SUSTAINABILITY Corporate Governance

Basic Concept

We place great importance on stakeholder under Group Philosophy “Creating Happiness and Harmony in Our Communities,” and strive to maximize enterprise value by making Lawson stores a place where -

  • the customer is always made to feel welcome
  • franchised store owners can feel that they are realizing their full potential
  • store crew members（part-time staff and workers） on short-term contracts can develop their skills and grow as a result of their own efforts
  • suppliers and service providers see their dreams take shape
  • employees can take pride in their work and really feel a sense of being useful to the society
  • shareholders can contribute indirectly to society and invest in their dreams for the future, and
  • members of customer communities can feel welcome and safe

These are our goals, and the realization of these objectives will contribute to the maximization of enterprise value.

To this end, we believe it is important not only to comply with laws and regulations and social norms, but also to enhance the soundness and transparency of management and improve corporate governance through the practice of considerate behavior based on Lawson’s Group Philosophy and Lawson’s Code of Ethics, as well as proactive disclosure in accordance with the Basic Principles for Information Disclosure.

Detail of Corporate Governance

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Corporate Governance and Internal Control Systems

Diversity, Transparency, Fairness, and Effectiveness of the Board of Directors

In order to ensure the diversity of the Board of Directors as a whole and to enable appropriate decision-making and supervision, Lawson appoints candidates with different expertise and experience as directors. We also appoint corporate auditors who have knowledge and expertise in finance, accounting, risk management, law and other areas necessary for auditing duties. In addition, We have introduced an executive officer system to separate management decision-making and supervision from business execution, and to create a system that enables rapid decision-making and business execution.

Lawson’s Board of Directors is made up of five members of the Board, including three males and two females, two of whom are independent members of the Board. The Board of Directors not only decides important management matters such as issues stipulated by laws and regulations and the Articles of Incorporation, but also monitors the conduct of business operations by its members of the Board. (12 times in fiscal 2022).

Lawson has established the Officer Selection Standards as criteria for appointing candidates for directors and corporate auditors. Furthermore, in addition to the independence standards established by the Tokyo Stock Exchange, Inc., We have established its own Criteria for Determining Independence and strive to ensure the transparency and fairness of management by appointing at least one-third of the directors as independent directors who are not likely to have a conflict of interest with general shareholders.
Furthermore, in order to establish a system for communication and coordination between outside directors and the management team as well as for collaboration with corporate auditors or the Board of Corporate Auditors, the head of independent outside directors is selected by mutual election (Miki Iwamura as of May 25, 2023).
In addition, Lawson has established a Special Committee on a voluntary basis to deliberate and review important transactions and actions that conflict with the interests of the parent company, Mitsubishi Corporation, and minority shareholders. The Committee consists of a chairman and five other members, all of whom are independent of the parent company, including independent outside directors and independent outside corporate auditors. This system is designed to verify the necessity, rationality, appropriateness, fairness, etc. of applicable important transactions, actions, etc., based on a high degree of independence, and report back to the Board of Directors.

Officer Selection Standards

  • Have a strong affinity with the Group Philosophy of “Creating Happiness and Harmony in Our Communities”
  • Have the ability to contribute to delivering sustainable growth to the Group and increasing its corporate value
  • An absence of mental or physical health problems that would hinder their ability to perform their duties
  • Popularity, dignity, and impeccable ethics
  • Have objective decision-making abilities and gifted with both foresight and insight
  • Have extensive experience and insight in such as corporate management and specialized fields
  • Be able to secure enough time to do the job line
  • Not disqualified under the Companies Act
  • Regarding independent officers, not conflict with “Criteria for Determining Independence”

Criteria for Determining Independence

  • A person or person who works for a party for whom the Group is an important business partner
    Refers to the case of a business-partner group that supplies products or services to the Group where the amount of business conducted between the Group and the business-partner group in the preceding business year was 2% or more of the business-partner group’s consolidated sales
  • A person who is an important business partner of the Group or person who works for a party that is an important business partner of the Group
    Refers to the case of a business-partner group to which the Group supplies products or services where the amount of business conducted between the Group and the business-partner group in the preceding business year was 2% or more of the Group’s consolidated sales (gross operating revenue)
  • A consultant, accounting specialist, or legal specialist who receives large amounts of money or other assets other than officer compensation from the Group
    Refers to a consultant, accounting specialist such as a certified public accountant, or legal specialist such as an attorney who receives money or other assets other than officer compensation from the Group and has received 5 million yen or more per year in each of the past two years from the Group
  • A major shareholder of the Company (if the shareholder is a corporation, a person who works for that corporation)
  • A close relative of the person works for the Group
  • A close relative of the person is a non-executive director or an accounting advisor of the Group (if the independent officer is an outside corporate auditor)
  • A person who, at the time of reappointment, has served for a total of more than eight years as an outside director or 12 years as an outside corporate auditor.

People to whom none of the above evaluation criteria for independence apply are considered for outside officer candidates. Note that even a person who fits any of the above criteria can be selected as a candidate for independent outside officer if the Board of Directors determines that said person is virtually independent.
In such case, the reason is explained and disclosed at the time of the candidate’s appointment as outside officer.

Every year, Lawson conducts an evaluation of the effectiveness of the Board of Directors, consisting primarily of a written survey of all directors and corporate auditors, with the aim of further ensuring the effectiveness of the Board of Directors and improving its functions. In this survey, Lawson receives responses from all directors and corporate auditors, then compiles and analyzes the results. In fiscal 2022, evaluation by an external organization, which is undertaken once every three years, was conducted.

  • Implementation of a questionnaire and individual interviews with all directors using external consultants
  • Check and analysis of materials for Board of Directors meetings as well as analysis and evaluation of results of the questionnaire and individual interviews by external consultants
  • Opinion exchange regarding evaluation results in meetings for independent directors to exchange opinions
  • Report of analysis and evaluation results to the Board of Directors and implementation of discussions

Opinion of external organization based on the evaluation of effectiveness of the Board of Directors

  • Directors and auditors actively exchange their opinions during Board of Directors meetings and operations are monitored based on sincere reports from the operating side. We believe that each director proactively works to demonstrate their supervisory function.
  • To make the Board of Directors more effective, it is desirable to have discussions and share information regarding the following items while creating priorities.
  • (1) Share important agenda to be determined by the Board of Directors (e.g., medium-term strategies, business portfolio)
  • (2) Check the monitoring subjects of the Board of Directors and monitoring methods in detail (including validation of the current rules and standards)
  • (3) Structure of the Board of Directors, etc.
  • As both the parent company and its subsidiaries are listed, the perspective of preparing for potential explanations to minority shareholders and other stakeholders is extremely important.
  • When promoting the discussion and information sharing above, information provision from the operating side is extremely important. It is recommended to proceed with operations while thoroughly discussing with the operating side the content and granularity of information required for discussions, initiatives to stop and to proceed with, as well as the priority order.

Going forward, we will further improve the effectiveness of the Board of Directors by having better discussions on medium- to long-term management issues and the approach that the Board of Directors should take, as well as by improving the operation of Board of Directors meetings, while referring to the results of evaluations of the effectiveness of the Board of Directors above, as well as discussions in meetings for independent directors to exchange opinions and Board of Directors meetings.

Audit & Supervisory Board

Lawson has 5 corporate auditors, including 2 males and 3 females, 3 of whom are independent corporate auditors.
Corporate auditors attend meetings of the Board of Directors and other important meetings where they also express their opinions. They also inspect important documents and conduct other activities in auditing the conduct of duties by directors (The Board of Corporate Auditors’ meeting was held 16 times in FY2022).

Nomination and Compensation Committee

All six members of the Nomination and Compensation Committee are non-executive directors or part-time outside corporate auditors, five of whom are independent directors, thus ensuring a high level of independence. Lawson consults with the Committee on candidates for directors, representative directors, positions and compensation for directors, and receives reports from the Committee. In addition, We recognize that succession planning for the CEO is an important management issue. As such, in order to enhance the objectivity, timeliness and transparency of the procedures surrounding succession planning, the Committee discusses this issue and determines the qualities and attributes necessary for the CEO of Lawson, as well as the training and nomination method of the successor as follows, and obtains approval.

Members of the Nomination and Compensation Committee
Committee Chairperson Yuko Gomi
Vice Committee Chairperson Miki Iwamura
Committee member Satoko Suzuki
Kiyotaka Kikuchi
Keiko Yoshida
Yuko Miyata

Qualities, Attributes, etc. Required of Lawson’s President

  • (1) Ability to respond to and create changes
    To ensure the continuation of the convenience store business, which is part of the societal infrastructure, it is essential to respond quickly to the constantly changing external environment and needs of society and customers. Furthermore, the ability to unearth new needs among customers and society as well as to create changes through innovations is vital.
  • (2) Strong leadership
    To maintain and elevate the chain’s brand, the exercise of strong leadership toward not only employees but also to stores throughout the country is critical.
  • (3) High-level communication skills
    The person at the top of Lawson needs to provide explanations to shareholders, investors, the media, etc. and to communicate information to the outside world. They also require high-level communication skills in order to ensure that store owners nationwide fully understand our management policy and Group Philosophy.
  • (4) Broad perspectives for viewing the Group as a whole and strong commitment to governance
    To contribute to management at the consolidated level, it is essential to maintain a broad perspective for pursuing total optimization for the Group as well as a strong commitment to promoting disciplined Group governance.
  • (5) Impeccable ethics
    As the president of a listed company, which could almost be described as a public institution, and as the top leader of a convenience store chain, they need to act in good faith and with impeccable ethics in any event that arises.

Note that no attributes for successors are specified. For example, they could be people from inside the company or outside the company.

Special Committee

Lawson has established a Special Committee on a voluntary basis to deliberate and review important transactions and actions that conflict with the interests of the parent company, Mitsubishi Corporation, and any minority shareholders. The committee consists of five members including the chairperson, all of whom are independent of the parent company, including independent outside directors and independent outside corporate auditors. This system is designed to verify the necessity, rationality, appropriateness, fairness, etc. of applicable important transactions and actions based on a high degree of independence, and then report the results back to the Board of Directors.

Members of the Special Committee (As of May 24,2023)
Committee Chairperson Yuko Gomi (Outside Corporate Auditor)
Vice Committee Chairperson Miki Iwamura (Outside Director)
Committee member Satoko Suzuki (Outside Director)
Keiko Yoshida (Outside Corporate Auditor)
Yuko Miyata(Outside Corporate Auditor)

Attendance at Board of Directors, Board of Corporate Auditors, Nomination and Compensation Committee, and Special Committee Meetings (FY2022)

    Outside
Officers		 Independent
Officers		 Board of
Directors		 Audit &
Supervisory
Board		 Nomination
and
Compensation
Advisory
Committee		 Special
Committee
Sadanobu Takemasu President and CEO,
Representative Director		 - - 12/12
(100％)		 - - -
Masayuki Itonaga
Appointed in May 2022		 Member of the Board,
Executive Managing Officer
and CFO		 - - 10/10
(100％)		 - - -
Keiko Hayashi
Retired in May 2022		 Member of the Board ○ ○ 11/12
(91.7％)		 - 2/2
(100％)		 -
Miki Iwamura Member of the Board ○ ○ 11/12
(91.7％)		 - 3/3
(100％)		 3/3
(100％)
Satoko Suzuki Member of the Board ○ ○ 12/12
(100％)		 - 3/3
(100％)		 3/3
(100％)
Kiyotaka Kikuchi Member of the Board - - 12/12
(100％)		 - 3/3
(100％)		 -
Shuichi Imagawa Standing Corporate Auditor - - 12/12
(100％)		 16/16
(100％)		 - -
Jun Miyazaki Standing Corporate Auditor - - 12/12
(100％)		 16/16
(100％)		 - -
Eiko Tsujiyama Corporate Auditor ○ ○ 12/12
(100％)		 16/16
(100％)		 3/3
(100％)		 3/3
(100％)
Yuko Gomi Corporate Auditor ○ ○ 12/12
(100％)		 16/16
(100％)		 3/3
(100％)		 3/3
(100％)
Keiko Yoshida Corporate Auditor ○ ○ 12/12
(100％)		 16/16
(100％)		 3/3
(100％)		 3/3
(100％)

* The above officers and their positions are as of the end of fiscal 2022.

Decision-Making Process and Policy for the Amount of Remuneration Paid to Directors.

(1) Basic policy on decisions concerning the amount of remuneration paid to directors

Regarding the amount of remuneration paid to directors, it is Lawson’s basic policy to design the remuneration system in close correlation with shareholder returns while ensuring that it will function sufficiently as an incentive for the enhancement of corporate value, sustainable growth and improvement of operating performance, and reward each director with a sufficient and adequate amount of compensation for the execution of their duties.

(2) Decision-making process for the amount of remuneration paid to directors

In order to enhance management transparency, the amount of remuneration paid to directors is determined at the board of directors meeting based on recommendations by Lawson’s Nomination and Compensation Committee, which consists exclusively of non-executive directors and outside audit & supervisory board members (part-time).
Based on “interviews on performance evaluation”, “interviews on goal setting for next fiscal year” and “discussions on basic compensation and performance evaluation of Lawson’s directors” which our Nomination and Compensation Committee conducts, the board of directors meeting determines the amount of individual remuneration paid to directors.

(3) Details of remuneration paid to directors

Remuneration paid to Lawson’s directors is composed of basic compensation through monthly cash payments and stock price-linked compensation through the granting of stock options.

[Basic compensation]

Basic compensation of directors is composed of fixed compensation with fixed monthly payments and variable compensation, which fluctuates in response to Lawson’s financial performance for each period.

1) Fixed compensation (60% of the total)

The amount of fixed compensation commensurate with the position is determined based on standards stipulated by internal rules.

2) Variable compensation (40% of the total)

In order to link the remuneration of directors with shareholder returns, Lawson has adopted a compensation system that is linked to its financial performance.
Variable remuneration is determined based on the percentage of budget achievement for EPS (consolidated current net profit per share) and SDGs targets (CO2 reduction rate per store, etc.). The variable remuneration amount is determined by adding a qualitative (10%) evaluation based on interviews with the Nomination and Compensation Committee to the amount above.
We reviewed part of our KPIs from March 2023 and decided to add the percentage of budget achievement for business profit (index equivalent to consolidated operating profit by the Japanese standard, calculated by subtracting the cost of goods sold as well as selling, general, and administrative expenses from the operating profit). Laying out the same targets as employees will lead to improvement of the company’s competitiveness. The purpose of EPS is to share more value with shareholders and to link it to the company’s performance. The purpose of the SDGs targets is to set targets in order to achieve the environmental vision set out in “Lawson Blue Challenge 2050!”
Regarding 3 non-executive directors, Miki Iwamura, Satoko Suzuki, and Kiyotaka Kikuchi, variable compensation is not applicable as they are focused on their supervisory and advisory roles as the Company’s representative directors and in the board of directors meetings.

[Stock price-linked compensation]

Stock options as stock-based compensation

By incorporating stock options as stock-based compensation linked with stock prices as part of compensation paid to directors, Lawson has a system in which management shares with stockholders the benefits from a rise in stock price as well as the risks associated with a price decline. We position stock options as compensation that is linked to medium to long-term improvement of its corporate value. Exercise price on stock options as stock-based compensation is \1 per share and the number of units granted, which is determined in accordance with the position of directors, is adjusted up or down by multiplying it by the percentage of the EPS target achieved. In addition, stock options as stock-based compensation can be exercised only during designated periods after retirement from office; directors are not allowed to exercise their stock option rights during their term in office.

(4) Limit on the amount of remuneration paid to directors

The limit on the amount of remuneration paid to Lawson’s directors is determined at the general meeting of shareholders in accordance with laws and regulations.

1) Amount of remuneration paid to directors

Resolutions at the general meeting of shareholders as of May 24, 2001: 400 million yen or less per year

2) Amount of stock options granted to directors

Resolutions at the general meeting of shareholders as of May 27, 2014: 300 million yen or less per year

Policy on Decisions Concerning the Amount of Remuneration Paid to Corporate Auditors
  • Basic policy on decisions concerning the amount of remuneration paid to corporate auditors
    Regarding the amount of remuneration paid to corporate auditors, it is Lawson’s basic policy to reward each corporate auditor with a sufficient and adequate amount of compensation for the execution of their duties.
  • Decision-making process for the amount of remuneration paid to corporate auditors
    The amount of remuneration paid to corporate auditors is determined based on discussions among corporate auditors and is within the remuneration amount limit resolved at the general meeting of shareholders.
  • Details of remuneration paid to corporate auditors
    Lawson’s corporate auditors receive basic compensation (fixed compensation) in cash.
    The amount of basic compensation is decided based on discussions among corporate auditors, taking into consideration whether or not they are working on a full-time basis, and segregation of auditing duties.
  • The limit of the amount of remuneration paid to corporate auditors
    The limit of the amount of remuneration paid to Lawson’s corporate auditors is determined at the general meeting of shareholders in accordance with laws and regulations.

Other Committees

Name Purpose Committee chair
Lawson Group Sweeping Transformation Executive Committee Promotion of company-wide strategies to achieve "Challenge 2025" President
SDGs Committee Company-wide response to the SDGs, compilation of plans, progress management and sharing, etc. CSO*1 Assistant
Compliance and Risk Management Committee Overall management of compliance (legal compliance) and risk management systems CRO*2
Information Security Management Committee Overall management of information security development and management systems CRO
Financial Reporting Internal Control Committee Overall management of the development and evaluation of the effectiveness of internal control over financial reporting President
Health and Wellness Promotion Committee Planning and formulation of strategies to achieve community health hubs for the entire Lawson Group CSO
  • CSO: Chief Sustainability Officer
  • CRO (Chief Compliance and Risk Officer): The executive with overall responsibility for the legal compliance and risk management system and framework in the Lawson Group

Basic Policy Regarding the Internal Control System

The business of Lawson Group encompasses a wide-range of operations, from the core business of convenience stores to high-end supermarkets and entertainment-related business, to financial, e-commerce, and consulting services. We operate a large number of LAWSON stores, covering every prefecture in Japan and several markets overseas, each of which offers a wide variety of products and services. As such, we are not only required to observe various laws and regulations but also we should assess the diverse range of possible risks and implement the appropriate countermeasures. In light of these characteristics, Lawson has established the “Basic Policy for Regarding the Internal Control System” to achieve healthy, sustainable growth. We are promoting maintenance of our internal control system based on this policy, while responding to changes in our management environment, conducting periodical reviews of the policy itself, and endeavoring to maintain and enhance an effective, practical internal control system.

Lawson’s internal control system (as of March 1, 2024)

  • CRO (Chief Compliance and Risk Officer): The executive with overall responsibility for the legal compliance and risk management system and framework in Lawson Group
  • CR Manager: Persons responsible for the development and implementation of a framework for identifying misconduct and problems concerning legal compliance and preventing risks from arising in the group where they belong, to support CRO



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