The Company and the Group position corporate governance as the most important foundation for facilitating good corporate behavior. The Company and the Group uphold “improving efficiency,” “securing soundness,” and “enhancing transparency” of corporate management as its basic policy for corporate governance. On this basis, the Company and the Group make determinations on important management issues, including the appointment of director candidates, determining director and auditor remuneration, and management oversight.

By establishing a prompt and appropriate decision-making process and improving the efficiency of corporate management, the Company aims to maximize its corporate value, thereby striving to provide appropriate returns to various stakeholders, including shareholders.

Amid significant changes in the business environment, to maximize the Company’s corporate value, the Company and the Group will appropriately recognize and manage the various risks surrounding the Company and the Group. The Company and the Group will strive to secure sound management by establishing a system (compliance system) to ensure compliance not just with laws and regulations, but with ethical standards and societal norms.

With the growing importance of information disclosure for companies, the Company and the Group will fulfill their accountability to all stakeholders, including shareholders, and further improve disclosure through proactive engagement in IR activities, thereby cultivating highly transparent management.

To further promote productive discussions by the Board of Directors and to strengthen its oversight functions, the Company has chosen the structure of a company with an Audit and Supervisory Committee.
This will allow it to delegate a considerable portion of important decisions on business execution to executive directors. In addition, by considering that directors with a wealth of knowledge and experience regarding the industry, market trends, products, merchandise, services, etc. can generate prompt and optimal management decisions, the Group companies have chosen the structure of a company with company auditors. The Company and the Group also appoint external directors and strengthen the executive officer and internal auditing systems, thereby improving corporate governance from the aspects of both oversight and execution.

At ordinary Board of Directors meetings held once a month in principle and extraordinary Board of Directors meetings held as appropriate,the Board of Directors aims to achieve flexible management through the current level of 13 directors. Certain important managerial matters at each business company are also resolved or reported at various bodies, including the Company’s Board of Directors.

The Audit and Supervisory Committee consists of four Audit and Supervisory Committee members and holds its meetings generally once a month, or when otherwise necessary. The Audit and Supervisory Committee assigns duties to respective Audit and Supervisory Committee members, and deliberates on key matters for consideration such as those involving the status of establishing and operating the Group’s corporate governance and internal control systems, and evaluations of the independent auditor.

The Company shall perform analyses and evaluations of the effectiveness of the Board of Directors each year to ensure that the Board of Directors effectively fulfills its roles and responsibilities to “improve efficiency,” “secure soundness,” and “enhance transparency” of the Company’s corporate management.

For the fiscal year ended March 31, 2024, the Company evaluated the effectiveness of the Board of Directors via questionnaires and one-on-one interviews with directors to ascertain the expectations and issues identified by each Director in his or her efforts to contribute further to Company growth.

Questionnaires were used to confirm various matters deemed important in the effective fulfillment of the Board’s roles and responsibilities, including Board composition, management, and status of deliberations concerning strategy, as well as the effects of initiatives to address issues in the previous fiscal year. Interviews were used to solicit and delve into the opinions of the Directors (excluding Chairman and Representative Director) on various topics, including their outlook on issues identified through the questionnaires and their expectations regarding improvements in the efficacy of the Board of Directors. This fiscal year, to ensure objectivity, the Company had an external organization design the questionnaire and interview items and analyze and evaluate the responses.

Based on the report on the results of the questionnaire and interview responses prepared by the external organization, deliberations took place at meetings of the Independent Advisory Committee and the Board of Directors on various topics, including the effectiveness of the Board of Directors during the fiscal year, where issues might lie, and responses to such issues.

Based on these deliberations, the Board of Directors was judged to be functioning effectively overall. Its free and open deliberations, which leverage the areas of expertise of the independent external directors, including the Group Management Committee, was recognized as a key strength. Under the current structure, independent external directors make up half of the Board members. The structure also ensures relative independence from the business execution side, while the composition of the Board ensures diversity in aspects such as experience, specialization, gender, and internationality.

At the same time, among issues recognized last fiscal year, the following two issues in particular were identified to need further improvements: (1) While some improvement was achieved by strengthening the sophistication of the risk management structure for the entire Group following the establishment of the Risk Governance Division, a clear need emerged for intensified efforts and more thorough reporting to the Board of Directors to enable the Board to better assess potential and Companywide risks and more effectively monitor the risk management initiatives of the Risk Governance Division. (2) The Board of Directors should ensure opportunities for further deliberations on the optimal allocation of resources within the entire Group and other key issues. It has also to deepen understanding throughout the Board of current conditions of the business environment and other related matters, particularly in the Gaming Business, a core Group business.

The need emerged during this fiscal year to enhance deliberations to reflect awareness of business portfolio management issues, including the need to confirm consistency of individual mergers and acquisitions with Groupwide strategic policies, with the aim of contributing to the sustained growth of the entire Group.

Having acknowledged these issues, the Company will strive to allow the Board of Directors to function even more effectively.

The Company has formulated a skills matrix based on the experience and knowledge required for management of a listed company and the experience and knowledge required to achieve the Company’s long-term vision. The basic policy calls for selecting and determining director candidates based on comprehensive assessment of both character and fit with the skills matrix. The Independent Advisory Committee examines a proposal for such candidates submitted by the President (Representative Director), conducts interviews and the like with such candidates, and submits the evaluation results as its opinion to the President (Representative Director). Based on these evaluation results, the President (Representative Director) judges the director candidates in accordance with the above-mentioned policy. The Board of Directors then discusses and approves such judgment. The same applies when the Independent Advisory Committee recommends director candidates to the President (Representative Director).

If a director is deemed unable to perform his or her duties due to mental or physical incapacity or if a material fact such as misconduct or violation of laws, regulations, or the Articles of Incorporation is recognized in the performance of his or her duties, the Independent Advisory Committee shall deliberate to determine the appropriate action in a timely manner. Base on the results of such deliberation compiled in a report to the Board of Directors, the appropriate action with regard to the director shall be determined by the Board of Directors.

The Company’s compensation system for directors and Audit &Supervisory Board members is designed to ensure transparency and provide greater incentive to increase corporate value.The compensation system for directors (excluding directors who are Audit and Supervisory Committee members and external directors) is determined based on the following basic policy.

Based on the basic policy, the remuneration system for Directors of the Company (excluding Audit and Supervisory Committee Members and External Directors) includes fixed remuneration, Directors’ bonuses, and restricted stock units.
SEGA CORPORATION and Sammy Corporation have adopted similar remuneration structures. All remuneration for a Director serving concurrently as Representative Director, President, and CEO of both companies is paid in compliance with the respective officer remuneration systems of both companies.

A compensation table shall be formulated specifying the compensation amounts for each component, namely, basic compensation and role-based compensation, and the Company shall provide the sum of these components as monthly fixed compensation.

Directors’ bonuses are paid as performance-linked remuneration in the amount determined by multiplying the above fixed remuneration by coefficients calculated based on a bonus table that defines the number of months of Directors’ bonuses based on three elements: the level of the adjusted EBITDA; level of business plans achieved; and the year-on-year growth.

The Ordinary General Meeting of Shareholders held June 25, 2024 resolved to adopt a system of remuneration through restricted stock units for Directors (excluding Audit and Supervisory Committee Members and External Directors; “eligible Directors” hereinafter) to further align the long-term interests of Directors with long-term shareholder interests and to provide incentives for increasing corporate value over the medium to long term. This program will supplant the system of share-based remuneration with restrictions on transfer for eligible Directors; eligible Directors will be issued shares of Company common stock allotted over a certain period of time. Upon comprehensive consideration of the contributions and various other factors of the Eligible Directors, a limit for the total amount of compensation and the number of shares would be set for each Performance Share Units (PSU) and Restricted Share Units (RSU) in relation to the Plan for Eligible Directors. In addition, the Board of Directors will determine the ratio of fixed compensation, single-year performance-linked bonuses and restricted stock units for the three fiscal years if the targets of the Medium-term Management Plan are achieved, to be approximately 1:1:1.

Compensation for directors and Audit & Supervisory Board members for the fiscal year ended March 2024 is as follows.

Directors who received ¥100 million or more in total compensation for the fiscal year ended March 2024 is as follows.

To improve corporate governance in the Company and the Group as a whole, the Company has established a Group Risk and Compliance Promotion Committee, and deliberates and confirms any problems occurring in constructing internal control for the management of the Group and the progress thereof, and thus strive to maintain and improve the level of corporate governance.
In addition, the Group established a scheme for evaluating and reporting of the internal control system as required under the Internal Control Report System Relating to Financial Reporting (the Japanese Version of the “SOX Act”), as stipulated in the Financial Instruments and Exchange Act. The Group also addressed inadequacies discovered in the course of these evaluations.
The Company will continue to strive to assure continuing trust/reliability in our financial reporting and to maintain and develop our internal control system, taking into consideration issues such as improving efficiency and securing soundness.