Basic concept

JTEKT continuously strives to enhance corporate governance in order to fulfill its corporate social responsibility and increase its corporate value.

Promotion structure

JTEKT holds, Board of Directors meetings every month where, in addition to items stipulated by law and the Articles of Incorporation, deliberations take place and decisions are made pertaining to the Medium-term Business Plan aimed at realizing JTEKT BASIC PRINCIPLE. This includes management strategies (business plan, personnel, organizational, capital and investment measures) aimed at achieving the Medium-term Business Plan, as well as oversight of the execution of duties by directors. Furthermore, two independent directors from outside the Ccompany were appointed to strengthen the supervising function of the Board of Directors. In addition, subcommittees under the Board of Directors, such as executive director meetings, management meetings, and Ccompanywide registered meetings, are held to fulfill deliberations on individual matters and supervise the performance of duties by managing officers. To ensure a transparent, fair, prompt and efficient management, JTEKT has opted for a company with an Audit & Supervisory Board to inspect directors' execution of duties, which consists of four auditors, two of whom are outside auditors (of which one is independent outside auditor). Additionally, three full-time staff members in Corporate Auditors Department assist Audit & Supervisory Board members.
Regarding internal auditing, Audit Department, which reports directly to senior management, inspects the business execution of each function and business division and the effectiveness of internal controls, reporting the results to representative directors and the Audit & Supervisory Board to ensure auditing independence. In accounting audits, Audit & Supervisory Board members receive reports and explanations from accounting auditors, confirming the appropriateness of auditing methods and results as well as the independence of accounting auditors.
In addition, in order to enhance the efficacy of these audits, Audit & Supervisory Board members, the accounting auditor and Audit Department regularly hold discussions to exchange information and engage in mutual cooperation.

Corporate Governance System

Board of directors	Once / Month	Makes decisions about important matters within management, and supervises directors' performance of duties.
Executive director meetings	Once / Month	Supplements the Board of Directors, deliberates important matters within management, and determines fundamental policies.
Management meetings	Once / Month	Supplements the Board of Directors, and manages the progress of policies within the performance of duties. In addition, these meetings enable problem points and issues within performance of duties to be shared extensively among directors and officers.
Audit & Supervisory Board	Once / Month	Inspects the appropriateness of methods and results of audits of the directors' performance of duties, and of audits performed by the accounting auditor.
Companywide registered meetings	-	Intensive deliberation on important management theme, and implement the PDCA cycle.

Progress toward Enhanced Governance

JTEKT recognizes that corporate governance enhancements are an important management issue, thus we are engaged in efforts to reform and strengthen our corporate structure including the formulation of guidelines in response to the Corporate Governance Code and annual implementation of the PDCA cycle.
In November 2019, we reviewed matters to be referred to the Board of Directors and delegated decision-making authority with regard to items of low importance to the executive director meetings, revising the Board of Directors regulations for the purpose of setting aside more time for Board of Director deliberation of management strategy and other, more important items.
In April 2020, the existing "managing officer system" was abolished and a new "senior management system" was introduced. As a result, this has enabled the promotion of talented young employees and the flexible assignment or withdrawal of human resources in important posts, which has significantly reduced the number of directors.
In Jan. 2021 Reform of officer system（①Abolition of director roles such as deputy president, senior managing director, and managing director, ②Name integration to Senior Executive Officer, ③Expansion of Senior management system) contributed to the slimming and flattening executive system, the speeding up management decisions, the promoting delegation of authority, further speeding up decisions on replacement, flexible promotion and withdrawal (expansion). As a result, the number of officers has also been significantly reduced.

Main Governance Reform Initiatives

Date	Measures	Purpose
June 2005	Introduction of executive officer system	Separation of management supervision and executive function
May 2006	Publication of Corporate Governance Report	Summarize, organize and disclose the key information on corporate governance
Jan. 2008	Establishment of Global Internal Audit Department	Audit of general tasks such as adequacy and legal compliance of management and procedures
June 2013	Appointment of foreign executive officer	To ensure executive officers diversity
June 2015	Appointment of two outside directors	Strengthening management oversight function
Feb. 2016	Establishment of Executive Officer Personnel Appointment Review Meeting (consisting of President and Independent outside directors)	To ensure the adequacy of personnel of executive officers
June 2016	Establishment of Executive Remuneration Meeting (consisting of President and Independent outside directors)	To ensure fairness and appropriateness in determining executive compensation
Mar. 2017	Establishment of Council for Enhancement of Corporate Value	Discussion on new value creation for improving sustainability
Oct. 2017	Establishment of Risk Management Department	Manage risks systematically to avoid or reduce them
June 2018	Increased number of outside directors by one, to a total of three	Further strengthening management oversight function
June 2019	Appointment of a female outside member of the Audit & Supervisory Board	To ensure greater executive officers diversity
Nov. 2019	Revision of Board of Directors Rules	Narrow down the agenda and devote the deliberation time of the Board of directors to the consideraton of more important matters
Apr. 2020	Introduction of Senior management system	Enables the selection of young employees to important posts and the flexible appointment and withdrawal of human resources to important posts
Jan. 2021	Review of officer system	①Abolition of director roles such as deputy president, senior managing director, and managing director ②Name integration to Senior Executive Officer, ③Expansion of Senior management system
June. 2022	The number of outside directors became one-third of all directors.	It can ensure the effectiveness of oversight function by the Board of Directors that assure independent and objective corporate management.
June. 2024	Appointment of a female outside directors	To ensure greater executive officers diversity

Group Governance

In order to engage in fair, transparent and efficient Group management, JTEKT is engaged in the following initiatives at our domestic and overseas subsidiaries.

• 1. We share items including the "JTEKT BASIC PRINCIPLE" and the Medium-term Business Plan, with the business plan progress confirmed at reviewing meeting on business of subsidiaries.
• 2. We require prior consultation or post-reports on important matters based on the "Prior Consultation and Reporting System Standards." Important matters concerning Group management are deliberated and decided by the Company committees.
  Also, regarding major subsidiaries, we confirm that the decision-making process is functioning properly within the subsidiary.
• 3. We developed the "JTEKT Group Business Management Guidelines" and require the establishment of internal control systems.
  We also require the prompt reporting of serious financial, safety, quality, environment and disaster risks.
• 4. We require the establishment of compliance systems based on the "Global Conduct Guidelines."
  We also conduct regular compliance inspections based on checklists provided by JTEKT.

Outside directors

JTEKT appoints outside directors who fulfill requirements for outside directors and possess experience and insight within their field. They are also selected based on the excellence of their character and viewpoints, and for their high ethical standards, perspectives, and knowledge in accordance with the JTEKT policy for appointing directors.
Furthermore, JTEKT conducts the appointment of outside members of the Audit & Supervisory Board from a perspective of audit neutrality and objectivity.

Appointment of Outside Directors and Outside Members
of the Audit & Supervisory Board

Title	Name	Main reasons (experience, insight, etc.) for appointment	Independent Director	Attendance record in FY2022 (attended/held)
				Board of Directors	Audit & Supervisory Board
Director	Kazunari Kumakura	Rich experience and deep insight relating to monozukuri(manufacturing) as a manufacturing business executive.	-	10/10 (Inauguration June 2023)	-
Director (Newly appointed)	Ikuji Ikeda	Rich experience as a manufacturing business executive and broad insight into corporate governance	○	-	-
Director (Newly appointed)	Yumiko Sakurai	Considerable knowledge relating to financial and accounting matters as a certified public accountant	〇	12/12	13/13 (Member of the Audit & Supervisory Board until June 2024)
Member of the Audit & Supervisory Board	Yasushi Matsui	Rich experience and broad insight relating to corporate governance as a manufacturing business executive	-	12/12	13/13
Member of the Audit & Supervisory Board (Newly appointed)	Akiko Miyakawa	Considerable knowledge relating to financial and accounting matters as a certified public accountant	〇	-	-

Provision of Information to Outside Directors

The Liaison Meeting for Outside Directors and Auditors is held the day before Board of Directors' meetings. This provides an opportunity for the outside directors and auditors to all meet at the same time, receive materials and explanations concerning the deliberation agenda items, and exchange opinions among themselves, thereby creating an environment in which they can actively participate in deliberation and reporting matters at Board of Directors' meetings.Information on management topics other than the agenda items is also shared by the Meeting, and the outside directors and auditors can express their opinions on new business and other topics under consideration.

Nomination of Director and Audit & Supervisory Board Member Candidates

JTEKT has established the "Executive Officer Personnel Appointment Review Meeting " consisting of President and Independent outside directors as a voluntary committee to enhance objectivity in the nomination of candidates for directors and Audit & Supervisory Board Members and in the consideration of the selection and dismissal of Senior Executive Officer and Senior Management.

Directors and Audit & Supervisory Board Members Remuneration

The remuneration of directors (excluding outside directors) is shown in the figure below.

Payment method	Cash compensation		Stock compensation(Restricted Stock)
Types of Compensation	Fixed (Monthly)compensation	Variable(Performance-linked) compensation	Variable(Performance-linked) compensation
Rough Ratios	70%	20%	10%
Yearly limit on compensation	800million yen		100million yen
Paid on	Monthly	Yearly（The day after the ordinary general meeting of shareholders）
Policy and Indicators	Set the base amount for each position	Calculate from the compensation table based on the following indicators a. Business profit b. Achievement of KPI of Safety and Quality	50% of the standard compensation calculated based on business profit (accrording to the left column)is granted as stock compensation.
Process	(1) Formulated a compensation draft based on the above policy and indicators (2) At "Executive Remuneration Meeting" consisting of President and Independent outside directors established, the proposed compensation in (1) will be discussed. ＜Deliberations＞ ・Consistency with decision policy and need for review ・Confirmation of indicator performance evaluation ・Remuneration levels by position（Comparison with companies of similar size to ours based on executive compensation survey data from an external research organization） (3) To be determined by the President of the Board of Directors by resolution of the Board of Directors based on the results of deliberations at the Executive Remuneration Meeting. (4) The allocation of stock compensation (number of shares) is decided by a resolution of the Board of Directors

The amount of remuneration for each Audit & Supervisory Board member is determined through discussions among Audit & Supervisory Board Members.

※1. The above amounts include those for two director, who retired from the post of director at the conclusion of the 123th Annual General Meeting of Shareholders held on June 22, 2023.

※2. The above amount of performance-linked compensation includes the unpaid amount which was booked as bonus provision for directors in the previous fiscal year.
(3 Directors, 71million yen)

※3.The amount of stock-based remuneration above is the amount recorded as expenses during the fiscal year to shares with transfer restricted stock granted as post-delivery stock remuneration.

Executive Remuneration Meeting

JTEKT has established the "Executive Remuneration Meeting" consisting of President and Independent outside directors as a voluntary committee to enhance objectivity in the consideration of directors' remuneration.
At the Executive Remuneration Meeting, JTEKT's compensation levels were confirmed with reference to data from an external research organization, and the following proposals were made and discussed.
(1) Proposal for monthly remuneration for FY2023 and the payment of bonuses reflecting the performance in FY2022
(2) Direction for reviewing the remuneration system for the following fiscal year and beyond

Effectivenes the Efficacy of the Board of Directors

(1) Method
JTEKT conducts a survey on "the effectiveness of the Board of Directors" once a year for directors and audit & supervisory board members (self-evaluation by written questionnaire).
In this survey, we evaluate whether the contents of deliberations and operation methods at the Board of Directors are appropriate and review them as necessary based on evaluations of those directors and audit & supervisory board members.
In addition, a questionnaire evaluation by an external organization was conducted to enable an objective understanding and assessment of our company's situation and issues through comparison with other companies starting in 2024.

(2) Overview of FY2023 Evaluation
The questionnaire responses were generally positive, and we recognize that the effectiveness of the Board of Directors as a whole has been ensured.

In the previous effectiveness evaluation, the Board of Directors shared the issue of enhancing discussions on human capital and intangible assets, but since then, the Corporate Value Enhancement Committee, which is attended by outside directors, has taken up human capital portfolio strategies linked to business strategies and investment in intangible assets as themes, and we recognize that discussions are steadily progressing. We are aware that the discussion is steadily progressing.

On the other hand, the effectiveness evaluation this time raised opinions about enhancing discussions on executive training, management strategy, and capital efficiency, which we shared as issues to be addressed to further improve the function of the Board of Directors.

We will continue our efforts to improve the functions of the Board of Directors, including reviewing the content of executive training and enhancing discussions on management strategy and capital cost.

Cross-Shareholdings

JTEKT has established policies regarding the strategic shareholdings it holds as policy stock holdings and criteria for exercising voting rights, as shown below. The Board of Directors will annually review the appropriateness of the purpose and economic rationality for holding each policy stock. Specifically, the appropriateness of holding the shares will be verified by determining whether the benefits to be gained from holding the shares and the ROE of the issuing company are commensurate with the Company's cost of capital and other factors.
During the fiscal year under review, the Company sold all of its shares in 20 out of 33 listed stocks after obtaining sufficient understanding through dialogue with the investee companies.
In addition, we will respond in a timely manner in accordance with the criteria for exercising voting rights.

(1) Policiy regarding the strategic shareholdings
JTEKT's policy stockholdings are held for the purpose of maintaining and strengthening long-term, stable relationships with business partners, and from the perspective of increasing corporate value over the medium to long term. JTEKT will consider reducing the number of stocks that are no longer in line with such holding purposes or for which the benefits and risks associated with holding are judged not to be commensurate with the cost of capital, etc.

(2) Criteria for exercising voting rights pertaining to strategic shareholdings
JTEKT basically respects the business judgment of corporate management as long as the company does not engage in antisocial behavior and does not disregard shareholder interests, such as when shareholder returns are deemed to be significantly disproportionate compared to society in general. In cases where scandals or anti-social activities occur within a company or by corporate managers, JTEKT shall regard them as a serious problem in terms of corporate governance, and shall exercise its voting rights in a manner that contributes to the improvement of corporate governance.