Messages from Outside Directors and an Outside Audit & Supervisory Board Member

Kao began its new mid-term plan, K25, in 2021. As an Outside Director, I would like to closely supervise the plan's implementation and preserve the integrity of its three pillars: Reborn Kao, Another Kao and ESG. In 2022, the key issue will be how Kao will fight in Reborn Kao. Poor earnings in Reborn Kao would make it impossible for Kao to take on substantial challenges in Another Kao. For the Consumer Products Business, how Kao sells its current products in the short-term will be one issue but creating mainstay products and services for the long-term is also important. Kao needs to fundamentally reconsider its sales methods and products from the customer's perspective and also revolutionize its marketing strategy by combining the use of digital transformation with optimal value communication. Kao must develop its businesses outside Japan based on the unique traits of each region rather than treating them as a uniform group. Kao also needs to conduct M&As that align with its growth strategy for business expansion outside Japan.
The Board of Directors will have to also vigilantly monitor these activities to ensure they align with ESG perspectives. Kao is at the stage where it can take the next step in its ESG activities, so I would like Kao to work on developing products that will be profitable under ESG criteria and place them on the market as soon as possible.
I became the Chairperson of the Board of Directors in March 2022. I will continue to evaluate Kao's initiatives objectively as an Independent Outside Director while also supporting executives in taking an aggressive approach to challenges, without being excessively afraid of failure. I am also committed to enhancing corporate value by making the Board of Directors more effective as its chairperson.

Each meeting of the Board of Directors features free and open discussions. In 2021, we had a constructive exchange of opinions as the responsible persons presented the key themes of K25, including initiatives on PR strategies, the Digital Life Platform, and Human Capital Development as well as updates on R&D, which is Kao's driving force. My stance on executives' proposals is always to help get the ball rolling, but I also carefully consider each proposal's feasibility by examining the appropriateness of its timeline for the given objective, risk factors in the global landscape, the public's receptiveness, and the scientific basis for product statements.
Kao offers an extraordinarily broad range of products. In addition to developing each brand individually, Kao should take a step toward showing people how their lives will improve by using all of Kao's products and develop more cross-sector products, as it did with Protect JAPAN and MyKirei by KAO in the U.S. I would like to help Kao showcase their collective strength by using new approaches that only Kao can use. With regards to human capital, Kao is moving in a good direction by increasing diversity and promoting young talent, but still has to increase motivation by revising evaluation criteria and further develop discussions on human capital strategy that is devised by backcasting from an ideal picture. Kao has extremely good seeds. I believe that Kao's future challenges will include being able to quickly convert these seeds into products and get them on the market, as well as sending a clear message to consumers about their differentiated value. As an Outside Director, I will continue to vigilantly monitor Kao's activities while lending a hand to support executives.

I have attended every meeting of the Board of Directors and the Audit & Supervisory Board since becoming an Outside Audit & Supervisory Board Member in 2020. All participants freely engage in lively and substantive discussions at the meetings of the Board of Directors, regardless of whether they are internal or external members, or Directors or Audit & Supervisory Board Members.
Kao's Inside Directors with executive duties listen earnestly to the opinions of Outside Directors and Outside Audit & Supervisory Board Members, and have processes in place for incorporating the content of our discussions into their management. I believe Kao is thorough in its application of corporate governance, and their willingness to utilize outside perspectives in their management is what makes Kao's Board of Directors function so well.
Audit & Supervisory Board Members conduct audits of internal controls, which are a part of corporate governance. At each audit site, we conduct audits, interview departments responsible for the second line, and hear how they are responding to current issues, incidents or accidents. We fulfill our role in defensive corporate governance by stopping problems before they start and, when problems actually occur, identifying root causes and thoroughly investigating each problem to prevent recurrence.
The content of the 2021 meeting of the Board of Directors was appropriate for being K25's launch year. We heard thorough reports on the progress of Reborn Kao and Another Kao. From 2022 onward, we can anticipate even more changes while pursuing new incarnations of Kao through Reborn Kao and Another Kao. I would like to keep a close eye on changes in risk management and internal controls that are caused by K25's reforms, not only for defensive corporate governance but for offensive as well. As an Audit & Supervisory Board Member, I hope to enhance Kao's corporate value by playing a part in maintaining appropriate corporate governance.