Corporate Governance

Materiality

Related ESG :: G

Governance

Management approach
Structure
Overview of boards and committees
Targets and indicators
Progress in system enhancement
Officer compensation system
Evaluating the effectiveness of the Board of Directors
Roundtable discussion with outside directors
Cross-shareholding

Management approach

Policy and approach

Based on the corporate philosophy “Jun-Ri-Soku-Yu,” the company believes that its purpose is to contribute to solving social issues through its proprietary technologies after ascertaining these issues from a long-term perspective.

The company, to respond to the changing times and enhance sustainable corporate value in the future as well, has established the policies of (1) ensuring timeliness and accuracy in decision-making, (2) ensuring transparency in management, and (3) emphasizing fairness, and will work to appropriately collaborate with all stakeholders, such as shareholders. Furthermore, by carrying out its fiduciary responsibility and accountability to shareholders, the company will ensure the effectiveness of corporate governance and continually work on its improvement.

Corporate Governance Report

Structure

The Company adopts an executive officer system and, following a resolution at the General Meeting of Shareholder held in June 2025, transitioned to a company with an audit and supervisory committee. To respond swiftly to significant changes in the business environment, a portion of decision-making authority over business execution will be delegated to the President and Representative Director(who also serves as an executive officer) and other executive officers, as necessary.
The Board of Directors places emphasis on deliberating and determining fundamental management policies and supervising business execution. The proportion of outside directors has been increased to enhance objectivity, and members responsible for audits now serve as voting members of the Board, further reinforcing the supervisory function. This structure enables the Company to balance prompt, efficient execution with robust governance.
To ensure transparency and fairness in the nomination and remuneration processes, the Company has established a Nomination and Compensation Advisory Committee. This committee, chaired by an outside director and composed mainly of outside directors, serves as an advisory body to the Board of Directors.

Corporate governance structure (as of the end of June 2025)

Composition of the Board of Directors

Overview of boards and committees

* Members and roles as of the end of June 2025.

	Members and roles		Main issues (FY2025)^*
Board of Directors Number of meetings held in FY2025:17	Members	The Board consists of 11 members, including the Chairperson who presides over meetings, six independent outside directors, and directors who concurrently serve as executive officers. The Articles of Incorporation stipulate that the number of directors shall not exceed 15, including no more than five directors who are members of the Audit and Supervisory Committee. Appointments are made to ensure that a majority of the Board consists of outside directors.	Review of 2025 medium-term management plan Consideration of the next Medium-Term Management Plan Management policy for fiscal 2026 Business strategy and management issues Safety, disaster prevention, and quality initiatives Important investment projects Respect for human rights, diversity promotion, human resource development Matters related to cross-shareholdings Matters related to R&D
Board of Directors Number of meetings held in FY2025:17	Role	The Board of Directors receives reports on the progress of medium- and long-term themes, including from the perspective of sustainability, and the status of business execution in each business, and conduct appropriate supervision. In addition, by taking our fiduciary responsibility and accountability to shareholders into account, it works to build a corporate governance structure that will enable us to sustainably enhance corporate value.
Audit and Supervisory Committee^* Number of meetings held in FY2025: 15	Members	3 members, including two independent outside directors.	Determination of auditing policy and auditing plans Sharing the results of operational and accounting audits, and visiting audit to group companies Confirmation of the content of proceedings at Board of Directors meetings and other important meetings Sharing details of discussions with board Confirming important documents Confirmation of matters related to accounting auditor
	Role	As a statutory and independent body entrusted by shareholders, it collaborates with the Board of Directors to support the Company’s oversight functions and audits the execution of duties by directors. To ensure sound and transparent management, and to strengthen corporate governance while promoting the Company’s sustainable growth, the committee is responsible for auditing and supervising the legality and appropriateness of directors’ business execution, making decisions regarding the appointment and dismissal of accounting auditors, and auditing the development and operation of the internal control system.
Nomination and Compensation Advisory Committee Number of meetings held in FY2025: 8	Members	4 members, including 3 independent outside directors and the Chair. The Nomination and Compensation Advisory Committee is led by an outside director. 1 outside corporate auditor also participates as an observer.	Director nomination proposals Setting of company-wide performance targets used in calculating short-term incentive compensation Revising of officer compensation system
	Role	Based on proposals from the President, the Nomination and Compensation Advisory Committee objectively and fairly deliberates on basic policies for nominations, including proposals for individual director nominations, as well as the system, level, and calculation method of officer compensation. Subsequently, it reports to the Board of Directors.
Board of Management Number of meetings held in FY2025: 31	Members	11 members, including those who concurrently serve as directors. The Chairperson and members of the Audit and Supervisory Committee also attend and may express their opinions.	Same issues as the Board of Directors
Board of Management Number of meetings held in FY2025: 31	Role	The Board of Management conducts preliminary reviews of matters requiring resolution by the Board of Directors and makes decisions on business execution matters delegated by the Board or individual directors. It also oversees risk management and other related matters in business operations through its subordinate bodies—the Corporate Planning Committee and the Financial Control Committee.	Same issues as the Board of Directors
Sustainability Committee Number of meetings held in FY2025: 6	Members	11 members, primarily drawn from the Board of Management. The President serves as the Chair. Members of the Audit and Supervisory Committee also participate and may express opinions.	Progress on material issues and related indicators Sustainability disclosure standards Value creation process Integration of sustainability indicators into the officer compensation system Development of a business continuity management (BCM) system Climate change initiatives Biodiversity conservation External Environmental, Social, and Governance (ESG) evaluations and ratings
	Role	The Sustainability Committees convenes six times per year to comprehensively discuss key issues (materiality), deliberate on strategies, measures, and indicators from the perspectives of risks and opportunities, and manage progress. The content of the Committee's discussions is reported to the Board of Directors on a regular basis.
Corporate Planning Committee Number of meetings held in FY2025: 13	Members	20 members. The Corporate Planning Committee members are selected from each specialized field and business departments. The Director in charge of planning serves as chair.	Significant capital investment projects Matters regarding new businesses Other important matters (investments, technology introductions, business alliances, acquisitions, etc.) Review of major Corporate Planning Committee matters Review of past capital investment projects
	Role	Delegated by the Board of Management, this committee provides expert and managerial opinions on strategic matters such as significant capital investments, new business initiatives, company formations, technology adoption, and business alliances. Its role is to enhance the efficiency of deliberations and decisions by the Board, as well as to ensure appropriate approval processes, including those related to affiliated companies.
Financial Control Committee Number of meetings held in FY2025: 14	Members	1 Chairperson, and 4 standing committee members.	The following matters of individual importance: Investments and lending Guarantees and reservations of guarantees (including management awareness letters) Collateral provision for third parties
	Role	The Financial Control Committee aims to improve the efficiency of deliberations and resolutions at the Board of Management, as well as ensure the appropriateness of the approval process. It does so by providing opinions and deliberating from both professional and managerial perspectives on important individual investments, loans, guarantees, and related matters. In addition, the committee facilitates the efficient deliberation or approval of issues not covered by the Board’s deliberations or decisions, in accordance with relevant rules and regulations.

The audit results for fiscal 2025 are based on the Board of Corporate Auditors prior to the transition to a company with an Audit and Supervisory Committee.

Targets and Indicators

< Targets >

Toyobo group is building a fair and highly transparent governance structure through compliance with the Corporate Governance Code and proactive information disclosure.

< Indicators and results >

Initiatives	Indicators	Targets	Results (FY2025)
Strengthen corporate governance Strengthen information disclosure	1. Number of Board of Directors’ and committee meetings^*	1. Disclose results	1. 25
	2. Attendance rate of officers at meetings in 1.	2. Disclose results	2. Share on the company website
	3. Disclosure of details of evaluation of Board of Directors' effectiveness	3. Disclose details of effectiveness evaluation	3. Share on the company website

Nomination and Compensation Advisory Committee

Progress in system enhancement

Toyobo group has worked continuously to strengthen corporate governance.

Initiatives to strengthen corporate governance

Year	Initiative & objective
1998	Established the Ethics Committee (the current Compliance Committee) To promote company-wide compliance activities as a key element of management
2004	Appointed one outside director, shortened the term of office for directors to one year To clarify management accountability by strengthening the supervisory function and shortening the term of office Established an Advisory Board on Officer Provisions, etc. (the current Nomination and Compensation Advisory Committee) To ensure transparency and fairness in procedures for determining officer compensation
2005	Introduced a corporate officer system and reduced the number of directors To split the decision-making/supervisory and executive functions
2015	Increased number of outside directors to two To strengthen the supervisory function by multiple appointments Established an outside officer liaison meeting Held regular opportunities for sharing of understanding and exchange of information by outside officers only Established the Nomination Committee (the current Nomination and Compensation Advisory Committee) To ensure transparency and fairness in procedures for nominating/dismissing directors
2016	Made an analysis/evaluation of the overall effectiveness of the Board of Directors Will annually identify issues and make improvements
2018	Increased number of outside directors to three, raising their ratio to one third of all directors To ensure diversity among members of the Board of Directors, as well as strengthen governance
2019	Increased number of outside directors to four (adding a female director) To further promote diversity among members of the Board of Directors Revised the officer compensation system (introduced compensation in the form of restricted stock units) To offer longer term incentives and realize greater sharing of value with shareholders
2021	Established the Nomination and Compensation Advisory Committee Integrated advisory and compensation advisory bodies, and improved their functionality
2022	Increased number outside directors to five Review of the executive compensation system (changes in the composition ratio of compensation and KPIs)
2023	Increase in the number of female directors to two
2024	Revised the officer compensation system (incorporated sustainability indicators as one of the evaluation criteria) Election and dismissal of top management and nomination of candidates for directors and corporate auditors
2025	Transition to a company with an Audit and Supervisory Committee

Election and dismissal of top management and nomination of candidates for directors

Policy

When selecting senior management (executive officers who also serve as directors) and nominating candidates for directors, the primary criterion is whether the individual possesses the character and insight suitable for their respective responsibilities. Selection is conducted with consideration of the standards for nominating officers, and decisions are made by the Board of Directors following deliberation by the Nomination and Compensation Advisory Committee.

(1) Stance on composition of the Board of Directors and Audit and Supervisory Committee

a) Board of Directors

The Board of Directors is required to possess the expertise and skills necessary to appropriately carry out strategic direction and key business decisions, as well as the independence required to strengthen oversight of the management team. Additionally, to ensure a balanced structure overall while securing diversity in professional background, gender, age, and other aspects, the Board is composed of the Chair of the Board, outside directors, and directors who concurrently serve as executive officers.
Regarding the number of Board members, based on the principles of (1) ensuring timeliness and accuracy in decision-making, (2) securing transparency in management, and (3) emphasizing fairness, the Articles of Incorporation stipulate that the Board of Directors must have no more than 15 members, including up to five who serve as members of the Audit and Supervisory Committee. The Articles also require that outside directors constitute a majority of the Board.

b) Audit and Supervisory Committee

The Audit and Supervisory Committee is composed not only of members with expertise and skills in finance and accounting but also includes individuals with knowledge of the Group's business, in order to ensure the effectiveness of auditing and supervision.

(2) Summary of criteria for nomination, etc.

a) Candidates for directors (excluding directors who are Audit and Supervisory Committee members) must possess knowledge, achievements, experience, and skills as executives, along with a Company-wide perspective

b) Candidates for outside directors should have extensive experience and broad insight that contribute to enhancing corporate value through business advice and management support, and must meet the Company’s independence criteria.

c) Candidates for directors who are Audit and Supervisory Committee members must be able to make appropriate judgments from an independent and objective standpoint in auditing the execution of duties.

d) Candidates for outside directors who are Audit and Supervisory Committee members must also meet the independence criteria.

The Company’s criteria for independence of outside directors

The company has deemed that if none of the attributes in the following items apply, the outside Director (or the candidate for outside Director) has a high degree of independence from the company, and there are no concerns of conflicts of interest with general shareholders.
(1) A major shareholder in the company (refers to a shareholder with a voting rights ownership ratio of 10% or more; the same applies below) or an individual who executes business for the shareholder
(2) An individual who executes business for a company of which the company is a major shareholder
(3) A business partner of the company for which the company is a major partner (refers to a party that provides products or services to the company for which the average annual transaction amount for the past three fiscal years is over 2% of that business partner’s annual gross sales) or an individual who executes business for that company
(4) A major business partner of the company (refers to a party that the company provides products or services to for which the average annual transaction amount for the past three fiscal years is over 2% of the company’s annual gross sales) or an individual who executes business for that company
(5) An individual who executes business as an employee of a financial institution that is a major lender to the company (refers to a lender for which the loan balance amount is equivalent to over 2% of the company’s total assets)
(6) An individual who obtains over ¥10 million per year in cash or other assets in profit from the company as a specialist, such as a consultant, accountant, or attorney at law, other than officers’ compensation (or an individual who belongs to a corporation, etc., that obtains over ¥100 million per year in this matter)
(7) Executives of companies with mutual outside director appointments
(8) An individual for which any item in (1) to (7) above has applied within the past three years
(9) A relation within the second degree of an individual for which any item in (1) to (8) above applies
Note: Even if none of the attributes above apply, in some cases it may be deemed that there is no independence in consideration of matters such as transaction volumes at a group company of the company or a group company of a business partner.

Procedures for nominations, etc.

The Nomination and Compensation Advisory Committee, comprising a majority of outside directors, has been established as an advisory body to the Board of Directors to ensure fairness and transparency, and is chaired by an outside director.
The Committee deliberates and reports to the Board of Directors on basic policies and criteria for nominating officers and succession planning, etc., based on proposals from the President.

Dismissal policy and procedures

In the event of an act of misconduct, impropriety, or actions suggesting a breach of trust, or of other reasons that make the member unsuitable to serve as an officer, after deliberation by the Nomination and Compensation Advisory Committee, a decision will be made by the Board of Directors on their dismissal.

Board of Directors meeting attendance and skills matrix

Click to enlarge the diagram

Expected expertise and skills for each item in the skills matrix

Skills	Details of skills
Corporate management	Possesses the skills to enhance corporate value by overseeing and driving strategies for sustainable growth by managing the restructuring of the overall Group’s business portfolio, considering business opportunities and risks both domestically and internationally
Production, technology and development	Possesses the skills to oversee and promote strategies related to strengthening manufacturing capabilities and future-oriented initiatives, such as exploring new businesses, new technologies, and commercializing related themes
Marketing and sales	Possesses the skills to oversee and promote sales strategies for deepening existing businesses and creating new business opportunities in growth areas
Finance and accounting	Possesses advanced expertise in finance and accounting to oversee and promote financial strategies and capital policies aimed at achieving management plans
Environment and society	Possesses the skills to oversee and promote strategies that contribute to solving social issues as stated in the Sustainable Vision 2030 and realize a sustainable society through business activities
Governance, risk management, and compliance	Possesses the skills to oversee and drive strategies to strengthen risk management and compliance, including key themes such as safety, disaster prevention, and quality under the 2025 Medium-Term Management Plan , based on the recognition that continually reinforcing governance and ensuring thorough legal compliance are fundamental to business operations
IT and digital transformation (DX)	Possesses the skills to oversee and promote digital strategies to transform business models and establish competitive advantages through IT technology and DX

CEO succession plan

The Company regards human resource strategy—including the succession of the President and CEO—as one of its top management priorities. With respect to the CEO succession plan, the Nomination and Compensation Advisory Committee identifies the qualities required of future leaders based on the anticipated management environment, and discusses the knowledge and experience that potential successors should further develop. In addition, the Board of Directors is regularly updated on the development status of executive officer candidates.

Training for officers

Newly appointed directors receive explanations regarding their roles and responsibilities, and are also sent to external training programs upon their appointment as executive officers or directors to support the acquisition of necessary knowledge.

In addition, newly appointed outside directors are provided with briefings on the Company's operations, finances, and organizational structure, and are given opportunities to visit business sites.

Officer compensation system

Basic policy

Toyobo's system of officer compensation is designed as follows, in line with basic policy, within the monetary amount resolved at the Annual General Meeting of Shareholders.

1): Provide incentives that lead to Toyobo group's sustained growth and enhance corporate value over the longer term
2): Secure highly talented management personnel
3): Set determination procedures that are objective and highly transparent

Compensation structure and levels are reviewed based upon the company's business environment, levels of employee salaries, and other companies' levels based upon surveys conducted by specialized external organizations.

Monetary compensation (including performance-based amounts)

(1) Composition of monetary compensation

Monetary compensation for directors (excluding outside directors and directors who are Audit and Supervisory Committee members) and executive officers consists of fixed monthly compensation, comprising the following two components:

1): Basic compensation
2): Short-term incentive compensation

(2) Short-term incentive compensation

1): Short-term incentive compensation reflects evaluations of both Company-wide performance and individual performance, with the weighting varying by position:
2): Individual compensation amounts are calculated by reflecting both Company-wide performance and individual performance.
3): ) Company-wide performance is evaluated using EBITDA, a key management indicator, as the KPI. The compensation fluctuates within a range of 0% to 200% based on the achievement level against the target value.
Starting with the remuneration for July 2026, ROE will be added as a performance indicator for the Representative Director.
4): Specific target values are proposed to the Nomination and Remuneration Advisory Committee, and based on their recommendations, are decided by the Board of Directors.
5): Individual performance is evaluated on a five-level scale, comprehensively considering the achievement of both departmental and personal objectives, and the resulting score is adjusted within a range of 0 to 200%.
6): Sustainability indicators have been incorporated into the evaluation criteria as common goals for all executive officers, based on the annual management policy, and are assessed according to the degree of achievement.

Sustainability indicators

The Company incorporates sustainability indices, such as Environment, Society, Governance (ESG) factors, into the executive compensation system.
Key performance indicators (KPIs) related to safety and disaster prevention, human capital, and climate-change response will be established annually and their achievement levels evaluated.The indicators for safety and disaster prevention, as well as human capital have each been applied to compensation from July 2024, based on fiscal 2024 results. The indicator for climate-change response will be applied from July 2025, based on fiscal 2025 results.

Sustainability indicators	KPIs	FY2026 targets	Reflection method
Safety and disaster prevention Indicators	Number of major accidents	0 accidents per year	An additional 5% of the total short-term incentive compensation base amount^* will be added if all items are achieved.
	Frequency rate of workplace accidents resulting in lost workdays	0.25 or less
	Number of fires or explosions	0 accidents per year
	Number of spill accidents	0 accidents per year
Human capital indicators	Results of the engagement survey	+5% vs. last year	An additional 5% of the total short-term incentive compensation base amount^*
Climate-change response indicator	Reduction in GHG emissions (Scope 1 and 2)	Down 2.7% vs. last year	5% of overall short-term incentive is added

The base amount is set at 100% of the short-term incentive compensation.

Stock compensation

In order to increase incentives to sustainably enhance corporate value and to promote more value sharing with shareholders, a certain percentage of compensation is granted annually as non-monetary compensation for granting restricted shares (non-performance-based, provided in advance).

Compensation ratio

To ensure appropriate incentives for enhancing corporate value, the ratio of basic compensation, short-term incentive compensation, and long-term incentive compensation for directors (excluding outside directors and directors who are members of the Audit and Supervisory Committee) and executive officers is designed to be approximately 6:3:1 assuming 100% axchievement of KPIs.

Other

(1): Compensation for outside directors consists of fixed monetary compensation, in light of their roles and independence.
(2): Compensation for directors who are members of the Audit and Supervisory Committee also consists solely of fixed monetary compensation, determined through discussions among the committee members, based on their respective duties and responsibilities, taking into account their roles and independence.
(3): To ensure transparency and objectivity in compensation decisions, the Nomination and Compensation Advisory Committee, comprising a majority of outside directors, has been established as an advisory body to the Board of Directors. This committee, in response to requests from the Board of Directors, deliberates not only on the structure, level, and calculation methods of executive compensation, but also on matters such as the performance targets for Company-wide evaluations, which form part of the compensation for each position. The Board of Directors makes the final decision on the amount of individual compensation based on the committee’s recommendations.

Details of officer compensation (FY2025)

* Including mid-period appointments and resignations

Position	Total compensation, etc.	Total compensation by type			Number of officers^*
	Total compensation, etc.	Basic compensation	Performance-based compensation	Non-monetary compensation (Compensation for granting restricted shares)	Number of officers^*
	(¥ mn)	(¥ mn)	(¥ mn)	(¥ mn)
Directors (Including outside directors)	309(53)	234(53)	45(-)	30(-)	12(5)
Corporate Auditors (Including outside corporate auditors)	71(18)	71(18)	―(―)	―(―)	4(2)
Total (Including outsite officers)	380(71)	305(71)	45(-)	30(-)	16(7)

Evaluating the effectiveness of the Board of Directors

To further enhance the effectiveness of the Board of Directors, the Company conducted an overall analysis and evaluation of the Board’s effectiveness in fiscal 2025, with input from an external organization. The key points of　the evaluation are summarized below.

Implementation method

(1): Participants: All directors and Audit and Supervisory Board members
(2): Method: A questionnaire consisting of 43 questions was conducted, with responses submitted directly to an external organization commissioned for the task.
(3): Analysis and evaluation: Based on the aggregated results reported by the external organization, the evaluation was carried out by the Board of Directors.

Summary of analysis and evaluation results

(1): The Board’s composition and the support systems in place for directors and corporate auditors continued to receive high marks, consistent with the previous year’s results. While multiple responses noted that Board discussions remain active and effective, there were some differences in evaluation depending on individual roles and backgrounds.
(2): Of the five issues identified in the previous year—(i) risk management measures for safety, disaster prevention, and quality assurance; (ii) understanding capital cost and profitability, and developing improvement strategies; (iii) reviewing the business portfolio; (iv) CEO succession planning and selection process; and (v) strengthening Group governance—most saw improved evaluations due to ongoing initiatives. However, some respondents noted that progress in certain areas remained insufficient.
In particular, items (ii), (iii), and (iv) received relatively lower evaluations and will remain areas for continued focus. Although improvements were noted for (i) and (v), sustained attention is needed to further enhance performance.
(3): With the transition to a company with an Audit and Supervisory Committee, a new priority is to consider the delegation of decision-making authority for business execution to directors, with the aim of establishing a structure that enables both swift, efficient operations and enhanced management oversight.

Issues and future initiatives

The Board of Directors is working to improve its overall effectiveness through the following initiatives.

(1) Understanding capital cost and profitability, and developing improvement strategies

The Board of Directors will position “Promotion of efforts to enhance capital profitability” (tentative) as an important agenda item and will actively oversee and support efforts to drive improvement in this area.

(2)Review of the business portfolio

The Board of Directors will position “Promotion of efforts to review the business portfolio” (tentative) as an important agenda item and will monitor and support progress on business portfolio reforms.

(3) Initiatives for CEO succession planning and appointment procedures

Strengthen the activities of the Nomination and Compensation Advisory Committee and enhance reporting to the Board of Directors.

(4) Review the operation of the Board of Directors following the transition to a company with an audit and supervisory committee

Revise the submission criteria to accelerate decision-making in management and promote the transition to a supervisory board.

Roundtable discussion with outside directors

Roundtable discussion with outside directors in the Integrate Report 2024 (766KB)

Cross-shareholdings

The company shall periodically review cross-shareholdings from assorted perspectives, such as the impact on improving medium-to long-term corporate value and economic rationality, and sell any stock which is no longer meaningful as is appropriate. On the other hand, the company shall enter into cross-shareholdings with key business partners when judging that the maintenance and strengthening of stable relationships with the business partners will contribute to sustainable growth and enhancement of medium-to long-term corporate value of the company.

The Board of Directors individually reviews cross-shareholdings every year, including future business strategies and operational relationships, and determines whether or not to continue holding these shares.

Also, with regard to the exercise of voting rights in cross-shareholdings, the company deeply considers the status of the business partner and the content of the proposals, and as needed, discusses with the business partner. The company thereby confirms whether these holdings contribute to the sustainable growth and medium-to long-term enhancement of corporate value of the company and its business partner, and makes a comprehensive decision.