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Corporate Governance

Roundtable Discussion with Independent Directors

Fujitsu Group

Integrated Report

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Roundtable Discussion with Independent Directors-Governance That Anticipates Change and Drives Innovation

--Mr. Callon, it has been one year since you were appointed as a director. Have there been any discoveries or surprises that you did not anticipate when you were looking at Fujitsu as an investor?

Callon: Actually, there have been no major surprises. As an investor, I was impressed with Fujitsu's deep commitment to generating social value, as evidenced by the establishment of Fujitsu's new Purpose and reformulation of the Fujitsu Way. However, as an investor, I had to base my evaluations only on surface-level results that were visible to external investors, such as Fujitsu's business strategy and execution and operating results. As a director, I am able to see not only our results but also the processes that underpin these results, including the roles that independent directors play in corporate governance and our discussions on strategy and execution. This has bolstered my confidence in Fujitsu as an excellent company.

Atsushi Abe	Chiaki Mukai	Yoshiko Kojo	Scott Callon
Managing Partner,	Specially Appointed	Professor, Department of	Chief Executive Officer,
Senior Advisor,	Vice President,	International Politics,	Ichigo Asset Management, Ltd.
Sangyo Sosei Advisory Inc.	Tokyo University of Science	Aoyama Gakuin University School
		of International Politics,
		Economics and Communication

Global society faces major challenges and changes, including its response to COVID-19, the economic realignment toward the realization of a decarbonized society, and the rising chorus of voices calling for diversity and equality. Amid this, Fujitsu is working to create value through its strategy focused on the "For Growth" and "For Stability" business domains.

After the shareholders' meeting held on June 28, 2021, we asked

the just-reappointed independent directors about how Fujitsu perceives

the changes in society and how they are linked to Fujitsu's own transformation.

Abe: Scott has contacts with numerous companies both as an investor and as a business executive, and he has a very broad perspective. As a member of the capital markets, Scott's opinions are very persuasive, and the executive team pays close attention to them when discussing the expectations and concerns of the capital markets and investors regarding Fujitsu. Scott's recommendations have also come into play in the capital allocation policy announced in April 2021, which represents a step forward from that announced last year.

Callon: A common challenge for Japanese companies is that even when they seek to provide robust disclosure, the disclosed information may not be conveyed fully and clearly to those outside the company. Thus, for Fujitsu's own disclosure,

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it is better to make our policies and goals more explicit. I have suggested this to Mr. Tokita (CEO) and Mr. Isobe (CFO), and we have discussed it with Mr. Abe.

--There is growing demand for Board oversight of climate change and other sustainability initiatives. How is Fujitsu's Board of Directors responding to this new demand?

As a director, I am able to see not only our results but also the processes that underpin these results, including the roles that independent directors play in corporate governance

and our discussions on strategy and execution. This has bolstered

my confidence in Fujitsu as an excellent company.

Callon: As can be seen in all of Fujitsu's business activities being linked to Our Purpose, Fujitsu's corporate values have always been that it should contribute to society and benefit all stakeholders. Japan historically has had a philosophy of "working for mutual benefit," so there is no need to newly articulate the concept of "stakeholder capitalism" here.

Mukai: In the fields of medicine, aerospace development, and education, in which I specialize, we are always thinking about our roles and significance in society, so I think it's natural for us to respond to social issues and the needs of the people in the community. The heart of DX lies in providing solutions to social issues, and I think our Group is exactly the same. Without being sensitive to the sustainability of society, our Group itself will not be sustainable.

Kojo: In the international community, there is a shared understanding that climate change has a negative impact on many issues, including poverty, infectious diseases, and biodiversity.

The Fujitsu Group has a high level of awareness within its executive team, as illustrated by the reformulation of the Fujitsu Way with Our Purpose as its pillar. We are proactive in addressing climate change issues, and we have set non-financial indicators to disclose our own initiatives to external stakeholders.

Mukai: In terms of integrating sustainability and business, progress on non-financial indicators has already been incorporated into the performance evaluations of senior manage- ment, and the Compensation Committee (please see page 74), of which Dr. Kojo and I are members, has begun considering the incorporation of reflecting the achievement of non- financial indicators in the remuneration of executive directors. However, the specific methods need to be discussed more. For example, it will take some time to come to a conclusion on how to take into account the difference between the time horizon of sustainability and the time horizon of business; how to ensure objectivity and fairness in evaluations; and how to measure results that are not easily quantifiable.

--Mr. Abe, you said here a year ago that Fujitsu was preparing to further change the way Board meetings were managed in light of the 2020 Evaluation of the Effectiveness of the Board of Directors. Specifically, what changes have been made?

Abe: We have been promoting closer communication between the Board of Directors and the executive team. This is because open communication is essential for drawing rational conclusions.

The independent directors' meetings have long functioned as a forum for sharing information and fostering understanding of our business. Since 2020, we have also held more than a dozen "business overview briefings" a year. These are study sessions where we receive explanations of individual businesses from the executive team. We also hold "private sessions" by independent directors and independent Audit & Supervisory Board members to enhance communication and share their concerns and opinions. We are also increasing opportunities for direct communication, for example, by holding one-on-one sessions between the president and independent outside directors. Mr. Kenichiro Sasae was elected as an independent director at the shareholders' meeting held today. Even before his appointment we recognized the need to have a system to shed light on what was not understood clearly for all of us, not just newly appointed Board members.

Mukai: The increase in communication between the Board of Directors and the executive team, and the ability to share the concerns of both parties, are really thanks to the contribution of Mr. Abe, the chairman of the Board of Directors, who acts as a link in the communication with the senior executive team.

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Kojo: We now have much better communication channels to convey to the executive team what information we need and to receive feedback from the team. This is very important in terms of not leaving opinions expressed unacted on and deepening discussions at Board meetings. The management of the Board of Directors has changed more and more over the past year as a result of the COVID-19 pandemic, and I feel that each time it has done so, its functions have been strengthened.

Abe: As was the case with the COVID-19 pandemic, unexpected situations occur in corporate management. What is particularly important for the executive team to take agile action in such situations is to have a common understanding of the extent to which the Board of Directors should be involved in decision making and the extent to which the executive team should involve the Board of Directors. I believe that the foundation for such common understanding is regular communication.

--What will be required in the future to further improve the effectiveness of governance, especially in terms of the diversity of the Board?

Kojo: The level of knowledge of the independent directors has definitely deepened through learning at the "business overview briefings" and "private sessions" that Mr. Abe alluded to earlier. Even so, it is clear that there are many technical topics that cannot be understood immediately after listening to a single explanation. Moreover, our approximately 130,000 employees have wide-ranging understanding of technical topics across the Group's broad business scope.

Mukai: As for my personal study, I have access to the materials of the management meetings on tablet computers provided to independent directors by the Company. In addition to reading a considerable amount of material, I ask questions to young employees who are members of the Independent Directors & Auditors Council Support Office when I don't understand something, as well as doing my own research. That said, there is much more than one person can comprehend with their own range of knowledge and understanding. That's why we need members with diverse expertise and experience.

Callon: A non-diverse board is like a soccer team consisting entirely of goalkeepers. For the Board to carry out its monitoring function and discuss and articulate Fujitsu's long-term strategy, it needs access to a diversity of knowledge and skills. This should include perspectives and advice based on industry knowledge and insights generated from Fujitsu peer benchmarking.

Abe: It is difficult to say whether expertise in computer science or IT services qualifies a person to be a member of the Board of Directors, because it is not as simple as that. It is important for the Board of Directors to have both a big-picture view and expertise as a group, and it is meaningless to satisfy only the formal requirements. This issue is also related to the function of the Board of Directors: whether it should be a so-called"management-type" board that discusses the substance of the business, or a "monitoring-type" board that sets management policies and subsequently focuses on confirming progress.

Callon: One thing I think we need is independent directors who are able to discuss technology and competition in the IT services industry on an equal footing with the management team. I started my career in computers, so I have a little bit of a back- ground; Dr. Mukai is a scientist; and Mr. Abe has a strong understanding of the IT industry. However, the IT services industry is changing dramatically, and the range of technologies that we need to understand in order to generate insights into Fujitsu's future is also very broad. Even with study, it is difficult to generate a level of understanding that supports in-depth discussions.

Considering that the heart of DX is to provide solutions to social issues, our Group's own sustainability is not possible without being sensitive to the sustainability of society.

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		investments are businesses with high success probabilities
What is important for the executive team to take flexible	and leverage Fujitsu's unique strengths. I support Fujitsu's
measures is to have a common understanding of the extent	Purpose-driven ambition to transform itself and strengthen
to which the Board of Directors will be involved in decision making	its ability to solve important social problems, along with the
dedication of all employees globally to grow long-term value
and the extent to which the executive team will involve
for all stakeholders.
the Board of Directors. I believe that the foundation for such
common understanding is regular communication.	Abe: With regard to internal reforms, under the leadership of
		CEO Tokita, Fujitsu's own DX promotion initiative, "Fujitra," has
		changed mindsets in our Group and is bringing about real
Mukai: In terms of diversity, I think it would be excellent if we	stakeholders. Personally, I am looking forward to the expan-	changes. In terms of business, we have taken the necessary
could include the voices of the younger generation, regardless	sion of business that utilizes the data within our Group of	steps, including the establishment of a new company. From
of whether or not they directly participate in Board meetings.	130,000 employees, and I myself need to learn more in order	now on, we will monitor the results of our efforts to strength-
Looking further into the future than the medium to long term	to consider the possibilities.	en our problem-solving capabilities and support the execu-
ultimately comes down to the question of how young people		tive team in achieving our goals by urging them on.
will change society and what they want to change.	Callon: In the past, hardware made up a large part of our	As chairman of the Board of Directors, I will continue to
	business and required significant, ongoing capital investment.	focus on eliciting the opinions of each director and communi-
--Finally, what are your opinions and expectations regard-	Today, however, we need to make decisions-essentially for	cating with the executive team to reach conclusions through
ing the next steps for value creation at Fujitsu, and what are	the first time ever-on how to allocate the cash from our	open discussion. I will conduct meetings with a sense of
your own aspirations?	large cash flow generation capability. Since this cash is hard-	urgency, as if we are being monitored by a third party, to
	earned and valuable, we need to determine whether potential	ensure that we are having rational discussions.
Kojo: The future of the COVID-19 situation remains uncertain,
and there is no foreseeable end to the crises that threaten the
sustainability of society in the future. Under such circum-

stances, I would like to ask what kind of value our Group can
provide to society, and I hope to continue to enhance my	The future of the COVID-19 situation remains uncertain,
skills in doing so.
and there is no foreseeable end to the crises that
Mukai: This is the third year since our Group turned its direc-	threaten the sustainability of society in the future.
Under such circumstances, I would like to ask
tion toward DX, so we need to be able to show tangible
what kind of value our Group can provide to society.
results from our efforts to our customers and other external

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Message from the New Independent Director

Fujitsu Group

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Fujitsu is one of Japan's leading companies in the field of advanced technology, including services related to information technology and the development of supercomputers. The further development and success of its business is important from the perspective of progress and benefits not only for Japan but for all of humanity.

I believe that Fujitsu's Purpose-"to make the world more sustainable by building trust in society through innovation"- aligns with the needs of our times. Fujitsu has also defined "Aspiration," supported by diversity and curiosity; "Trust," or acting with ethics and transparency; and "Empathy," listening to society and various stakeholders including shareholders, as important values. This is a thoughtful stance not only in the business world but also in considering the ideal form of nations and the international community as a whole.

I am delighted to be able to participate as an independent director in a company that advocates such values and prin- ciples. I have served as an independent director at other companies as well, and I feel that corporate governance reforms in Japan in recent years are still underway in many

companies, and that such reforms vary depending on the characteristics of each company. I hope that Fujitsu will continue to pursue new challenges and innovation and to evolve its business under its unique but internationally competitive governance, while maintaining its admirable culture. I see my role as an independent director to support this endeavor from a wider perspective, and I hope that my experience in the field of diplomacy will be useful here.

The Japan Institute of International Affairs, where I serve as president, was presented with the "2020 Think Tank of the Year-Top Think Tank in the World" award, and its findings may be of some help. Competition for technology among companies is intensifying around the world, and nations and groups of nations are looking to gain the ascendancy. In an age when those who control technology control the rules and the order of the surrounding data and cyber space, I would like to support Fujitsu in making the best choices between various alliances and partnerships and help navigate between liberalized and tightly regulated markets.

Kenichiro Sasae

President

The Japan Institute of International Affairs (JIIA)