Sustainability

Corporate Governance

Enhancing Corporate Governance and Risk Management

Sun Asterisk Inc. (hereinafter "Sun*") regards the establishment and continued enhancement of a corporate governance system suitable to Sun*, which will serve as the foundation for Sun* to fulfill its corporate social responsibilities and conduct operations aiming to increase corporate value in the medium to long term, as an important management issue.

Sun* is committed to establishing an internal system that ensures prompt and rational decision-making as well as efficient business execution, and to enhancing corporate governance, in order for Sun* to pay respect to its stakeholders, increase soundness and transparency as a company, and aim for stable long-term appreciation of shareholder value. Sun* has implemented all of the principles stipulated in the "Corporate Governance Code" of the Tokyo Stock Exchange and provides details on the disclosure items required under each principle in Sun*'s Corporate Governance Report.

Corporate Governance System

Sun* determined that a structure with an "audit and supervisory committee" (in which the majority of the members would consist of "audit and supervisory committee members" and outside directors with audit and supervising responsibilities as well as voting rights at board of directors meetings) would be effective for supervising of the Board of Directors and enhancing corporate governance. Accordingly, upon receiving approval on the necessary amendments to the articles of association at the 6th Ordinary General Meeting of Shareholders held on March 29, 2019, we converted to a "company with an Audit and Supervisory Committee" in order to further ensure the soundness and efficiency of our operations. Sun* organs include shareholders' meetings, Board of Directors, an Audit and Supervisory Committee and accounting auditor. In addition, Sun* also has a management council to expedite decision-making in business execution.

Sun* has not established an independent "nomination/compensation committee" as it is not mandatory. But on issues related to executive compensation and shareholders' meeting agenda items including director candidates, we explain and seek advice from independent outside directors and Audit and Supervisory Committee members prior to receiving a resolution from the board of directors. For this reason, we believe the independence and objectivity of functions and accountability of the Board of Directors are uncompromised.

Sun*'s Continued Efforts

March 2019: Transition to company with Audit and Supervisory Committee, appointed two outside directors.
October 2019: Completed report on reasons for appointing outside directors and their independency status.
July 2020: Listed on the Tokyo Stock Exchange's Mothers market.
March 2021: Appointed a female director.
October 2021: Establishment of voluntary Nomination and Compensation Committee.
Mar. 2022: Appointment of three outside directors and two female directors.
Dec. 2022: Listed on the prime market of the Tokyo Stock Exchange (segment transfer).

Corporate Governance System

Board of Directors

The Board of Directors consists of seven directors, three of whom are Audit and Supervisory Committee members (two of whom are outside directors). Board of Directors meetings are held monthly and as needed to make important management decisions as well as to receive business execution reports from executive directors and provide supervision thereon. In addition, outside directors also provide appropriate guidance to management from their independent standpoint.

Audit and Supervisory Committee

The Audit and Supervisory Committee consists of one internal director who is a full-time Audit and Supervisory Committee member and two independent outside directors. Audit and Supervisory Committee members attend Board of Directors meetings and other important meetings, and audit the business execution of executive directors by inspection of documents or through reports. Committee members conduct audits based on the audit plan and hold meetings monthly or as needed. In addition, by exchanging opinions with the Internal Audit Office and the Accounting Auditor, committee members can efficiently gain a reasonable understanding of the status of business execution and enhance the effectiveness of audits.

Management Council

The Management Council is composed of 5 full-time directors and the heads of relevant organizations. Meetings are held monthly or as needed to deliberate and report on important matters. Full-time Audit and Supervisory Committee members participate in management council meetings for the purpose of auditing the soundness and appropriateness of the deliberation process.

Nomination and Compensation Committee

Before the establishment of the Nomination and Compensation Committee, discussions regarding nominations and compensation had been conducted by the Audit and Supervisory Committee, but in October 2021, the Board of Directors passed a resolution to establish a voluntary Nomination and Compensation Committee, believing that outside directors being central in the discussions for not only audit, but also nomination and compensation will further enhance the corporate governance of the Company.
The Committee, consisting of three outside directors (Toshihiro Ozawa, Eriko Ishii, and Makiko Ishiwatari) and one director (Ken Nihonyanagi), is an advisory body to the Board of Directors and examines the nominations and compensation of directors.

Internal Audit Office

The Internal Audit Office has been established to monitor the achievement of legitimacy, reasonableness, effectiveness, efficiency and reliability of overall management policies and status of business execution, and assess and verify progress made thereon. They conduct audits related to accounting, operations, efficiency, economy, legal compliance, and internal control through regular audits or extraordinary audits conducted as needed. The Internal Audit Office reports the results of internal audits to the Representative Director, the Board of Directors, and the Audit and Supervisory Committee, provides advice and proposals for any problems found, and contributes to the enhancement of internal control by monitoring the improvements achieved thereon.

Accounting Auditor

We have appointed Grant Thornton Taiyo LLC as our accounting auditor. No special interest exists between Sun* and the auditing company or their business executives.

Liability Limitation Contract

Sun* has entered into liability limitation contracts with Mr. Ken Nihonyanagi, Mr. Toshihiro Ozawa, and Ms. Eriko Ishii and Ms. Makiko Ishiwatari based on Article 427, Paragraph 1 of the Companies Act, to limit liability for damages under Article 423, Paragraph 1 of the same Act. The limit of liability for damages under the contracts is the minimum liability limit stipulated by law.

Members of the Board of Directors and the Audit and Supervisory Committee and Their Experience/Expertise

Name	Position	Attribution		Experience / Specialty
Name	Position	Independence	Corporate CEO/Management Top	Related Industry /Business	IT/ Technology	Marketing/ Sales	Global Business	Personnel/ Human Resources Development	Treasury /Accounting	Risk management /Public relations
Taihei Kobayashi	CEO		Male	●	●	●	●	●	●
Yusuke Hattori	Director		Male	●	●		●		●	●	●
Takuya Umeda	Director		Male		●		●	●	●	●
Makoto Hirai	Director		Male	●	●		●		●
Ken Nihonyanagi, Director	Director Full-time Audit and Supervisory Committee member		Male					●		●	●
Toshihiro Ozawa	Outside director Audit and Supervisory Committee	●	Male	●	●	●					●
Eriko Ishii	Outside director Audit and Supervisory Committee	●	Female					●			●
Makiko Ishiwatari	Outside director	●	Female	●			●	●	●

Policies and Procedures Regarding the Nomination of Director Candidates

Basic Policy for Appointment of Directors

Our general policy is to appoint officers who can contribute to the sustainable development of the group and the improvement of corporate value over the medium to long term. Accordingly, we consider and appoint each officer from among those who possess the following qualities. In selecting candidates for each position, we consider the balance of capabilities and knowledge of the Board of Directors and the Management Council as well as reduce underrepresentation to help promote diversity.

Those with outstanding personalities and insight and respect for our management philosophy.
Those with a deep understanding of Sun*'s history, corporate culture, employee characteristics, and sufficient business experience and knowledge.
Those who, based on factors including our business environment and competition, can contribute to increasing corporate value, and are capable of developing and implementing business strategies and action plans to continuously improve corporate value over the medium to long term, and who, at all times, endeavor to verify outcomes and further improve on strategies and action plans.
Those who are keyed into changes in the industry that our group belongs and the value of the services we provide, and who can constructively deliberate on the direction the group should take

Criteria for Selecting Director Candidates who are Not Audit and Supervisory Committee Members

We select candidates from those with the experience, capability, leadership, medium to long-term perspective and high ethical standards suitable for management decision-making and supervision of business execution, upon overall assessment of factors including their personality, experience, and years of tenure as a director.

Criteria for Selecting Director Candidates who are Audit and Supervisory Committee Members

We select candidates from those with one of the following experience or capabilities, upon overall assessment of factors including their personalities, concurrent posts with other companies, and years of tenure as a director.

Those who have served Sun* as directors or executive officers, or who have had positions in management function departments or the internal audit department, etc.
Lawyers or other legal experts
Those with management experience
Those with substantial expertise in accounting and finance
Those with knowledge and experience in industries related to our business, such as IT and internet-related industries
Those with profound experience in research and development
Those with experience or capabilities equivalent to any of the above

Appointment Procedure

The Board of Directors shall select candidates for directors based on the general policy above and the selection criteria to be submitted to the general meeting of shareholders for approval. Pursuant to Article 34-2 of the Companies Act, the Board of Directors shall obtain the consent of the Audit and Supervisory Committee when submitting proposals for directors who are Audit and Supervisory Committee members.

Criteria for Independencey

In appointing independent outside directors, Sun* complies with the requirements for outside directors stipulated in the Companies Act and the Independence Criteria stipulated by the Tokyo Stock Exchange. In addition, Sun* has established its own criteria for independence.

Criteria for Independence of Outside Directors PDF

（26KB）

Reasons for Appointing Outside Directors and their Independency Status

Mr. Toshihiro Ozawa

Outside Director/Audit and Supervisory Committee Member

Independent officer: ○

Board of Directors Attendance: ○ (12/12)

Audit and Supervisory Committee Attendance: ○ (14/14)

( ) indicates previous year's attendance

Reason for Appointment

Mr. Ozawa has been long involved in IT-related businesses as well as management of public companies, and possesses significant experience and broad insight in the utilization of IT and corporate governance. Since his appointment in April 2019 as an outside director (Audit & Supervisory Committee member) of Sun*, he has utilized his experience and insight and contributed to the strengthening of the audit system and corporate governance of Sun* by engaging in open discussions with company management on subjects such as anticipated risk factors. Sun* selected Mr. Ozawa as an outside director and Audit and Supervisory Committee Member candidate as, based on the above, we expect him to continue to provide appropriate guidance from an independent perspective on the decision making of our Board of Directors.

Ms. Eriko Ishii

Outside Director/Audit and Supervisory Committee Member

Independent officer: ○

Board of Directors Attendance: ○ (12/12)

Audit and Supervisory Committee Attendance: ○ (14/14)

( ) indicates previous year's attendance

Reason for Appointment

As a lawyer, Ms. Ishii possesses profound insight and a wealth of experience in corporate legal affairs and governance, based on which she can objectively monitor the management of Sun* to further strengthen corporate governance. Additionally, we expect her to contribute to the strengthening of the function of our Board of Directors from the perspective of diversity. For these reasons, Sun* selected Ms. Ishii as an outside director and Audit and Supervisory Committee member candidate. Although Ms. Ishii does not have any management experience other than through outside director positions, based on the above, Sun* believes she can appropriately fulfill her responsibility as an outside director and Audit and Supervisory Committee member.

Ms. Makiko Ishiwatari

Outside Director

Independent officer: ○

Board of Directors Attendance: ○ (9/9)

Audit and Supervisory Committee Attendance: ○ (-)

( ) indicates previous year's attendance

Reason for Appointment

In addition to the wide range of experience she has gained through managing financial institutions and foreign-affiliated Japanese corporations, she is also well-versed in marketing, human resource development, and coaching.
We expect her to provide advice and recommendations from a broad range of management perspectives, and therefore, we nominate her as an outside director.
The Company has designated Ms. Ishiwatari as an independent director and an outside director because she meets the criteria for independence as stipulated by the Tokyo Stock Exchange and there is no risk of a conflict of interest between her and general shareholders.
(Note) Ms. Makiko Ishiwatari's name in the family register is Makiko Murase.

Assessing Board Effectiveness

The Company conducts self-assessments and analyses of the effectiveness of its Board of Directors with the aim of achieving the advancement of the effectiveness of the Board of Directors and thereby increasing the Company’s corporate value. At the most recent meeting of the Board of Directors held on January 17, 2024, the results of the effectiveness evaluation were confirmed and challenges for the future were shared.

1．Methods of Analysis and Evaluation
(1) The Company's Board of Directors has established the evaluation method and process through repeated discussions.
(2) Questionnaires were sent to all directors in service (including those who are members of the Audit and Supervisory Committee) and responses were obtained. The evaluation items were as follows: (a) Composition of the Board of Directors, (b) Agenda of the Board of Directors meetings, (c) Operation of the Board of Directors meetings, and (d) System to support the Board of Directors.
(3) Based on the responses to the questionnaire, the Board of Directors exchanged opinions and discussed future initiatives.

2. Summary of Analysis and Evaluation Results
The results of the questionnaire and discussions confirmed that the Board of Directors maintains a high level of effectiveness and that substantive discussions are held at Board meetings. In light of the role of the Company's Board of Directors, we judged that the Board of Directors as a whole, maintains a high level of effectiveness from the following perspectives:
- The Board of Directors has been engaging in constructive discussions by utilizing the experience and expertise of each director through adequate support for directors in cooperation with the Corporate Planning Department, Internal Audit Department, and other divisions.
- There is active discussion on improving group performance to enhance corporate value.

However, on the other hand, for the purpose of achieving the advancement of the effectiveness of the Board of Directors, and to continue to improve corporate value, the following items were identified as issues that need to be further addressed.

Preparation and discussion of important agenda items, such as mid- to long-term management issues.
Ongoing monitoring and discussion on risk management and sustainability.
Improvement of the operation of the Board of Directors, including agenda control and sharing of materials in advance of meetings.
Provide directors with information on relevant laws and regulations, training opportunities, and mediation.

3. Future actions
Based on the results of the survey and discussion, all directors discussed the ideal governance of the group, and confirmed that the following items will be focused on in FY2024.

(1) Discussion of important agenda items such as mid- to long-term management strategies.
(2) Monitoring and discussion of indicators for each theme, such as risk management and sustainability.
(3) Expansion of discussion time by carefully selecting board meeting agenda items to enable the above discussions.
(4) Expansion of support for the Board of Directors through provision of information on related laws and regulations and training opportunities for directors, and mediation.

By implementing the above initiatives, the Company will continue its efforts to improve the effectiveness of the Board of Directors and strengthen corporate governance.

Directors' Remuneration Policyy

① Fundamental Policy

Our basic policy is to establish a directors' remuneration structure that appropriately incentivizes directors to achieve continuous enhancement of corporate value while maintaining alignment with shareholders' interests, under which remuneration of each director is determined in accordance with their responsibilities. Remuneration of executive directors will consist of a fixed basic component, a performance-linked component, and non-monetary remuneration, while remuneration of directors with administrative responsibilities and outside directors will be limited to a basic remuneration in light of their responsibilities.

② Policy for Determining Basic Monetary Remuneration of Directors (Including policy to determine the relevant remuneration period and conditions)

Basic remuneration of directors will be a monthly fixed remuneration to be determined in line with the positions, responsibilities and years of tenure as a director and after overall assessment of remuneration levels of other companies, company performance and company employee wage level.

③ Policy for Determining Amount and Details of Performance-linked Remuneration and Non-monetary Remuneration(Including policy to determine the relevant remuneration period and conditions)

The performance-linked remuneration, etc. shall be a cash remuneration reflecting the results of the performance indicators (KPI) to raise awareness of the need to improve performance in each fiscal year, and shall be paid at a certain time each year as a bonus (pre-determined salary) in an amount predetermined in proportion to the percentage of achievement of the target consolidated operating profit for each fiscal year. At the Board of Directors meeting held on February 22, 2023, it was resolved that performance-linked remuneration for the 11th and subsequent fiscal years shall be a cash remuneration reflecting the results of the performance indicators (KPI) to raise awareness of the need to improve performance for each fiscal year, and that the amount calculated based on whether the target values of consolidated sales and consolidated EBITDA for each fiscal year are achieved or not shall be paid. The target value shall be the consolidated EBITDA calculated based on the "consolidated net sales" and "consolidated EBITDA forecast" stated in the financial statements for the previous fiscal year.
The target performance indicators and their values shall be set at the time of the plan's formulation and, from time to time, in response to changes in the environment, the Nomination and Compensation
The target performance indicators and their values shall be set when the plan is formulated, and shall be reviewed from time to time in light of the Nomination and Compensation Committee's report in response to changes in the environment.
As for non-monetary compensation, some kind of stock compensation plan shall be considered within five years after listing, and shall be introduced as appropriate, based on the report by the Nomination and Compensation Committee in response to changes in the business environment.

④ Policy on Determination of Allocation of Amounts between Monetary Remuneration, Performance-linked Remuneration and Non-monetary Remuneration for Directors.

Allocation for executive directors will be based on the policy that the portion of performance-linked remuneration will increase in line with the seniority of the director, using allocation ratios utilized by companies of size, industry and business type similar to Sun* as benchmarks for consideration of the Audit & Supervisory Committee. The Board of Directors (Representative Director entrusted with the authority under ⑤ below) must respect the recommendation given by the Audit and Supervisory Committee, and will determine the remuneration for each director within the recommended remuneration allocation band designated for each type.

The guideline allocation ratio for each type of remuneration for the time being shall be: basic remuneration 55-75%, performance-linked remuneration 25-45%, non-monetary remuneration 0%.

⑤ Determination of Remuneration of Each Director

Determination of actual amount of remuneration of each director shall be entrusted to the Representative Director by resolution of the Board of Directors. The scope of authority will be the allocation to each individual of the bonus based on the basic remuneration of each director and the performance of the business under that director's responsibility. In order to ensure proper execution of responsibility by the Representative Director, the Board of Directors shall present the Audit & Supervisory Committee with the draft proposal for their consideration and recommendation. The Representative Director entrusted with the authority must determine the final allocation in accordance with the Committee's recommendation. For non-monetary remuneration, the Board of Directors will establish details of the non-monetary remuneration of each director based on the recommendation of the Audit and Supervisory Committee.

Compensation, etc. by Officer Category

Category	Total Remuneration, etc. (Thousands of yen)	Total Amount Per Type of Remuneration (Thousands of yen)			Number of Persons Receiving Payment
Category	Total Remuneration, etc. (Thousands of yen)	Basic Remuneration	Performance-linked remuneration, etc.	Non-monetary compensation, etc.	Number of Persons Receiving Payment
Directors (excluding audit committee members and outside directors)	115	59	56	－	4
Directors (Audit and Supervisory Committee Members) (excluding outside directors)	14	14	－	－	1
Outside Director	13	13	－	－	4

Internal Control System

Sun* Group has implemented its system in accordance with its Basic Policy on Corporate Governance to ensure increased transparency and compliance by Sun*. Please refer to the “Corporate Governance Report” for details.

Corporate Governance

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