system. The latest revision of the resolution was adopted on March 8, 2024.

    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 fully complies with societal rules, corporate ethical principles and laws and regulations. Furthermore, in February 2023 we published a Group purpose and we are building a management structure to facilitate continuous growth and development by pursuing the realization of our corporate philosophy and continuing to create value for society.

    The Company has formulated Benesse Group Risk Management and Compliance Rules targeting the Group as a whole. 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 to promote risk management and compliance for the Benesse Group as a whole. Committee members include the CEO, CXO and others, the Presidents of Benesse Corporation and Benesse Style Care Co., Ltd., and the heads of their in-house business companies. The Committee is chaired by the Chief Legal and Risk Officer (CLRO) which oversees risk management and compliance. By monitoring the progress of material risk countermeasures included in the business plans of the Company and its subsidiaries, the Committee visualizes the status of the Group’s major risks, and determines the Group's major risks and risk countermeasures every fiscal year. The Committee regularly reports the results to the Company’s Board of Directors which are then disseminated within the Company and its subsidiaries, and promotes improvements (including corrective measures, implementation of preventive measures, education, and training, etc.) and other important risk countermeasures. Applying the PDCA cycle in this way, negative information is shared and normal risk management and compliance activities are promoted.

    With regard to crisis measures, we establish a simple and clear system within the Benesse Group Risk Management and Compliance Rules to ensure that information is immediately reported to the Company in the event of a crisis. We believe that it is important to respond in a timely and appropriate manner in accordance with this system when a crisis occurs.

    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, the system has been expanded to domestic Group companies and a contact point via a third party organization is in operation. The internal reporting system was expanded in 2009 to include overseas Group companies. In November 2019, the global whistleblower system was upgraded, and the company established a whistleblower contact point in the Group in response to the amendments to the Whistleblower Protection Act which took effect in June 2022.

  • Outline of the Terms of Liability Limitation Agreements and Directors and Officers Liability Insurance Agreements

    The Company has signed agreements with all directors (excluding executive directors, etc.) and Audit & Supervisory Board members to limit their liability for damages in accordance with Article 423, Paragraph 1 of the Companies Act. Based on these agreements, in cases where the directors (excluding executive directors, etc.) and Audit & Supervisory Board members act in good faith and there is no gross negligence of duty, liability for damages is limited to the minimum amount prescribed by Article 425, Paragraph 1 of the Companies Act.

    Furthermore, the Company has signed directors and officers liability insurance agreements with an insurance company, in accordance with Article 430-3, Paragraph 1 of the Companies Act. The Company’s directors and Audit & Supervisory Board members are insured and the Company pays all premiums. The insurance agreements cover compensation for damages and legal fees in the event that the insured is held liable for damages arising from his/her execution of duties. However, the agreements do not cover damages arising from violations of laws and regulations knowingly committed by the insured. This is to ensure that the insured’s proper execution of duties is not compromised.

• 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 3 and less than 7 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

  Our Articles of Incorporation stipulate that resolutions on matters stipulated in each item of Article 202, Paragraph 1 or Article 241, Paragraph 1 of the Companies Act, such as offering matters when granting shareholders the right to receive allotment of shares or stock acquisition rights, shall be made by a resolution of the Board of Directors, not by a resolution of the General Shareholders Meeting.

  The Articles of Incorporation also stipulate that the Company may, by a resolution of the Board of Directors, pay interim dividends with a record date of the last day of September each year in order to flexibly return profits to shareholders.

  Furthermore, 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.

Ⅱ. Management

• Management

Ⅲ. Implementation of auditing

• 1. Implementation of corporate auditing

  We have changed from a company with a board of corporate auditors to a company with corporate auditors by resolution of the Ordinary General Meeting of Shareholders held on June 3, 2024, and one full-time corporate auditor and one part-time corporate auditor have been appointed. The full-time corporate auditor has a considerable number of years of experience in areas related to finance and accounting, and the part-time corporate auditor is an attorney at law. In addition, the Company has established the Corporate Auditors' Office as an organization to assist the Corporate Auditors in the performance of their duties and to enhance the auditing function, and has assigned one full-time staff member to this office.

  In accordance with the Corporate Auditors' Auditing Standards, the Corporate Auditors have established an auditing policy that places emphasis on preventive audits and is responsible for establishing a high-quality corporate governance system that lives up to the public's trust.

• 2. Implementation of internal audit

  With regard to internal audits, the dedicated internal auditing department under the direct control of the President consisting of 23 members monitors the Company and each operating company with respect to the status and operation of their internal controls and the status of their risk preparation. In addition, it also utilizes a Control Self-Assessment (CSA) system to enhance cooperation and verification functions with business division managers. The results of these audits are reported to the Board of Directors and auditors as appropriate. 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.