Corporate Governance

Fundamental Approach to Corporate Governance

Maintaining a sound framework for corporate governance is required to increase corporate value and fulfill corporate citizenship obligations by managing operations properly and ensuring that all activities are transparent and in compliance with laws and regulations. Paramount Bed Group will continue to position measures to strengthen corporate governance as one of its highest priorities and take actions as needed to improve governance according to the fundamental policies stated below.

• 1.Respect for the rights of shareholders and equality for all shareholders
• 2.Suitable collaboration with shareholders and all other stakeholders to reflect their interests
• 3.Proper disclosure of corporate information to maintain transparency
• 4.Ensure the effectiveness of the Board of Director’s oversight of business operations by using independent external directors to receive objective advice and reflect the opinions of all stakeholders
• 5.Constructive dialogues with shareholders with investment policies that are consistent with the interests of medium and long-term shareholders

Corporate Governance Framework

Business operations

The Board of Directors normally meets once each month to discuss and quickly reach decisions about important matters concerning management as prescribed by laws and regulations. There is also a Group Management Council that consists of directors, executive officers and other individuals at Paramount Bed and its consolidated subsidiaries. This council holds discussions concerning a broad range of management issues to help ensure that management activities are conducted in the best possible manner.

Audits and oversight

Paramount Bed Holdings has corporate auditors and the Board of Corporate Auditors normally meets once each month. Strict auditing activities are performed based on auditing policies that are determined by laws and regulations and the assignment of responsibilities determined by the corporate auditors. Corporate auditors attend meetings of the Board of Directors and other important meetings, receive reports about business activities from directors and others, examine significant documents, and perform other duties. There are three corporate auditors, including two external auditors.
The Internal Auditing Department, which is supervised directly by the president, performs audits of business operations and accounting procedures at Paramount Bed and consolidated subsidiaries. These audits are performed in accordance with internal auditing rules and based on a plan. This department is also responsible for strengthening internal audits.

Nominations

A number of considerations are used to select candidates for election as directors and corporate auditors. Candidates must have outstanding character and knowledge as well as considerable experience and accomplishments in their respective fields of expertise. High ethical standards are another requirement. Diversity is one more factor that is considered. Directors who oversee business operations must also have substantial specialized knowledge and experience concerning these operations. After hearing the opinions of the independent external directors, the representative director submits proposals for candidates by reflecting all of these requirements. In addition, the prior approval of the Board of Auditors is obtained for corporate auditor candidates.

Compensation

Directors, other than external directors, receive compensation that consists of a fixed amount based on each director’s responsibilities and an amount that varies depending on results of operations. Bonuses are determined by a formula and also reflect sales and earnings. Compensation is determined after receiving the opinions of independent external directors. Compensation for directors does not exceed the aggregate annual limit of ¥500 million that has been approved by shareholders.
Compensation for each corporate auditor is determined by the corporate auditors and does not exceed the aggregate annual limit of ¥100 million that has been approved by shareholders.

Corporate Governance Flowchart