Message from an Audit & Supervisory Board Member

May 30, 2025

To maintain and improve transparency in the governance system, the Board of Directors at Kirin Holdings actively seeks opinions not only from directors but also from Audit & Supervisory Board members. In this section, we interviewed Yoko Dochi, an external member of the Audit & Supervisory Board, about our governance structure.

After an earlier career in international finance as an investment banker, I took on responsibility for investor relations (IR) at two leading global companies, namely Toyota Motor Corporation (“Toyota”) and SoftBank Group Corp (“SBG”), for 22 years. Toyota Motor Corporation has always enjoyed top-class market capitalization in the automobile industry and among Japanese companies, so its existing and prospective shareholder base was extensive. I engaged with all types of investors, mainly those overseas, at the forefront. The number of dialogues that I led was well over 3,000 in the 17 years with Toyota, and through this experience, I gained valuable insights into the diverse attributes of investors, what they expect from companies, and how they make investment decisions. When I took on the position of global head of investor relations at SoftBank Group Corp., the company had just transformed itself from Japan’s third-largest telecommunication company to one of the largest global strategic investment companies. The transformation was so fast that many investors struggled to catch up, which resulted in a significant discount of SBG’s market capitalization to its intrinsic corporate value. I focused on regaining investors’ confidence through numerous dialogues. Kirin Holdings is currently undergoing a significant transformation of its business portfolio. Its share prices, particularly since the launch of the Health Science Business, appear to have been underperforming. I gather this is probably due to the lack of confidence on the part of investors in its strategy and/or execution. I also think that the company would benefit from gaining appreciation and support from a broader range of institutional investors globally. With my executive experience in IR, I hope to make a unique contribution as an external member of the Audit & Supervisory Board at Kirin Holdings.

Furthermore, three-fourths of my career consists of overseas tenures, mainly in the United States and the United Kingdom. At Toyota Motor Corporation, I was also involved in the management of its European regional headquarters. It was a successful case of locally led management on the base of globally standardized production and business processes in a very challenging, mature car market. My experience might be relevant to supporting Kirin Holdings’ next phase of globalization.

Additionally, when Toyota faced a global recall crisis in 2010, I gained a valuable experience in restoring the company’s reputation and stakeholders’ trust through all-out engagement efforts while company-wide countermeasures were firmly and rapidly put into place. Of course, ideally, no quality issues should emerge, but if an unexpected crisis occurs, these experiences might help in playing the role of an external member of the Audit & Supervisory Board.

Every company operates in uncertainty—the future is inherently unpredictable and the environment surrounding businesses is constantly changing. So good governance requires not only fundamental systems such as regulatory compliance and risk management, but also overarching systems that enable a company to continue business activities sustainably, ethically, and in alignment with the expectations of all stakeholders, no matter how the business environment evolves. In other words, companies should maintain the right balance between two inseparable wheels: management, which strategically executes business operations with transparency while demonstrating strong accountability and leadership, and supervision, which monitors management and provides appropriate advice and guidance and challenges as necessary. If the balance results in sustainable business growth and the continued creation of corporate value, that will be a state of “good governance.” The right balance is a tricky one to define—it can vary depending on a company’s scale, industry and business characteristics, and corporate life stages. And I think any effective governance system should evolve by adapting to changes in the environment over time.

Kirin Holdings’ Audit & Supervisory Board consists of two full-time members and three independent external members. Each brings a high level of expertise and conducts multifaceted audits and supervision, which I find truly excellent. Mr. Nishitani and Mr. Ishikura, the full-time members, have decades of executive and managerial experience in Kirin Holdings’ core businesses. By applying their understanding of the organization and its culture to auditing, they offer in-depth analyses and opinions from an independent standpoint. Regarding external members, both Ms. Kashima, who is a certified public accountant, and Mr. Fujinawa, who is a lawyer, have leading expertise and a wealth of experience in their respective fields, while I have an executive background in investor relations and finance at global companies, as was mentioned earlier.

Currently, Kirin Holdings is pursuing a long-term strategy that positions the Health Science Business as the primary driver of future growth. It is in the process of globally scaling up the Health Science Business to become the leading company in the Asia-Pacific market by materializing synergies with Blackmores and FANCL, which recently became its wholly owned subsidiaries. At this important juncture, I believe our diverse skill sets could contribute significantly. With regard to Kyowa Hakko Bio, we continue to monitor the on-going structural reform from various risk-related perspectives and provide opinions on its effectiveness and speed, for example.

Since the dual leadership system was introduced around the time when I assumed my current position, I am not in a position to compare it with the previous one. However, given the stage of growth that Kirin Holdings is currently in, I appreciate the current system as highly effective. Under this system, Mr. Isozaki, representative director of the Board & CEO (“CEO”), provides strategic leadership for the entire Kirin Group, while Mr. Minakata, representative director of the Board, president & COO (“COO”), oversees the diverse operations of each business area. Their respective roles are clearly defined, so I have never come across any confusions as to who should speak between the CEO and the COO during Board of Directors meetings. Furthermore, the leadership succession plan has been discussed by the Nomination and Remuneration Advisory Committee. A policy of evaluating individual performance over a defined timeline to deliberate a steady succession has been reported to the Board of Directors. I consider this a highly sound and healthy approach.

At Kirin Holdings, business plans, for example, are discussed by the Board of Directors around four times from the formulation phase to the final decision-making phase. The content of the business plans are progressively refined based on suggestions from directors with diverse areas of expertise. This practice in turn encourages both board directors and Audit & Supervisory Board members to take shared ownership of the company’s strategies, which I find highly meaningful.

Meetings of Kirin Holdings’ Board of Directors are held once a month. Examples of a good practice include that Mr. Yanagi, who is a non-executive director, serves as the chair, and that the members of the Audit & Supervisory Board are expected to express their opinions as actively as board directors. Chairman Yanagi is excellent in inviting comments from everyone—sometimes by encouraging someone with particularly relevant expertise to the discussed topic to speak up. At the Board of Directors meetings, I tend to raise questions or comment on specific areas, such as disclosure and communication to the capital markets to improve their understanding or appreciation of the company. Also, I often make comments on capital policies, including capital allocation, and target setting for the medium- to long-term financial and non-financial KPIs—whether they adequately and sufficiently measure Kirin Holdings’ corporate value, or whether they are aligned with the expectations of investors and shareholders. Other external directors also provide high-level opinions and suggestions candidly while measuring the impact on management, from which I also learn a great deal. I feel that Kirin Holdings’ board meetings provide an open space in which we can exchange differing opinions without hesitation.

Among the Board of Directors meetings held last year, discussions involving the TOB (takeover bid) of FANCL left a particularly strong impression on me. As the stock price rose after the initiation of the TOB, the Board discussed raising the maximum offer price. Initially, non-executive directors and external members of the Audit & Supervisory Board, including myself, had varying opinions as to whether the price proposed by management was reasonable based on strategic significance, while acknowledging that it fell within an appropriate range. It was then proposed that all executive directors in the board room say a few words on the necessity of the full acquisition one by one from their respective standpoints. By then, we had many occasions to hear from Mr. Yoshimura, the board director in charge of the Health Science Strategy, on his determination to succeed, but the reasoning, passion, and commitment expressed by the other executive directors in their own words were powerful enough to convince us. In the end, the Board unanimously agreed to raising the offer price as proposed.

At Kirin Holdings, external members of the Audit & Supervisory Board are required to attend many important meetings in addition to Board of Directors meetings. Group Executive Committee and Risk and Compliance Committee meetings are attended by the full-time members of the Audit & Supervisory Board and then reported at the monthly Audit & Supervisory Board meetings prior to Board of Directors meetings. Additionally, we hold quarterly interviews with the accounting auditors. In addition, we participate in strategic dialogues with all management directors twice a year, together with non-executive directors. We also have annual interviews with the CEO and the COO respectively, to share our takeaways from audits candidly. In this way, we have many opportunities to engage with internal stakeholders.

Furthermore, on-site inspections at Group companies and functional departments are actively conducted throughout the year. Last year, I visited the Kirin Central Research Institute, the Institute of Health Sciences, the Institute for Future Beverages, and Koiwai Dairy Products, where I took part in 45-minute one-on-one meetings with about six leaders and members in varied positions. At Coca-Cola Beverages Northeast, I visited major plants and logistics centers, in addition to conducting interviews over the course of two days. During the on-site inspections, I assess workplace conditions while reviewing the results of compliance and engagement surveys as well as the records of working-hours. If I identify any issues, I examine the root cause and try to make suggestions for improvement. In light of these opportunities to make on-site visits, I appreciate that external members of the Audit & Supervisory Board have access to sufficient information.

What seems most important is to raise investors’ expectations and confidence in Kirin Holdings’ growth strategies to gain trust in the management’s ability to execute them. It is important that the company not only articulates its long-term strategic visions, but also executes business plans for the Health Science Business to deliver tangible financial results meeting the recently announced milestones. In terms of investors relations, following the investor event last year, more leaders, including but not limited to Mr. Yoshimura, in the Health Science Business should engage in dialogues with the investment community to demonstrate the progress of PMI (post-merger integration) and/or synergy creation, for instance, and articulate their commitment and passion in real terms. Additionally, Kirin Holdings’ corporate value creation centers on CSV management, where the creation of economic and social values are two sides of the same coin. I believe this is a unique strength of the company that increases resilience and sustainability of its earnings ability in the long run. Kirin Holdings’ leadership in CSV management can be showcased more prominently to the investment community.