Corporate Governance

The Ricoh Group, through its corporate activity as a whole, including management activities, is working to improve its governance system1 to strengthen competitiveness in line with stakeholder expectations, while ensuring management transparency based on business ethics and legal compliance. In this way, the Ricoh Group aims to achieve sustainable growth and improve shareholder value and corporate value.

The Company has adopted a corporate audit setup. It strives to strengthen Board of Directors’ oversight of management and enhance the operational implementation of executive officers. Most members of the Nomination Committee and Compensation Committee are Outside Directors. These bodies evaluate directors and executive officers and submit their recommendations to the Board of Directors.

The Board of Directors reflected on Ricoh’s founding principles and discussed the ideas and principles of the Board and the Directors, which are the basis for deliberations, decisions, and actions that contribute to enhancing corporate value. It accordingly established the “Board Culture,” which should be maintained and cultivated by itself explicitly as follows.

Ricoh structured its Board of Directors in line with its cultural stance, ensuring management transparency and fair decision-making by having Outside Directors, including the Chairperson, comprise a majority of its members. A Lead Independent Director enables Outside Directors to serve more effectively. The Lead Independent Director strengthens governance in collaboration with the Chairperson, the most senior Outside Director. The Board appoints a Lead Independent Director based on the Company’s business circumstances and the appointment of its Chairperson and Directors. Clear collaboration and a well-defined division of roles by the Chairperson and Lead Independent Director ensure that the Board performs effectively.

In Board deliberations, the Company draws on the expertise and experience of Directors not serving concurrently as Executive Officers. Independent Outside Directors and Executive Directors lead discussions on key issues, driving appropriate decision-making to enhance corporate value. This structure provides oversight of management from the perspectives of shareholders and other stakeholders. Directors must, in principle, attend at least 80% of Board meetings and supervise corporate management.

Nominating the CEO and other senior executives and determining their compensation are among the Board of Directors’ most critical responsibilities in overseeing management. Ricoh ensures transparency and objectivity in appointing, dismissing, and compensating Directors and Executive Officers through the Nomination Committee, which an Outside Director chairs and primarily comprises Outside Directors, and the Compensation Committee. One Outside Audit and Supervisory Board Member observes all of both committees’ deliberations. In fiscal 2023, these committees each comprised four Outside Directors and one Internal Director.

The Audit and Supervisory Board discusses and decides on audit policies and assignment of duties, audits the execution of duties by Directors, supervises management by cooperating with the Company’s Independent Auditor and the internal audit division, and audits internal departments and subsidiaries. Audit and Supervisory Board Members attend important meetings, including, but not limited to, Board of Directors meetings, and exchange information regularly with Representative Directors.

Ricoh has five auditors. Two internal full-time members are familiar with in-house matters. Three external members meet the Company’s independence requirements for the Audit and Supervisory Board. This entity’s composition balances essential knowledge, experience, and expertise, with each member contributing diverse experience and insights for thorough, independent, and objective deliberations.

For details on the status of activities by Audit and Supervisory Board Members and the Audit and Supervisory Board, please refer to the Notes on the Audit Performance.

Directors’ review meetings

These meetings are for in-depth discussions among Directors and Audit and Supervisory Board Members on such key corporate issues as the mid-term management strategy before the Board of Directors reaches formal decisions.

Management capabilities

Superior insight and judgment necessary for management functions

1. Broad knowledge about businesses and functions and the ability to think and make decisions appropriately from company-wide and long-term perspectives

2. Keen insight to discern the essence and clarify issues

3. Vision to make best decisions at a global level

4. Broad range of experiences as a basis for judgment and insight and a proven track record in dramatically improving corporate value and competitiveness

5. Solid understanding of corporate governance and the ability to think and make appropriate judgments from the perspective of diverse stakeholders, including shareholders and customers

Character and personality

Mutual trust between Directors and management team for the smooth execution of oversight functions

1. Integrity: Exemplifies fair and honest decisions and actions based on a high sense of morality and ethics in addition to the strict observance of laws, regulations, and internal rules.

2. Interacts with others with respect and trust based on a spirit of respect for humanity. Has a deep understanding of and accepts diverse values and ideas, and sets an example through decisions and actions that respect individuality.

As well as the above requirements, election criteria for Outside Directors include excellence in terms of expertise in different fields, the ability to identify and resolve issues, insights, and strategic thinking, risk management, and leadership. Outside Directors must also fulfill the Company’s independence standards applicable to them and Outside Audit and Supervisory Board Members.

We believe that the Company’s Board of Directors should comprise Directors with management ability, character and personality, and diverse viewpoints and backgrounds, in addition to sophisticated multilateral skills.

We maintain a policy of selecting candidates based on their character and expertise irrespective of race, ethnicity, gender, or nationality and to ensure diversity relating to these attributes.

They undergo careful screening across several sessions of the Nomination Committee, which establishes its rationale for their nomination before reporting to the Board of Directors.

Ricoh positions this plan as an important vehicle for constantly enhancing the Group’s shareholder and corporate value over the medium to long term and fulfilling its social responsibilities as a good corporate citizen.

The CEO Succession Plan is being continuously improved through procedures that are objective, timely, and transparent to strengthen corporate governance.

• Every year, the Nomination Committee conducts a two-stage evaluation of the CEO at the request of the Board of Directors. As with directors also serving as Executive Officers, the committee assesses the CEO on management performance as a director, financial results, returns on capital, and other key management benchmarks. The appraisal also covers contributions to shareholders, capital market evaluations, and future financial perspectives to gauge the CEO’s oversight and execution skills comprehensively.
• The Nomination Committee reports its findings to the Board of Directors to ensure effective oversight of the CEO.

Key items for CEO evaluation

In evaluating the CEO, total shareholder returns are one criterion for contribution to shareholders and evaluation from capital market perspectives. To avoid the impact of sudden share price fluctuations, Ricoh bases those returns on the annual average share price (see table below).

Positioning of Nomination Committee and Board of Directors

Each year, the CEO lists prospective CEO candidates and prepares development plans for them, presenting proposals to the Nomination Committee.

The Nomination Committee deliberates the validity of the CEO candidate list and development plans, advises the CEO on candidate development, and reports the findings to the Board of Directors. The Board of Directors confirms the validity of the candidate selection and development plans upon reporting from the Nomination Committee and is actively involved in selecting and developing CEO candidates.

Candidate development

The Nomination Committee deliberates on the development plan for future CEO candidates. It provides guidance to the CEO, who offers growth opportunities suited to all candidates according to their individual targets during the next fiscal year, allowing them to gain experience. The CEO also directly mentors the candidates to promote their development based on individual assessments.

Candidate evaluations

Ricoh evaluates CEO candidates annually. The CEO reports to the Nomination Committee on the achievements and progress of candidates during the development period. The committee deliberates whether to maintain or replace candidates, seeking advice from external experts where necessary. The committee then evaluates the candidates and reports its findings to the Board of Directors. The Board then participates in the evaluation process by reviewing the Nomination Committee’s report and confirming the validity of evaluations and decisions regarding whether to maintain or replace candidates.

The Audit and Supervisory Board selects candidates based on a balance of knowledge, experience, and expertise. They should be able to help Ricoh generate sound and sustainable growth and improve corporate value over the medium to long term. At least one candidate must have sufficient knowledge of finance and accounting.

The Audit and Supervisory Board established the following criteria that it assesses comprehensively to select candidates.

In addition to the above criteria, Outside Audit and Supervisory Board Members offer exceptional expertise and experience in corporate management, finance, accounting, and law. There are additionally no independence issues regarding their relationships with the Company, its representative and other Directors, or key employees with respect to Ricoh’s Standards for Independence of Outside Directors and Outside Audit and Supervisory Board Members.

In appointing Audit and Supervisory Board Members, the Company considers it essential that these individuals have diverse experiences and perspectives in addition to the above auditing capabilities, knowledge, and temperament.

Ricoh makes no distinction based on attributes such as race, ethnicity, gender, or nationality. It ensures diversity by selecting candidates based on their character and knowledge.

The Audit and Supervisory Board spearheads recommending, nominating, and proposing candidates with an emphasis on ensuring their independence. Based on these suggestions, the Board of Directors passes resolutions to submit election proposals to the General Meeting of Shareholders.

The compositions of the Board of Directors and the Audit and Supervisory Board and the expertise of Directors and Audit and Supervisory Board Members are as follows. The table below represents the skills of Directors and Audit and Supervisory Board Members that are deemed exemplary but does not represent all their knowledge and experience.

Skills matrix

Ricoh uses executive compensation to incentivize efforts to improve its performance earnings and deliver sustainable shareholder value growth over the medium to long term. To strengthen corporate governance, the Company has ensured objectivity, transparency, and fairness in setting compensation levels and determining individual compensation. It bases executive compensation decisions on the following basic policies:

(1) Method for determining policy on determining Director compensation

The Compensation Committee, an advisory body to the Board of Directors, discusses and reports on this policy to the Board of Directors, which makes decisions based on this discussion.

(2) Policy regarding decisions on Director compensation and matters related to performance-linked and non-monetary compensation for fiscal 2023

a. Process for determining compensation

The Company has established the Compensation Committee to build a more objective and transparent compensation review process that helps increase profits, enhance corporate value, and strengthen corporate governance through incentives. The Compensation Committee determines base compensation, bonuses, compensation for acquiring stock, and stock-based compensation linked to performance following multiple deliberations based on the compensation standards for Directors and business performance and on the Nomination Committee’s evaluation of Directors, and presents recommendations to the Board of Directors.

The Board of Directors assesses and approves remuneration plans from the Compensation Committee. The Board of Directors determines the total bonus pool after confirming that amounts for each Director are in line with the formula for such bonuses, and decides whether to submit a bonus payment proposal for a Director at the General Meeting of Shareholders. Payments are subject to shareholder approval in that gathering of the proposal.

b. Policy for determining compensation levels

To ensure appropriate linkage with corporate performance, the Compensation Committee confirms every fiscal year whether the target level of the Company’s performance has been secured for each compensation category of basic compensation and short-, medium-, and long-term incentives. The compensation levels of the peer group officers based on the results of a survey by an external professional organization are used as guides, while the payment rate for short-, medium-, and long-term incentives is set to fluctuate according to the Company’s performance.

c. Compensation for Directors

⓵ Basic compensation

This monthly cash compensation reflects the expected roles and responsibilities of directors.

Payment levels are within the total compensation limit that the General Meeting of Shareholders determines, the total amount for fiscal 2023 being ¥281.68 million.

⓶ Short-term performance-linked bonuses

These bonuses are monetary compensation paid after the end of a fiscal year, reflecting the Company’s performance and shareholder value improvements in the relevant fiscal year. Ricoh established the following evaluation indicators for fiscal 2023.

The Compensation Committee deliberates on the appropriateness of individual bonus amounts based on using the formula to calculate Directors’ bonuses and Nomination Committee evaluations of Directors. The committee then makes recommendations to the Board of Directors, which then decides whether to submit a bonus payment proposal for a Director to the General Meeting of Shareholders.

For fiscal 2023, the calculations based on the Director bonus formula determined by the Compensation Committee were appropriate. The total bonus was ¥63.85 million.

⓷ Compensation that reflects the improvement of shareholder value (over the medium to long term)

Compensation reflecting this improvement comprises compensation for acquiring stock and performance-linked stock compensation to strengthen Directors’ commitments to improving Ricoh’s corporate value over the medium to long term.

(3) Policy on determining the ratio of fixed and variable compensation to Directors

To clarify responsibility for performance based on roles and duties, Ricoh has designed the ratio of fixed (basic) compensation and variable compensation (comprising a performance-linked bonus, stock acquisition–based compensation, and performance-linked stock-based compensation) so those with more management responsibilities receive a greater proportion of variable compensation. For the President and CEO as the highest-ranking officer, the fixed/variable compensation ratio was around 5:5 for achieving fiscal 2023 performance targets (¥70 billion in operating profit and an ROE of 5.3%). For achieving the maximum performance targets (at least ¥84 billion in operating profit and an ROE of at least 7.95%), the ratio was 3:7.

The Company will keep emphasizing shareholder and corporate value improvements over the medium- to long-term. It will further increase the proportions of variable compensation linked to shareholder value and business performance. It will continue to discuss appropriate remuneration levels for compensation categories.

Their compensation is solely a base amount for appropriately conducting audits. The Audit and Supervisory Board discusses compensation levels considering objective data from external experts and determines them within the compensation framework approved at the 84th Ordinary General Meeting of Shareholders.

On May 7, 2024, the Company assessed the Board of Directors’ effectiveness for fiscal 2023 (April 2023 to March 2024). The key findings are summarized below.

The assessment continued to cover not only the effectiveness of the Board of Directors but also how executives responded to requests from the Nomination Committee and the Compensation Committee and the Board of Directors. A third party conducted the assessment to ensure objectivity.

Evaluation process

The evaluation was conducted through discussions attended by all Directors and Audit and Supervisory Board Members, after sharing their written assessments and the analysis of third-party questionnaires that ensured anonymity. Through the discussions, participants reviewed and evaluated the Board’s performance during fiscal 2023, in terms of the basic policies on the operation of the Board of Directors and the three improvement items that the Board set forth in the previous effectiveness assessment.

Fiscal 2023 basic policies

1) Discuss and oversee the realization of corporate value that meets stakeholder expectations

2) Monitor and support performance and key measures, from both quantitative and qualitative aspects, to achieve qualitative growth with transformation into a digital services company

Fiscal 2023 action items

1) Enhance deliberations on improving corporate value, deepen discussions to a level where concrete measures can be implemented, and provide more effective supervision from the perspective of corporate value

2) Supervise and support the Company to achieve qualitative growth with transformation into a digital services company through steady implementation of the fiscal 2023 business plan

3) Continuously improve integrated risk management linked to the management system, which enables both sound risk-taking and risk control to accelerate the transformation into a digital services company

2-1. Results of operation of the Board of Directors

Under a new management structure in fiscal 2023, the Board of Directors prioritized enhancing corporate value, deepened discussions from a shareholder perspective, and ensured steady implementation of key measures. In this first year of the 21st Mid-Term Management Strategy, the Board also deliberated and made decisions on joint ventures, mergers and acquisitions, and business divestitures to accelerate Ricoh’s transformation into a digital services company.

Outside Directors and Outside Audit and Supervisory Board Members conducted ongoing on-site inspections, engaged in roundtable discussions with local employees, and observed management meetings to better understand the Company’s circumstances. The Board also enhanced information sharing among Directors and Audit and Supervisory Board Members through pre-briefings to improve Board discussions and reinforce supervisory effectiveness.

To ensure transparency of deliberations at the Board of Directors meetings, the following disclosure regarding time allocated for the agenda items for the fiscal 2023 Board of Directors meetings is provided.

2-2. Summary

The following summarizes the results of Board of Directors deliberations regarding written evaluations from Directors, Audit and Supervisory Board Members, and third-party assessments.

• The Board determined that its composition, with a majority of Outside Directors offering diverse expertise, was well-suited to the new structure for both oversight and execution. With well-structured agendas and neutral meeting management by the Board Chairperson, an Outside Director, the Board encouraged open and vigorous discussions from multiple perspectives. The executive team effectively integrated the Board’s input into management decisions, addressing key issues directly. As a result, the Board concluded that it operated effectively.
• The Nomination Committee conducted fair and rigorous evaluations of the new executive team, including the CEO. The Compensation Committee built on past discussions in deliberating further on compensation systems to enhance corporate value. Both committees, which Outside Directors chair and consist of a majority of Outside Directors, functioned effectively as advisory bodies to the Board, ensuring deliberations from shareholder perspectives.
• It was pointed out, however, that implementing measures to improve corporate value and generate positive results, which the Board of Directors has repeatedly discussed, remains Ricoh’s greatest challenge and requires close supervision from the perspectives of shareholders and other stakeholders.
• Also, the Board emphasized the need to enhance deliberations to meet stakeholder expectations for growth. It stressed the importance of further clarifying Ricoh’s vision, having successfully transformed its business and revenue structures, and the ideal management capital supporting that vision.

Fiscal 2023 action items 1 and 2

• The new management team launched the Corporate Value Improvement Project. The Board of Directors was deeply involved from the planning stages, dedicating significant time to discussions, including informal forums, to drive actionable measures. The Board provided effective supervision by incorporating suggestions and feedback from shareholders and other stakeholders.
• The Board was commended for monitoring the progress of key initiatives within each business unit and supported changes in the business portfolio by establishing joint ventures, undertaking mergers and acquisitions, and divesting businesses to transform Ricoh into an increasingly profitable digital services provider that delivers improved capital returns.
• At the same time, the Board stressed the need to reflect on Ricoh’s performance in fiscal 2023, enhance the Company’s ability to tackle changes in the business climate, and reinforce supply chain management by monitoring the fiscal 2024 business plan to strengthen management resilience.
• In addition, Board members agreed that implementing measures to improve corporate value and achieving positive results remain top priorities. It emphasized the need to clarify the growth potential and revenue structure of the digital services business as the Company’s future vision. It also stressed the need to enhance management capital, including the human resources underpinning this vision and ensuring coordination between execution and supervision to build stakeholder trust.

Fiscal 2023 action item 3

• The Board was commended for strengthening the governance system by enhancing reports and discussions with the Audit and Supervisory Board Members. The executive team, the Nomination Committee, and the Board of Directors sincerely deliberated the Audit and Supervisory Board’s recommendations on organizational structure, leading to immediate improvements.
• Still, the Board pointed out the need to continuously review and improve risk management to tackle increasingly diverse and complex global risks and align the headquarters and organizational structure with the demands of a digital services company.

Based on the above evaluation, the Board of Directors will operate in accordance with the following basic policies and endeavor to improve its effectiveness through three specific initiatives.

Fiscal 2024 basic policies

1) Supervise measures to improve corporate value and deliver positive results

2) Strengthen deliberations and support to clarify the Company’s vision in line with stakeholder expectations

Fiscal 2024 action items

1) Prioritize implementing corporate value improvement measures, discussed in fiscal 2023, as a critical issue, and monitor and support progress in line with fiscal 2024 business plans

2) Intensify discussions to sharpen the Company’s vision to match stakeholders’ growth expectations. Supervise and support the formulation and implementation of measures that bring this vision to life

3) Enhance human resources and other management capital, optimize the organizational structure, and evaluate the risk management framework to accelerate the business structure transformation while continuing to pursue development and improvements

From the viewpoint of streamlining and strengthening business alliances and the development of collaborative businesses, the Company shall be able to hold shares of related partners only when such holding of shares is deemed necessary and effective for the future development of the Ricoh Group, while taking the returns such as dividends into consideration.

Specifically, the Board of Directors will verify, for each stock, whether the benefits and risks of holding shares are worth the capital cost, and if holding shares loses significance in the medium to long term, those holdings will be reduced accordingly.

When exercising voting rights for cross-shareholdings, the Company will carefully examine all agenda items to determine whether it will improve medium- to long-term corporate value or impair shareholder value before deciding to vote for or against proposals.

Status of cross-shareholdings

The Ricoh Group implements Security by Design to maintain information security from the planning and design stages in keeping with international standard ISO/IEC*¹ 27034-1. We immediately deploy vulnerability countermeasures in accordance with international standards ISO/IEC 29147 and 30111. We raise awareness of cyberattack risks, provide contact points for reporting vulnerabilities, and offer information on countermeasures. We comply with increasingly stringent laws and regulations in various countries.

The Ricoh Group deploys cybersecurity measures worldwide. We created the RICOH Computer Security Incident Response Team in fiscal 2013 to analyze threats based on incident reports from the Security Operation Center and external response team organizations and information from security information websites. The team takes the lead in promptly and optimally responding to threats. We constantly monitor group-wide IT systems to quickly detect external unauthorized intrusions and internal unauthorized use and swiftly respond to incidents.

We are bolstering the security of operational technologies in plant networks. We are constantly deploying initiatives to enhance organizational governance, with all plants proactively evaluating their situation through internal and third-party assessments while taking steps to address issues that come to light.

Progress with digitization and the growing use of big data have heightened concerns about data privacy and personal data protection. We manage information based on a data privacy policy for all customer personal data that complies with the Personal Information Protection Act and other laws and regulations. We will launch a full-fledged data business to create new value by drawing on AI to help customers grow and resolve their issues.