Corporate Governance and Internal Controls

Gakken Group Charter of Corporate Conduct

Based on our Group Philosophy‐Gakken Group truly hopes for everyone to lead the enriched life by providing the sensation, satisfaction and peace of mind for the day along with the dreams and hopes for tomorrow‐we aim at conducting corporate activities that meet the values that people and society now expect in the fields of education, information, and culture.
As a member of Gakken Group, we take responsibility and pride in our Gakken brand developed over many years, conform to laws, ordinances and social ethics, and are committed to fulfill our social responsibility.
The top management and each individual employees of Gakken Group carry out business in accordance with Gakken Group Charter of Corporate Conduct and promote compliance management.

For our customers

We ensure the highest level of safety for our products and services and promote appropriate sales activities to earn the confidence of our customers.

For stockholders and investors

We provide appropriate management information disclosure to establish a relationship of trust with stockholders and investors.

For business partners

We maintain fair relations with all of our business partners, and conduct fair and free market competition.

For employees

We respect human rights, and create corporate culture where all employees can fully demonstrate their creativity.

For Society

We conduct social action programs and environmental protection, and fulfill our responsibilities as a corporate member of society.

Stance and Development Status of Internal Controls System

Gakken Group has established Gakken Group Charter of Corporate Conduct, which is based on Group Philosophy. In order to establish a system to ensure the appropriateness of operations (internal controls system), the board of directors decided on a basic policy for the establishment of an internal controls system at a meeting in May 2006, and in October 2006 established the Internal Controls committee, under which four subcommittees (Compliance subcommittee, Information Security subcommittee, Risk Management subcommittee, and Financial Reporting Control subcommittee) and an e-learning operation team were established.

Corporate Governance System

Gakken Group Board of Directors is composed of nine directors, two of whom are independent directors, who are responsible for the execution and supervision of group's corporate governance. In addition to matters stipulated by the Companies Act, it makes decisions on management policies related to the entire group and supervises the execution of business by directors. The Board of Corporate Auditors consists of four corporate auditors, two of whom are independent auditors. We have established a secretariat for the Board of Corporate Auditors to improve the quality and efficiency of audits. In addition, we have established a Governance Advisory Committee as an organization to discuss and make recommendations on the state of our governance as a third party once every six months.

GRC(Governance/Risk /Compliance) Training

Every fiscal year, Gakken Group conducts GRC training for all managers and employees with main themes of compliance and risk management. The training mainly utilizes e-learning, and the teaching materials are produced in-house by Gakken Group.
We actively incorporate the advice of the Governance Advisory Committee, which is composed of outside experts who provide specific examples of accidents that are likely to occur in day-today operations and other information to deepen understanding of the topics.
In addition, we work to foster a sound corporate culture by regularly monitoring the understanding the Gakken Group Charter of Corporate Conduct and the Gakken Compliance Code, as well as regularly monitoring the status of compliance of our Information Security Policy.

Effectiveness Evaluation of Board of Directors

Every year, we conducts a self-evaluation questionnaire for all directors and corporate auditors, except for the president, representative director, to assess whether or not they are effectively fulfilling the roles and responsibilities of the board of directors, and prepares a draft evaluation report consisting of analysis results and a draft action plan. We then reflect objective opinions from the Governance Evaluation committee before adopting a resolution for the report at a meeting of the board of directors and finally disclosing it to the public.

1.Implementation

Questionnaires were conducted similar to FY2019

2.Effectiveness Evaluation and Analysis Evaluation

(1)Composition of Board of Directors

In terms of whether Board of Directors has the knowledge,experience and ability to fulfill its roles and responsibilities in a balanced manner, and is diverse and appropriately sized, the attributes of outside directors, and the current composition of internal directors were generally satisfactory (overall average score of 3.8 to 4.3).

(2)Agenda Items of Board of Directors

We evaluated the agenda items of Board of Directors, reports on the progress of the management plan, reports on the progress of investments, discussions on the submission of proposals to the general meeting of shareholders, and the process leading to resolutions of the Board of Directors. The result was generally satisfactory (overall average score of 3.9 to 4.6).

(3)Meetings and Deliberations of Board of Directors

The average score for the number of meetings held by the Board of Directors, the length of time Board of Directors deliberated, the presence or absence of constructive deliberation by Board of Directors, the length of time Board of Directors spent explaining agenda items, and the quality of presentations were generally satisfactory (overall average score of 3.7 to 4.3).

(4)Information Provision

The average score for all of the following items (3.7 to 4.3) was generally satisfactory, the provision of information necessary for Board of Directors deliberations, the quality and quantity of information provided to outside directors, information provided to outside directors about the company, information provided to outside directors about management issues, information provided to outside directors about market trends and the competitive environment and information provided to outside directors about unique risk factors and laws and regulations, the content of collaboration meetings for outside directors and inside directors, and communication between outside directors and inside directors.

(5)Roles and Responsibilities of Board of Directors

The average score for the establishment of Group Philosophy, etc., the dissemination of behavior guidelines, constructive discussion of management strategies and plans, the structure and content of the compensation system for directors, clarification of delegation to senior management by Board of Directors, and training for directors were generally satisfactory( overall average score of 3.8 to 4.4).

(6)Action Plan Decided in December 2019

For Plan① Further enhance deliberations by Board of Directors, Plan② Improve the effectiveness of the provision of information to outside directors, and Plan③ Continue holding training sessions for directors to promote the Digital Transformation (DX) strategy, we received scores of 3.8, 3.9, and 3.7 respectively, which indicate that these items were generally satisfactory.

3. Outline of Action Plan

Having received the results of the analysis of the questionnaire, objective opinions were heard from the company’s Governance Advisory Committee, which is composed of outside experts. In the “Questionnaire on Assessing the Effectiveness of the Board of Directors,” as for items with large evaluation differences between directors and corporate auditors, as well as items with large evaluation differences between inside and outside directors, after discussion, we formulated an action plan which states that “items with the largest evaluation differences will be prioritized and specific measures will be taken to improve them.”

Internal Controls over Financial Reporting

For Gakken Group, internal controls means that all directors and employees independently and voluntarily establish a system and framework for the sound management of group, and carry out day-to-day operations accurately so as to improve operational efficiency, comply with laws and regulations, and prepare reliable and accurate financial statements. As shown in the overview of the assessment of internal controls on the lef t, the Finance Department controls the accounting and financial reporting process, the IT Department controls IT, and the Operations Depar tment controls the business process, which all mutually interact.