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

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Overview of the Process to Select Kao's New President and Chief Executive Officer

Outside Director
Chairman of the Board of Directors

Sonosuke Kadonaga

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In January 2021, Dr. Yoshihiro Hasebe was appointed Kao's new President and Chief Executive Officer. As Chairman of the Board of Directors and of the Committee for the Examination of the Nominees for Directors and Audit & Supervisory Board Members, I was involved for approximately a year in the process to select the new President and Chief Executive Officer. The steps in the selection process were conducted appropriately, starting with discussions of what qualities the person needed to have, and then continuing with the selection of candidates, learning about the qualities and aptitudes of each candidate, and then using this as the basis for evaluating the candidates. The first step in the process was for the examination committee to discuss what kinds of qualities Kao's next President and Chief Executive Officer needed to have. Out of this discussion, we determined that the following five qualities would be our main focus: (1) Being able to identify what is essential and press on with reforms without being tied to how things were in the past, (2) Having ideas, and being able to communicate and implement them in a way that resonates with employees, (3) Being able to create new businesses with an eye to the future, (4) Being able to maximize opportunities while minimizing risk, (5) Being able to embody the Kao Way, our corporate philosophy. Next, an extensive pool of potential candidates was narrowed down and committee members gained a more in-depth understanding of the candidates, including through opportunities for direct interactions with them. We held repeated discussions about the candidates based on the above, and as a result of comparing each candidate with the qualities we were looking for in Kao's next President and Chief Executive Officer, the Committee for the Examination of the Nominees for Directors and Audit & Supervisory Board Members reported to the Board of Directors that Dr. Yoshihiro Hasebe was the most qualified candidate. The selection process and the results of our deliberation were shared with the Board of Directors, which then held its own discussions, followed by unanimous approval for the appointment of Dr. Yoshihiro Hasebe as Kao's next President and Chief Executive Officer.
While Dr. Yoshihiro Hasebe has assumed his new position in the midst of a very challenging business environment stemming from the COVID-19 pandemic, I am confident that he will continue to act boldly and proactively to implement reforms, and will adopt an aggressive management posture aiming to realize Kao's vision.

Aiming to Contribute to the Realization of K25 and the Enhancement of Corporate Value through Open, Constructive Dialogue

Outside Director

Nobuhide Hayashi

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I believe that the ultimate purpose of the Board of Directors is to enhance corporate value over the mid- to long-term, and to effectively realize the putting in place of a governance framework appropriate to the company's actual circumstances. FY2020 was the year in which Kao formulated its new mid-term management plan, the Kao Group Mid-term Plan 2025 (K25). This process began with discussion regarding the overall vision for K25. The Board of Directors engaged in repeated, in-depth discussion, and in addition, intensive, whole-day discussions were held involving all Outside Directors. In this way, the formulation of K25 was undertaken after extensive consensus-building between management and Outside Directors. I believe that undertaking the process in this way made it possible to achieve more in-depth discussion of Kao's vision, business model and human capital development strategy. Implementation of K25 began in January 2021. Going forward, we will need to carry out a thorough PDCA (plan, do, check, act) cycle on an annual basis in accordance with the K25 roadmap, while ensuring that K25 is strategically disseminated both within and outside the company. I also believe that we will need to specify the types of human capital that will be required in order to implement K25 effectively, and engage in discussion regarding talent cultivation plans and the effective utilization of external talent, including recruitment of non-Japanese employees. It is also very important to check whether the outcomes of discussion by the Board of Directors are able to take root firmly within the organization as a whole, and to ensure that, when problems emerge, possible solutions to these problems are discussed by the board. I feel that, overall, Kao's Board of Directors is very well structured, and I hope that the board will be able to continue making a positive contribution toward the achievement of K25 and the enhancement of corporate value through open, constructive discussion that does not discriminate between Inside and Outside Directors.

Contributing toward Enhancing Governance throughout the Kao Group as a Whole

Outside Audit & Supervisory Board Member

Nobuhiro Oka

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Since taking up the position of Outside Audit & Supervisory Board Member in March 2018, I have attended every meeting of the Board of Directors and of the Audit & Supervisory Board. Kao's Board of Directors operates with a high level of efficiency, with open, wide-ranging discussion based on the spirit of the Kao Way that does not distinguish between Outside and Inside Directors, or on the basis of the position held. With regard to internal controls, Kao is currently engaged in the building of a framework to further enhance the effectiveness of its internal controls and adjust how they operate. I hope to engage in further discussions on this matter at the meetings of the Board of Directors, which is charged with the role of management oversight. Regarding risk management and crisis management, it is important not only to make the maximum possible effort to prevent incidents from occurring, but also to ensure that, if an incident does occur, the negative impact is minimized. In my role as an Outside Audit & Supervisory Board Member, I am focused on realizing the timely transmission of information and on ensuring appropriate initial response, etc.
I also serve as a Member of the Audit & Supervisory Board of Kao Group Customer Marketing Co., Ltd., a subsidiary of Kao Corporation, and I aim to make a contribution from the perspective of enhancing group governance in the Kao Group as a whole. The Kao Group holds Affiliated Company Audit & Supervisory Board Member Coordination Meetings which are attended by auditors from Kao affiliates within Japan, with the Audit & Supervisory Board Members of Kao Corporation playing a central role. I do my utmost to take advantage of opportunities such as this to spread awareness of the proper approach for Audit & Supervisory Board Members to take, and to invigorate their activities. The effectiveness of the Audit & Supervisory Board is evaluated on an annual basis. As a result, a number of new initiatives were implemented in FY2020, including the establishment of a Compensation Advisory Committee for Audit & Supervisory Board Members Initiatives such as this will provide a foundation for raising the overall level of corporate governance at Kao and for supporting further enhancement of corporate value.

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