Corporate Governance

Correspondence to Corporate Governance CodeIR Information

Reasons for Non-compliance with the Principles of the Corporate Governance Code

Supplementary Principle 1.2.4 Exercise of Shareholder Rights at General Meetings of Shareholders
MarketEnterprise has yet to use the Electronic Voting Platform but it adopts the methods of exercise of voting rights through the Internet. What is commonly called the “convocation notice in a narrow sense” is translated into English and published on the investor relations website of the Company. Going forward, however, MarketEnterprise seeks to enhance the system by using the Electronic Voting Platform and preparing the English version of the convocation notice, bearing in mind the trend of the shareholding ratio of institutional and foreign investors.

Supplementary Principle 1.2.5 Preparation for Attendance of Beneficial Shareholders at the General Meeting of Shareholders
MarketEnterprise considers that the voting rights for the General Meeting of Shareholders are held by the parties stated or recorded on the shareholder registry as MarketEnterprise cannot identify beneficial shareholders such as institutional investors holding shares under the name of trust banks and other similar institutions. Therefore, as a general rule, MarketEnterprise does not permit beneficial shareholders to attend the General Meeting of Shareholders, exercise voting rights, or ask questions at the meeting. In the future, however, MarketEnterprise will consider and respond to matters concerning the attendance of beneficial shareholders at the General Meeting of Shareholders while paying attention to requests from beneficial shareholders and relevant trends in trust banks and other similar institutions.

Supplementary Principle 4.1.2 Commitment to the Medium-term Management Plan
MarketEnterprise recognizes difficulties in disclosing medium-term earnings forecasts that involve few variables and thus contribute to proper investment decisions. This is because MarketEnterprise operates relatively novel business in the rapidly changing social environment observed recently. Therefore, MarketEnterprise does not disclose numerical targets, deeming that such disclosure does not necessarily contribute to appropriate decisions to be made by its stakeholders. However, MarketEnterprise does disclose earnings forecasts for a single fiscal year. MarketEnterprise provides shareholders and other stakeholders with analysis of discrepancy between the forecasts and the actual results through earnings release, periodic financial results briefings, and other relevant occasions. In addition, the analysis is reflected in the management plans of the subsequent fiscal years.

Supplementary Principle 4.1.3 Oversight of Succession Planning for the CEO
The Board of Directors of MarketEnterprise has yet to concretely discuss a plan for developing succession candidates of CEO as an urgent issue, given the history of MarketEnterprise and the age of the current CEO. Going forward, concrete discussions will be held on what the succession plan should be.

Supplementary Principle 4.2.1 Setting of Appropriate Proportion of Performance-linked Remuneration and Stock-based Remuneration
Remuneration of Directors of MarketEnterprise is determined exclusively by the Representative Director in accordance with a resolution of the Board of Directors within the scope of the total amount of remuneration resolved at the General Meeting of Shareholders.
MarketEnterprise recognizes the distribution of earnings to shareholders as one of the most important management issues. When determining remuneration of Directors, MarketEnterprise preferentially considers matters such as the balance between the remuneration and retained earnings necessary for a medium- to long-term growth. In addition, evaluation results are reflected in the remuneration according to the scope of duties of each Director (that is, contribution to business performance over the medium to long term), group-wide performance, and the degree of group-wide target achievement, while considering common practices, business performance, economic situation, employee compensation, and other factors. Before determining the remuneration, the Representative Director explains the reasons for decision on each remuneration to Independent External Directors and obtains advice from them.
MarketEnterprise considers the adoption of performance-linked remuneration and stock-based remuneration for the medium to long term to be an issue for examination in the future as it is difficult for MarketEnterprise that operates relatively novel business to identify the correlation between accomplishments and remuneration (incentive) to the extent reasonable.

Supplementary Principle 4.3.2 Appointment of CEO by an Objective, Timely and Transparent Procedure
The Board of Directors deems that appointment/dismissal of the CEO is the most important strategic decision for the Company. Based on this perception, the Board of Directors appoints the Representative Director considering sense of value, capability, behavioral characteristic, and other factors required for the CEO, with attendance of Independent Directors/Audit & Supervisory Board Members (consisting of two External Directors and three External Audit & Supervisory Board Members). In addition to the above, such appointment is made taking into account the changes in the environment and circumstances surrounding MarketEnterprise as well as the progress of strategies laid out.
Establishment of a plan for developing succession candidates of CEO has yet to be concretely discussed as an urgent issue, considering the history of MarketEnterprise and the age of the current CEO. Going forward, concrete discussions will be held on what the succession plan should be.

Supplementary Principle 4.3.3 Establishment of Objective, Timely and Transparent Procedures for the Dismissal of CEO
Rules on Officers of MarketEnterprise prescribe that if an Officer of MarketEnterprise commits any wrongdoing or breach of duty or is ineligible to be an Officer, the Board of Directors may urge the Officer to resign his/her office. MarketEnterprise has yet to define the evaluation criteria or specific procedures for dismissal of the CEO. In contrast, dismissal of Officers of MarketEnterprise is made based on fair reasons for dismissal pursuant to a resolution at the General Meeting of Shareholders with approval from the Board of Directors.
MarketEnterprise appoints two External Directors and three External Audit & Supervisory Board Members, and designates all External Directors/Audit & Supervisory Board Members as Independent Directors/Audit & Supervisory Board Members. In addition, MarketEnterprise builds the framework to facilitate cooperation among Independent External Directors by semiannually holding External Directors/Audit & Supervisory Board Members meetings consisting of only External Directors/Audit & Supervisory Board Members, where External Directors/Audit & Supervisory Board Members exchange information and opinions as well as develop a shared awareness from an independent and objective standpoint. They also conduct the evaluation of MarketEnterprise, and as part of this, evaluate whether the Representative Director is adequately fulfilling his responsibilities. Through those activities, effective oversight of the management is achieved. As a result, MarketEnterprise believes that objective, timely, and transparent procedures to dismiss the Representative Director is ensured through the oversight by External Directors and the audit by External Audit & Supervisory Board Members.

Supplementary Principle 4.8.2 Cooperation of Independent External Directors with Management and Audit & Supervisory Board Members
MarketEnterprise appoints two External Directors and three External Audit & Supervisory Board Members, and designates all External Directors/Audit & Supervisory Board Members as Independent Directors/Audit & Supervisory Board Members. MarketEnterprise builds the framework to facilitate cooperation among Independent External Directors/Audit & Supervisory Board Members by semiannually holding External Directors/Audit & Supervisory Board Members meetings consisting of only Independent Directors, where Independent Directors exchange information and opinions as well as develop a shared awareness from an independent and objective standpoint, and provide effective oversight of the management. At the Board of Directors meetings, the Independent External Directors express their candid opinions and proactively contribute to discussions on the meetings.
The management of MarketEnterprise develops the environment so that Independent External Directors can fulfill their responsibilities. As part of this, the management provides Independent External Directors with detailed explanations on agendas and matters to be reported at the Board of Directors meetings in advance. Thanks to the External Directors/Audit & Supervisory Board Members meetings, good coordination has been maintained between Independent External Directors and the Audit & Supervisory Board. Therefore, MarketEnterprise does not consider that an election of a lead independent external director is suitable given the current situation.

Supplementary Principle 4.10.1 External Directors’ Involvement and Advice with Regard to Nomination and Remuneration
Of five Directors of MarketEnterprise, two Directors are Independent External Directors. Independent External Directors utilizes their specialized knowledge and abundant experience as a corporate manager to state opinions and provides advice as necessary at the Board of Directors and to each Director.
At present, before holding Board of Directors meetings to discuss matters on nomination and remuneration of Directors, the Representative Director explains the reasons for the decision on each remuneration to Independent External Directors and obtains their advice. Based on the recognition that appropriate involvement and advice of Independent External Directors have been obtained at the Board of Directors meetings, any committee as an optional advisory body has yet to be established. Going forward, however, MarketEnterprise will consider such establishment as necessary to strengthen the governance structure.

Principle 4.11 Preconditions for Board of Directors and Audit & Supervisory Board Effectiveness
MarketEnterprise considers that it should consider diversity and appropriate size of the Board of Directors taking into account the circumstances of the Company and social situations.
At present, the Board of Directors of MarketEnterprise consists of five Directors (including two External Directors). MarketEnterprise believes that the size of the Board of Directors is appropriate as prompt decision-making has been facilitated with a small number of Directors.
All the Directors of MarketEnterprise have a thorough knowledge of business operations and deep insight as well as knowledge, experience, and expertise on finance, accounting, risk management, compliance, etc. Therefore, MarketEnterprise believes that the Board of Directors is well balanced as a whole in knowledge, experience, and skills in order to fulfill its roles and responsibilities.
MarketEnterprise adopts the management structure composed principally of the Inside Directors of MarketEnterprise with a high degree of expertise. This is because MarketEnterprise deems that it is desirable to operate business by integrating execution of operation and management decision-making so that it can adapt to rapidly changing management environment timely and appropriately. At present, diversity including gender and international experience of MarketEnterprise has yet to be achieved. Nevertheless, when nominating Directors MarketEnterprise adheres to a policy that it appoints persons determined to have sufficient qualities as a Director of MarketEnterprise from the perspectives of knowledge, experience and skills, regardless of gender or nationality.
The Audit & Supervisory Board of MarketEnterprise consists of three External Audit & Supervisory Board Members who have experience as Audit & Supervisory Board Members of multiple companies or otherwise who have sufficient knowledge, experience, and expertise as a certified public accountant or an attorney at law.
With regard to the effectiveness of the Board of Directors, MarketEnterprise believes that it has been well-functioning because, in addition to the way for selection of officers described above, the Board of Directors has a highly effective management oversight structure with three Inside Directors versus five Independent External Directors/Audit & Supervisory Board Members (consisting of two External Directors and three External Audit & Supervisory Board Members). Therefore, MarketEnterprise does not deem that establishing a system for analyzing and evaluating effectiveness of the Board as a whole is an urgent issue under the current structure.

Supplementary Principle 4.11.3 Analysis and Evaluation of Board Effectiveness as a Whole
The Board Directors of MarketEnterprise has a highly effective management oversight structure with three Inside Directors versus five External Directors/Audit & Supervisory Board Members (consisting of two External Directors and three External Audit & Supervisory Board Members). In addition, MarketEnterprise builds the framework to facilitate cooperation among Independent External Directors/Audit & Supervisory Board Members by semiannually holding External Directors/Audit & Supervisory Board Members meetings consisting of only Independent External Directors/Audit & Supervisory Board Members. External Directors and External Audit & Supervisory Board Members appropriately express their opinions and provide candid advice on matters such as what the Board of Directors should be, the way to operate the Board of Directors, and the situation of discussions. Based on the evaluations provided by them, MarketEnterprise strives to further improve the Board effectiveness.
Based on the above, MarketEnterprise believes that the Board of Directors has been well-functioning, and therefore, does not deem that establishing a system for analyzing and evaluating the Board effectiveness as a whole is an urgent issue under the current structure. Depending on changes in business management systems, MarketEnterprise will consider establishing such a system on assumption that MarketEnterprise discloses a summary of the evaluation results of the Board of Directors in the future.

Principle 5.2 Establishing and Disclosing Business Strategies and Management Plans
MarketEnterprise develops its Medium-term Management Plan on a rolling basis. Specifically, the Medium-term Management Plan covers a period of three years, but is reviewed and revised annually. The plan is developed by setting the target sales and profits after identifying future management challenges based on considerations of past business results, forecasts, goals and feasibility, human resource plans, facility plans, financing plans, economy, social situations, and the market environment in accordance with management policies. Upon developing the plan, MarketEnterprise sets the key performance indicators (KPIs) for each business segment and grasps the status of achievement of the earnings target. At present, MarketEnterprise has yet to set any numerical targets on profitability and capital efficiency after accurately identifying the company’s cost of capital. In addition, it does not disclose medium- to long-term numerical targets because it is difficult to disclose medium-term earnings forecasts that involve few variables and thus contribute to proper investment decisions, given that it operates relatively novel business in the rapidly changing social environment observed recently. At present, MarketEnterprise discloses business strategies for the next fiscal year, earnings forecasts (sales, operating profit, ordinary profit, and profit attributable to owners of parent), and provide its shareholders with explanations that are easy to understand at financial results briefings or other events.

Disclosure Based on the Principles of the Corporate Governance Code

Principle 1.4 Cross-Shareholdings
At present, MarketEnterprise does not hold any shares of other listed companies for cross-shareholding purposes. However, we have a policy that allows us to hold such shares if it is determined from a comprehensive standpoint that strengthening relationship with companies with relevant technologies and know-hows through cross-shareholdings is strategically important because it helps enhance its corporate value and medium- to long-term growth potential. Determination of holding such shares is made through discussions at the Board of Directors meetings regardless of the investment amount. At the Board of Directors meetings, multi-faceted verification is made including the validity of the amount to be invested and interests as well as conformity to the policy described above. If cross-shareholdings are determined to be invalid due to changes in conditions of MarketEnterprise and the investee company, MarketEnterprise will reduce such shares or conduct a review in accordance with the discussion at the Board of Directors meetings. MarketEnterprise appropriately exercises voting rights for such shares by determining, on a proposal to proposal basis, whether voting for a proposal will contribute to medium- to long-term improvements in corporate value of the investee company.

Principle 1.7 Related Party Transactions
In principle, MarketEnterprise has a policy of not engaging in transactions with related parties. However, if a transaction is considered to contribute to an increase in corporate value of MarketEnterprise, less substitutable, and highly economically reasonable, MarketEnterprise engages in such a transaction after thorough deliberation and resolution of the Board of Directors. At the deliberation, careful consideration is given on matters such as whether the transaction may damage the soundness of management of the MarketEnterprise Group, whether the transaction is determined to be valid in a rational manner, or the conditions of the transaction are appropriate compared to other external transactions. The Audit & Supervisory Board Members monitor and assess competition, conflict-of-interest, and other translations in accordance with Standards of Audit by Audit & Supervisory Board Members to ensure that no violation is made on duties of Directors.

Principle 2.6 Roles of Corporate Pension Funds as Asset Owners
MarketEnterprise does not have a corporate pension fund system.

Principle 3.1 Full Disclosure
(i) MarketEnterprise has published its business principles and vision on the website of MarketEnterprise.
(ii) MarketEnterprise has published basic views on corporate governance on the website of the Company, the Corporate Governance Report, and the Annual Securities Report.
(iii) Remuneration of Directors is determined exclusively by the Representative Director in accordance with a resolution of the Board of Directors within the scope of the total amount of remuneration resolved at the General Meeting of Shareholders.
MarketEnterprise recognizes the distribution of earnings to shareholders as one of the most important management issues. When determining remuneration of Directors, MarketEnterprise preferentially considers matters such as the balance between the remuneration and retained earnings necessary for a medium- to long-term growth. In addition, evaluation results are reflected in the remuneration according to the scope of duties of each Director (that is, contribution to business performance over the medium to long term), group-wide performance, and the degree of group-wide target achievement, while considering common practices, business performance, economic situation, employee compensation, and other factors. Before determining the remuneration, the Representative Director explains the reasons for decision on each remuneration to Independent External Directors and obtains advice from them.
(iv) MarketEnterprise’s policy for nomination of Directors and Audit & Supervisory Board Members is to nominate suitable persons who can fulfill the duties and responsibilities by thoroughly considering each person’s personality and expertise. For nomination of External Directors and External Audit & Supervisory Board Members, MarketEnterprise nominates candidates in accordance with the independence standards stipulated by the Tokyo Stock Exchange. In addition, MarketEnterprise examines whether each candidate can maintain an independent status and a fair and unbiased attitude, as well as he/she can attend the Board of Directors meetings. MarketEnterprise appoints candidates of Audit & Supervisory Board Members bearing in mind that at least one person who has sufficient expertise on finance and accounting should be appointed. The Representative Director and Directors nominate candidates of Directors and the nomination is resolved pursuant to a resolution at the Board of Directors. The Representative Director and the General Manager of Administration Department nominate candidates of Audit & Supervisory Board Members, and the Board of Directors determines the matters to be reported and proposed at the General Meeting of Shareholders with the consent of the Audit & Supervisory Board. Appointment/dismissal of Executive Officers and senior officials are determined at the Board of Directors and the evaluation meeting held by full-time Directors respectively.

Supplementary Principle 4.1.1 Clarification of the Scope of Delegation to Management and Disclosure of a Brief Summary Thereof
MarketEnterprise sets the Board of Directors as the management decision-making and supervision organization on matters including management policies and business strategies, and sets the Management Committee as the business execution function based on this decision-making. At the Management Committee, agile decision-making is made on business execution.
The Board of Directors decides matters stipulated in laws, regulations, and the Articles of Incorporation. In addition, other important matters related to business execution are determined such as approval and changes of company-wide operation policies, budget, personnel plans, medium- to long-term management plans, issues of organizations and human resources. The Management Committee is chaired by the President and composed of the full-time Directors, the full-time Audit & Supervisory Board Member and managers of business units. This committee determines concrete business strategies in accordance with the policies determined by the Board of Directors, checks progress involving these strategies (including revisions as needed), facilitates the sharing of information among business units and departments, and performs other roles. The Management Committee is also functioning as a committee that has the goals of identifying important issues and providing information about these matters and of ensuring that everyone at MarketEnterprise has the same information and understanding regarding important issues. The important issues shared and discussed at the Management Committee are reported to the Board of Directors. With this, the Board of Directors learns and supervises the situation of MarketEnterprise appropriately.
The matters that should be determined and resolved at the Board of Directors are clearly stipulated by the “Rules for the Board of Directors” of MarketEnterprise. Matters other than those are delegated to the Representative Director, Directors, Executive Officers or other officers in accordance with the “Division of duties” and “Authority Delegation Rules.”

Principle 4.9 Independence Standards and Qualification for Independent External Directors
MarketEnterprise uses the independence standards stipulated by the Tokyo Stock Exchange as MarketEnterprise’s independent standards. In addition, MarketEnterprise appoints persons as Independent External Directors who are determined to have substantial independence, track records, experience, and insight to be Independent External Directors, and who can contribute to candid, proactive and constructive discussions at the Board of Directors.

Supplementary Principle 4.11.1 Views Regarding the Balance, Diversity and Size of the Board as a Whole
MarketEnterprise has a basic policy to nominate candidates of Inside Directors of MarketEnterprise to appoint persons who have a thorough knowledge of business operations and deep insight, as well as knowledge, experience, and expertise on finance, accounting, risk management, compliance, etc.
As a basic policy, MarketEnterprise appoints persons as the External Directors who are determined to maintain a neutral and fair standpoint independent from the management, have experience in corporate management and a high level of expertise, and be able to appropriately fulfill responsibilities as External Directors of MarketEnterprise in sound cooperation with Inside Directors through activities such as advice on management as a whole and oversight on execution of operation.
Candidates for Directors nominated by the Representative Director and Directors are evaluated at the Board of Directors meetings considering balance in knowledge, experience and skills of the Board of Directors as a whole, diversity including gender and international experience, and other factors. The nomination is resolved at the General Meeting of Shareholders.
MarketEnterprise recognizes that the size of the Board of Directors should be arranged taking into account the circumstances of MarketEnterprise and social situations. At present, MarketEnterprise deems that a structure with seven or fewer Directors including two or more Independent External Directors is an appropriate size, where the Board of Directors functions most effectively and efficiently.
The Representative Director and Directors nominate candidates of Directors and the nomination is resolved pursuant to a resolution at the Board of Directors.

Supplementary Principle 4.11.2 Status of Positions Held Concurrently by Directors and Audit & Supervisory Board Members
Rules on Officers of MarketEnterprise prohibits Directors and Audit & Supervisory Board Members from operating his or her own business or concurrently serving as other external duties during the term of office of them without consent from the Board of Directors. While three Directors and three Audit & Supervisory Board Members concurrently serve as officers of listed companies, MarketEnterprise has judged that this does not hinder them from performing roles and responsibilities of Directors or Audit & Supervisory Board Members. This was approved by the Board of Directors. The attendance at the Board of Directors and Audit & Supervisory Board Members has been high, and therefore, MarketEnterprise deems that sufficient time is secured to fulfill their roles and responsibilities.
The status of important concurrent service by Directors and Audit & Supervisory Board Members is disclosed every year through the convocation notice for the General Meeting of Shareholders and the Annual Securities Report.

Supplementary Principle 4.11.3 Analysis and Evaluation of the Effectiveness of the Board of Directors as a Whole
Described in [Reasons for Non-compliance with the Principles of the Corporate Governance Code].

Supplementary Principle 4.14.2 Training Policy for Directors and Audit & Supervisory Board Members
MarketEnterprise provides the newly elected officers with explanations about important matters to be known as Directors and Audit & Supervisory Board Members. As necessary, opportunities of visits to offices of MarketEnterprise are also provided. MarketEnterprise covers the costs for external seminars that the Officers attend to acquire knowledge necessary for fulfilling roles and responsibilities of the Directors and Audit & Supervisory Board Members. With these opportunities, Officers have been advancing knowledge in their expertise while developing knowledge in basic fields such as law and finance.

Principle 5.1 Policy for Constructive Dialogue with Shareholders
MarketEnterprise recognizes the importance of holding active dialogues with shareholders at all times in order to achieve sustainable growth and medium- to long-term improvements in corporate value. Therefore, MarketEnterprise endeavors to incorporate the opinions and requests of shareholders obtained from dialogues in management to grow MarketEnterprise together with shareholders.
The President has developed an IR structure centered around the General Manager of Administration Department for overseeing and ensuring that constructive dialogue takes place. MarketEnterprise proactively responds to answer to questions from individual investors and information-gathering requests from institutional shareholders so that they can gain an understanding of MarketEnterprise’s management strategies and management plans. MarketEnterprise facilitates dialogue through means such as by holding individual meetings, financial results briefings, and briefings for individual investors, participating in IR events held by securities or other companies, and setting opportunities for dialogues with institutional investors.
To prepare for constructive dialogue with shareholders, information of the Company is shared once a week in principle with the General Manager of Administration Department (in charge of information handling) and with persons in charge of internal departments (general affairs, financing, accounting, legal affairs, and public relations departments). This ensures positive cooperation between internal departments and appropriately provides useful information that contributes to rational investment decisions by shareholders and investors. At the same time, MarketEnterprise takes the utmost care to prevent insider trading and leakage of confidential information by means such as making explicit rules on whether information is disclosed or not before publishing the information.
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