SUSTAINABILITY Corporate Governance

Basic Approach

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
  • 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 will continue to ensure that laws and regulations are strictly observed, and social codes of conduct are honored. In accordance with Lawson’s Group Philosophy and the Lawson’s Code of Ethics, we will give attention to people requiring support. Moreover, we believe it is important to increase management soundness and transparency as well as to raise corporate governance standards through compliance and rigorous 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, the Company appoints candidates with different expertise and experience as directors. The Company also appoints corporate auditors who have knowledge and expertise in finance, accounting, risk management, law and other areas necessary for auditing duties. In addition, the Company has 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.

The Company’s Board of Directors is made up of seven members of the Board, including four males and three females, three 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. The Board met 13 times in fiscal 2020. Furthermore, the Company has adopted an executive officer system and entrusts authority to executive officers to expedite business execution. Moreover, the Company holds management meetings as a supplementary decision-making body to the Board of Directors. The management meeting comprises personnel who are generally of executive managing officer level or above and members designated by the President. (and met 13 times in fiscal 2020).

The Company 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., the Company has 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.

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.
In the event that a director or representative director commits an act that significantly damages corporate value after assuming office or no longer meets the criteria for appointment as an officer, the Company shall consider dismissing the said director or representative director following consultations with the Board of Directors.

Every year, the Company conducts a self-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, the Company receives responses from all directors and corporate auditors, and compiles and analyzes the results. The results of the survey are shared with the Board of Directors and discussed in order to ensure even higher effectiveness. An external organization conducts this self-evaluation once every three years to ensure the objectivity of the results.

Audit & Supervisory Board

The Company 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 17 times in FY2020).

Nomination and Compensation Committee

All seven members of the Nomination and Compensation Committee are non-executive directors or part-time outside corporate auditors, six of whom are independent directors, thus ensuring a high level of independence. The Company consults with the Committee on candidates for directors, representative directors, positions and compensation for directors, and receives reports from the Committee. In addition, the Company recognizes 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 the Company, 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 Eiko Tsujiyama (Outside Corporate Auditor)
Vice Committee Chairperson Keiko Hayashi (Outside Director)
Committee member Miki Iwamura (Outside Director)
Satoko Suzuki (Outside Director)
Kiyotaka Kikuchi (Director)
Yuko Gomi (Outside Corporate Auditor)
Keiko Yoshida (Outside Corporate Auditor)

Qualities, attributes, etc. required of the Company’s chief executive officer

  • (1) Ability to respond to and engineer change
    To ensure the continuation of the convenience-store business, which is part of the societal infrastructure, it is essential to respond with a sense of urgency to the constantly changing external environment and needs of society and customers.
    Furthermore, the ability to unearth new needs among customers and society and to deploy innovation to engineer change 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 the Company 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 chief executive officer 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 hard and fast attributes for successors are specified. For example, they could be people from inside the Company or outside the Company.

Attendance at Board of Directors meetings, Audit & Supervisory Board meetings, and Nomination and Compensation Advisory Committee meetings (FY2020)

    Outside
Officers		 Independent
Officers		 Board of
Directors		 Audit &
Supervisory
Board		 Nomination
and
Compensation
Advisory
Committee
Sadanobu Takemasu President and CEO,
Representative Director		 - - 13/13
(100％)		 - -
Katsuyuki Imada Member of the Board, Senior
Executive Managing Officer		 - - 13/13
(100％)		 - -
Satoshi Nakaniwa Member of the Board,
Executive Managing Officer		 - - 13/13
(100％)		 - -
Yutaka Kyoya Member of the Board - - 13/13
(100％)		 - 4/4
(100％)
Keiko Hayashi Member of the Board ○ ○ 13/13
(100％)		 - 4/4
(100％)
Kazunori Nishio Member of the Board - - 13/13
(100％)		 - -
Miki Iwamura Member of the Board ○ ○ 12/13
(92.3％)		 - 3/4
(75％)
Satoko Suzuki Member of the Board ○ ○ 11/11
（100％）		 - 4/4
（100％）
Masakatsu Gonai Standing Corporate Auditor - - 13/13
(100％)		 17/17
(100％)		 -
Shuichi Imagawa Standing Corporate Auditor - - 11/11
(100％)		 12/12
(100％)		 -
Eiko Tsujiyama Corporate Auditor ○ ○ 13/13
(100％)		 17/17
(100％)		 4/4
(100％)
Yuko Gomi Corporate Auditor ○ ○ 13/13
(100％)		 17/17
(100％)		 4/4
(100％)
Keiko Yoshida Corporate Auditor ○ ○ 11/11
(100％)		 12/12
(100％)		 4/4
(100％)

* The above officers and their positions are as of the end of fiscal 2020.

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 the Company’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 the Company’s 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 the Company’s directors” which the Company’s 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 the Company’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 the Company’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, the Company has adopted a compensation system that is linked to the Company’s financial performance.
Variable compensation is paid in accordance with the degree to which targets for EPS (earnings per share) and year on-year increase in total price mark-up (gross profit) at existing stores. The final amount of variable compensation is determined after adding a qualitative component (10%) based on an evaluation performed at a meeting with the Nomination and Compensation Committee.
As a result of the review of some KPIs in the 47th term, KPIs will be determined based on the percentage of budget achievement for "EPS" and "SDGs targets (CO2 reduction rate, etc.)".
The EPS targets are aimed at better sharing value with shareholders and linking this to the Company’s operating results, while the SDGs targets are aimed at achieving the Company’s environmental vision of “Lawson Blue Challenge 2050!”
Regarding 4 non-executive directors, Keiko Hayashi, 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, the Company 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. The Company positions 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 the Company’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 the Company’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
    The Company’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. Regarding retirement benefits, the system itself was abolished.
  • The limit of the amount of remuneration paid to the Company’s corporate auditors is determined at the general meeting of shareholders in accordance with laws and regulations.
    Amount of remuneration paid to corporate auditors Resolutions at the general meeting of shareholders as of May 27, 2020: 100 million yen or less per year

Other Committees

Name Purpose Committee chair
Lawson Group Great 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* Assistant
(In charge of environment and social coexistence)
Compliance and Risk Management Committee Overall management of compliance (legal compliance) and risk management systems In charge of CR
Information Security Committee Overall management of information security development and management systems In charge of CR
Financial Reporting Internal Control Committee Overall management of the development and evaluation of the effectiveness of internal control over financial reporting President
Digital Transformation Promotion Committee Review and promotion of digital transformation President
Community Health Hub Promotion Committee Planning and formulation of strategies to achieve community health hubs for the entire Lawson Group CSO

* CSO: Chief Sustainability Officer

Basic Policy Regarding the Internal Control System

The business of the 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 must also assess the diverse range of possible risks and implement the appropriate countermeasures. In light of these characteristics, Lawson has established the “Basic Policy for Maintaining the Internal Control System” to support its efforts 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.

●Specified infectious disease outbreaks as a risk

In light of the COVID-19 pandemic, we have reconfirmed that epidemics of infectious diseases present a severe business risk. We have therefore added specific mention not only of new strains of influenza but also various other infectious diseases as assumed risks in the formulation of Lawson’s business continuity plan (BCP).

●Added promotion of digital transformation (DX)

As the headquarters that supports the franchise business, we have newly added the promotion of DX through the renewal of IT infrastructure and other measures as a means to realizing our future vision.

Lawson’s internal control system (as of June 1, 2021)

  • CR Executive Officer: The executive with overall responsibility for the development and implementation of a framework for identifying misconduct and problems concerning legal compliance and preventing risks from arising
  • CROs (Compliance and Risk management Officers): Persons responsible for compliance in the various divisions who support the CR Executive Officer and assume overall responsibility for the development and implementation of a framework for identifying misconduct and problems concerning legal compliance and preventing risks from arising



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