Mazda respects the intent of the Corporate Governance Code set by the Tokyo Stock Exchange and, while working to build a good relationship with its stakeholders, including shareholders, customers, suppliers, the local community, and its employees, the Company shall strive to sustain growth and enhance its corporate value over the medium and long terms through transparent, fair, prompt, and decisive decision-making and to continue to enhance its corporate governance.

The corporate governance structure on this page is the structure after the General Meeting of Shareholders held on June 25, 2024.

Corporate Governance Report

Overview of Corporate Governance System

The Company’s surrounding business environment is undergoing rapid changes. To enable faster business decision-making, further enhance discussion of management strategies and strengthen supervisory functions of board of directors meetings, the Company transitioned to a company with an audit and supervisory committee.
In addition to bodies designated by law such as the General Meeting of Shareholders, board of directors, and the Audit & Supervisory Committee, the Company holds executive committee meetings to convey information necessary for debate on important company-wide policies and initiatives and business management, as well as advisory bodies that contribute to decision-making by the board of directors or the president.

Board of Directors

The Company’s board of directors deliberates and makes decisions on items related to the execution of important business, such as management strategy and basic management policies, and supervises the execution of individual directors’ duties. In addition, facilitate quick and flexible decision-making, based on the Articles of Incorporation a substantial part of decision-making regarding the execution of important business will be delegated to management, and executive directors including and below the president to whom authority has been delegated based on the Company’s rules of administrative authority will make decisions regarding these matters. The board is made up of 14 directors, six of whom are highly independent outside directors. The board of directors generally meets once per month.

Audit & Supervisory Committee

The Company’s Audit & Supervisory Committee audits the board of directors’ decision-making process and business execution through the execution of voting rights at board of directors meetings and the execution of its right to state opinions on the personnel changes and remuneration of directors (excluding directors who are Audit & Supervisory Committee Members) at the General Meeting of Shareholders. The Audit & Supervisory Committee is made up of five members, four of whom are highly independent outside directors. To ensure the smooth operation of the Audit & Supervisory Committee’s audits, one of its members are fulltime.

Executive Officer System

The Company has also introduced an executive officer system. By separating execution and management, the effectiveness of the oversight of the board of directors is enhanced, and decision-making is speeded up through expanded debate by the board of directors and by delegating authority to executive officers. In this way, the Company is working to further managerial efficiency.

Officer Lineup & Remuneration Advisory Committee

The Company established the Officer Lineup & Remuneration Advisory Committee, made up of three representative directors and six outside directors and chaired by a representative director, as an advisory body to the board of directors. The committee reports to the board of directors the results of its deliberation on matters such as officer lineup and policies regarding the selection and training of directors, as well as remuneration payment policies and the remuneration system and process based on those policies, which contribute to the Company’s sustainable growth and raising of corporate value in the medium and long term.

Executive Committee Meetings

The Company established executive committee meetings to report information necessary for debate on important company-wide policies and initiatives.

Internal Audits

The Global Audit Department (19 full-time staff) conducts audit functioning as the Company’s internal Audit Department in an effort to contribute to sound and efficient management, and it audits the appropriateness of the business activities of the Company and its affiliated companies with regard to managerial targets, policies and plans as well as laws and regulations. It also audits the appropriateness and effectiveness of internal control.

Accounting Audits

Accounting audits are conducted by KPMG AZSA LLC, with whom the Company has concluded an audit contract. The certified public accounts who conducted the Company’s accounting audits are Hiroshi Tawara, Koji Yoshida and Kazumi Kanehara who are employed by KPMG AZSA. Those assisting with the Company’s accounting audits include 13 certified public accountants and 38 others, five of whom have passed the certified public accountant examination.

Organizational Affiliation

Skills Matrix of the Board of Directors

When nominating and appointing candidates for director or executive officers under the basic premise that they are healthy both physically and mentally, the Company will consider their professional and personal achievements, whether they have an appropriate attitude in regard to fulfilling the mandate of shareholders, customers and other stakeholders, high ethical standards, leadership qualities, the ability to take action, and the experience and ability to carry out their duties. In addition, as the business environment surrounding the Company rapidly changes, Mazda believes that the Board of Directors must have an appropriate balance in knowledge, experience and competence and also be diverse in composition to exectively fulfill their roles and responsibilities for the sustainable growth and improvement in corporate value over the medium and long term.

• *1 ● in the “Organizational affiliation” column shows the person's status as chairperson.
• *2 The “Fields of experience and expertise” column only shows each person's major fields of experience and expertise, instead of providing complete information.
• *3 Attendance record of Mr. Jeffrey H. Guyton, Mr. Takeji Kojima and Mr. Hiroshi Inoue covers the period after they assumed their posts on June 27, 2023.

Analysis and evaluation of the board’s effectiveness

To steadily advance measures for the further enhancement of its efficiency, the Company's board of directors analyzed and evaluated the meetings conducted in fiscal 2023.
The method and results are outlined below.

i. Method of analysis and evaluation

Using a survey form prepared by the board's secretariat, all directors conducted a self-evaluation of the board's effectiveness. Based on the survey results, the directors analyzed the current situation and discussed improvements, this year focusing particularly on matters identified as ongoing issues. Subsequent discussions were then held at Board of Directors meetings to define the principles to pursue and the approach to adopt.

The survey primarily covered the constitution of Board of Directors, deliberation on the business strategy, deliberation on compliance and internal control, provision of information (the amount of information, materials, explanations, and support for outside directors) and involvement in deliberation.

ii. Overview of results

It was found that the directors are appropriately involved in determining the Company's business strategy and other matters and share details of these, that the outside directors express their opinions from an independent perspective after gaining an understanding of the Company's situation through briefings on resolutions beforehand and other forms of support, and that oversight on the execution of operations has been ensured. It was also confirmed that discussions at Board of Directors meetings have become livelier and that directors have a strong awareness and expectations regarding further improvements in the effectiveness of the Board of Directors.
Furthermore, as there has been progress in delegation of the Board of Directors' authorities to representative directors within the appropriate scope under the Company's Articles of Incorporation, improvement in the speed of decision-making and improvement in the productivity of discussions resulting from securing ample discussion time were confirmed.
At the same time, as the surrounding business environment continues to change drastically, and the outlook remains uncertain, the directors again clarified and shared their understanding of the functions and roles of the Board of Directors and discussed how agenda items should be selected and the processes required for deliberation. Through the discussion, all directors confirmed that important matters such as the management strategy should be brought up in a timely manner and decisions made after thorough discussion, and that it is necessary to continue to strengthen the monitoring of the progress of the management strategy and related specific initiatives from various perspectives. The directors also recognized the need to share information and hold discussions among themselves at an early stage to enable them to consider the opinions of outside directors amid rapid changes in the external environment.

The Company will analyze and evaluate the effectiveness of the Board of Directors every year and continue initiatives for constant improvement to raise corporate value in the medium to long term.

Reasons for Appointment of Outside Directors

[Outside Directors] These directors are anticipated to enhance the supervisory functions of the Board of Directors through their efforts, in addition to leveraging the following experience and insight in the management of the Company.

[Outside Directors (Audit & Supervisory Committee Members)] These directors are anticipated to strengthen the audit and supervisory functions of the Company's management through their efforts by leveraging the following experience and insight.

Criteria for determining the independence of outside officers

Outside directors are deemed to be independent if they fulfill the requirements outlined below.

1. The person is not an executive or former employee of the Company's group (*1) and no close family member (*2) is currently an executive of the Company's group or has been an executive of the Company's group within the past three years.
2. The person is not now nor has been within the last three years any of the following:
   • (i)   An executive at a major shareholder (*3) of the Company
   • (ii)  An executive at a company for whom the Company is a major business partner (*4) or a major business partner of the Company (*5)
   • (iii) A person affiliated with the auditing firm that serves as the Company's accounting auditor
   • (iv) A lawyer, certified public accountant, tax accountant or other consultant who receives a large sum of money from the Company for something other than director remuneration (*6) (if the person receiving the money is a corporation or other organization, a person affiliated with the organization)
   • (v)  A director, Audit & Supervisory Board Member or executive officer at a company with a director from the Company
   • (vi)  An executive of an organization receiving large donations or aid from the Company (*7)
3. None of 2.(i) through (vi) above (important posts only) apply to any close family member of the person
   
   
• *1 The Company or its subsidiaries
• *2 Spouse or a family member within the second degree of kinship
• *3 A shareholder holding 10 percent or more of the Company's voting rights at the end of the fiscal year
• *4 A business partner to whom 2 percent or more of consolidated net sales in recent fiscal years has been paid by the Company
• *5 A business partner by whom 2 percent or more of the Company's consolidated net sales in recent fiscal years have been paid or a financial institution that has provided loans for 2 percent or more of the Company's consolidated assets
• *6 Money other than officer remuneration received from the Company or property benefits that exceed 10 million yen a year
• *7 An organization that received donations or aid exceeding 10 million yen per year

Directors' Remuneration

The Company establishes policies for determining details on individual remuneration for directors (excluding directors who are Audit & Supervisory Committee members) as mentioned below. After the Officer Lineup & Remuneration Advisory Committee deliberates on and confirms the draft of the Decision Policies, it submits a report to the Board of Directors, and the Board of Directors makes a decision based on the report.

1. Policy on setting individual remuneration amounts for directors and calculation methods (basic policy)
   
   The basic policy on remuneration for the Company's directors is: 1) linked to the Company’s sustainable growth and increase in corporate value in the medium to long term, 2) used to acquire and maintain capable personnel, 3) understandable and easy to explain to stakeholders and directors, and 4) set after the consideration of remuneration standards of other automobile manufacturers and the position of salaries of Mazda employees, with the understanding that directors work alongside employees.
   To ensure transparency of the decision-making process for determining remuneration as well as fairness and objectivity on how decisions are made and remuneration is allocated, the Officer Lineup & Remuneration Advisory Committee comprised of Representative Directors and Outside Directors has been established as an advisory organ to the Board of Directors. The Committee discusses and confirms the basic policy, remuneration system based on it, and the decision-making process.
   The remuneration of a director (excluding a director who is an Audit & Supervisory Committee member and outside director) consists of 1) a fixed amount of basic remuneration commensurate with the director’s position and responsibilities, and level of remuneration in the director’s country/location of ordinary residence, 2) performance-based monetary remuneration determined at the end of the fiscal year based on the achievement of goals set at the beginning of the fiscal year in accordance with the business plan, and 3) restricted stock remuneration aimed at increasing motivation to contribute to enhancing corporate value over the medium and long term and sharing the benefits with shareholders.
   For directors of foreign nationality (non-Japanese nationality), fringe benefits, etc. may be provided within an appropriate range commensurate with remuneration practices, etc. in the director’s country/location of ordinary residence.
   Outside directors (excluding directors who are Audit & Supervisory Committee members) receive a fixed amount of basic remuneration only, considering their independence from the execution of operations.
2. Policy on setting performance indicators for performance-based remuneration and method of calculation of the performance-based remuneration amount or quantity
   
   Indicators that can objectively confirm the Company’s performance are used for performance-based monetary remuneration. The primary indicators used are consolidated net income attributable to owners of the parent and consolidated sales. These target values are the values announced in the business results outlook at the beginning of each fiscal year, and the amount of performance-based monetary remuneration for a given fiscal year is based on the level of achievement of the target values for that fiscal year. The amount of performance-based monetary remuneration is also set based on position and duties.
   In addition, at the beginning of the fiscal year each director sets personal targets, and at the end of the fiscal year a “personal performance payment” that recognizes the level of achievement of those targets is set.
   Furthermore, a portion of restricted stock remuneration to be granted as non-monetary remuneration will be performance share units (PSUs), in which the number of shares to be granted is determined according to whether the target for each performance indicator was achieved. For PSUs, return on equity (ROE), which represents capital efficiency, is used as a financial indicator, and employee engagement, customer focus enhancement, and greenhouse gas emission reduction are used as non-financial indicators, based on the Company’s medium- to long-term management strategy and management issues. These targets are set on a fiscal year basis based on medium- to long-term targets.
3. Policy on content of non-monetary remuneration, setting the amount or quantity, and the calculation thereof
   
   As non-monetary remuneration, restricted stock remuneration, for which the transfer is prohibited during the tenure of office and allowed upon retirement, will be granted, and this will consist of restricted stock remuneration that is not linked to business performance (RS), and PSUs that are linked to business performance.
   For RS, a standard amount will be set based on the director’s position and responsibilities, and the number of shares equivalent to the standard amount will be granted.
   For PSUs, the Company will grant a number of units equivalent to the base amount (1 unit = 1 share equivalent) based on the director’s position and responsibilities, and after the performance evaluation period (one fiscal year in which the unit grant date falls), the number of shares calculated according to the number of units will be granted based whether the target for each performance indicator was achieved.
   If it is not appropriate to grant restricted shares, such as when a PSU recipient retires as a director at the end of his or her term of office, PSUs will be paid in cash in lieu of the grant of shares.
4. Policy on setting the ratio of basic remuneration, performance-based remuneration, and non-monetary remuneration for individual remuneration
   
   The ratio of each type of remuneration for directors (excluding directors who are Audit & Supervisory Committee members and outside directors) will be set as follows when the Medium-term Management Plan and all PSU performance indicators are achieved.
   
   ＜Structure of remuneration for directors＞
   
   
   
5. Policy on determining the time and conditions for granting remuneration to directors
   
   Basic remuneration and performance-based monetary remuneration are paid monthly by dividing the total annual amount of remuneration determined at a Board of Directors meeting into 12 payments. Restricted stock remuneration, as non-monetary remuneration, is alloted at a set time after the Ordinary General Meeting of Shareholders.
   With regard to restricted stock remuneration, in the event of serious misconduct, etc., the Company will be able to request the acquisition of all or part of the shares (malus).
6. Matters concerning the methods of determining individual remuneration for directors
   
   The Officer Lineup & Remuneration Advisory Committee discusses and confirms the validity of the remuneration structure for directors (excluding directors who are Audit & Supervisory Committee members) such as standards, composition, and indicators and targets for performance-based monetary remuneration and PSUs. The Representative Director, President & CEO calculates the specific amount of the personal performance payment of the performance-based remuneration for each director (excluding the Chairman, President and outside directors) within a range obtained by multiplying the personal performance payment base amount (roughly 4% of basic remuneration commensurate with position and responsibilities) by a coefficient of 1 to 2.5, and submits it for approval by a resolution of the Board of Directors.

Dialogue with Shareholders and Investors

For continued growth and enhancement of corporate value over the medium and long terms, the Company promotes investor relations through the timely and appropriate disclosure of information to shareholders and investors and through constructive dialogue.
As methods of dialogue, the Company holds quarterly briefings on financial results including at general meetings of shareholders to explain business conditions and business activities. In addition, the Company holds business briefings for securities analysts, institutional investors and individual investors. The Company endeavors to disclose information in a timely manner by posting notices of the convocation of general meetings of shareholders, financial results information, the Medium-Term Management Plan, securities reports and other company information of interest on the Company website.
The officer who oversees finance will have overall responsibility for dialogue with shareholders under CEO and CFO's leadership, and the financial planning department (investor relations department) will be in charge. To enhance dialogue, they will cooperate with departments in charge, including the Corporate Planning & Development Division, the Corporate Communications Division and the Corporate Services Division, and create a framework for the proper provision of information. Opinions from shareholders will be relayed to the board of directors or the management team as necessary by the officer who oversees finances.
Based on dialogues and opinions, we are expanding information disclosure.

Results of Main IR Events and Dialogues in FY March 2024

Main Themes and Topics Discussed in Dialogues

Recent Financial Results

• Factors and background of changes in profit and profit margin
• Situation of logistics such as car carrier vesseles
• Volume of new products, such as Large products, and their contribution to profit
• Demand and sales trends in major markets such as the U.S.

Medium- to long-term strategies

• Medium- to long-term growth strategies, investment plans
• Electrification/EV strategy and concrete initiatives
• Status of collaboration with partner companies

ESG

• Roadmap toward carbon neutrality
• Human capital management and human rights initiatives
• Initiatives to strengthen corporate governance

Others

• Initiatives to enhance corporate value
• Shareholder returns and capital policy

Cross-Shareholdings

i. Policy on cross-shareholdings

Taking into overall consideration the business strategy, the necessity of business activities such as maintaining and strengthening business dealings, and the comparison of benefits and risks of cross-shareholding with the cost of capital, the Company will have cross-shareholdings when it will lead to the enhancement of corporate value over the medium and long terms. If the purpose of cross-shareholdings is judged to have diminished, the Company will aim to reduce cross-shareholdings, including the selling of shares based on the relevant company’s circumstances, etc.

ii. Verification by the board of directors

Every year at a board of directors meeting, the Company will individually verify the appropriateness of its cross-shareholdings according to the above policy.
Stocks held as of the end of March 2024 were verified at a board of directors meeting, and the rationality of those holdings was confirmed.

iii. Basic policy on exercise of voting rights

When exercising its right to vote for cross-shareholdings, the Company will comprehensively evaluate whether or not matters that have come up for a vote will contribute to enhancing the corporate value, etc., of the Company and companies in which the Company holds shares over the medium and long terms; the Company will then decide whether to vote for or against any proposals.

Basic Views on Eliminating Anti-Social Forces

The Mazda Group will have no connection with anti-social forces or groups nor carry out any acts to facilitate the activities of such forces or groups. In the event of unreasonable demands from anti-social forces or groups, these will be dealt with firmly, including systematic efforts in cooperation with external bodies such as the police or lawyers as necessary.