Corporate Governance

The Board of Directors exercises strong management monitoring with a high degree of transparency through the nomination of Directors, Audit and Supervisory Board Members and Executive Officers, decision of director remuneration, and important decision-making.

①The Board separates the management monitoring and business execution functions. The Board Chair is nominated from among Directors who do not concurrently serve as Outside Officer.

②At least three highly independent candidates are nominated for Outside Director, and from the Ordinary General Meeting of Shareholders in June 2021, Outside Directors account for at least one-third of all Board members.

③From fiscal 2021, Directors and Audit and Supervisory Board Members are required to basically attend at least 80% of all Board meetings.

④The Board delegates appropriate authority to the President to ensure efficient decision-making.

In FY2021, a total of 19 monthly Board meetings and extraordinary Board meetings were held.

• Earnings and financialcondition
• Financing

• FY2021-2025 JAL Group Medium Term Management Plan Formulation of Rolling Plan2022

• - ESG Strategy
• - Business Strategy(LCC,newbusinesses,etc.)
• - Finance Strategy

• Made JALUX a consolidated subsidiary
• Develop human resources to promote advancement of women and women in management posts

• Aircraft accident report
• Decision of new executive officers
• Board Effectiveness Assessment
• Compliance with the Revised Corporate Governance Code
• Response to priority risks
• Strengthen internal controls of the JAL Group
• Revise the officer remuneration system

• Feedback on IR briefings, etc.
• Customer feedback
• Shareholder benefit programs and communication with shareholders

①In fiscal 2021, we redefined diversity to make board composition diverse in terms of gender, nationality, work history, age, and other variables. Directors are nominated from among persons with extensive experience, deep insight, and specialized knowledge in various fields.

②In fiscal 2021, we decided to increase female Director appointments.

③In fiscal 2021, we formulated and published a skills matrix specifying the specialized knowledge and experience required of Director.

①Outside Directors provide advice to management from a practical and multilateral perspective and monitor business execution appropriately. Any person who does not qualify as highly independent within the definition of Standards for Independence of Outside Directors established by the Company shall not be nominated. For Standards for Independence of Outside Directors, please refer to the 「JAL Group Fundamental Policies of Corporate Governance. PDF」In addition, persons who hold concurrent positions in more than four listed companies excluding the Company are not elected as a candidate for Outside Director.

②One Outside Director shall be appointed as Lead Independent Outside Director to improve coordination with Audit and Supervisory Board Members and internal divisions.

• Ratio of Independent External Directors：33.3%（3 out of 9 Directors are External Directors）
• Ratio of female directors：11.1%（1 out of 9 Directors is a female director）

• 4 years and 5 months

We have established various committees under the Board of Directors in order to build a corporate governance system that demonstrates high management transparency and strong management oversight. A majority of the committee members are Outside Directors, ensuring independence from management.

In addition to the above voluntary committees, the Lead Independent Outside Director organized a few Independent Outside Audit and Supervisory Board Member Opinion Exchange Meetings, comprising only Outside Directors and Outside Audit and Supervisory Board Members, to strengthen the network between Outside Directors.

The Audit and Supervisory Board makes objective and appropriate decisions from an independent standpoint, based on their responsibility to our shareholders, in fulfilling their role and responsibility pertaining to their duties, namely, audit of business execution, nomination and dismissal of accounting auditors, and exercise of rights concerning auditor remuneration.

〔Audits〕

①Audit and Supervisory Board Members attend Board meetings and other important meetings, and audit important management matters, business operations and business execution by exchanging opinions with Representative Directors and Outside Directors, and inspecting important agenda items and resolutions to be passed.

②They also audit business sites and subsidiaries each year together with the Corporate Auditors Office, report back to Representative Directors and provide feedback to executing departments.

③Further, they work closely with the internal Audit Department and accounting auditors, meet regularly with full time auditors of major subsidiaries, and strive to improve and strengthen Group auditing.

〔Candidate of Audit and Supervisory Board Members〕

①Audit and Supervisory Board Members are nominated from among persons with extensive knowledge and experience in various fields to conduct audits from a neutral and objective perspective and ensure sound management.

②Any person who does not qualify as highly independent within the definition of Standards for Independence of Outside Directors established by the Company shall not be nominated for Outside Audit and Supervisory Board Member. For Standards for Independence of Outside Directors, please refer to the Fundamental Policies of Corporate Governance.PDF

• Ratio of Independent External Audit & Supervisory Board members：60%（3 out of 5 Directors are External Directors）
• There are no female Audit & Supervisory Board members.

• 3 years and 1 months

We have created a skills matrix, which is a set of skills required by Directors and Audit and Supervisory Board Members regarding their specialized knowledge and experience. It includes basic corporate management skills of management experience, financial accounting, and legal affairs and risk management, and also safety management, which is particularly important in view of our business characteristics, global experience, sales and marketing, and IT and technology.

We have established the following standards to determine if an External Director qualifies as independent in order to establish a corporate governance system that results in high management transparency and strong management monitoring and to enhance corporate value. (Basically, persons who are not described as follows qualify as independent.)

①A person who executes or has executed business in the Company or a consolidated subsidiary in the past 10 years

②A person who is described by any of the items a - f in the past three years.
a. a business counterpart or a person executing business of such business counterpart, whose transactions with the Company for one business year exceeded 1% of consolidated revenue of the Company or the business counterpart
b. a major shareholder of the Company or a person executing business of such shareholder holding an equity ratio of 5% or more in the Company
c. a major lender for the Company or a person executing business of such lender.
d. a person who receives over JPY 10 million in donations annually from the Company or a person belonging to an entity receiving such donations
e. a person receiving remuneration of over 10 million yen excluding director remuneration from the Company or a person belonging to an organization receiving remuneration exceeding 1% of consolidated revenue of the Company
f. a person executing business of another company, where a person executing business of the Company is appointed as External Director

③The spouse or relative within the second degree of kinship of an individual described in 1 and 2.

(Note) A person executing business refers to an executive director or executive officer

①The qualifications required of the President and other leaders are as follows: “Persons with qualities to steadily achieve positive results toward realizing the Corporate Policy by working together with all employees based on a firm commitment to flight safety, which is the basic foundation of business continuity for the JAL Group. They must also display initiative in practicing the JAL Philosophy. The Nominating Committee continuously discusses possible candidates for President and other executives. By providing candidates with practical and diverse experiences, such as management in a Group company and overseas assignments and activities in external organizations, they acquire the necessary grounding for management at an early stage.

②To develop the next generation of executives including Executive Officers, the Personnel Committee discusses career path mapping, cross-functional rotation, external networking and human resource pooling to promote diversity and expand their capacity and perspectives.

①Legal considerations are explained to Directors, as necessary, to ensure that they are fully aware of their duties, including the fiduciary duties of the duty of loyalty and the duty of care. They are provided opportunities for continuous participation in external training and affiliated organizations.

②In addition to the provision of corporate information, Audit and Supervisory Board Members are given opportunities to participate in external training and external organizations.

③Outside Directors and Outside Audit and Supervisory Board Members receive advance explanations on Board agendas, corporate information and other requests, as appropriate. In order to deepen the understanding of the Company, Directors and Audit and Supervisory Board Members receive explanations on safety matters through visits to frontlines, a climb up Mt. Osutaka, a tour of the Safety Promotion Center, and explanations on company history and the JAL Philosophy.

The Board of Directors evaluates board effectiveness with reference to a self-assessment by each Board member and Audit and Supervisory Board member, and appropriately reviews Board operations, in accordance with the Fundamental Policies of Corporate Governance.

①To ensure anonymity of Board members and Audit and Supervisory Board members, the Secretariat of the Board conducted a questionnaire consisting of such items as discussions on Board composition and operations, management strategy, dialogue with shareholders, and Board culture, and an open ended question asking for individual opinions.

②Next, the Board of Directors discussed issues and actions to be taken based on the results of the questionnaire.

③Following discussions by the Board, the Secretariat interviewed Outside Directors and Outside Audit and Supervisory Board members regarding the individual opinions provided in the questionnaire.

④Then, the Corporate Governance Committee, comprised mainly of Independent Outside Directors, formulated proposals, and the Board of Directors decided on necessary actions as described below. An external assessment is conducted approximately once every three years, and the most recent assessment was conducted last year.

The Board of Directors and Audit and Supervisory Board members are appointed in a balanced manner in terms of expertise and experience that is relevant to our business and their positions. Free and open discussions are held, and the opinions of Outside Directors are respected, while Audit and Supervisory Board members audit the execution of duties by Directors.

The Company actively provides Outside Directors with information and accessibility to high-level information, whereby Outside Directors fulfil their roles appropriately.

In order to realize JAL Vision 2030, the Board will continue to monitor and discuss initiatives to address sustainability issues in our ESG strategy, strengthen monitoring of business restructuring, and strive to increase corporate value over the medium to long term.

In fiscal year 2022, the Board confirmed the need to respond to the following issues and will address them steadily and surely.
①Implement a human resource strategy to execute the management strategy and continuously strengthen human resource capabilities, which is our greatest strength;
②Further strengthen risk management of the JAL Group to prepare for risks when expanding businesses and the increased threat of external risks such as cybersecurity risks; and
③Improve information dissemination and identify and analyze needs of individual shareholders to strengthen interactive communication, leading to constructive dialogue.

Remuneration Policy for Directors (excluding External Directors) and Executive Officers

①To support the sustainable and steady growth of the Company and the JAL Group and to increase corporate value over the medium and long term, the Company will encourage the performance of duties consistent with its Corporate Policy and management strategies and provide strong incentives for the achievement of specific management targets.

②To encourage a healthy entrepreneurial spirit, the Company will establish appropriate proportions for annual incentives (performance- linked bonuses) linked to fiscal year performance and for long-term incentives (performance-linked share-based remuneration) linked to corporate value in accordance with medium- to long-term performance, designed to promote alignment of interests with its shareholders

③The Company will reward the management team appropriately based on the Company’s business performance.

①The Company will set appropriate remuneration levels based on the Company’s operating environment and with reference to objective data on remuneration in the marketplace.

②Considering factors including the nature of the Company’s business and the effectiveness of incentive remuneration, fixed remuneration and performance-linked remuneration are comprised as follows. (Assuming 100% achievement against targets)

The above ratio is for guidance only and adjustments can be made to reflect changes in the price of the Company’s shares or other factors.

※ This amount excludes allowances in cases where an Executive Officer serves concurrently as a Director or where an Executive Officer has representative authority.

The amount to be paid every fiscal year as an annual incentive will vary from 0 to 150 depending on the degree of achievement, with 100 representing the amount to be paid when achievement is in line with performance targets.

Evaluation indices will be considered for review as necessary in accordance with changes in business conditions, the roles of each officer and other factors.

The number of shares to be granted every fiscal year as a long-term incentive will vary from 0 to 150 depending on the degree of achievement, with 100 representing the number to be granted when achievement is in line with performance targets. The performance evaluation period will be three years, with performance for three consecutive fiscal years evaluated every year.

Evaluation indices will be considered for review for each Medium Term Management Plan period.
ith respect to common stock granted to eligible Directors and Executive Officers through the share-based remuneration plan, the Company will establish a target number of held shares for each position and impose limits on share sales to further promote the aligning of interests with shareholders.Executive officers cannot sell their shares until performance-linked share-based remuneration has been issued to the amount equivalent to three years' worth (based upon when 100% of performance targets are achieved).

Matters related to remuneration for Directors and Executive Officers will be decided by the Board of Directors following a deliberation and recommendation process by the Company’s voluntarily established Compensation Committee.

※1 Annual incentives (performance-linked bonuses)

※2 Long-term incentives (performance-linked remuneration)

The ratio of the amount of shares held by Director Executive Officers to Basic remuneration (including shares acquired in Employee Stock Ownership Plan, etc.) is 45% for Representative Director, President and 16% for other Directors Executive Officers.

• Development of the Internal Controls System (Fundamental Policies)
• Operation of the Internal Controls System

In accordance with the annual audit plan developed by the Audit Department based on the results of the risk analysis, internal audits are conducted with a focus on company-wide issues, such as risks leading to significant losses, operational effectiveness and efficiency, reliability of financial reporting, compliance with laws and regulations, and preservation of assets. Of these, the reliability of financial reporting is evaluated generally as an independent organization under the direct control of the president under the Internal Control Reporting System for financial reporting based on the Financial Instruments and Exchange Act.
From an audit perspective, as the third line of defense in the "Three Defense Line Model," we focus on confirming the status of the second line of defense, which is the support or monitoring function for each organization in the Group based on expertise in the General Affairs Department, Risk Management Department, Legal Department and Accounting Department.
The results of internal audits are reported to the president on a case-by-case basis, and information is provided to corporate auditors and audit firms on important matters related to internal controls, and efforts are made to cooperate with each other.
The Corporate Safety and Security Division and the Maintenance Auditing Department of the Maintenance and Engineering Division are responsible for safety audits and maintenance audits conducted in accordance with laws and regulations pertaining to air transport services.

KPMG AZSA LLC conducts accounting audits in accordance with the Companies Act and the Financial Instruments and Exchange Act.
In addition to periodic audits, accounting issues such as the establishment, amendment and abolition of laws, regulations and rules are checked as necessary to achieve appropriate accounting work.

We are aware that the general meeting of shareholders is a venue for constructive dialogue with shareholders, and secure and provide a period for them to sufficiently examine accurate information from their standpoint through the Convocation Notice of the General Shareholders' Meeting, etc. We provide easy-to-understand information at the general meeting of shareholders and have developed an environment in which shareholders can exercise their rights appropriately.
Furthermore, we conduct IR (Inventor Relations) activities to maintain positive interactive communication under the following policy, in which Representative Directors, the Finance and Accounting Director, etc. engage in active dialogue, and fairness, accuracy and continuity of management strategies, business strategies, financial information, and such are emphasized.

①We assign the Finance and Accounting Director and General Affairs Director as management to oversee dialogue with shareholders

②We assign a supervisor to oversee information gathering, management and disclosure, and also staff to implement these duties in the Finance Department, and disclose information in a timely, fair and appropriate manner in coordination with related departments.

③We hold meetings to explain our financial results and management plan when announcing them, issue “JAL Report,” etc., hold meetings for shareholders to explain other matters , and arrange tours of facilities,etc. to promote investment opportunities and improve information disclosure.

④We feedback results of dialogue with shareholders to management, as necessary, so that management may share the shareholders' requests and opinions and an awareness of issues, and reflect their views in corporate management.

⑤We establish and disclose a "silent period," during which we do not provide any replies or comments to inquiries or information on corporate status to prevent information leaks and ensure fairness. We conduct information management and control insider information.

JAL Group has established the Basic CSR Policy "The JAL Group will strive to meet the expectations of society, address social issues, and pass on a better society to future generations through its core air transport business as the 'Wings of Japan'." We aim to realize our Corporate Policy by collaborating with shareholders and practicing JAL Philosophy.

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