Section 1 General Provisions

1. Purpose


MEDIA DO Co., Ltd., seeks to achieve sustainable growth and accomplish medium- to long-term improvements in corporate value. To guide efforts toward this end, the Company has established the MEDIA DO Basic Corporate Governance Policy, which compiles the Company’s basic stance toward corporate governance as well as its policies for related frameworks and initiatives, based on its corporate philosophy, comprised of its mission and vision. MEDIA DO is enhancing its corporate governance systems in accordance with this policy, which the Company will revise as necessary based on changes in the social and regulatory climates.

Mission
Unleashing a Virtuous Cycle of Literary Creation

Vision
More Content for More People!

2. Basic Stance toward Corporate Governance


MEDIA DO recognizes the following as important management issues to be addressed as its management grows increasingly more global: The expedition and streamlining of management decisions to facilitate the further broadening of its business and the heightening of corporate value, and the improvement of management health and transparency through enhanced corporate governance. Entrenching corporate ethics and awareness of these principles throughout the Company will be imperative to improving the health of management. By fostering such awareness, MEDIA DO aims to develop a corporate culture in which all internal institutions, officers, and employees make fair and accurate decisions. Meanwhile, improving management transparency, and thereby building long-term, trusting relationships with stakeholders, will require prompt and proactive disclosure of information. Systems for information disclosure, both legally mandated and voluntary, are therefore being enhanced toward this end.

To ensure impartial and highly effective management, MEDIA DO will continue to strengthen its corporate governance systems through such means as more effectively allocating resources, expediting decisions, and entrenching compliance awareness under the guidance of the Board of Directors.

The Company has adopted the Company with Board of Company Auditors structure described in the Companies Act of Japan in order to install a double-check system for corporate activities comprised of oversight from both the Board of Directors and Audit & Supervisory Board members.

3. Implementation, Revision, and Abolishment


Decisions related to the implementation, revision, and abolishment of this policy will be made via resolution by the Board of Directors.

Section 2 Relationships with Stakeholders

1. Relationships with Shareholders


(1) Impartiality toward Shareholders and Protection of Shareholder Rights
The Company shall establish and institute policies and implement its articles of incorporation in a manner that ensures respect for the rights of shareholders and impartiality toward all shareholders.

(2) Frameworks for Facilitating the Exercise of Voting Rights at the General Meeting of Shareholders
Recognizing the importance of enabling all shareholders to exercise their voting rights at the General Meeting of Shareholders, the Company shall install frameworks that allow shareholders to appropriately exercise their rights.

(3) Basic Capital Measure Policies
MEDIA DO’s basic financial strategy policy emphasizes a balance between ensuring high capital efficiency and maintaining financial health and thus calls for management resources to be allocated strategically for the purpose of achieving sustainable growth and medium- to long-term improvements in corporate value.

Ongoing investments will be conducted for spurring the growth and strengthening the foundations of the Company’s core eBook distribution business. At the same time, management resources will be allocated to other businesses with consideration for the recoverability of investments, on-hand funds, and future free cash flows from the perspective of the MEDIA DO Group’s overall business portfolio.

To facilitate these resource allocations, the Company endeavors to maintain a capital structure that is balanced to accommodate capital efficiency, financial health, and growth potential in order to ensure the necessary funds can be secured in an efficient and reliable manner.

Furthermore, MEDIA DO recognizes that returning profits to shareholders is an important management task. The Company also acknowledges the managerial importance of conducting crucial capital investments and reinforcing operating foundations toward ensuring ongoing growth. Accordingly, MEDIA DO adheres to a policy of securing internal reserves while issuing shareholder returns based on comprehensive consideration of the Company’s financial position, performance trends, and other management conditions.

(4) Cross-Shareholding Policies
MEDIA DO engages in cross-shareholdings only when deemed necessary for enhancing business activities or corporate value and when the number of shares required to be held is judged to be rational. Examples of cases in which the Company will engage in cross-shareholdings includes when business alliances or information sharing conducted in association with cross-shareholdings have the potential to generate new synergies in the core eBook distribution business.

Moreover, cross-shareholdings are assessed based on Groupwide equity costs by looking at the quarterly financial, earnings, and funding information of cross-shareholding counterparties as well as whether the intended qualitative synergies are being generated to determine, among other factors, if a given holding should be maintained over the medium to long term when considering the projected risks and returns.

Assessments and evaluations based on these factors are carried out by the Company’s Investment Committee and by the Board of Directors. Voting rights associated with cross-shareholdings are exercised based on comprehensive evaluation of the degree to which each individual proposal will contribute to improved corporate value for the Company and to higher medium- to long-term corporate value for the cross-shareholding counterparty as well as how the proposal will impact the Company.

(5) Related-Party Transactions
Approval from the Company must be received prior to engaging in related-party transactions. This approval is only to be issued after discussion by the Board of Directors taking into account input from outside directors and Audit & Supervisory Board members, and the applicable officer is to be identified as an individual with a special conflict of interest and excluded from the vote on whether the transaction will be carried out. All Company officers are asked to fill out annual surveys to identify any related-party transactions.

2. Relationships with Other Stakeholders


(1) Definition and Exercise of Values
MEDIA DO aspires to maintain appropriate relationships with all stakeholders, including employees, customers, business partners, creditors, and local communities, and to respect the interests of these parties while engaging in sound and ethical business activities. To guide us in this endeavor, the Company has established a set of values that serves as a code of conduct defining the principles and stances to be emphasized by everyone working within the MEDIA DO Group.

These values will be reviewed as appropriate to verify that they conform with the current social climate and with the expectations of stakeholders, and any necessary revisions will be implemented based on resolutions by the Board of Directors.

(2) Sustainability for the MEDIA DO Group
The MEDIA DO Group’s mission is “unleashing a virtuous cycle of literary creation” and its vision is “More Content for More People!” These principles exemplify our commitment to building a social ecosystem founded on co-creation among the creators and publishers who produce written works, the users of these works, the eBook distributors that serve as points of contacts between these two, and the Group, which functions as an intermediary between these parties.

Accordingly, sustainability for the MEDIA DO Group entails a concerted effort by all officers and employees to carry out their business activities based on a sense of responsibility and pride toward the contributions made by the Group’s businesses and services. These contributions support the development of a healthy economy and the cultural advances stimulated by written works. Based on this belief, we seek to address social and environmental issues, such as those identified by the United Nations Sustainable Development Goals, through management practices and strategies founded on our mission and vision. In addition, we view business opportunities and risks through the lens of environmental, social, and governance issues as we pursue increased corporate value by helping to resolve social issues while achieving steady growth.

(3) Promotion of Diversity
MEDIA DO encourages respect for individuality as well as mutual understanding with regard to employees’ diverse values and backgrounds. Furthermore, the Company stands in staunch opposition of discrimination and violations of human rights on the basis of ethnicity, nationality, gender, religion, or physical or mental characteristics.

In addition to promoting diversity in the recruitment of human resources, MEDIA DO also seeks to improve employee quality of life through the empowerment and motivation of employees. By incorporating human resources with diverse values, the Company aims to become an entity capable of continuously generating innovation and new value.

To guide these efforts, basic policies pertaining to human rights and diversity management will be implemented and disclosed.

(4) Whistleblowing System
In accordance with its whistleblowing regulations, the Company has installed frameworks that allow for consultation and appropriate responses to reports from officers and employees regarding violations of laws or regulations performed by individuals or organizations. Through these frameworks, action is taken to quickly identify and rectify misconduct and legal violations.

Whistleblowing systems include internal reporting venues as well as independent external reporting venues, both of which have provisions to protect the anonymity of individuals submitting reports and to ensure that these individuals do not suffer disadvantageous treatment as a result of reporting.

Reported issues will be swiftly and appropriately investigated and corrective measures will be put in place.

The Executive Committee receives regular reports on the status of investigations and corrective measures related to reported issues, oversees response efforts, and periodically reports on these efforts to the Board of Directors.

Section 3 Appropriate Information Disclosure and Transparency

1. Information Disclosure Policy


MEDIA DO discloses important information pertaining to its business activities, including financial information and non-financial information regarding business strategies, risks, and corporate governance. Through such information disclosure, the Company aims to maintain the trust of all stakeholders, including shareholders and other investors; business partners such as creators, publishers, and eBook distributors; and officers and employees, and to facilitate accurate understanding and evaluation of the Company. Transparency, impartiality, and consistency are pursued as the Company practices timely and appropriate information disclosure in accordance with the Financial Instruments and Exchange Act of Japan and the Timely Disclosure Rules of the Tokyo Stock Exchange.

Section 4 Corporate Governance Systems

1. Directors and the Board of Directors


(1) Role and Duties of the Board of Directors
MEDIA DO’s internal regulations for the Board of Directors defines requirements for the Board of Directors, which are adhered to alongside the requirements stipulated for the Board of Directors in laws and in the Company’s articles of incorporation.

As the organization entrusted with the management of the Company from shareholders, the Board of Directors is responsible for formulating business strategies and plans and instituting effective corporate governance systems. In these activities, the Board of Directors seeks to entrench MEDIA DO’s corporate philosophy to stimulate ongoing growth and improvements in medium- to long-term corporate value and to heighten profitability and capital efficiency. Furthermore, the Board of Directors make decisions on matters stipulated in laws and in the Company’s articles of incorporation as well as on other important management decisions as the body with authority for operational execution-related decisions. The Board of Directors also oversees the execution of duties by directors and executive officers.

Moreover, the Board of Directors coordinates with Group companies to facilitate consolidated Group management and construct corporate governance systems that contribute to the growth of the MEDIA DO Group as a whole. These efforts are based on the regulations for the management of affiliate companies established by the Company for the purpose of the ensuring smooth operation and appropriate management of affiliates and for promoting Group governance.

In performing the aforementioned decision-making and oversight duties, the Board of Directors engages in earnest initiatives grounded in strong corporate ethics and advances management dialogues through free and open discussions. An independent, objective standpoint is adopted in these endeavors.

(2) Scope of Authority for the Board of Directors
The Board of Directors is responsible for making decisions regarding items stipulated in the Companies Act of Japan; the establishment of corporate philosophies, medium-term management plans, management policies, and budgets; the revision and abolishment of policies and important regulations; the appointment of human resources to important officer positions; and other matters related to operational execution. The authority for operational execution-related decisions not described above is delegated to executive officers to separate the operational execution function from the managerial oversight function in order to ensure that executive officers can effectively address urgent and future management issues.

(3) Terms of Directors
In the Company’s articles of incorporation, the term of a director is stipulated to end with the conclusion of the Annual General Meeting of Shareholders held for the fiscal year ending within one year of the director’s appointment. This term has been chosen for the purpose of heightening the Company’s ability to respond flexibly to the rapid pace of change in the presently borderless content market.

The upper limit for the term of outside directors has been set at four years, in principle, to ensure that such directors can maintain their independence.

(4) Structure of the Board of Directors
The Company’s articles of incorporation stipulate that the Board of Directors is to consist of no more than eight members. In addition, multiple outside directors designated as independent directors are to be appointed, so that the wealth of specialized insight and experience possessed by these directors can be incorporated into management. Systems for enhancing the oversight function and accountability of the Board of Directors are also to be put in place.

(5) Desired Qualities and Appointment Policies for Directors
The basic policy for appointing directors is to select individuals who have been deemed appropriate and who will contribute to a balanced distribution of business insight, experience, and skills within the Board of Directors. In accordance with this policy, candidates for positions as directors are comprehensively assessed and judged by the Board of Directors, after holding discussions with candidates, based on their experience, insight, and specialties and how they conform with the Company’s business philosophy and strategies.

(6) Chairperson of the Board of Directors and the Conducting of Meetings
The president shall be appointed to the position of chairperson of the Board of Directors except when otherwise legally required. Should the president fall victim to an accident or otherwise be rendered unable to perform their duties, a director will be assigned to take their place as chairperson of the Board of Directors through a resolution by the Board of Directors following the predetermined procedures.

Meetings of the Board of Directors shall be conducted based on the following policies to ensure constructive discussions.

  1. The secretariat of the Board of Directors shall distribute materials pertaining to meetings of the Board of Directors prior to the day of meetings.
  2. The secretariat of the Board of Directors shall decide the agenda items to be raised at meetings of the Board of Directors and inform directors and Audit & Supervisory Board members of these items prior to the day of meetings.
  3. The secretariat of the Board of Directors shall provide the necessary briefings to individuals attending meetings of the Board of Directors prior to meetings.
  4. The number of agenda items and the frequency of meetings of the Board of Directors shall be set as appropriate based on meeting standards to ensure sufficient time for discussions.

2. Audit & Supervisory Board Members and the Audit & Supervisory Board


(1) Role and Duties of Audit & Supervisory Board Members and the Audit & Supervisory Board
Audit & Supervisory Board members audit the execution of duties of directors by attending meetings of the Board of Directors and other important meetings and regularly meeting with directors and other officers to discuss the status of their execution of duties.

The Audit & Supervisory Board meets once a month. At meetings, the Audit & Supervisory Board members establish audit plans and review the status of audit implementation and audit results and perform other tasks to ensure effective and efficient audits.

Moreover, information is shared between Audit & Supervisory Board members, the Internal Audit Office, and the accounting auditor to ensure efficient and synergetic audits.

(2) Terms of Audit & Supervisory Board Members
In the Company’s articles of incorporation, the term of an Audit & Supervisory Board member is stipulated to end with the conclusion of the Annual General Meeting of Shareholders held for the last fiscal year ending within four years of the Audit & Supervisory Board member’s appointment.

(3) Structure of the Audit & Supervisory Board
The Company’s articles of incorporation stipulate that the Audit & Supervisory Board is to consist of no more than four members, including both standing Audit & Supervisory Board members and outside Audit & Supervisory Board members, and that a majority of these members should be outside Audit & Supervisory Board members designated as independent auditors. Candidates for positions as outside Audit & Supervisory Board members designated as independent auditors shall be chosen from among individuals that meet the independence standards for outside Audit & Supervisory Board members defined in the regulations for the Audit & Supervisory Board.

3. Independence Standards


For positions as outside directors designated as independent directors and outside Audit & Supervisory Board members designated as independent auditors, the Company choses candidates who fulfill the requirements for outside officers of the Companies Act of Japan as well as the standards for independent directors and independent auditors stipulated by the Tokyo Stock Exchange and who therefore effectively pose not concern for conflicts of interest with general shareholders. Moreover, candidates are expected to understand the Company’s business philosophy and possess specialized insight and experience enabling them to voice objective opinions regarding management policies and corporate strategies.

4. Appropriate Audits by the Accounting Auditor


To ensure the accuracy and reliability of accounting audits, the accounting auditor is expected to maintain an impartial and independent standpoint and to coordinate with the Audit & Supervisory Board and the Internal Audit Office to conduct appropriate audits.

5. Nomination and Compensation Committee


The Company shall maintain the Nomination and Compensation Committee as an advisory body to the Board of Directors tasked with examining and discussing matters pertaining to the nomination and compensation of directors for the purpose of ensuring the objectivity and transparency of decisions regarding these matters.

(1) Role of the Nomination and Compensation Committee
The Nomination and Compensation Committee shall be assembled and operated based on resolutions by the Board of Directors. The committee will be responsible for evaluating the suitability of candidates for positions as directors and executive officers in order to heighten the transparency and objectivity of appointments and dismissals.

The committee will also assess the policies and procedures for the compensation of directors and executive officers from the perspectives of transparency and objectivity.

Furthermore, the Nomination and Compensation Committee shall examine and discuss potential measures pertaining to the nomination of candidates for positions as the representative director, other directors, and executive officers as well as executive director and executive officer succession plans. In addition, the committee will be responsible for examination and discussions related to the development and revision of officer compensation systems and the determination of compensation amounts.

The results of these examinations and discussions will be reported to the Board of Directors.

(2) Composition of the Nomination and Compensation Committee
The Nomination and Compensation Committee is to be comprised of three or more members appointed via resolution by the Board of Directors. One of these members is to be the representative director while outside directors designated as independent directors are to account for a majority of members.

The chairperson of the Nomination and Compensation Committee is to be selected via a majority vote by committee members from among the outside directors designated as independent directors on the committee.

(3) Compensation of Directors

i. Basic Policies

  • Compensation systems for directors should be designed to generate strong motivation to pursue ongoing improvements in corporate value.
  • Compensation systems should also incorporate objective and transparent procedures founded on principles of accountability toward shareholders and other stakeholders.
  • Compensation amounts should be set appropriately based on the roles and responsibility of each individual director.

ii. Types of Compensation

  • Compensation for executive directors is comprised of monetary compensation (not considered performance-linked compensation) and stock compensation. Monetary compensation consists of basic compensation and commitment-linked compensation.
  • Compensation for outside directors consists of only basic monetary compensation (not considered performance-linked compensation) out of consideration for the oversight functions and independence of outside directors.

iii. Policies for Determining Individual Amounts of Monetary Compensation

  • Basic compensation shall be determined based on the roles and responsibilities of individual directors with consideration paid to their salaries as employees.
  • Commitment-based compensation shall be paid based on the degree of accomplishment of the targets set for individual directors.
  • Monetary compensation is to be issued to directors on a monthly basis throughout the duration of their terms.

iv. Policies for Determining Amounts of Non-Monetary Compensation

  • Stock compensation shall be issued through a restricted stock compensation system in which shares of common stock of the Company are allocated to applicable directors entirely in the form of in-kind contributions of monetary compensation claims. The allocated shares of stock will be subject to transfer restrictions imposed over a period of two to five years set by the Board of Directors.
  • The amounts, share numbers, and allocation timings for this system are to be set in a manner that provides effective incentive for pursuing medium- to long-term performance and corporate value growth and that thereby promotes the sharing of value with shareholders.

v. Ratios of Compensation by Type

  • The ratios of compensation by type for executive directors shall be set as follows.
Monetary CompensationStock Compensation
80–90%10–20%
  • Compensation for outside directors shall be comprised entirely of basic compensation.

vi. Policies for Determining Individual Director Compensation

  • Via resolution of the Board of Directors, the authority for determining the amounts of monetary compensation to be paid to individual directors shall be delegated to the representative director. The Board of Directors shall consult and receive reports from the Nomination and Compensation Committee with regard to the amounts of monetary compensation to be paid to individual directors. The representative director is then to determine the amounts of monetary compensation to be issued to individual directors based on the aforementioned delegated authority with due consideration paid to the advice of the Nomination and Compensation Committee.
  • Amounts of stock compensation are to be determined via resolution by the Board of Directors. The Board of Directors shall consult and receive reports from the Nomination and Compensation Committee with regard to the amounts of stock compensation to be issued to individual directors. The Board of Directors is then to determine the amounts of stock compensation to be issued to individual directors with due consideration paid to the advice of the Nomination and Compensation Committee.

6. Evaluation of Effectiveness of the Board of Directors
Self-evaluations and analyses of methods of conducting meetings of the Board of Directors are performed for the purpose of ensuring the effectiveness of the Board of Directors. Advice from third-party institutions is received in performing the self-evaluations and analyses, and the results of the self-evaluations and analyses are disclosed.

7. Director and Audit & Supervisory Board Member Training Policies
Newly appointed directors are encouraged to proactively take part in external seminars and joint external organizations in order to acquire the knowledge necessary for carrying out their duties and to update their understanding with the latest insight and to thereby improve their overall knowledge and skills. Audit & Supervisory Board members are encouraged to participate in seminars arranged by the Japan Audit & Supervisory Board Members Association and in other venues to receive the training necessary for performing their duties.
Outside directors and outside Audit & Supervisory Board members are provided with opportunities to attend twice-annual Companywide gatherings and other events in order to acquire the necessary knowledge pertaining to the Company’s business, organization, and finances.


Section 5 Engagement with Shareholders

1. Policies Regarding Frameworks and Initiatives for Facilitating Constructive Dialogue with Shareholders


MEDIA DO seeks to foster trusting relationships with shareholders and to increase the transparency of its activities through information disclosure and engagement in pursuit of ongoing growth and medium- to long-term improvements in corporate value.

The Company promotes constructive dialogue with shareholders through the following frameworks and initiatives.

  1. Constructive dialogue with shareholders and other investors is spearheaded by the representative director and the relevant executive officers.
  2. Corporate management divisions under the direct jurisdiction of the representative director are assigned responsibility for investor relations (IR) activities to serve as an internal venue for facilitating engagement. These divisions work closely with other relevant divisions to advance dialogues and build relationships with shareholders and other investors.
  3. The representative director and divisions responsible for IR activities proactively create opportunities for direct engagement with shareholders. Examples of these opportunities include quarterly financial results briefings, individual meetings with shareholders, small meetings, and teleconferences with overseas investors. In addition, the representative director and divisions responsible for IR activities conduct regular domestic and overseas financial roadshows and participate in conferences organized by securities companies.
  4. For private investors, ongoing enhancements are made to MEDIA DO’s corporate website to offer a better understanding of the Company’s business activities and initiatives. Proactive information disclosure is also practiced through MEDIA DO’s integrated reports, shareholder newsletters, and other publications.
  5. Reports are submitted to the Board of Directors with regard to the findings of surveys by external firms on the status of the Company’s shareholder base and on other matters. The Board of Directors is also informed about the opinions and concerns of shareholders gathered during engagement activities.
  6. Insider information is managed rigorously based on the Company’s insider trading management regulations, and regular workshops are held to inform officers and employees about this subject.

Established on April 13, 2021
Revised on June 1, 2021