Initiatives to Strengthen Corporate Governance

History of Hitachi's Corporate Governance Reform

1999	Introduction of Objective Perspective Management Advisory Committees ▶ Practical advice from experts in Japan and overseas
2003	Demarcation of Management Oversight and Execution Transitioned to a company with committees (currently a company with nominating committee, etc.) ▶Increased management speed and improved management transparency
2006	Enforcement of Companies Act
2010	Enhancement of Interactions with Capital Markets Launched Hitachi IR Day (briefing on business strategy by division) ▶ Clarified commitment of business units top management to the capital markets
2012	Acceleration of Global Management Increased number of Independent directors, including non-Japanse directors, to comprise a majority Development of Guidelines for Strengthening Governance Development of Corporate Governance Guidelines
2014	Development of Stewardship Code
2015	Application Start of Corporate Governance Code
2016	Enhanced Dissemination of Information about Medium- to Long-term Sustainable Growth Published the Integrated Report
2019	Acceleration of the Social Innovation Business across Five Growth Fields Executive vice presidents were placed in five sectors Held ESG briefing sessions ▶ An independent director (chair of the Audit Committee) and the CEO shared their remarks
2022	Reception of Grand Prize Company at JACD Corporate Governance of the Year® 2022
2023	Amendment of Executive Compensation System Further strengthen links between corporate value and compensation

Implementing All of the Principles of the Corporate Governance Code

We are implementing all the principles of the Corporate Governance Code. Please refer to the Corporate Governance Report for details.

Corporate Governance Report (as of July 7, 2023) (PDF format)

Experience, Knowledge and Capabilities Required for Directors

Hitachi Directors need to have a wide range of experience and knowledge in global and diverse fields to be worthy of leading Hitachi's management to expand the Social Innovation Business globally, and have the qualities of broad experience and expertise in management.
The experience, knowledge, capabilities and other qualities required for Hitachi directors are as follows.

Policies and procedures for nomination of Director candidates

In accordance with the provisions of the company law, the Company shall determine the candidates Director Nominating Committee. The size, structure, aptitude, and independence of the independent Director of the Board of Directors, which should be considered in determining the Director candidate, are stipulated in article 2 and 5 of the company's Corporate governance guidelines:

Function, size of the board

Given the need for diversity of the Board views and efficiency of the Board, the number of directors shall be no more than 20, diversity in the experience and expertise, etc. possessed by the director candidates, the composition ratio between outside directors and other directors (directors concurrently serving as executive officers and non-executive directors from within the Hitachi Group), and other such matters in order to ensure the effectiveness of the management supervision and decision-making functions of the Board.
Consider the period of time since the candidate's assumption of office as the Company's director and the candidate's age to keep bringing fresh ideas and viewpoints regularly to the Board.
In principle, a person will not be nominated as a director candidate after his or her 75th birthday. However, in special circumstances, a person over 75 years old may be nominated as a director candidate if the Nominating Committee approves. Also, in principle, the Nominating Committee will not nominate a person as an independent director candidate if a person has reached 10 years of total tenure. However, in special circumstances, a person with the total tenure of 10 years or more may be nominated as an independent director candidate, but even in this case, a person with the total tenure of 12 years or more can no longer be nominated as an independent director candidate.

Qualification for Directors

In nominating a director candidate, the Nominating Committee shall consider that:

such nominee has the highest personal and professional ethics, integrity and insight; and
such outside director nominee has distinguished records of leadership or experience at policy making levels in business, law, administration, or accounting, etc., in addition to satisfying the criteria for independency.

Criteria for Independency

The Nominating Committee considers an outside director to be independent unless:

his or her immediate family member is, or has been within the last three years, a director or an executive officer of the Company or any of its subsidiaries:
he or she is currently an executive director, an executive officer or an employee of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds 2% of any of the companies' consolidated gross revenues:
he or she has received during any of the last three fiscal years more than ¥ 10 million in direct compensation for his or
her service as a specialist in law, accounting or tax, or as a consultant from the Company, other than director compensations; or
he or she serves as an executive officer or director of a not-for-profit organization, and the Company's discretionary
charitable contributions to the organization in any of the last three fiscal years are more than ¥ 10 million and 2% of that organization's annual gross revenues.

Board of Directors Composition (As of June 2023)

At Board of Directors, discussions are conducted from a variety of perspectives by directors possessing a wealth of experience and knowledge pertaining to management, legal affairs, accounting, capital markets, government agencies and digital initiatives at global corporations.

Highly Experienced Directors

Name	Main industrial fields	Notes	Positions at Hitachi and responsibilities
Katsumi Ihara	Electric and precision instruments, finance	Engaged in Sony Group management, possessing a wealth of experience and insight in the field of international corporate management.	Independent director Nominating Committee chairman Audit Committee member Compensation Committee member
Ravi Venkatesan	IT and services	Possesses a wealth of experience and insight in international corporate management at Microsoft India and other companies,and in particular, the digital field and business in emerging markets.	Independent director
Cynthia Carol	Materials and chemicals, energy and resources	Possesses a wealth of experience and insight as a manager of large international corporations including Anglo American.	Independent director Nominating Committee member
Ikuro Sugawara	General industry	Held a leading position in the Ministry of Economy, Trade and Industry, and possesses a wealth of experience and insight in the administrative field.	Independent director Audit Committee member
Joe Harlan	Electricity and gas, energy and resources, materials and chemicals	Possesses a wealth of experience and insight in international corporate management, including at the Dow Chemical Company.	Independent director Compensation Committee member
Louise Penstrand	IT and services, finance and retail	Attorney licensed in New York and the UK possessing a wealth of insight into corporate legal affairs and corporate governance cultivated through experience as a Legal Officer at PayPal Holdings and other large global corporations.	Independent director
Takatoshi Yamamoto	Finance	Possesses extensive insight into business and management in the fields of corporate analysis and international corporate management.	Independent director Compensation Committee chairman
Hiroaki Yoshihara	Finance, general industry	Possesses a high degree of professional knowledge and a wealth of experience in the fields of international corporate management, finance and accounting.	Independent director Nominating Committee member Audit Committee chairman
Helmut Ludwig	Machinery, manufacturing	Mainly engaged in Siemens Group management, possessing a wealth of experience and insight in international corporate management and the digital field in particular.	Independent director Audit Committee member
Keiji kojima	IT and services	Engaged in R&D at Hitachi and its group companies, most recently in the Smart Life sector, possessing a wealth of experience and achievements, particularly in digital businesses related to Lumada global deployment.	Director, Representative Executive Officer, President & CEO Compensation Committee member
Mitsuaki Nishiyama	Materials and chemicals	Engaged in operations in accounting and financial affairs and management at Hitachi and Group company etc., possessing a wealth of experience and achievements.	Director Audit Committee member
Toshiaki Higashihara	Transportation and logistics, IT and services, energy and resources	Engaged in managing a wide range of fields at Hitachi and its group companies, including the social infrastructure and electric power system businesses, possessing a wealth of experience and achievements that include promoting the global expansion of Hitachi Group business.	Director, Executive Chairman, Representative Executive Officer Nominating Committee member

Board of Directors

Message from the Chairman of the Board

Analysis and Evaluation of the Effectiveness of the Board of Directors

The Company evaluates the effectiveness of its Board of Directors as a whole each year, in a continuous effort to maintain and improve its functions.

Fiscal 2022 Evaluation Process

Points of evaluation
1. Questionnaire-based self-assessment by each director (February to March 2023)	Composition: diversity on the Board, the number and proportion of Inside and Outside directors, etc. Visibility of responsibilities and roles of the Board Meeting operation: meeting frequency, deliberation time, agenda setting, quality of deliberation, Chairman's role, etc. Contribution: contribution to strategy building and change of company culture, contribution to constructive discussions, utilization of Director's knowledge and experience, discussions contribution to CEO succession plan, etc. Understanding of the company: Hitachi Group Identity, risk factors, potential challenges and opportunities. Three committees: composition, responsibilities and roles, coordination with the Board, etc. Supporting system for the Board: provision of necessary information such as the Board materials, etc.
2. Discussions among independent directors (March 2023)	Independent directors had a meeting and discussed the Board effectiveness there referring to the Board's activities in each evaluation items set out in the above 1.
3. Discussions at the Board meeting (May 2023)	The Board analyzed and evaluated its effectiveness as a whole and confirmed the policy on approaches to further enhance the Board's effectiveness based on the results of the preceding process, considering comparison to the evaluation results for previous year and measures taken for improving its effectiveness.

Evaluation Results and Future Initiatives

Evaluation Results
Overall evaluation in fiscal 2022	The Board assessed that Board members are diverse and make use of their knowledge and expertise to speak out, having vigorous discussions especially on matters related to business strategies such as the Mid-term Management Plan targeting the mid/long-term growth of corporate value. The Board, therefore, concluded that the effectiveness of the Board as a whole is maintained.
Future initiatives
Further enhancement of corporate governance	Based on discussions at the Board meetings, set up meetings to provide feedback and confirm future action items with executives to further promote shared recognition between the Board members and the executives. The Board will respond to requests for dialogue from investors to the extent possible.
Enhancement of the Board support system and improvement of practical issues in operations	Increase opportunities to have meetings with BU CEOs, etc. and expand to provide Independent Directors with information on opportunities of visiting sites and events of Hitachi Group. Further improve structure and content of materials for the Board meeting and operation of provision of materials well in advance of the Board meeting.

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