LIXIL : Mar 23, 2020InfoExplanatory Material for Briefing on Progress of Management Strategy and Strengthening Governance > NEW

ABOUT THE PROGRESS OF MANAGEMENT STRATEGY AND STRENGTHENING GOVERNANCE

LIXIL Group Corporation

March 23, 2020

Copyright © LIXIL Group Corporation. All rights reserved.

AGENDA

Teruo Suzuki

Outside Director, Chairperson of the Governance Committee and

Member of the Audit Committee

Regarding Appointment of Director Candidates and Executive Officers for the

next termP14 Yuji Nishiura Outside Director, Chairperson of the Nomination Committee and

Member of the Compensation Committee

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NEW TRANSFORMATION INITIATIVES

New sales structure to come into effect in Japan from April 1

Integration of LIXIL Building Technology Japan into LIXIL Housing

Technology Japan, and Housing & Services into new Sales Development Division

• Simplify organization structure
• Leverage synergies

Centralized reporting for core functions worldwide

• Strengthen management through greater alignment on enterprise goals
• Strengthen functional excellence to better manage risks

Transforming operations to become a more modern, agile and entrepreneurial company

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REVITALIZE JAPAN: WORKFORCE TRANSFORMATION

Manage career paths

| Support career planning | Establish meritocracy based system | Career Option Program |

Career Option Program

Result overview:

• Eligibility: Permanent employees 50 or older, who have worked at Group companies for ten consecutive years or more as of the effective date

• Retirement date: June 25, 2020

• Application period: February 17, 2020 to February 28, 2020

• Number of applicants: 497

• Financial impact: Costs of JPY5.5 billion to be recorded as SG&A in Q4.

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REGARDING THE MERGER OF

LIXIL GROUP CORPORATION AND LIXIL CORPORATION

Teruo Suzuki

Outside Director, Chairperson of the Governance

Committee and Member of the Audit Committee

LIXIL Group Corporation

March 23, 2020

Copyright © LIXIL Group Corporation. All rights reserved.

STRENGTHENING GOVERNANCE THROUGH MERGER

• Strengthen Monitoring and Supervision by the Board of Directors

 Pursue effectiveness of monitoring and supervision

In addition to monitoring and supervising the portfolio management of the holding company, the Board of Directors will also monitor and supervise the business operations

 Improve management transparency

By dissolving the two-tier structure, the Board of Directors will support the decisive management executions of LIXIL, the largest operating company in the Group

• Strengthen Group companies’ management and improve management efficiency
• • Enable faster decision-making
  • Eliminate duplication of management and human resources (reduce additional operating costs)
  • Improve management control and supervision across the Group by headquarter function

Significance and purpose of the

The new management team, which was established after the Annual General Meeting of Shareholders held in June 2019, will eliminate the current two-tiered structure. Each Director and Executive Officer will thereby monitor and supervise the business more actively and respond to the Company’s shareholder mandate, including achieving performance targets and ensuring thorough compliance.

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Operating Company: LIXIL

GOVERNANCE-RELATED CHALLENGES AND THE PURPOSE OF MERGER

Governance structure of LIXIL Group Corporation, LIXIL Corporation, and other operating companies (as of March 23; before the merger)

Holding company: LIXIL Group

Board of Directors

Nomination Committee

Audit committee

Management and supervision

of business portfolio

Operating Company: LIXIL

Management and supervision

of business management

Group Companies(1)

IMPROVING MANAGEMENT TRANSPARENCY AND GROUP GOVERNANCE

Governance structure of LIXIL Group Corporation, LIXIL Corporation, and operating companies other than LIXIL (from December 1 (plan); after the merger)

Holding company: LIXIL Group

IT

Legal

Human Resources

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CONTENTS

1. Results of the appointment of director candidates for the next term
2. Appointment process for director candidates for the next term
3. Results of the appointment of executive officers for the next term
4. Appointment process of executive officers for the next term
5. Revision of the Nomination Committee’s system and operations

Appendix 1:Stance on Board diversity

Appendix 2:Reasoning regarding the reappointment of the CEO

Appendix 3:Approach on revision of Nomination Committee rules and guidelines

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1. RESULTS OF THE APPOINTMENT OF DIRECTOR CANDIDATES FOR THE NEXT TERM

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2. APPOINTMENT PROCESS FOR DIRECTOR CANDIDATES FOR THE NEXT TERM

• Based on the above, the Nomination Committee convened, deliberated and reached a decision in March 2020.

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3. RESULTS OF THE APPOINTMENT OF EXECUTIVE OFFICERS FOR THE NEXT TERM

• Decided to align executive officersʻ term of office with the fiscal year.

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4. APPOINTMENT PROCESS OF EXECUTIVE OFFICERS FOR THE NEXT TERM

• Based on the above, the Board of Directors resolved the proposal from the Nomination Committee in March 2020.

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5. REVISION OF THE NOMINATION COMMITTEE’S SYSTEM AND OPERATIONS

1. Revise the Nomination Committee’s Rules and Corporate Governance Guidelines =>Prevent arbitrary interpretations, abuse of systems, and out of control actions.

2. Enhance minutes of committee meetings =>Ensure transparency of discussions.

3. Review policies, standards, and procedures related to “Composition of Board of Directors and appointment of director candidates“ and collect the opinions of all directors =>Eliminate bias in opinions and decisions.

4. Formulate a CEO succession plan and clarify the election process =>Improve persuasiveness

5. Promote interviews and dialogue with the shareholders, executive officers, employees, etc. =>Avoid being a “blackbox” and enable open and transparent understanding

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APPENDIX 1: STANCE ON BOARD DIVERSITY

1. The Nomination Committee focuses on two criteria regarding the diversity of the Board of Directors: “attributes” (gender, nationality, etc.) and “knowledge and experience”
2. The 10 items that comprise the criteria for “knowledge and experience“ (skill matrix) is currently under review.
3. • Practical experience in corporate management.
   • Experience in overseas business and overseas M&A.
   • Knowledge concerning finance, etc.
4. While the number of directors has been reduced, the Nomination Committee has aimed to maintain and improve diversity. Taking this approach into account, the Nomination committee will update the skill matrix regularly.

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APPENDIX 2: REASONING REGARDING THE REAPPOINTMENT OF THE CEO

Every year, the Nomination Committee examines the pros and cons of reappointing the CEO based on three performance indicators: “business performance“, “progress of measures“, and “internal evaluation“.

1. Since Mr. Seto’s return as CEO, the company’s business performance and share price have been favorable (except in the case of abnormalities).
2. Regarding the medium-term management plan, the company is boldly taking on difficult challenges and starting to achieve results.
3. • The plan on the merger of LIXIL Group Corporation and LIXIL Corporation and promotion of other organizational reforms.
   • Execution of the comprehensive HR program to revitalize the Japan business (new HR strategy), etc.
4. Mr. Seto has received an extremely positive evaluation from the executive officers.
5. • The internal atmosphere has improved. Decision making and execution has sped up.
   • A sense of global unity is rapidly advancing, etc.

In view of the above and other factors, the Nomination Committee agreed to the reappointment of Mr. Seto as CEO. In addition, the Committee received a proposal from the CEO regarding the executive officer system for the next term.

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APPENDIX 3. APPROACH ON REVISION OF NOMINATION COMMITTEE RULES AND GUIDELINES

Clarify the authority and process of the Nomination Committee and prevent arbitrary interpretation.

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Disclaimer

LIXIL Group Corporation published this content on 23 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 March 2020 06:26:02 UTC