SGH

Corporate Governance

Policy

The SG Holdings Group supports the concept of "Stakeholder Management" as the foundation of its management philosophy and promotes business activities which meet the expectations of our various stakeholders by 1) continuous improvement of our level of customer service, 2) stabilization and improvement of the foundation of living of our employees and their families, 3) contribution to local communities, their safety and environment through diverse business and social activities, 4) enhancement of corporate value for our shareholders and 5) equal and fair transactions with business partners. We have formulated the SG Holdings Basic Policy of Internal Control System as a statement of our internal control policies and work to strengthen all of our systems accordingly based on the firm conviction that creating a transparent management and administrative structure through strong and comprehensive corporate governance is a key requisite for realizing stakeholder management.

Systems

SG Holdings, as a pure holding company, strives to streamline the Group's management structure and achieve rapid management decision making. The Board of Directors is responsible for management of the Group as a whole, and supervision of the execution of business. SG Holdings has introduced an Executive Officer System in order to separate the management oversight function and the business execution to ensure that authority and responsibilities are clear. In addition, the Audit & Supervisory Board has been established to supervise and audit management. We continually strive to strengthen the Company's business management structure and the foundations of our businesses to be prepared to respond to changes in the business environment and to manage with a high degree of transparency.

Corporate Governance Systems

Board of Directors

The Board of Directors holds regular meetings of the Board of Directors every month, in addition to extraordinary meetings when there are urgent matters to be decided. It is responsible for making decisions on general Group business execution and reporting on the status of management execution of the individual directors in accordance with internal rules, including the Board of Directors' Regulations and the Duty and Authority Regulations. All Audit & Supervisory Board Members attend meetings of the Board of Directors in a system enabling them to supervise the execution of business by Directors.

Audit & Supervisory Board

The Audit & Supervisory Board holds regular meetings of the Audit & Supervisory Board every month, in addition to extraordinary meetings when necessary. Its responsibilities include reporting on business audits by the full-time Audit & Supervisory Board Member and discussing proposals to the Board of Directors in advance. Furthermore, Audit & Supervisory Board Members continually audit and supervise the business execution by Directors and attend Board of Directors meetings, stating as necessary their opinions from their perspective. In addition, the full-time Audit & Supervisory Board Member attends committees and meetings other than Board of Directors meetings as an observer in order to deepen his/her understanding of internal conditions and management, actively works to maintain an effective auditing environment and collect internal information and, moreover, continually monitors, expresses an objective opinion and provides advice in regard to the development and operation of the internal control system.

Other Committees and Meetings

Outside officers

SG Holdings has appointed Outside Directors and Outside Audit & Supervisory Board Members. Their role is to improve the appropriateness of decisions of the Board of Directors by making the necessary comments from a specialized perspective principally on management and business strategy. Furthermore, certified public accountants with an advanced knowledge on finance and accounting and attorneys with advanced knowledge on the law are appointed as Outside Audit & Supervisory Board Members who conduct stringent auditing of the appropriateness of the decision-making and business execution of Directors from a specialized perspective while maintaining a high level of independence. The Outside Directors and Outside Audit & Supervisory Board Members have no business relationships or other interests with the Company. Furthermore, the election of Outside Directors and Outside Audit & Supervisory Board Members is determined based on the assumption that adequate independence for executing duties as outside officers from a perspective independent from the Company's management can be ensured based on their backgrounds and relationships with the Company.

Audit

Audit by Audit & Supervisory Board Members

In their audit work, Audit & Supervisory Board Members attend Board of Directors meetings and other important meetings as well as conduct site visits to Group companies and business locations to ensure effective monitoring. To perform their audit functions as efficiently as possible they collaborate closely with the Company's and its subsidiaries' internal audit units and Audit & Supervisory Board Members.

Internal Audit

The Company has established the Internal Audit Department as an independent unit to conduct the Company's internal audits and pursuant to the Comprehensive Internal Audit Regulations carry out the functions required for comprehensive internal auditing of the Group to ensure the conservation of its assets and promote efficient management. The Internal Audit Department reports the results of its audits to CEO and President, and the Audit & Supervisory Board Members and provides advice, proposals and directives for improvements to the units it audits. Sagawa Express Co., Ltd. and some other Group subsidiaries also have their own internal audit units which conduct audits as appropriate in addition to audit by the Internal Audit Department of the Company.

Accounting Audit

SG Holdings has concluded an audit agreement with an auditing firm under which that firm conducts an accounting audit in accordance with an annual audit plan and the Company pays the agreed upon compensation to it.


Building a Responsible Management Foundation