• Basic Corporate Governance Principles
• Corporate Governance System
• Nomination of Officers
• Compensation of Officers
• Actions to Ensure Board Effectiveness
• Responding to Large-Scale Acquisitions of Seiko Epson Shares

To realize our Purpose, which expresses our aim or reason for being in society based on the Epson Way, which defines our values and behaviors based on the Management Philosophy, EXCEED YOUR VISION, promote sustainable growth, and increase corporate value over the medium and long term, Seiko Epson Corporation ("the Company") strives to continuously enhance and strengthen corporate governance so as to realize transparent, fair, fast, and decisive decision-making.

Under a company with an Audit & Supervisory Committee, to further increase the effectiveness of corporate governance, the Company further improves the supervisory function of the Board of Directors, further enhances deliberation and speeds up management decision-making.

The general principles of corporate governance at the Company are as follows:

1. Respect the rights of shareholders, and secure equality.
2. Bear in mind the interests of, and cooperate with, stakeholders, including shareholders, customers, local communities, business partners, and Epson personnel.
3. Appropriately disclose company information and maintain transparency.
4. Directors, Executive Officers, and Special Audit & Supervisory Officers shall be aware of their fiduciary duties and shall fulfill the roles and responsibilities expected of them.
5. Engage in constructive dialogue with shareholders.

The Company is structured as a company with an Audit & Supervisory Committee. It has a Board of Directors, an Audit & Supervisory Committee, and a financial auditor. It has also voluntarily established advisory committees for matters such as the Director nomination and compensation.
This governance system was adopted to further increase the effectiveness of corporate governance by strengthening supervision over management and by enabling the Board of Directors to devote more time to discussions while speeding up decision-making by management.
The main corporate management bodies and their aims are described below.

The Board of Directors, with a mandate from shareholders, is responsible for realizing efficient and effective corporate governance, through which the Company will accomplish its social mission, sustain growth, and maximize corporate value over the medium and long terms. To fulfill these responsibilities, the Board of Directors will exercise a supervisory function over general management affairs, maintain management fairness and transparency, and make important business decisions, including decisions on things such as management plans, business plans, and investments exceeding a certain amount.

The Board of Directors operates in accordance with the Articles of Incorporation and regulations that were approved by resolution of the Board of Directors. The Board of Directors is composed of 10 directors¹, including six Outside Directors. Meetings of the Board of Directors are, as a rule, held once per month and as needed. Chairman of the Board, who is a non-executive director, acts as the chairman of the Board meetings. The Board of Directors makes decisions on basic business policies, important business affairs, and other matters that the Board of Directors is responsible for deciding as provided for in internal regulations. Business affairs that the Board of Directors is not responsible for deciding are delegated to executive management, and the Board monitors these. To speed up management decisions and increase business agility as a company with an Audit & Supervisory Committee, the Company has expanded the scope of affairs delegated to executive management from the Board of Directors, including capital investments below a certain threshold. The Company held a total of 13 meetings of the Board of Directors in FY2022 and three meetings in FY2023 from April 2023 to the Ordinary General Meeting of Shareholders in June 2023, to establish our Purpose and the review of the philosophy structure, receive reports on the status of execution of each business and the status of deliberations on mid-term strategies, and to deliberate future strategies to achieve Epson 25 Renewed. The attendance rate of each Director was 100%. Corporate Governance Policy states that at least one-third of the board members should be Outside Directors.
¹ As of June 30, 2023

The Audit & Supervisory Committee, with a mandate from shareholders, is responsible for independently and objectively auditing and monitoring the execution of Director duties and for ensuring the sound and sustained growth of the Company. The Audit & Supervisory Committee verifies the effectiveness of the internal control system and conducts audits primarily in cooperation with internal audit departments and the financial auditor. The Audit & Supervisory Committee has established basic guidelines for selecting outside financial auditors and evaluates their independence, audit quality, etc. based on certain standards. Resolutions concerning financial auditors selected by the Committee per the guidelines are submitted for approval at a general meeting of shareholders. The Audit & Supervisory Committee also discusses the selection, dismissal, resignation, and compensation of Directors who are not Audit & Supervisory Committee members and decides on the opinions to be presented at a general meeting of shareholders.

The Audit & Supervisory Committee operates in accordance with the regulations that were approved by resolution of the Audit & Supervisory Committee. The Audit & Supervisory Committee is composed of four Audit & Supervisory Committee members², three of whom are Outside Directors. It is chaired by a full-time member of the Audit & Supervisory Committee. Meetings are generally held once per month and as needed.
² As of June 30, 2023

The Compliance Committee’s function is to discuss the content of reports that it receives concerning important compliance activities, and report its findings and communicate its opinions to the Board of Directors in order to see that compliance activities are appropriately executed by line management.

The Compliance Committee operates in accordance with the regulations that were approved by resolution of the Board of Directors. As an advisory body to the Board of Directors, the Compliance Committee is composed of Outside Directors and Directors who are Audit & Supervisory Committee members. The Compliance Committee is chaired by a full-time member of the Audit & Supervisory Committee. Meetings are held every half year and as needed. Financial auditors and the head of the internal audit control departments attend meetings of the Committee as observers.

A Chief Compliance Officer (CCO) is elected by the Board of Directors and supervises and monitors compliance-related affairs on the whole. The CCO periodically reports the state of compliance affairs to the Compliance Committee.

The Company has established the Director Nomination Committee and the Director Compensation Committee as voluntary deliberation bodies, and they are chaired by an Outside Director, and the majority of committee members are Outside Directors. These Committees are designed to ensure transparency and objectivity in the screening and nomination of candidates for Director, Executive Officer, and Special Audit & Supervisory Officer and in matters of Director compensation. The Human Resources Department serves as the secretariat for these deliberation committees. These Committees operate in accordance with the regulations that were approved by resolution of the Board of Directors.

The overview of each of these Committees is as follows:

Composition

Both the Director Nomination Committee and the Director Compensation Committee are composed of all Outside Directors, President and Representative Director, and the Outside Directors shall select the committee chairs from among themselves. Directors who are full-time members of the Audit & Supervisory Committee can attend meetings of either Committee as observers.
The current³ members are as follows:
Chairman: Outside Director, Yoshio Shirai
Members: Outside Directors, Mari Matsunaga, Tadashi Shimamoto, Masaki Yamauchi, Susumu Murakoshi, Michiko Ohtsuka, and Yasunori Ogawa, President
³ As of June 30, 2023

The Mandates, Roles, and Activities of the Director Nomination Committee

The Company has established a Director Nomination Committee to impartially examine through a transparent and objective process the selection of Director candidates and the dismissal of Directors as well as to evaluate and supervise the status of Director successor development plans created by the President and Representative Director, the issues therein, and Director succession plans created by the President and Representative Director.

The Committee met 13 times in FY2022 and four times in FY2023 from April 2023 to the Ordinary General Meeting of Shareholders held in June 2023. The Committee deliberated on matters including succession planning for the President and Representative Director, policies for selecting Officers (Directors, Executive Officers and Special Audit & Supervisory Officers) and proposing candidates, selection of Outside Director candidates, revision of the executive officer system and review of skill matrix.

The Mandates, Roles, and Activities of the Director Compensation Committee

The Company has established a Director Compensation Committee to impartially examine through a transparent and objective process proposals and discussions concerning matters such as the compensation system and bylaws for Directors of the Company as well as Directors' individual compensation. The Director Compensation Committee, with a mandate from the Board of Directors, decides the individual compensation of Directors who are not Audit & Supervisory Committee members.

The Committee met seven times in FY2022 and three times in FY2023 from April 2023 to the Ordinary General Meeting of Shareholders held in June 2023. The Committee deliberated on matters including the amount of base compensation for each Director, bonus payment coefficient and amount for each Director, number of shares to be allocated and amount of monetary compensation claims under the restricted stock compensation plan, a company indemnification plan, and renewal of directors and officers liability insurance.

Committee attendance

The attendance rate of each member of the Director Nomination Committee and the Director Compensation Committee during the FY2022 and during the period from April 2023 to the June 2023 Ordinary General Meeting of Shareholders was 100%.

The Corporate Management Council is an advisory body to the President whose purpose is to help ensure that the right decisions are made based on a range of opinions on the executive management side. Meetings of the Corporate Management Council are where Directors, each business and General Administrative Managers, etc. exhaustively examine important business topics that affect the Epson Group as a whole and matters on the agenda for meetings of the Board of Directors. The Corporate Management Council is generally held on a weekly basis. Outside Directors can attend this meeting, but even if they cannot attend, they are provided with materials for the topics discussed and supplementary explanations of what was discussed. The Company strives to ensure the fairness and transparency of the execution of business affairs through the attendance of a Director who is a Full-Time Audit & Supervisory Committee member and Special Audit & Supervisory Officer.

The policies and procedures for nominating Director candidates and for selecting and dismissing Executive Officers (including the President) and Special Audit & Supervisory Officers are as follows:

1. Considering the role that Officers of the Company are required to fulfill and the nomination criteria that Epson has established, Officers must meet the standard requirements of insight, accountability, and ethics. They must also satisfy the selection criteria in 2, depending on their respective roles, and must be able to contribute to an increase in corporate value.
2. In addition to the foregoing requirements, Officers of the Company shall satisfy the selection criteria below.
   1. Non-Executive Director candidates
      Oversight capability, management knowledge, professional knowledge
   2. Executive Director candidates
      Oversight capability, foresight/insight, the ability to conceive a vision, decisiveness/courage, the ability to execute and produce results, an inclination to drive change and innovation, the ability to be a unifying force
      A candidate for President and Representative Director in particular shall possess the following:
      - The ability to face societal issues, construct a vision based on deep insight, and the courage to carry out that vision
      - A strong sense of ethics and the ability to humbly accept diverse values, tap the initiative of employees, and be a unifying force that consolidates the power of the entire company
   3. Executive Officers
      Foresight/insight, the ability to conceive a vision, decisiveness/courage, the ability to execute and produce results, an inclination to drive change and innovation, the ability to be a unifying force
      
   4. Special Audit & Supervisory Officer
      The ability to influence and lead the Company, creativity, the ability to drive change, management ability, the ability to lead a group, management knowledge, professional knowledge
      
3. Outside Directors must satisfy criteria concerning the independence of Outside Directors in order to guarantee their independence. The Board of Directors established "Criteria for Independence of Outside Directors."

^* As a general rule, Outside Directors shall not concurrently serve as either a Director or a Kansayaku of more than three publicly listed companies other than the Company per the bylaws established by resolution of the Board of Directors.
^* Per the Company policy, Directors shall attend at least 75% of the meetings of the Board of Directors per year.

Nomination, selection, and dismissal are decided by the Board of Directors after a fair, transparent, and rigorous screening by the Director Nomination Committee, which also presents its opinion. The consent of the Audit & Supervisory Committee is required for nominating Director candidates who are Audit & Supervisory Committee members and for appointing Special Audit & Supervisory Officers.

The Company has established the criteria below to objectively determine whether potential Outside Directors are independent.

1. A person is not independent if:
   1. The person considers the Company to be a major business partner¹, or has served as an executive² within the past five years in an entity for which the Company is a major business partner;
   2. The person is a major business partner³ of the Company or has served as an executive within the past five years in an entity that is a major business partner of the Company.
   3. The person is a business consultant, certified public accountant, or lawyer who has received a large sum of money or other forms of compensation⁴ (other than remuneration as an officer) from the Company or has, within the past three years, performed duties equivalent to those of an executive as an employee of a corporation or group, such as a union, that has received a large sum of money or other forms of compensation from the Company;
   4. The person is a major shareholder⁵ of the Company or has, within the past five years, been an executive or Audit & Supervisory Board Member of an entity that is a major shareholder of the Company;
   5. The person is an executive or Audit & Supervisory Board Member of an entity in which the Company is currently a major shareholder;
   6. The person is a major lender⁶ to the Company or has been an executive of a major lender to the Company within the past five years;
   7. The person has been employed by an auditing firm that has conducted a legal accounting audit of the Company within the past five years;
   8. The person has been employed by a leading managing underwriter of the Company within the past five years;
   9. The person has received a large donation⁷ from the Company or, within the past three years, has performed duties equivalent to those of an executive as an employee of a corporation or a group, such as a union, that has received a large donation from the Company;
   10. The person came from an entity with a relationship of reciprocal employment of Outside Director⁸; or
   11. A spouse or relative within the second degree of kinship of a person having the interests listed in (Ⅰ) through (Ⅸ) above.
       
       
2. Even if any of the foregoing criteria apply to a potential Outside Director, the Company can elect that person as an Outside Director if that person satisfies the requirements for Outside Directors set forth in the Companies Act, and the Company deems the person suitable as an Outside Director of the Company in light of his or her personality, knowledge, experience, or other qualifications upon explaining and announcing the reasons thereof.

Notes

1. A person (usually a supplier) considers the Company to be a major business partner if 2% or more of its consolidated net sales (consolidated revenue) has come from the Company in any fiscal year within the past three years.
2. "Executive" means an executive officer, executive director or operating officer, or an employee occupying a senior management position of department manager or higher.
3. A person (usually a buyer) is a major business partner if 2% or more of the Company's consolidated revenue has come from that partner in any fiscal year within the past three years.
4. "A large sum of money or other forms of compensation" means an average annual amount for the past three years that is:
   1. no less than 10 million yen for an individual; or
   2. no less than 2% of the annual revenues in any fiscal year for a group.
5. "Major shareholder" means a shareholder who directly or indirectly holds 10% or more of the voting rights.
6. "A major lender" means a financial institution or other major creditor that is indispensable for the Company's financing and on which the Company depends to the extent that it is irreplaceable in any fiscal year within the past three years.
7. "Large donation" means a donation whose annual average amount for the past three years exceeds either:
   1. 10 million yen or
   2. 30% of the annual expense of the group, whichever is higher.
8. “Reciprocal employment of Outside Director” means accepting an Outside Director from an entity that currently employs someone from the Company as an Outside Director.

The Company believes that a diverse Board of Directors is useful for facilitating substantive board discussions that cover all angles. Therefore, our basic policy is to maintain a board that is well-balanced and composed of persons who combine a broad spectrum of knowledge, experience, and skill in their respective areas of expertise, without regard to gender, race, ethnicity, country of origin, nationality, cultural background, age, etc.

The current Board of Directors has been established based on this policy, clarifying a management system toward achieving the Management Philosophy and Corporate Vision in order to realize sustained growth and increase medium- to long-term corporate value. The skills of the Company’s Directors and areas in which they are particularly expected to show expertise are as follows.

^* Up to three areas of expertise particularly expected are stated.
^* As of June 30, 2023.

The policies and procedures related to officer compensation are as follows:

Compensation for executive officers

1. Compensation shall provide an incentive to improve business performance and reflect the commitment thereof in order to promote the Epson Group’s sustainable growth and corporate value in the medium and long term.
2. Compensation shall be sufficient to attract and retain qualified persons both from within the Company and from outside.
3. Compensation shall be commensurate with period performance so that directors and executive officers can demonstrate their management capabilities to the fullest during their tenure.
4. Compensation shall clearly reflect the linkage between officer compensation and the value of the Company’s shares and strengthen awareness of the need to share profits with shareholders.
5. A mechanism to suppress fraud shall be embedded.
6. The process for determining compensation shall be highly transparent, objective, and fair.

Compensation for non-executive officers

1. The composition of compensation shall guarantee independence so that these Officers can suitably exert their general management supervisory function, etc.
2. Compensation shall be sufficient to attract and retain qualified persons both from within the Company and from outside.

With the aim of ensuring transparency and objectivity, compensation of officers is determined through resolutions at the General Meeting of Shareholders and the Board of Directors’ meeting for Directors who are not Audit & Supervisory Committee members, or through resolutions at the General Meeting of Shareholders and discussions by Audit & Supervisory Committee members for Directors who are Audit & Supervisory Committee members, after going through fair, transparent and rigorous reporting by the Director Compensation Committee. With regard to compensation of the Directors who are not Audit & Supervisory Committee members, the Audit & Supervisory Committee shares and discusses what have been examined by the Director Compensation Committee to confirm whether there are special items to be stated at the General Meeting of Shareholders. Matters related to the compensation, including the individual amounts, of the Directors who are not Audit & Supervisory Committee members are left to the discretion of the Director Compensation Committee.

The Company’s officer compensation shall consist of base compensation, which is comprised of fixed compensation, bonuses, which is performance-linked compensation, and stock compensation, which is non-monetary compensation. Given their roles to monitor the management as a whole as well as their independence from the business affairs, the Company pays only base compensation to non-executive officers and therefore does not pay bonuses and stock compensation.

Notes

1. The Company has introduced an officers' shareholding association system to link compensation more closely to shareholders' value. A portion of the base compensation is discretionally allotted for the acquisition of the Company's shares. The Company has established the criteria for shareholding by its officers based on internal regulations defined by the Board of Directors to demonstrate its commitment to and responsibilities for the management to all shareholders.
2. The amount above includes bonuses to be paid to Directors in the amount of 110 million yen (amount to be paid to three Directors excluding Chairman and Director without the right of representation, Outside Directors, and Directors who are Audit & Supervisory Committee Members), subject to the approval of the proposal concerning the payment of bonus to Directors to be proposed at the Ordinary General Meeting of Shareholders scheduled on June 27, 2023.
3. The stock compensation stated above represents the amount recorded for the current fiscal year based on Japanese Generally Accepted Accounting Principles (JGAAP).
4. Stock options are not granted.

The Board of Directors of the Company analyzes and evaluates the effectiveness of the entire Board of Directors every year based on Article 19 of the Corporate Governance Policy.

Evaluating the effectiveness of the Board of Directors (general principles)

When evaluation is performed: February to March
When evaluation results are analyzed and issues are selected: April to May
Disclosure of issues in a Corporate Governance Report: June
Interim report to the Board of Directors (regarding actions taken to resolve issues): October to November
Final report to the Board of Directors (regarding action take to resolve issues): February of the following year
Disclosure in a Corporate Governance Report of the results of actions taken to resolve issues: June of the following year

The results of actions taken to address issues that were raised when the effectiveness of the Board of Directors was evaluated for the 2020 fiscal year are provided below. The effectiveness of the Board of Directors in the 2020 fiscal year was evaluated by having all Board members complete a questionnaire. The questionnaire results showed that the Board of Directors is functioning effectively.

(1) Set aside more opportunities to discuss progress and issues related to the environment, DX, and co-creation to accelerate the realization of Epson 25 Renewed.
The Board of Directors set aside more opportunities for the Board members* to discuss progress and issues related to the environment, DX, and co-creation and took additional steps, as described below, to accelerate the realization of Epson 25 Renewed.

• Environment:
  The Board of Directors discussed at length initiatives to decarbonize, close resource loops, reduce customers’ environmental impact, strengthen environmental communication, and develop environmental technologies. Discussions were oriented, in part, toward setting environmental targets aligned with the business growth strategy.
• DX:
  The Board of Directors discussed initiatives toward formulating and coordinating digital transformation (DX) strategies among the businesses, improving and deploying digital infrastructure, and utilizing data. They also set a clear direction for addressing issues in DX promotion, including in data utilization. The acquisition of DX and IT talent was a priority issue in the 2020 fiscal year evaluation of Board effectiveness. The Company has begun, and will continue taking, a different approach to this issue than before, including referral-based recruitment and hiring overseas IT engineers dispatched by temporary staffing agencies as regular employees.
• Co-creation:
  The Board of Directors discussed the sourcing of environmentally progressive startups, the proactive exploration based on strategy, and follow-up with companies in which Seiko Epson invests. These discussions led to observable results in terms of improvement in sourcing methods and the acceleration of discussions on potential collaborations.
  

* Directors and other attendees (as in all cases below)

(2) Intensify discussions on succession plans and training of the management team and drive further improvement

The Board members discussed management succession plans, skill matrices, officer training, and other related matters. They clarified the direction and remaining challenges in addressing each issue. Moving forward, the Board of Directors will address the remaining identified challenges, along with the issues in the Board effectiveness evaluation for the 2022 fiscal year.

Board effectiveness in the 2022 fiscal year was evaluated by again having all Board members complete a questionnaire that covered the topics below, and then analyzing and evaluating effectiveness based on the answers. Some new items were added to the questionnaire and some other items were revised in the light of recent corporate governance trends.

1. Composition of the Board of Directors
2. Functions of the Board of Directors
3. Activities of the Board of Directors (self-evaluations and evaluations by other Directors)
4. Operation of the Board of Directors
5. Functions and operations of advisory bodies to the Board (the Director Nomination Committee, Director Compensation Committee, and Compliance Committee)
6. Succession planning and training of the management team
7. Compensation of the management team
8. Dialog with shareholders
9. Epson 25 Renewed progress
10. Free comments

The results of the evaluation showed that the Board of Directors as a whole is functioning effectively. However, Board members held discussions and, considering the results of the 2021 fiscal year Board effectiveness evaluation, the Board identified the following issues in order to improve effectiveness in the future.

1. Enhance discussions on long-term corporate strategy.
2. Increase the ability to execute Epson 25 Renewed and the speed of execution.
3. Develop details of succession plans for the management team and carry out the plans.

* An evaluation by a third-party organization was not conducted because it is the Company's policy to implement them once every three years

In the future, we will work to further improve effectiveness by addressing these issues.

The Company's Corporate Governance Policy stipulates the following:

1. Whether to accept a bid to purchase a number of shares that would give the acquirer control over the Company's financial and business policies ("large-scale acquisition" hereafter) should ultimately be decided by the shareholders.
2. Epson shall ask persons who attempt to make large-scale acquisitions of Company shares to provide a sufficient amount of the information needed to determine the desirability of the large-scale acquisition from the perspective of ensuring and enhancing corporate value and the common interests of shareholders, after which Epson shall disclose the opinions of the Company's Board of Directors regarding the proposed large-scale acquisition, thereby doing its due diligence to provide shareholders with the time and information they need to consider the desirability of the large-scale acquisition. The Company shall also take appropriate actions based on the Financial Instruments and Exchange Act, the Companies Act, and other applicable laws and regulations.