Non-financial Information(ESG)

Corporate Governance

Basic Policy

Makita believes that the most important issue is to achieve unending development together with its various stakeholders. In order to achieve this, we have established a management policy/quality policy and are working to strengthen and enhance our corporate governance. From this perspective, we will work to maintain and improve the fairness and transparency of our management by striving to enhance management transparency and management checking functions, as well as proactively and promptly disclosing information.

Reasons for Adopting current Corporate Governance Structure

Makita has chosen to adopt the system of a Company with an Audit & Supervisory Committee because the system further strengthens the supervisory function of the Board of Directors by enabling the Audit & Supervisory Committee Members, who are responsible for auditing the execution of duties by Directors, to exercise their voting rights at the Board of Directors meetings and also allowing the Audit & Supervisory Committee to have the right to express its opinions on the nomination and compensation of Directors (excluding Directors who are Audit & Supervisory Committee Members). Furthermore, in order to ensure objectivity, transparency, and fairness in management, we have established the Nomination and Compensation Committee with Independent Outside Directors as main members, thereby striving to enhance our corporate governance system.

Independence Criteria and Qualification for Independent Outside Directors

Outside Directors are appointed from among those who have a wealth of experience and broad insight in corporate management and those who have a wealth of experience and insight in various fields, including finance, accounting and legal affairs.
In determining independence, Makita follows the independence criteria stipulated by financial instruments exchanges as well as the standard that he or she has not held office in the Company as an Independent Officer for a long period of time.

Preconditions for Securing the Effectiveness of the Board of Directors

The Board of Directors of Makita strives to have a well-balanced mix of knowledge, experience, and ability as a whole, to achieve both diversity and appropriate size, and to have a ratio of Independent Outside Directors of at least one-third.
We believe that it is necessary to appoint as Internal Directors (excluding Directors who are Audit & Supervisory Committee Members) those who have the ability to formulate and execute management strategies based on their own experience and insight, including a wealth of experience in the Company’s operations, and as Outside Directors (excluding Directors who are Audit & Supervisory Committee Members) those who have a wealth of experience and broad insight in corporate management. We also believe that it is necessary for Directors who are Audit & Supervisory Committee Members to be appointed from among those who have internal and external work experience and a wealth of experience and insight in various fields, including finance, accounting and legal affairs, and that at least one of them is required to have a wealth of experience and insight in finance, accounting and other fields.

Corporate Governance System

Organizational form

Company with an Audit & Supervisory Committee

Directors

Chairman of the Board of Directors	Chairman (excluding person concurrently serving as President)
Number of directors	15 people
Number of outside directors	5 people
Number of independent directors out of outside directors	5 people

Outside Directors

Name	Position
Masahiro Sugino	From another company
Takahiro Iwase	From another company
Akira Kodama	From another company
Shoji Inoue	Lawyer
Koji Nishikawa	CPA

Name	Membership of the Audit & Supervisory Committee	Independent officers	Supplementary explanations regarding qualifying criteria	Reasons for appointment
Masahiro Sugino		○	Makita has a business relationship with LIXIL Corporation, at which Mr. Sugino served as President and Representative Director, and sells products, etc. to LIXIL Corporation. However, the transaction amount for the fiscal year ended March 31, 2021 was 2 million yen, which constituted less than 0.01% of the Company’s consolidated revenue, so it is not a significant business relationship.	Mr. Sugino has participated in the management of LIXIL Group, including INAX, for many years and has a thorough knowledge of corporate management, with which he currently provides useful opinions on the management of the Company from a broad perspective. Makita has judged that he is suitable for the position of Outside Director because we believe that he will be able to utilize his wealth of experience and broad insight for the management of the Company from an independent perspective. We believe that there is no special interest between him and the Company and that there is no risk of conflict of interest with general shareholders.
Takahiro Iwase		○	Makita has a business relationship with Aichi Steel Corporation, at which Mr. Iwase served as Chairman and Representative Director, and mainly purchases components, etc. from Aichi Steel Corporation. However, the transaction amount for the fiscal year ended March 31, 2021 was 1,047 million yen, which constituted only 0.5% of the consolidated net sales of Aichi Steel Corporation, so it is not a significant business relationship.	Mr. Iwase has participated in the management of core companies of the Toyota Group, including TOYOTA MOTOR CORPORATION, for many years and has a thorough knowledge of corporate management. Makita has judged that he is suitable for the position of Outside Director because we believe that he will be able to utilize his wealth of experience and broad insight for the management of the Company from an independent perspective. We believe that there is no special interest between him and the Company and that there is no risk of conflict of interest with general shareholders.
Akira Kodama	○	○	Makita has a business relationship with Hekikai Shinkin Bank, at which Mr. Kodama served as Managing Director and Corporate Officer. However, the transactions between the Company and Hekikai Shinkin Bank are only deposits, so it is not a significant business relationship.	Mr. Kodama has many years of experience at financial institutions and his expertise in accounting and so on, with which he currently provides useful opinions from a professional perspective. Makita has judged that he is suitable for the position of Outside Director who is an Audit & Supervisory Committee Member because we believe that he will be able to utilize his wealth of experience and insight to audit and supervise the management of the Company from an independent perspective. We believe that there is no special interest between him and the Company and that there is no risk of conflict of interest with general shareholders.
Shoji Inoue	○	○	-	Mr. Inoue has extensive knowledge and expertise gained through his practice as attorney at law, with which he currently provides useful opinions from a professional perspective. Makita has judged that he is suitable for the position of Outside Director who is an Audit & Supervisory Committee Member because we believe that he will be able to utilize his wealth of experience and insight to audit and supervise the management of the Company from an independent perspective. We believe that there is no special interest between him and the Company and that there is no risk of conflict of interest with general shareholders.
Koji Nishikawa	○	○	Makita has a business relationship with PricewaterhouseCoopers Aarata LLC, at which Mr. Nishikawa served as a partner, and receives corporate in-service training from PricewaterhouseCoopers Aarata LLC. However, the transaction amount for the fiscal year ended March 31, 2021 constituted less than 1 million yen, so it is not a significant business relationship.	Mr. Nishikawa has extensive knowledge and expertise in corporate accounting audits as a certified public accountant. Makita has judged that he is suitable for the position of Outside Director who is an Audit & Supervisory Committee Member because we believe that he will be able to utilize his wealth of experience and insight to audit and supervise the management of the Company from an independent perspective. We believe that there is no special interest between him and the Company and that there is no risk of conflict of interest with general shareholders.

Support System for Outside Directors

Support for Outside Directors (excluding Directors who are Audit & Supervisory Committee Members) is mainly provided by personnel of the General Affairs Department, while support for Outside Directors who are Audit & Supervisory Committee Members is mainly provided by dedicated personnel of the Audit & Supervisory Committee Staff Office. Of the matters to be deliberated at the Board of Directors meetings, the Company sets up a forum for information sharing in advance for particularly important matters. In the event that an Outside Director is absent from a meeting of the Board of Directors for unavoidable reasons, a system is in place to explain the outline of the matters to be resolved in advance whenever possible, listen to his opinions, and communicate them to the other Directors at the meeting.

Audit & Supervisory Committee

All Committee Members	Full-time Members	Inside Directors	Outside Directors	Chairperson
4	2	1	3	Inside Director

As employees assisting the duties of the Audit & Supervisory Committee, necessary personnel are posted to assist the duties of the Audit & Supervisory Committee. Employees assisting the duties of the Audit & Supervisory Committee shall not work concurrently at other divisions, but shall exclusively follow directions from the Audit & Supervisory Committee.
In addition, in order to ensure the independence of the employees assisting the duties of the Audit & Supervisory Committee, the consent of the Audit & Supervisory Committee is required for decisions on matters concerning the appointment and change of such employees.

Nomination and Compensation Committee

Available Name of committee	Number of all committee members	Number of Internal Directors	Number of Outside Directors	Chairman
Nomination and Compensation Committee	5	2	3	Outside Director

The Nomination and Compensation Committee consists of at least three Directors, the majority of whom are Independent Outside Directors. The members of the Committee are selected from among the Directors by a resolution of the Board of Directors, and the Chairperson of the Committee is selected from among the Independent Outside Directors by a resolution of the Nomination and Compensation Committee. While including Internal Directors as members of the Committee to make discussions more substantive, the Company has enhanced the independence of the Nomination and Compensation Committee by appointing the Chairperson and a majority of members from among Independent Outside Directors.
The General Affairs Department is in charge of the secretariat, and the members as of the submission of this report and their attendance in FYE2021 (from December 2020, when the Nomination and Compensation Committee was established, to March 2021) are as follows.

[Chairperson]
Mr. Masahiro Sugino, Outside Director, Attendance: 2 out of 2 meetings

[Members]
Mr. Masahiko Goto, Chairman and Representative Director, Attendance: 2 out of 2 meetings
Mr. Munetoshi Goto, President and Representative Director, Attendance: 2 out of 2 meetings
Mr. Takahiro Iwase, Outside Director, Attendance: ―
Mr. Akira Kodama, Outside Director (Standing Audit & Supervisory Committee Member), Attendance: ―
* Mr. Iwase and Mr. Kodama were appointed as the members on June 25, 2021.
* Attendance of Mr. Akiyoshi Morita, who passed away on April 29, 2021: 2 out of 2 meetings

The Nomination and Compensation Committee is responsible for the functions of both a nomination committee and a compensation committee. The Nomination and Compensation Committee deliberates and gives advice on the following matters based on the consultation of the Board of Directors: 1) policies concerning the nomination of Representative Directors and Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members); 2) matters concerning the selection of Representative Directors and the selection of Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members); 3) matters concerning the succession plan for the President; and 4) policies concerning decisions on the details of individual compensation for Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members). In addition, based on the delegation of the Board of Directors, the Committee also determines the details of individual compensation for Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members).

Decision-Making Policy on Compensation for Directors

[Compensation for Directors (Excluding Directors Who Are Audit & Supervisory Committee Members)]
The Board of Directors, after consultation with and receiving advice from the Nomination and Compensation Committee, determines the decision-making policy on the details of individual compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members). The compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members) consists of monthly compensation, bonuses and restricted shares compensation, and for the purpose of providing sound incentives for improving the corporate value over the medium- to long-term, the Company appropriately determines the proportion of the monthly compensation, bonuses and restricted shares compensation.
With respect to monthly compensation and bonuses, decision of the amount of individual compensation for Directors shall be delegated to the Nomination and Compensation Committee pursuant to a resolution by the Board of Directors. The Nomination and Compensation Committee consists of five members: Chairman and Representative Director Mr. Masahiko Goto, President and Representative Director Mr. Munetoshi Goto, Outside Director Mr. Masahiro Sugino, Outside Director Mr. Takahiro Iwase, and Outside Director (Standing Audit & Supervisory Committee Member) Mr. Akira Kodama. The Chairman of the Committee is Outside Director Mr. Masahiro Sugino.

●Monthly Compensation
The amount of monthly compensation for each Director (excluding Directors who are Audit & Supervisory Committee Members) is determined by the Nomination and Compensation Committee under the authority delegated by a resolution of the Board of Directors, based on performance, positions, increase of employee salary and other factors, within the scope of the maximum amount of compensation resolved by the General Meeting of Shareholders.

●Bonuses
Bonuses are paid to Directors, excluding Directors who are Audit & Supervisory Committee Members and Outside Directors, and linked to consolidated business result in order to motivate them to improve such business result. For the purpose of management of the Company in a manner favorable to shareholders, just as in the case of dividend payment, bonuses are based on the profit attributable to owners of the parent per share (Basic) after certain adjustments reflecting special circumstances. After consultation with and receiving advice from the Nomination and Compensation Committee, the Board of Directors determines the total amount of bonuses to be paid to Directors based on a certain formula and submits the total amount of bonuses to the General Meeting of Shareholders. The allocation of bonuses to each Director is determined by the Nomination and Compensation Committee under the authority delegated by a resolution of the Board of Directors, based on performance, positions and other factors. Bonuses to Directors are paid at a certain time each year.

●Restricted Shares Compensation
Restricted shares compensation is introduced to Directors (excluding Directors who are Audit & Supervisory Committee Members and Outside Directors) in order to allow them to share the risks and benefits of stock price fluctuations with shareholders to a greater extent and further enhance their motivation to contribute to improving the stock price and the corporate value of the Company. The allotment of restricted shares to each Director is decided based on position, etc. at the Board of Directors after consultation with and receiving advice from the Nomination and Compensation Committee. Restricted shares are granted at a certain time each year.

[Compensation to Directors Who Are Audit & Supervisory Committee Members]
Full amount of the compensation to Directors who are Audit & Supervisory Committee Members is fixed so that their independence from the management can be secured and the specific amount for each of them is decided through discussions among the Directors who are Audit & Supervisory Committee Members.

The following is a schematic diagram of the Makita Group’s corporate governance structure.