Corporate Governance Structure and Initiatives | Directors

The Capcom Group is committed to leveraging its strengths per our Management Philosophy to achieve stable medium- to long-term growth and enhance corporate value through our business activities. To accomplish this, we are focused on increasing management transparency and soundness, building a system that can adapt to environmental changes, and continuously improving our corporate governance.

In this section, Capcom will explain the corporate governance structure and systems that it has initiated so far based on the key concepts of “effectiveness and visibility” in terms of the results of third-party assessment.

Using external perspectives to ensure effective governance

External directors ensure the effectiveness of the corporate governance function by playing key roles in the Compliance Committee and the Nomination and Remuneration Committee.

They also focus efforts on compliance and the prevention of corrupt or illegal activities, and openly exchange opinions and provide counsel at Board of Directors meetings in an effort to strengthen the management audit function. The Secretariat staff helps with the work of the external directors who are not members of the Audit and Supervisory Committee. For external directors who are members of the Audit and Supervisory Committee, the full-time staff of the Internal Audit Division helps with their work. In addition, in the fiscal year ended March 31, 2024, Capcom took steps to enhance the reporting of stakeholder opinions and other information to the Board of Directors and utilized round-table discussions with external directors to discuss the Group’s current status and medium- to long-term strategies with top management.

Since all seven of the external directors meet the criteria of independent directors, they have been designated as independent directors.

For the "Criteria for Independence of External Directors," please refer to the " Notice of Convocation of the 2024 Annual General Meeting of Shareholders " available on the "General Meeting of Shareholders"

Reasons for Selection of External Directors

Name	Reasons for selection
External Directors
Toru Muranaka	Due to expectations for his ability to contribute to the auditing and supervision of the Board of Directors through proposals and advice on legal compliance and propriety from a professional standpoint along with his high level of expertise and broad insight and knowledge as an attorney specializing in corporate and financial instruments and exchange law.
Yutaka Mizukoshi	Due to expectations for his ability to contribute to the auditing and supervision of the Board of Directors based on an external perspective, including his enthusiastic provision of opinions and advice from an independent standpoint based on his familiarity with management analysis and establishment of management strategies as well as his deep insight into economic trends and international sensibilities that comes from his experience and knowledge from his many years in the consulting industry.
Toshiro Muto	Due to expectations for his ability to contribute to the auditing and supervision of the Board of Directors by providing objective opinions and advice on general management from an independent standpoint with a broad perspective based on his extensive knowledge and experience as he possesses a high level of insight related to fiscal and monetary affairs, general economics, and corporate governance cultivated at the Ministry of Finance, the Bank of Japan, and operating companies.
Yumi Hirose	Due to expectations for her ability to contribute to the auditing and supervision of the Board of Directors and improvement of the human resources strategy by actively providing opinions and advice from an outside perspective based on her knowledge and experience, which include specialized knowledge and extensive experience from her many years as a tax administrator of tax agency offices, her considerable knowledge of finance and accounting, and her high level of knowledge related to health management.
Main Kohda	In addition to possessing extensive insights into international finance, her experience serving as a member of various governmental advisory councils and her rich background as an external director for publicly listed companies have given her a deep understanding of the business world. Given her wealth of knowledge, experience, and the profound insights and objective perspective demonstrated through her writing activities, she is expected to contribute to enhancing the Board of Directors’ auditing and supervision.
External Directors (Audit and Supervisory Committee)
Mutsuhiko Koro	In addition to his specialized knowledge and extensive experience in tax administration, he possesses considerable expertise in finance and accounting. Based on this high level of insight, he is expected to contribute to enhancing the Board of Directors’ auditing and supervision from an independent and objective standpoint.
Wataru Kotani	Due to expectations for his ability to contribute to the auditing and supervision of the Board of Directors based on the perspective of risk management and legal compliance, as he possesses broad expertise and extensive experience in IT security and legal affairs from his many years of involvement in police administration and provides opinions and advice from a neutral and objective standpoint.

The Company evaluates the effectiveness of the Board of Directors by means of individual questionnaires, interviews, and other methods that facilitate getting individual opinions from all directors. In addition, to further enhance the function of the Board of Directors, in the fiscal year ending March 2024, we focused on enhancing the reporting of opinions gathered through dialogue with stakeholders to the Board of Directors. We also utilized round-table discussions with external directors to discuss not only agenda items for the Board of Directors but also the Group’s current status and medium- to long-term strategies with top management. The evaluation of the effectiveness of the Board of Directors in the fiscal year ended March 31, 2024, was generally positive.

To further improve the effectiveness for strengthening the supervision function, we will work on the issues below in the fiscal year ending March 31, 2025.

［Main issues］

• ・Achieving synergy by engaging in round-table discussions with external directors and enhancing coordination with the Board of Directors
• ・Enhancing discussions on nomination and remuneration of directors and senior management for the improvement of corporate value over the medium to long term
• ・Strengthening the risk management system and expanding opportunities to discuss long-term issues

We will continue to promote sharing and understanding of various issues at our Board of Directors meetings to further enhance its function.

Revised Remuneration System Aimed at Enhancing Corporate Value and Alignment with Shareholders

The Company reviewed the remuneration system for Directors (excluding External Directors and Members of the Audit and Supervisory Committee. Hereinafter "Eligible Directors") at the General Meeting of Shareholders held in June 2024 with the aim of further strengthening efforts to increase the Company’s corporate value over the medium- to long-term, granting incentives to help the Group achieve stable profit growth, and sharing value with shareholders.

(1) Revision of Monetary Compensation Framework
Establishment of a performance-based bonus separate from base compensation, which varies in accordance with the Group’s business performance growth and other factors

(2) Introduction of Stock Compensation System
Introduction of a new performance-linked stock compensation system that uses the achievement level of growth targets of business performance among other factors as a benchmark

Guidelines for Determining the Remuneration, etc. of Individual Directors

1. Determination Guidelines for Remuneration, etc. of Directors (excluding members of the Audit and Supervisory Committee)
In order to ensure objectivity and transparency regarding remuneration for Directors (excluding members of the Audit and Supervisory Committee), the Board of Directors consults the Nomination and Remuneration Committee, which is chaired by an External Director (with External Directors comprising the majority of its members), and determines remuneration within the remuneration limit resolved at the General Meeting of Shareholders based on the deliberation and recommendations of the Committee regarding the following guidelines.

2. Determination Guidelines for Remuneration, etc. of Directors who are members of the Audit and Supervisory Committee
In order to ensure independence, individual remuneration, etc. for Directors who are members of the Audit and Supervisory Committee is not linked to business performance, and consists only of basic remuneration (fixed remuneration). The amount is determined within the total amount approved at the General Meeting of Shareholders through consultation among Directors who are members of the Audit and Supervisory Committee, taking into account full-time and part-time positions.

• See the [Reports and Materials] Annual Securities Report for details on the Director Remuneration System. (Japanese language only)

Remuneration system for Eligible Directors

Type of remuneration				Overview
Fixed remuneration		Monetary	Basic remuneration	A fixed amount of remuneration based on positions, responsibilities, etc. is paid proportionately each month
Performance-linked remuneration (variable remuneration)	Short-term	Monetary	Bonuses	Short-term incentives to raise awareness of improving company performance by steadily achieving the Group’s management goal of 10% increased operating income per fiscal year The amount calculated by linking the rate of change in consolidated operating income from the previous fiscal year to the rate of change in the total monetary remuneration (basic remuneration and bonuses) of Eligible Directors, minus the basic remuneration amount, is paid In principle, paid at a fixed time every year
	Medium-to long-term	Stock	Performance- linked stock remuneration	Medium- to long-term incentives to sustainably improve company performance and corporate value, and share an awareness of profit with shareholders Evaluation indicators are (i) the degree of achievement of the Company’s net income attributable to owners of the parent growth target and (ii) the Company’s stock price growth rate [total shareholder return (TSR) ÷ Tokyo Stock Price Index (TOPIX) growth rate] during the Target Evaluation Period (3 years) After the Target Evaluation Period has passed, depending on the degree of achievement of the above evaluation indicators, common shares of the Company with a transfer restriction period until retirement from the position of Director or other position determined by the Company’s Board of Directors (hereinafter "restricted stock") are allocated

Calculation Method for Performance-linked Remuneration

(1) Bonuses

[Calculation formula]

(2) Performance-linked stock remuneration

[Calculation formula]

1) "Standard number of shares" is the number of shares calculated using the following formula.

• (a) "Standard amount" is 50% of the total basic remuneration of Eligible Directors.
• (b) "Coefficient based on the positions, responsibilities, etc. of the Eligible Directors" is determined by the Company’s Board of Directors according to the positions, responsibilities, etc. of the Eligible Directors.
• (c) "Base stock price" is the average closing price of Company shares on the Tokyo Stock Exchange for the month preceding the start of the Target Evaluation Period (Note).

2) "Degree of achievement of growth targets such as business performance" is an evaluation coefficient that varies from 0% to 150%, and is calculated according to (i) the degree of achievement of the growth target for net income attributable to owners of the parent and (ii) Company stock growth rate results of a relative comparison of the Company’s TSR with the Tokyo Stock Price Index (TOPIX)’s TSR during the Target Evaluation Period.

Evaluation indicator	Evaluation percentage (weight)	Evaluation coefficient fluctuation range	Evaluation method
(i) Net income attributable to owners of the parent	50％	0％ – 150％	Compare to the cumulative amount if 10% growth is achieved each fiscal year during the Target Evaluation Period, and if the degree of achievement is 41% or more, the evaluation coefficient will be in the range of 50% to 150%.
(ii) TSR (TOPIX comparison)	50％	0％ – 150％	Compare the Company’s TSR during the Target Evaluation Period with the TOPIX growth rate for the same period, and if the growth rate is 50% or more, the evaluation coefficient will be in the range of 50% to 150%.
Total	100％	0％ – 150％	–

Remuneration Composition

The ratio of base remuneration, bonuses, and performance-linked stock remuneration for eligible directors is not set because the composition ratio changes depending on business performance and other factors. However, it is the Company’s policy that an appropriate remuneration system and structure should be in place to continuously improve business performance and corporate value over the medium- to long-term and to align profit interests with shareholders.

Reference: Image of Remuneration Composition for Eligible Directors

Amount of payment for bonuses and standard amount for the performance-linked stock compensation system when the management objective of 10% growth in consolidated operating income is achieved.
(percentage in the case that basic remuneration is 100)

Officer Remuneration (Year ended March 31, 2023)

Total remuneration, total amount by type of remuneration, and number of directors the remuneration was paid to, by type of director of delivery company

Type of director	Total remuneration (million yen)	Total of remuneration by type (million yen)				Number of directors paid
		Basic remuneration	Performance linked remuneration	Severance	Of those items to the left, non-monetary remuneration
Director (excluding Audit and Supervisory Committee and external directors)	968	587	381	–	–	7
Member of Audit and Supervisory Committee (excluding external directors)	21	21	–	–	–	1
External directors	61	61	–	–	–	5
Member of Audit and Supervisory Committee (external directors)	33	33	–	–	–	2