Discussion between Outside Directors

Corporate Governance Encouraging Appropriate Risk-Taking and Swift Action to Enhance Management and Improve Corporate Value

• [1] Takuya Nakata Chairman of the Board of Directors
• [2] Mikio Fujitsuka Independent Director (Resigned on June 20, 2025)
• [3] Paul Candland Independent Director
• [4] Hiromichi Shinohara Independent Director
• [5] Naoko Yoshizawa Independent Director
• [6] Naho Ebata Independent Director

Strategic Challenges of Achieving Speed and Innovation

Nakata: Could you please tell me about what issues you saw with regard to Yamaha’s management when we started the discussion process for formulating the new medium-term management plan?

Candland: The biggest issue I saw was Yamaha’s ability to swiftly innovate its products and services and to tie this innovation to future progress in response to rapidly changing customer needs and technological advancements.

Fujitsuka: I also saw medium- to long-term issues in relation to speed and innovation. Sales growth began to struggle two or three years ago, prompting the executive team to explore new outlets for growth based on new themes and M&A activities. However, these efforts have yet to produce clear results. As a member of the Audit Committee, I speak with the executive team on a regular basis. During such conversations, I could not help but sense the need to expedite the making and implementation of decisions.

Yoshizawa: Yamaha has a competitive brand, a diverse portfolio of sound- and music-related technologies fostered over its more than 135-year history, and the support of an employee base that is passionate about sound and music. However, the assets it has amassed over this long history have culminated in conservative trends. I think there are times in which Yamaha needs to be swifter with its inputs and its actions.

Shinohara: Accelerating innovation may sometimes require Yamaha to deviate from its prior emphasis on creating 100 out of 100 products. It is, of course, important to apply the processes that have been developing hardware such as musical instruments and audio equipment. However, there are also cases in which it might be better to adopt an agile approach of releasing products and services that are 70% or 80% finished into the market to gauge the response and refine those offerings based on user feedback. With this regard, Yamaha Music Innovations, a business development base established in Silicon Valley in April 2024, was converted into a corporate entity in January 2025. This move was meant to facilitate the acceleration of open innovation on a global scale. Another move to this end was the establishment of a corporate venture capital fund to engage in collaborative ventures with various start-ups. I think that such changes in course by management are something we should applaud.

Nakata: As Yamaha advances various activities to get back to a growth track, the executive team has become keenly aware of the need to ramp up the speed of management.

Fujitsuka: The discussion process for formulating the new medium-term management plan really picked up in April 2024, right when Atsushi Yamaura assumed the position of president. The recent major decisions we have seen, such as the change in organization structure and the reorganization of piano production systems to accommodate market changes, seem emblematic of management’s strong commitment to addressing the issue of speed that has been mentioned. I believe it is incredibly meaningful that the new medium-term management plan was founded on such decisions.

Candland: During the period of the previous medium-term management plan, Yamaha had to respond to some really abrupt and massive changes, like the COVID-19 pandemic, the parts shortages that resulted from the ensuing supply chain disruptions, and the contraction of the Chinese market. Even amid this adversity, we were able to engage in swift and open discussion together with newly appointed President Yamaura, with his fresh perspective. I have a lot of praise for this.

Stakeholder Understanding that Can Be Gained by Presenting Clear Strategies

Nakata: Discussions at meeting of the Board of Directors have given us a clear understanding of the strategic themes, such as speed, innovation, and growth. While looking at these themes, I want to reflect on the matters discussed in the intensive examinations at Board meetings of the plan measures formulated by the executive team.

Ebata: Over the years, Yamaha has been forced to lower its performance forecasts midway through a fiscal year on numerous occasions. Such occurrences have made me concerned for the possibility of damage to the trust of the market and of investors. Accordingly, I have been emphasizing the importance of management expressing a strong commitment to its numerical targets in recovering lost trust.

Shinohara: When it comes to growth, I have pointed out the need to pursue bottom-line growth, as opposed to focusing purely on top-line growth. In the pursuit of bottom-line growth, it is important not to spread resources too thin by trying to do everything at once. Rather, a focused approach should be adopted based on an understanding of which fields require strategic attention and which do not.

Ebata: Going forward, I believe it will be more important than ever to really think about where capital and people should be allocated and in what fields a more aggressive approach may be required versus what fields cementing foundations should be the priority. The diverse lineup of product and services Yamaha offers as a comprehensive musical instruments manufacturer grant it the strength to address various needs in education and other fields. At the same time, however, this reality has led the Company to disperse its investments across a wide variety of fields.

Shinohara: I told the executive team that it needed to present, in the new medium-term management plan, concrete examples of how it would be strategically focusing investments and building its portfolio, rather than leaving everything in vague general terms. The same goes for the new value Yamaha will provide through music, and we discussed exactly what constituted that value in concrete terms.

Yoshizawa: I personally encouraged management to put forth convincing targets based on numbers in the long-term vision laid out in the new medium-term management plan. One option for setting these targets I proposed was to define specific key performance indicators. In addition, a lot of points have been brought up at Board meetings about the plan’s key strategy of setting sustainability as a source of value, which was also one of the key strategies of the prior medium-term management plan. For example, many directors have questioned whether certain targets were appropriate and whether they were convincing to internal and external stakeholders.

Nakata: Being told of the importance in gaining stakeholder understanding of how we communicate our strategies really changed how the executive team thought about things. I believe that everyone really paid attention to whether or not our explanations would be convincing to employees as well as to shareholders and other investors when formulating the plan.

System Revisions to Encourage Risk-Taking and Ambition

Nakata: We often receive questions from shareholders and other investors about whether or not our plan–do–check–act cycle is functioning effectively. Given this concern, what points do you think we should focus on when monitoring the implementation of the new medium-term management plan?

Candland: If Yamaha were to work toward greater transparency, making all information readily available, it would contribute to greater trust. It is also important for people inside the Company to have open access to information. This contributes to faster decision-making and execution.

Yoshizawa: Whether at meetings of the Audit Committee or of the Board of Directors, I don’t want to limit myself to just pointing out issues. Rather, I want to be even more aggressive in encouraging the executive team to take swift action to tackle these issues and provide feedback on these matters.

Ebata: I intend to focus on whether frontline organizations are being quick in detecting and responding to signs of change. Society is changing at a breakneck pace, and Yamaha is certain to fall behind if it cannot achieve this speed. From a medium- to long-term perspective, avoiding taking risks due to excessive risk aversion is actually a risk in and of itself. This is why I want to encourage management to take risks as appropriate. I also hope to support the Company in fostering an environment in which it is easy for those on the front lines to speak up when they see signs of change.

Candland: The 2025 revision to the officer compensation system was one way that we sought to encourage risk-taking and ambition. In the past, the officer compensation system only contained provisions for reducing compensation should the Company fail to meet its targets. This could also be taken to mean that there were no incentives to exceed said targets. That is why we expanded the portion of compensation tied to results under the new system. We should not merely be satisfied with accomplishing our targets. Rather, we should seek to greatly surpass these targets. This type of commitment is important for employees and managers alike, and even more important for members of the executive team.

Nakata: I have always believed that it is important to be vocal and assertive in voicing your opinion, contrary to what is commonly believed in Japan. I really appreciate all of your input, and I hope that management will use this input to push Yamaha forward, even if it sometimes means butting heads with President Yamaura.

Enhancement of Management Using Diverse Opinions

Nakata: Lastly, could you please share what you see as your role as directors?

Shinohara: Yamaha is currently facing the challenge of getting back to a growth track. In this challenging time, it is sometimes necessary to offer some more scathing or aggressive comments. Yamaha’s management is already incredibly thoughtful, but I want to do what I can to help them achieve an even higher level of thoughtfulness. A multifaceted approach is required when implementing reforms. Fortunately, Yamaha has an unmatched strength in terms of its position as a comprehensive musical instruments and audio equipment manufacturer. I hope to help Yamaha maintain this strength while further strengthening the Company.

Ebata: Yamaha is looking to increase the representation of women in management positions, but the ratio of female managers has yet to reach 20%. As a woman, a director, and—not to mention—someone on the younger side, I believe that it is imperative for the Board of Directors to increase its diversity.
Accordingly, my role goes beyond just using my expertise to perform my duties as a member of the Audit Committee; I also want to contribute to the creation of new value through discussions with management based on differing sets of beliefs as well as changing consumer tastes, which have been undergoing significant change as of late.

Candland: I have a unique perspective as someone who is not Japanese. Based on this perspective, I feel it is my duty to be straightforward in pointing out things that others might be hesitant to say.
Also, with the insight gained from my experience in corporate management, I believe that I have a role to play in helping set priorities, determining what fields Yamaha should focus on pursuing growth, and facilitating the adoption of new technologies.

Yoshizawa: I see my role as being to constantly encourage management to be mindful of change, to detect signs of change, and to respond with quick action. As members of the Audit Committee, we join in on audits, which gives us the opportunity to see how the way things are perceived might differ between management and the front lines. We therefore have a responsibility to communicate the disparities we notice during frontline audits to management and to prod them to respond with prompt action.

Fujitsuka: First and foremost, the job of directors is to help Yamaha achieve its financial targets. At the same time, directors must support management in monitoring the progress of the new medium-term management plan in making any course corrections that might be warranted by emergent issues, and in ensuring that the frontline organizations are able to accomplish their goals. I may be resigning from my position in June 2025, but I still plan to keep my eyes on Yamaha even after I depart.

Nakata: Yamaha is lucky to have a Board membered by individuals with such diverse backgrounds and expertise. I am once again reminded of how important it is that we incorporate your advice and guidance throughout management. I also plan to be diligent in checking to ensure that the executive team offers feedback with regard to the matters discussed at Board meetings to drive the further enhancement of management.