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

Business performance continues to be under pressure due to the impact of the COVID-19 pandemic, increases in raw material prices, and the slowdown in the Chinese market. To break through this situation, the Board of Directors deliberated over FY2023 focusing on structural reform and redefining the mid-term plan.
The participants in these deliberations spoke openly, regardless of whether they were from inside or outside the company. As such, I believe that these Board of Directors meetings were quite intense and productive. The result was that Kao announced its new Mid-term Plan (K27) and has made bold structural reforms. I feel that the decline in operating income has bottomed out, and the company has built a foundation for increased profits.
In FY2024, Kao will continue to invest decisively and manage its portfolio in a disciplined manner while also evolving its deliberations on growth strategies and execution monitoring to secure a firm path for achieving K27. To this end, we will fully share details on K27 with the newly appointed Outside Director and Outside Audit & Supervisory Board Member, will always keep track of the challenges and points of deliberation in the Board of Directors, and will assign them different levels of priority when holding deliberations. A characteristic of our Board of Directors is an open-minded culture in which each member, regardless of their position, can express opinions frankly and I will continue to preserve this going forward as Chairperson.

One year has passed since I was appointed as Outside Director. Careful deliberations have been carried out on important issues such as structural reforms and redefining the mid-term plan. In this way, the Board of Directors has demonstrated its effectiveness.
Kao has a widespread excellent corporate culture in which employees make earnest efforts to put the corporate philosophy into practice based on the company’s Purpose. During this year, the company has redefined K27 to reflect the substantial expectations of stakeholders and has accelerated its pursuit of returning to a growth trajectory and achieving capital efficiency. Kao is making further progress in promoting world-class sustainability, as stated in its Commitment to the Future.
Currently, stakeholders who have high expectations for Kao are expecting engagement that clarifies the value creation story that leads to the K27 targets. I will carry out monitoring so that the company will not just achieve profit growth led by priority businesses but also pursue capital efficiency that is optimal for the whole company, including corporate and supply chain divisions, and that the company will return the
results of these efforts to shareholders while contributing to greater job satisfaction for employees, thereby creating a highly sustainable value creation cycle that starts from employees.

The Audit & Supervisory Board conducts fruitful deliberations in a free and open-minded atmosphere. I value maintaining an appropriate relationship with the executive side, and when attending Board of Directors meetings or exchanging opinions with the Representative Directors, I try to actively express
my opinions from my perspective as an Outside Audit & Supervisory Board Member, which is different from that of an Outside Director.
One characteristic of Kao’s Audit & Supervisory Board is how the Audit & Supervisory Board Members actively go to the Genba meaning actual site or spot and hold interviews with each division. These interviews are attended by Full-time Audit & Supervisory Board Members and at least one Outside
Audit & Supervisory Board Member who listens directly to the opinions of the Genba from an outside perspective and gather information. Another characteristic of the Board is its group governance structure, which focuses on supporting the auditors of its subsidiaries, such as the staff of the Office of the Audit & Supervisory Board also serving as auditors of the subsidiaries. Amid demand for revisions to management plans and business strategies, I will regularly conduct monitoring to ensure that the internal control system is being built and is operating fairly. The Audit & Supervisory Board Members over the years have continually brought about innovation in all audit activities, and I feel that the Kao Way has been instilled within these efforts.