Message from the Chairman

Value creation is the true essence of a company.
The fundamental functions of a company are said to be marketing and innovation. For the Hakuhodo DY Group, our purpose is to help our clients with their marketing and innovation-related activities. Customer acquisition is the true essence of marketing, and market creation is the true essence of innovation.
Marketing and innovation work together to complement one another. To create markets, you need to first acquire customers. And to acquire customers, you need to first push the limits and create new markets.
The Group has adopted Sei-katsu-sha Insight as one of its policies. Under this policy we view customers as seikatsu-sha. There is also the notion of considering customers as consumers, and although this way of thinking is likely more common, we at the Hakuhodo DY Group do not view our customers simply as consumers.
Rather than viewing people simply as the targets of consumption, or consumers, we view them as sei-katsu-sha who can design their own lifestyles on their own accord. By doing so, we have come to know sei-katsu-sha better than anyone else. Using this knowledge, we come up with new ideas and express creativity in the best way possible. We refer to this approach as Sei-katsu-sha Insight, and it is an extremely valuable policy to the Group.
The other policy we value is Commitment to Partnership. This policy allows us to take on the issues of our clients from the standpoint of sei-katsu-sha and offer clients comprehensive solutions to these challenges, thereby creating long-term partnerships with them.
Viewing customers as sei-katsu-sha, our goal with these policies is to work together with our business partners to bring happiness to sei-katsu-sha.
Sei-katsu-sha wish for a society with safety and peace of mind. Sei-katsu-sha also wish for a society in which they can express themselves. Additionally, sei-katsu-sha wish for a sustainable society.
I mentioned previously that value creation is the true essence of a company. In the case of the Group, our value creation lies in our goal of realizing a society in which sei-katsu-sha can flourish and live active lifestyles of their choosing. We will realize this goal together with our business partners by drawing on creativity in the best possible way.
Next, let me talk about our stakeholders, who represent our partners in delivering the value we create.
As I stated before, sei-katsu-sha (and in a greater sense, society) and our clients are our most important partners in providing value. But these are not our only stakeholders. Business partners such as media companies, content holders, and producers are also important stakeholders.
Furthermore, our employees represent another extremely valuable stakeholder. As such, we adopt the policy of recognizing our people as our assets. We maintain this policy because we work in a service industry that centers on mental work. The minds of our employees are what allows us to produce ideas. For this reason, we place importance on employee satisfaction and are making particular efforts to respect individuality, develop personal creativity, and enhance our teamwork capabilities. These efforts ultimately help us improve our level of customer satisfaction.
Also, our most important stakeholders are our shareholders and other investors. Leveraging their investments, we aim to consistently enhance corporate value. Going forward, we will continue to make concerted efforts to meet the expectations of our shareholders and other investors.

The Hakuhodo DY Group adopts a holding company structure.
To put it simply, a holding company is a company that designs (plans) companies, a company that designs a corporate group. I believe this role is extremely important for maximizing our value creation.
Now, let me explain how we work to design the Group. The first way we accomplish this is by drafting and promoting Group strategies aimed at future growth. To achieve such strategies we must execute investments.
Our operating companies are primarily responsible for formulating strategies that help us prevail over the competition today. Accordingly, they focus their attention on clients and media companies and promote strategies to enhance competitiveness.
The next role the holding company plays in designing the Group is in providing support to the operating companies in order for them to maximize their value creation.
The support entails several aspects. For example, we share business plans with the operating companies and provide them with financial support. We also help them integrate their information systems and take on a portion of their back-office work.
The third role we play is in determining how we will pursue the above efforts in order to enhance corporate value and then explaining our approach to our shareholders and other stakeholders to receive a high evaluation from them.
As a publicly traded company, Hakuhodo DY Holdings designs the Group’s value creation and works to fulfill its promise to stakeholders, starting with the capital markets, by delivering to them the value that the Group creates.

The Hakuhodo DY Group operates based on the management model of “independence and solidarity,” which is part of its philosophy.
“Independence” refers to two ideas, which are that each operating company should (1) realize growth by leveraging its uniqueness as a strength, and (2) fulfill its promise (business plans) to the holding company as a result of doing so. Based on this independence, the holding company makes a promise to the capital markets and other stakeholders that the Group will achieve its ambitions. This promise refers to qualitative aspects, such as achieving our goals, and quantitative aspects, such as accomplishing our business plans (figures). In this way, the Group operates based on a “chain of promises.”
“Solidarity” involves realizing sophisticated collaboration between operating companies by having them combine their respective strengths and, through this collaboration, offer new value to sei-katsu-sha, clients, and media companies.
Through this spirit of independence and solidarity, we are able to create a cohesive Groupwide structure that brings together the strengths of each operating company to create even greater value, thereby accelerating growth.
Corporate governance plays an important role in steadily fulfilling this “chain of promises” between stakeholders, our holding company, and operating companies.
The Board of Directors of Hakuhodo DY Holdings serves as the core of the Hakuhodo DY Group’s corporate governance.
The Board of Directors discusses Group growth strategies and creates medium-term business plans. It also deliberates on the budget and formulates plans for each fiscal year. We announce these medium-term business plans and yearly plans as our promise to the capital markets and other stakeholders. The operating companies establish their own medium-term business plans and yearly plans, which serve as their promise to the holding company.
The Board of Directors needs to discuss the feasibility of sustainable growth from a long-term perspective. Meanwhile, the Board must also create short- and medium-term business plans. This is because no matter how valuable a long-term goal or target may be, that goal or target cannot be attained if we do not succeed with efforts in the short and medium term.

The Board of Directors of Hakuhodo DY Holdings comprises three different types of members: directors who belong to the holding company, directors who also serve as presidents of the operating companies, and outside directors.
Currently, the Board of Directors of Hakuhodo DY Holdings is made up of ten members, four of whom are outside directors.
Comprising 40% of the Board of Directors, the Company’s outside directors also serve as directors of the Group’s core operating companies. Such a composition allows us to steadily enact the “chain of promises” between the holding company and the operating companies on behalf of our shareholders and other stakeholders. This is because we cannot fulfill our promises to stakeholders if we are unable to execute strategies.
In addition, we place the following expectations on our independent outside directors. The famous Japanese scholar Hokoku Yamada once said, “Those who govern well stay outside of matters and observe their essence instead of succumbing to them.” To ensure that the Company is growing in the right fashion, a view of the Company from the outside is crucial. We ask that our outside directors adopt this outside view (meaning the view of the stakeholders) as they monitor the company’s business execution in an objective manner. We also ask that the outside directors draw on their expertise, which is usually in areas where our internal expertise is not sufficient, to provide their opinions and advice.
Our four outside directors possess an abundance of experience in law, corporate management, investment banking, and government administration, respectively. With their guidance, I believe the Board of Directors holds open discussions, switching between a broad, overlooking perspective and one that is focused on specifics.

Board of Directors (As of June 30, 2022)

Under the Board of Directors, we have established the Nomination Committee and the Remuneration Committee as discretionary bodies.
Each committee is composed of four outside directors and three directors, including representative directors, and both have an outside director serving as the chair.
The role of the Nomination Committee is to create personnel plans for directors and corporate officers and establish important regulations related to nomination. The proposals of the Nomination Committee are reported to the Board of Directors, where they are subsequently deliberated and decided upon.
The most important nomination is naturally that of the company president, and the Nomination Committee handles the creation of succession plans for the president.
Within these plans, the committee first determines the requirements for leadership. The committee defines leadership as “the ability to maximize organizational capabilities to realize sustainable growth and enhance corporate value.” To evaluate this ability, the committee considers a candidate’s courage, wisdom, and compassion as well as their level of contribution to the company’s corporate culture. Courage means the ability to lead in an effective manner, wisdom involves analytical capabilities, and compassion relates to charismatic behavior.
The level of contribution to corporate culture refers to the ability to further develop the ideas, culture, and actions encapsulated by the policies Sei-katsu-sha Insight, Commitment to Partnership, and the belief that our people are our assets in a positive manner.
Furthermore, for officers who have the potential to be candidates for president, the committee works to change and expand their areas of responsibility so that they can gain experience in a broad range of fields.
Taking the above into account, the current president then selects multiple candidates for the role of president based on the Nomination Committee’s requirements for leadership. When selecting these candidates, the president does not rule out the possibility of choosing a candidate from an external organization.
The president then explains the reasons for choosing each individual candidate, including their track record and evaluation, to the members (outside directors) of the Nomination Committee. The committee members (outside directors) are also given the opportunity to meet individually with each candidate before holding deliberations in an effort to draw on the outside view (view of the stakeholders) of these members. Training seminars and other events are used as the location for holding these meetings.
For the final stage of the nomination process, the president conducts a comprehensive evaluation on the next potential president based on the business environment surrounding the Group and in consideration of the Nomination Committee’s requirements for leadership. Through this evaluation, the president narrows down the candidates to one person. The Nomination Committee then holds deliberations on this candidate and makes its final proposal. The president submits this final proposal to the Board of Directors and, after that, the final decision on the Company’s next president is made.
The role of the Remuneration Committee is to create plans for director and corporate officer compensation systems and amounts and to establish important regulations related to compensation. The proposals of the Remuneration Committee are reported to the Board of Directors, where they are subsequently decided upon.
Our basic policy for director compensation involves providing directors with a shared sense of value with the shareholders and other stakeholders, thereby incentivizing them to enhance corporate value over the medium to long term. In addition, this policy gives consideration to establishing compensation levels that are appropriate for the roles and responsibilities of the directors and that can secure and maintain superior talent.
Compensation for directors is composed of an annual compensation, annual bonuses (short-term incentive), and stock-based compensation (medium- to long-term incentive). The percentage of the annual bonus and stock-based compensation, for which the amounts and values change according to business performance, is set at 40% of the total compensation of each director in the case of standard business performance
We understand that director compensation plays an extremely pivotal role in ensuring that the Company’s directors take the responsibility as leaders to act on the “chain of promises” between stakeholders, our holding company, and our operating companies.

Nomination Committee and Remuneration Committee (As of October 31, 2022)

The impact of the COVID-19 pandemic has brought about significant changes in the external environment. Crisis accelerates the speed of change. As a result, changes that would normally take five to 10 years to occur will likely happen over the period of only a few years. Sei-katsu-sha, companies, and society itself all change.
Under such circumstances, the importance of being able to flexibly respond to change will certainly increase.
To that end, we need to consider our purpose in creating value for stakeholders, what kind of value that is, and how to best offer it.
Therefore, I believe that we must further enhance the function of the Board of Directors, which serves as the core of our corporate governance. This will involve broadening our horizons and understanding the necessary time frames as we work to develop our story for sustainable growth.
In June 2022, we made changes to certain parts of the Board of Directors’ structure. Welcoming to the Board Ikuko Arimatsu, the Company’s first female director, we increased the number of outside directors from three to four. In addition to increasing the ratio of Board members with an outside view at the holding company, this move has helped us promote diversity. Engaging in decision-making with greater objectivity and based on more diverse value systems helps us put our “chain of promises” into action and ultimately leads to the enhancement of our corporate value.
To achieve our sustainability goal of realizing a society in which sei-katsu-sha can flourish and live active lifestyles of their choosing, which I talked about earlier, it is imperative that we draw on the best possible creativity. Such creativity is not born out of a homogenous environment but rather is fostered organically through the interactions and shared inspiration of people with diverse values. In other words, diversity is not something we promote simply because of social demands but rather because it represents the lifeblood of our creativity and value creation. We therefore must promote diversity in all facets of the Company if we wish to achieve our mission.
Going forward, we will continue to incorporate diverse value systems, including at the Board of Directors, from a broad range of perspectives as we strive to continue to be a Company that can provide value to all of our stakeholders.