Corporate Governance

As a bank that owns and operates an ATM network that manages deposits from a large number of customers and has a nature similar to that of public infrastructure, the Bank recognizes that ensuring disciplined corporate management is vital in responding to social trust and seeks to ensure effective corporate governance. This is achieved by maintaining and improving corporate governance and compliance systems to ensure transparent, fair and swift managerial decision making; clarifying the roles and responsibilities of executives and employees; strengthening management oversight functions; and ensuring equitable operations. The Bank adopts the organizational form of a Company with Audit & Supervisory Board. At the Board of Directors, the Bank ensures effective corporate governance through decision making by Directors with executive authority over operations who are well versed in the Bank’s operations and Outside Directors who have considerable experience and insight in their areas of expertise as well as through audits by the Audit & Supervisory Board Members.

For the sustainable growth and the improvement of corporate value, the Bank has positioned strengthening governance as a key management issue. In FY2023, with new Outside Directors and a new Outside Audit & Supervisory Board Member added, we have enhanced the independence of the Board of Directors, and have put our effort in making the Board of Director more effective with the Board of Directors composed of diverse members. Please note that the Company set the basic views, the framework, and the operation policy that need to be addressed to enable the effective corporate governance in its Corporate Governance Guidelines, and released it on our website.

The Seven Bank has conducted “evaluation of effectiveness of the Board of Directors” since FY2015. In FY2023, a questionnaire survey was anonymously conducted for Directors and Audit & Supervisory Board Members about the operation of the Board of Directors, the composition of the Board of Directors, agenda items of the Board of Directors and other items. The results were deliberated at the Board of Directors.

The Bank’s Board of Directors has been fulfilling both its decision-making and supervisory functions as all Directors and Audit & Supervisory Board Members share its roles and responsibilities and conduct deliberations from diverse perspectives through free and open discussions based on the members’ respective knowledge and expertise. Thus, it was confirmed that the Board of Directors has been operating appropriately, thereby ensuring its effectiveness. Details of initiatives concerning the priority matters are as follows.

The Bank’s Independence Standards for Outside Officers are as follows.

Other matters concerning Independent Officers
The Bank registers all persons who fulfill the qualifications of Independent Officers, as well as the Independence Standards for Outside Officers, as Independent Officers.

We believe that the role of Directors and Audit & Supervisory Board Members is to realize appropriate business management by supervising and auditing business execution while fully understanding the social responsibilities and mission of the banking business. In order to properly fulfill this role, we utilize the skill matrix when appointing Directors and Audit & Supervisory Board Members, and aim for a well-balanced composition of members with diverse skills and expertise.

Seven Bank’s “Policy on Compensation of Officers and Compensation System for Officers” were, excluding compensation for Audit & Supervisory Board Members, proposed to the Board of Directors by the Nomination & Compensation Committee, and determined with a resolution of the Board of Directors as follows:

The Bank decides compensation of officers based on the following points.

The Bank has established a Nomination & Compensation Committee, comprising a total of four members made up of two Independent Outside Directors and two Representative Directors, chaired by an Independent Outside Director, as an advisory body to the Board of Directors (as of the end of the fiscal year under review)*. The Nomination & Compensation Committee proposes specific amounts of compensation, etc. to be granted to Directors within the range of the total amount approved at the General Meeting of Shareholders, for determination by resolution of the Board of Directors. From the perspective of understanding the process of discussion, Audit & Supervisory Board Members may participate as observers who do not possess voting rights, when a Nomination & Compensation Committee meeting is held. The procedure is stipulated in the Regulations for Officers, which is modified, amended, or abolished by a resolution of the Board of Directors upon discussion with the Audit & Supervisory Board Members.
Compensation, etc. for Audit & Supervisory Board Members is determined upon discussion by the Audit & Supervisory Board Members within the range of the total amount approved at the General Meeting of Shareholders.

• ※The Nomination & Compensation Committee consists of a total of five members: three Independent Outside Directors and two Directors as of July 1, 2024.

The Bank’s compensation structure for officers comprises “basic compensation” as fixed compensation and “bonuses” and “performance-based stock compensation” as variable compensation, which are applied as follows.

Each plan is positioned as follows.

The ratio of each plan has been decided as described below by a resolution of the Board of Directors upon a proposal by the Nomination & Compensation Committee. Factors taken into account included a balance between fixed compensation and variable compensation, a balance between cash remuneration and stock compensation, and a balance between bonuses and stock compensation, which are incentives to execute management with a well-balanced perspective in both the short-term and the medium- to long-term (excluding compensation for Audit & Supervisory Board Members).

In addition, non-executive Directors and Audit & Supervisory Board Members receive only fixed compensation, as their role is to supervise the Bank’s management from an objective and independent standpoint.

To provide a competitive compensation level and thereby secure highly capable human resources, the Bank’s compensation level for officers has been determined by a resolution of the Board of Directors based on the proposal made by the Nomination & Compensation Committee. The deliberation was based on the analysis and comparison of data on the compensation levels of a group of companies of the same size and operating in the same industry as the Bank, which has been drawn from a larger body of objective data on compensation levels provided by an outside professional organization (excluding compensation for Audit & Supervisory Board Members).

Fiscal year under review (from April 1, 2023 to March 31, 2024)

Audit & Supervisory Board Members and the Accounting Auditor hold regular meetings to exchange opinions and promote mutual cooperation, based on the audit contract with KPMG AZSA LLC. Audit & Supervisory Board Members perform audits on the execution of duties by Directors by attending the Board of Directors meetings or other means. In addition to conducting their own operational and accounting audits, Audit & Supervisory Board Members receive reports on results of external audits by the Accounting Auditor, and check the appropriateness thereof. Members from the Internal Audit Division are also present when receiving accounting audit reports from the Accounting Auditor, in an effort to facilitate close cooperation.

The Bank has in place the Internal Audit Division, which is independent of the Bank’s other departments engaging in business operations and directly reports to the President and Representative Director.
The Internal Audit Division annually sets a basic policy for internal auditing plans and priority issues to be addressed, which are to be approved by the Board of Directors. Individual internal auditing plans are formulated by the General Manager of the Internal Audit Division, and approval of these plans is obtained from the President and Representative Director, who is the officer in charge of the Internal Audit Division. Individual internal audits are conducted by investigating and evaluating the appropriateness and effectiveness of internal management systems as a whole based on the following items to discover problems, if any, and suggest how to address them. The results of these audits are reported to the President and Representative Director, the Executive Committee, the Board of Directors, and the Audit & Supervisory Board.

Internal audits are conducted on all the Bank’s departments and systems, including those of its subsidiaries. Audits are also conducted on the operations of the Bank’s major outsourcing contractors regarding the status of management by its relevant internal departments, as well as on the outsourcing contractors themselves, within the scope agreed with them. Audit & Supervisory Board Members receive periodic reports from the Internal Audit Division on its audit plans and results, and request investigations as necessary to ensure that the audit results of the Internal Audit Division are effectively utilized for internal control system audits by Audit & Supervisory Board Members. In addition, Audit & Supervisory Board Members receive reports on the status of internal control systems regularly or as necessary from the departments in charge of internal control functions, and ask for detailed explanations as necessary.

Concerning the system upgrades stipulated in Article 362, Paragraph 4, Item 6 of the Companies Act, the Board of Directors made a resolution on May 8, 2006, on matters to be implemented by the Bank. Progress of the details of this resolution is reviewed each fiscal year. In line with this resolution, Seven Bank strives for good corporate governance and internal control, while ensuring appropriateness in the Seven Bank Group’s operations.

Seven & i Holdings Co., Ltd., the Bank’s parent company, aiming to become a worldwide top-class retail group centered on “food,” operates domestic convenience store operations with Seven-Eleven at its core, overseas convenience store operations, superstore operations, financial services, etc. Seven Bank operates, with financial services at its core, ATM platform business, banking business, credit card and electronic money businesses, etc. Although Seven & i Holdings’ financial services includes not only the Company and its subsidiaries, but also Seven Financial Service Co., Ltd., and Seven CS Card Service Co., Ltd., their services and target customers are different from ours, and therefore we consider that our clear business demarcation is and will be ensured. As business segments clearly differ between the parent company group and the Company, we believe that we are in the position where we can grow together with the parent company group through developing unique retailor-specific financial services mainly for customers visiting the parent company group stores.

Seven & i Holdings Co., Ltd. is the Bank’s parent company, indirectly holding 46.43% of its voting rights, and therefore falls under the category of controlling shareholder stipulated in the Timely Disclosure Rules. When conducting transactions, etc., with the parent company, the Bank will comply with the arm’s-length rule under the Banking Law, which is a rule established to prevent the soundness of the Bank’s management from being compromised through conflict-of-interest transactions. The Bank fully confirms the necessity for such transactions and that the conditions of such transactions do not differ significantly from conditions of usual transactions with third parties. The transaction for the acquisition of shares of Seven Card Service Co., Ltd. from Seven Financial Service Co., Ltd., a wholly-owned subsidiary of Seven & i Holdings Co., Ltd., conducted in 2023 fell under a transaction with a controlling shareholder. Accordingly, the Bank set up a special committee to discuss and determine the validity of the transaction conditions and the fairness of the procedure in order to ensure the benefit of minority shareholders following the “Fair M&A Guidelines.” The committee thoroughly discussed from an independent standpoint at a different level from the Board of Directors and finally made a decision. If another material case similar to the above arises, the Bank will pay full attention to protecting the benefit of our minority shareholders by setting a special committee.

The Bank believes that in order to achieve sound and sustainable growth, it is essential to engage in business development (innovation) by integrating collaboration with various partners to an advanced degree based on our credibility and transparency of management as a corporate entity. Furthermore, we recognize that listing on the market is one of the most effective ways to ensure the Bank’s credibility and transparency of management. As an independently listed company, the Bank independently and autonomously deliberates and determines our own business strategies, personnel policies, capital policies, etc., as we engage in our own operating activities. In addition, in order to ensure the necessary independence from our parent company, the Bank has also appointed Independent Outside Directors and Independent Outside Audit & Supervisory Board Members, who provide supervision to ensure that no conflicts of interest arise between our parent company and shareholders other than the parent company. The Bank does not have any agreements concluded regarding group management with the parent company. Furthermore, we have established the Nomination & Compensation Committee chaired by an Independent Outside Director as an advisory body to the Board of Directors. This Committee deliberates on matters concerning recommendations of candidates for Director and Executive Officer, thereby ensuring independence from our parent company in the appointment of top management. In addition, to comply with the disclosure obligations, etc., of the parent company, the Bank has established the Guidelines for Reporting of Material Facts with the parent company and reports to the parent company accordingly. These reports are limited to matters that impact the parent company’s timely disclosure, materially impact the parent company’s consolidated financial statements, and may potentially impair the credibility of the Seven & i Group.

The parent company’s approach and policy regarding group management are as follows.
“Although the Company owns the listed subsidiary, Seven Bank, Ltd., the ATM platform business and banking operations conducted by this entity and its subsidiaries do not overlap with the core operations of other Group companies, ensuring clear business demarcation. From the standpoint of respecting the independence of its listed subsidiaries, the Company values the management decisions of said company, and respects the independent and autonomous deliberation and determination of its business strategies, personnel policies, and capital policies, as it engages in its operating activities.” (Quoted from the website of Seven & i Holdings Co., Ltd.)