Corporate Governance

The Company's corporate governance is as follows.

• Basic Policy for Corporate Governance
• Outline of Corporate Governance
• Skill matrix
• Independence Criteria for outside officers
• Succession Plan

Dispensing pharmacy and cosmetic and drug store are the key business areas being developed by the AIN Group. As this business is characterized by responsibilities for people’s health, we recognize it is indispensable to continue the sound and transparent business activities that prioritize compliance.
To achieve this goal, we have adopted the Company with Corporate Auditors to oversee not only important decision-making in the management and the business execution, but also general corporate management. 
The Internal Audit Office which is independent from business management conducts internal audits covering all management activities related to governance processes, risk management and control, and the Group serves to ensure thorough compliance with relevant laws, internal rules and regulations.
In addition to the above, as part of our efforts to enhance corporate governance, we have formed a Compliance Committee for the purpose of establishing, promoting, and embedding compliance system, a Risk Management Committee for realizing comprehensive risk management from a group-wide perspective, and a Sustainability Committee for the purpose of establishing, promoting, and embedding the Group's sustainability management system.

The Company has adopted the structure of a company with Board of Corporate Auditors, and has established the Nomination and Remuneration Committee as a voluntary advisory body. In addition, the Company separates the decision-making and supervisory functions of management from those of business execution through the introduction of an executive officer system.
In order to strengthen corporate governance, the Company has established a Compliance Committee, Risk Management Committee, and Sustainability Committee to manage and promote measures.

The Board of Directors is composed of at least 1/3 independent outside directors, from the viewpoint of strengthening its supervisory function. In addition, the Company establishes skill sets for its management strategies and supervisory functions that contribute to the enhancement of corporate value over the medium to long term, and ensures that the composition of the Board of Directors takes into consideration the balance of diversity of the skills, genders, and other attributes of each officer. In order to enhance corporate value over the medium to long term, the Board of Directors formulates management policies and plans, makes decisions on the execution of important business operations, supervises and evaluates the execution of business operations by directors, and develops internal controls, risk management systems, etc., thereby contributing to ensuring the soundness of management.
The Board of Directors met 12 times in fiscal 2024, and held discussions related mainly to matters such as business strategies, compliance, risk management, status of internal audits, initiative related to materiality and the strategies of human capital management. Outside directors participate in management with appropriate advice from diverse perspectives, in addition to advice based on their respective skills when making important decisions for the Company, while also effectively exercising their supervisory functions through their high level of independence.

The attendance of each officer in fiscal 2024 is as follows.

Note. ◎ after the name indicates the chairperson.
           Information for Mr. Nobuyuki Takakura and Ms. Kaori Ishikawa are for meetings of the Board of Directors held after they assumed the position of director (July 2023)

At present, the Board of Directors consists of 11 members (seven men and four women), including five outside directors, and is chaired by Mr. Shoichi Shudo, Representative Senior Managing Director.

The Board of Corporate Auditors conducts audits of the execution of duties by directors, while also exchanging opinions with accounting auditors for each accounting audit, and striving to improve the accuracy of audits by corporate auditors concerning laws, regulations, the Articles of Incorporation, and matters related to accounting. In addition, the Board of Corporate Auditors accompanies audits of subsidiaries by accounting auditors, thus working to strengthen auditing functions.
Outside corporate auditors work with the standing corporate auditor to formulate audit policies and plans, inspect important documents related to management, audit financial statements and reference documents, audit proposals submitted to the General Meeting of Shareholders, check the status of the execution of business operations by directors, and provide advice, suggestions, and recommendations to directors and the Board of Directors through discussions at meetings of the Board of Corporate Auditors. In order to cooperate with the Internal Audit Office, the Board of Corporate Auditors participates in regular internal audit meetings once a quarter and receives reports.

The Board of Corporate Auditors met 12 times in fiscal 2024, and engaged in activities mainly concerning matters such as the formulation of audit policies and plans, the preparation of audit reports, ensuring the appropriateness of accounting audits, agreement with the evaluation and remuneration of accounting auditors, and checks of the status of the development and operation of internal control systems. The Board of Corporate Auditors consult to conduct audits of the Board of Directors and the business execution to ensure that business operations are conducted with compliance in mind, and the Board of Corporate Auditors monitor, supervise, and advise on specific measures. 

The attendance of each corporate auditor in fiscal 2024 is as follows.

Furthermore, at present, the Board of Corporate Auditors consists of three members, including two outside corporate auditors, and Mr. Koichi Kawamura serves as a standing corporate auditor. He has been engaged in accounting procedures, preparation of financial statements, audit operations, etc., as the Department Manager of Accounting of a key subsidiary of the Company and a corporate auditor of that company, and has abundant knowledge of finance and accounting. Ms. Ayako Sano has wide-ranging knowledge of corporate legal affairs as an attorney at law, in addition to which she has insights into taxation. Ms. Mizutani Minako has abundant specialist experience in finance and accounting due to her experience as a tax accountant, and each corporate auditor possesses sufficient knowledge of finance and accounting.

The Company has established the Nomination and Remuneration Committee as a voluntary advisory body in order to enhance the fairness, transparency, and objectivity of procedures related to the nomination, remuneration, etc., of directors and enhance corporate governance. The Board of Directors has resolved that at least half of the members of this committee will be independent officers. For the purpose of contributing to the establishment of appropriate management systems and ensuring the transparency of management, this committee mainly deliberates the appointment and dismissal of directors, succession plans, and remuneration for officers, and it expresses its views to the Board of Directors.

At present, the Nomination and Remuneration Committee consists of three directors, including two independent outside directors. In fiscal 2024, the committee met twice, and deliberated director candidates, the skills matrix, succession plans, and remuneration for officers.

The attendance of each committee member in fiscal 2024 is as follows.

Note . ◎ after the name indicates the chairperson.

Furthermore, at present, the Nomination and Remuneration Committee is chaired by Ms. Mariko Watahiki, independent outside director and consists of three members including Ms. Noriko Endo, independent outside director, and Mr. Kiichi Otani, President and Representative Director.

The Board of Managing Directors consists of the President and Senior Managing Directors, and has been established for the purpose of deliberating and deciding on matters delegated by the Board of Directors and other important management matters in order to enhance the speed of management decision-making.

Management meetings consist of directors, the standing corporate auditor, executive officers, and department managers of the Group, and are held twice a month for the purpose of monitoring practical matters. Through discussions concerning the execution of business operations in each division, management meetings exercise a function of mutual checking.

The Company has established the Compliance Committee for the purpose of establishing, disseminating, and ensuring the entrenchment of the Group's compliance system, and its composition is based on a resolution by the Board of Directors.
The committee holds regular meetings once every six months, and also holds irregular meetings as needed. It deliberates and considers matters such as the Group's policies and measures related to the promotion of compliance, measures to prevent recurrence of serious compliance violations, and policies for handling individual reports, and reports or submits its views to the Board of Directors. In addition, with regard to reports, from the viewpoint of protecting whistleblowers, a “compliance hotline” contact point for whistleblowers has been established by delegation to an external organization. As necessary, the committee obtains legal assessments, views, etc., from external attorneys, including when responding to reports, and engages in deliberations and consideration.
At present, the Compliance Committee is chaired by the President and Representative Director, with a Representative Senior Managing Director as vice chair (in charge of operational support), and two Representative Senior Managing Directors, the director in charge of risk management, and the standing corporate auditor as members. Its secretariat is the Risk Management Office.

Furthermore, when deliberating and considering individual reports, depending on the content of the report, related officers and the Presidents of related Group companies, as well as other officers and employees designated by the chair or vice chair of the committee as equivalent responsible persons participate in meetings of the committee as extraordinary members.

The Company has established the Risk Management Committee for the purpose of achieving unified risk management from a group-wide perspective and preventing the overlooking of new risk events arising from changes in the business environment, and thereby achieving comprehensive risk management. Its composition is based on a resolution by the Board of Directors. In addition, attorneys and other external experts in risks surrounding companies provide advice as appropriate.The committee mainly reviews risk items and assessments and manages progress in each department in charge of risk.
At present, the Risk Management Committee is chaired by the President and Representative Director, and it consists of the director in charge of risk management and managers of each department in charge of risk. Its secretariat consists of the Division Manager of the Risk Management Office, the Division Manager of Operational Support, Department Manager of the Administrative, Division Manager of the Corporate Planning, and Department Manager of the Sustainability Management.

The Company has established the Sustainability Committee for the purpose of establishing, disseminating, and ensuring the entrenchment of the Group's sustainability management system, and its composition is based on a resolution by the Board of Directors.
The committee mainly deliberates and considers matters related to the promotion of sustainability management, and submits and reports important matters related to sustainability management to the Board of Directors.
At present, the Sustainability Committee is chaired by the President and Representative Director, with a Representative Senior Managing Director as vice chair, and each Division Manager, the Division Manager of the Risk Management Office, the Division Manager of the Facility Design, the Division Manager of the Internal Audit Office, the Division Manager of the Corporate Planning, the Department Manager of the Corporate Alliances, and Presidents of key subsidiaries as members. Its secretariat is the Sustainability Management Department.

The Company has established an Internal Audit Office that is independent of business management, in order to enhance and strengthen internal audit functions. The scope of internal audits extends to all management activities related to governance processes, risk management, and control. The Internal Audit Office engages in activities such as drafting audit plans, conducting audit procedures for all divisions of the Group at least once a year in principle, and preparing audit reports and improvement instructions. In addition to regular audits of business operations, the Internal Audit Office conducts personal information protection audits concerning matters such as the status of the operation of the personal information protection system.
The Internal Audit Office cooperates with the Board of Corporate Auditors and the accounting auditors to coordinate overlapping operations and improve the quality of operations, and reports directly to the President and Representative Director, the Board of Directors, and the Board of Corporate Auditors concerning the status of activities, including the results of audits.
In addition, the Internal Audit Office reports the status of internal audits at management meetings, and endeavors to improve compliance through individual guidance and repeats of audits in cooperation with each business division of the Group.
As of May 1, 2024, the Internal Audit Office consisted of 12 persons.

With regard to the skill sets required by the Board of Directors, the Company’s management strategy is business growth centered on both the dispensing pharmacy business and the cosmetic and drug store business, and the Board of Directors considers and selects the skills required to develop supervisory functions that contribute to the enhancement of corporate value over the medium to long term, after deliberation by the Nomination and Remuneration Committee.

The company determines “Independence Criteria for outside directors and outside corporate auditors” and “Immaterial Criteria for the judgement that the relationship with the Company is unlikely to affect shareholder’s decision concerning the exercise of voting rights” in order to judge their independence objectively.

 An outside director and/or an outside corporate auditor of the Company (hereinafter referred to as the “outside officer”) will be determined as sufficiently independent from the Company if the said outside officer satisfies the requirements set forth below:

1. Presently or at any time within the past ten years, the person has never been an executing person of the Company or a consolidated subsidiary (hereinafter referred to as the “AIN Group.”) 

2. Presently or at any time within the past five years, the person has not fallen under any of the following items: 
(1) A person who directly or indirectly holds 10% or more of voting rights of the Company, or its executing person;
(2) A person of a company of which the AIN Group holds directly or indirectly 10% or more of the total voting rights, or its executing person;
(3) A counterparty which has transactions principally with the AIN Group (total amount of transactions with the AIN Group exceeding 2% of annual consolidated sales of the party), or its executing person;
(4) A principal counterparty of the AIN Group (total amount of transactions with the party exceeding 2% of annual consolidated sales of the AIN Group), or its executing person;
(5) A consultant, accounting professional or legal professional who has been paid by the AIN Group a large amount of money exceeding the greater of 10 million yen or 2% of the gross income of the person or other assets in addition to the remuneration for directors. (in the event that the consultant, accounting professional or legal professional is an organization such as an artificial person or association, a person who belongs to such organization is included);
(6) A person/organization who receives a donation of a large amount of money exceeding the greater of 10 million yen or 30% of the gross expense of the person/organization from the AIN Group, or an executive person;
(7) A person who is a major lender of the AIN Group (total amount of borrowings from the person exceeding 2% of total consolidated assets of the AIN Group), or its executing person;
(8) A person who belongs to auditing firm, which is an accounting auditor of the Company;
(9) An executing person in other company of which the executing person of the Company is an outside officer of the other company

3. If an executing person of the Company or a person listed Clause 2 of this criteria is correspond to an important person (director except outside director, corporate auditor except outside corporate auditor, executive officer, department manager and higher management grades), a person is not a spouse of, relative within the second degree of relationship with said person.

Formulated November 28, 2023

In the event that an outside director or an outside corporate auditor of the Company (hereinafter referred to as the “outside officer”) satisfies the requirements set forth below, the Company judges that the attribute information of the outside officer is unlikely to affect shareholder’s decision concerning the exercise of voting rights:

1. A counterparty with the total amount of transactions with the AIN Group not exceeding 1% of the annual consolidated sales of the AIN Group nor the sales of the party in the previous fiscal years, or its executing person.

2. A person that has received a donation not exceeding 10 million yen from the AIN Group in the previous fiscal years, or its executing person.

Formulated November 28, 2023

After the Nomination and Remuneration Committee discusses the ideal personality required for the next president, the Human Resources Development Committee selects candidates as well as formulates and implements a development plan for them. The Nomination and Remuneration Committee evaluates and supervises the status of development. Currently, we are evaluating, shortlisting and replacing successor candidates.

Succession plan steps

1. Planning of roadmap
2. Formulation of the image of the ideal president and evaluation criteria
3. Selection of successor candidates
4. Formulation and implementation of development plan
5. Evaluation, shortlisting and replacement of successor candidates
6. Evaluation of shortlisted candidates and nomination of candidate
7. Support after nomination 

Development of candidates

Regarding the ideal personality required for the next president, we focus on improving business value over the medium to long term, and need to have business management skills and experience, deep knowledge of finance, as well as a sincere personality. We have selected several candidates and aim to develop them by having them gain specific experience through company management and business operations as directors and executive officers, including at Group companies.

Evaluation of candidates

In addition to evaluation based on the requirements for the next president, candidates are interviewed by outside directors who serve on the Nomination and Remuneration Committee to gain an understanding of their personalities. Under deliberations by the Human Resources Development Committee, as necessary, requirements and processes are reviewed and candidates are replaced. The final candidates are reported to the Board of Directors after deliberation by the Nomination and Remuneration Committee.