Receipt of the Investigation Report of the Special Investigation Committee Regarding Suspected Improper Receipt of Compensation by the Company's Managing Director and the Company's Future Response
Sanrio Company,Ltd. and its consolidated subsidiary Sanrio Inc. The primary recipient was the Company's managing director.
Sanrio Inc., the Los Angeles area, New York University's doctoral program, and a residence in Los Angeles
Individual level: Control procedures were bypassed based on the subjective justification that the COLA program did not constitute compensation and through the sharing of that interpretation. Systems level: Rules governing compensation controls and information sharing between the parent company and its subsidiaries were unclear. Organizational level: The management executives of the U.S. subsidiary were prone to making discretionary decisions, and opportunities for corrective action were limited.
Economic benefits of US$1,682,018 (¥252,302,700) provided to the director. These amounts have already been recorded as expenses by Sanrio Inc. in the respective fiscal years. Investigation expenses and other costs will be incurred in the fiscal year ending March 2027, but their impact is expected to be minor.
The benefits have already been recorded as expenses by Sanrio Inc. in the respective fiscal years. Investigation expenses and other costs are expected to be recorded in the fiscal year ending March 2027.
The impact of investigation expenses and other costs in the fiscal year ending March 2027 is expected to be minor. The financial results for the fiscal year ended March 2026 are expected to be announced in late June 2026.
Company response
A Special Investigation Committee established on 1 May 2026. The chair is Morikawa Kiyo (森川紀代), and the members are Yoshida Takeshi (吉田武史) and Sato Yasunori (佐藤保則). The committee comprises an outside director, an attorney and a certified public accountant.
Clarify the roles of the Company's directors and ensure effectiveness through appropriate staffing, To place a degree of restraint on the concentration of authority in specific individuals and situations in which internal controls may be bypassed, focus the Company's directors' roles on management oversight and end their concurrent positions involving subsidiary execution responsibilities, Separate the roles of overseeing execution and carrying out execution itself, establish a framework in which they are handled by different individuals, and ensure appropriate staffing, Review the structure and role of the Nomination and Compensation Advisory Committee, Clarify controls over compensation paid by overseas affiliated subsidiaries to the Company's directors, Define the total amount of all monetary consideration that the Company's directors may receive through the Company and its subsidiaries as compensation, As a general rule, prohibit payments exceeding the total amount, and require prior approval by the Company's Board of Directors or the Nomination and Compensation Advisory Committee in exceptional cases where such payments are necessary, Add a reporting line from the CFOs of overseas affiliated subsidiaries to the Company, Establish the Group CxO structure at an early stage and add dotted reporting lines from each function of overseas affiliated subsidiaries to the corresponding Company function, Have subsidiary CFOs report on a dotted-line basis to the Company's CFO function, thereby strengthening subsidiary management, checks and controls, Strengthen headquarters' management oversight of subsidiaries, Review the Company's Regulations for the Management of Overseas Affiliated Companies and Regulations on Decision-Making for Overseas Affiliated Companies, Expand the scope of matters defined as important matters, including expenses and investments above specified amounts and the hiring, transfer, dismissal and evaluation of personnel in important positions, and have Company meetings deliberate and manage reporting on such matters, Require the Company's prior approval for payments of subsidiary executive compensation above specified amounts or on an exceptional basis, and require regular reporting on all executive compensation payments, Tighten decision-making rules at overseas affiliated subsidiaries, Review monetary thresholds, authorized decision-makers, decision-making bodies and reporting destinations, and require execution of annual business plans, proper documentation and regular reporting to the Company, Strengthen the operation and enforcement of the various rules described above, Require overseas executive coordination meetings to receive thorough reports from subsidiaries on matters reported to or resolved by subsidiary boards of directors, minutes and other relevant materials, Strengthen the information management infrastructure for overseas executive coordination meetings, including infrastructure that supports the collection and recording of information from subsidiaries and centralized management across subsidiaries, Strengthen checks and balances within overseas affiliated subsidiaries, Review the composition of subsidiary boards of directors and ensure the involvement of individuals with a degree of independence from local management, Require formal approval by the board of directors for executive compensation, Establish a compensation committee and clarify its authority and procedures, Ensure thorough documentation of minutes, approval records, the basis for allocations and other matters, and maintain auditability, Clearly separate the functions of proposal, financial verification, independent review and final approval, exclude interested parties from the process, and eliminate reciprocal decision-making structures, Strengthen education and monitoring for the Company's officers, Provide systematic training on the principles that compensation determined by the Company is total compensation including the subsidiary portion, compensation must be managed on a consolidated basis, officers owe a duty of care and a duty to report, and informal approvals and practices are not permitted, Establish functions responsible for confirming the legality of compensation and the appropriateness of approval processes, Based on the Three Lines Model, ensure the effectiveness of day-to-day monitoring through self-assessments by the first line and reviews by the second line, Strengthen the global whistleblowing system and ensure anonymity, accessibility and whistleblower protection, as well as thorough awareness of the system, Improve the quality of the internal audit framework, Conduct regular audits focused on compensation governance and reporting and approval processes between the parent company and its subsidiaries, Introduce risk-based audits covering executive compensation and other benefits of high importance, Ensure thorough reporting of audit results to the Board of Directors and strengthen follow-up on corrective actions for identified matters
At the Board of Directors meeting held on 29 May 2026, the Company accepted the managing director's resignation offer, and the resignation took effect on the same date. The Representative Director and President will repay 30% of monthly compensation for 3 months, and the executive vice president will repay 10% of monthly compensation for 1 month. The Company's response concerning a former officer of the U.S. subsidiary is under consideration.
Once the calculation and review of any additional compensation amounts to be disclosed have been completed, the Company will promptly file amended reports for prior years' annual securities reports. The preventive measures will be implemented sequentially. The financial results for the fiscal year ended March 2026 will be announced in late June 2026, subject to confirmation of the audit status.
The Company will promptly announce the formal announcement date for its financial results once determined. The amended reports will be filed promptly once the calculation and review have been completed.
| Item | Details |
|---|---|
| Event name | Receipt of the Investigation Report of the Special Investigation Committee Regarding Suspected Improper Receipt of Compensation by the Company's Managing Director and the Company's Future Response |
| Date of occurrence | Economic benefits were received from 2022 through 2026. COLA was received from 2023 through 2026, tuition from 2022 through 2026, and residential rental expenses from 2023 through 2026. |
| Date recognized / date notice received | In February 2026, the Company received an anonymous report from an officer or employee of the U.S. subsidiary. On 29 May 2026, the Company received the investigation report of the Special Investigation Committee. |
| Subject Entity | Sanrio Company,Ltd. and its consolidated subsidiary Sanrio Inc. The primary recipient was the Company's managing director. |
| Target Locations / Products | Sanrio Inc., the Los Angeles area, New York University's doctoral program, and a residence in Los Angeles |
| Cause | Individual level: Control procedures were bypassed based on the subjective justification that the COLA program did not constitute compensation and through the sharing of that interpretation. Systems level: Rules governing compensation controls and information sharing between the parent company and its subsidiaries were unclear. Organizational level: The management executives of the U.S. subsidiary were prone to making discretionary decisions, and opportunities for corrective action were limited. |
| Amount of Impact on Business Performance | Economic benefits of US$1,682,018 (¥252,302,700) provided to the director. These amounts have already been recorded as expenses by Sanrio Inc. in the respective fiscal years. Investigation expenses and other costs will be incurred in the fiscal year ending March 2027, but their impact is expected to be minor. |
| Accounting period in which recognized | The benefits have already been recorded as expenses by Sanrio Inc. in the respective fiscal years. Investigation expenses and other costs are expected to be recorded in the fiscal year ending March 2027. |
| Impact on Earnings Forecast | The impact of investigation expenses and other costs in the fiscal year ending March 2027 is expected to be minor. The financial results for the fiscal year ended March 2026 are expected to be announced in late June 2026. |
| Investigation structure | A Special Investigation Committee established on 1 May 2026. The chair is Morikawa Kiyo (森川紀代), and the members are Yoshida Takeshi (吉田武史) and Sato Yasunori (佐藤保則). The committee comprises an outside director, an attorney and a certified public accountant. |
| Measures to prevent recurrence | Clarify the roles of the Company's directors and ensure effectiveness through appropriate staffing, To place a degree of restraint on the concentration of authority in specific individuals and situations in which internal controls may be bypassed, focus the Company's directors' roles on management oversight and end their concurrent positions involving subsidiary execution responsibilities, Separate the roles of overseeing execution and carrying out execution itself, establish a framework in which they are handled by different individuals, and ensure appropriate staffing, Review the structure and role of the Nomination and Compensation Advisory Committee, Clarify controls over compensation paid by overseas affiliated subsidiaries to the Company's directors, Define the total amount of all monetary consideration that the Company's directors may receive through the Company and its subsidiaries as compensation, As a general rule, prohibit payments exceeding the total amount, and require prior approval by the Company's Board of Directors or the Nomination and Compensation Advisory Committee in exceptional cases where such payments are necessary, Add a reporting line from the CFOs of overseas affiliated subsidiaries to the Company, Establish the Group CxO structure at an early stage and add dotted reporting lines from each function of overseas affiliated subsidiaries to the corresponding Company function, Have subsidiary CFOs report on a dotted-line basis to the Company's CFO function, thereby strengthening subsidiary management, checks and controls, Strengthen headquarters' management oversight of subsidiaries, Review the Company's Regulations for the Management of Overseas Affiliated Companies and Regulations on Decision-Making for Overseas Affiliated Companies, Expand the scope of matters defined as important matters, including expenses and investments above specified amounts and the hiring, transfer, dismissal and evaluation of personnel in important positions, and have Company meetings deliberate and manage reporting on such matters, Require the Company's prior approval for payments of subsidiary executive compensation above specified amounts or on an exceptional basis, and require regular reporting on all executive compensation payments, Tighten decision-making rules at overseas affiliated subsidiaries, Review monetary thresholds, authorized decision-makers, decision-making bodies and reporting destinations, and require execution of annual business plans, proper documentation and regular reporting to the Company, Strengthen the operation and enforcement of the various rules described above, Require overseas executive coordination meetings to receive thorough reports from subsidiaries on matters reported to or resolved by subsidiary boards of directors, minutes and other relevant materials, Strengthen the information management infrastructure for overseas executive coordination meetings, including infrastructure that supports the collection and recording of information from subsidiaries and centralized management across subsidiaries, Strengthen checks and balances within overseas affiliated subsidiaries, Review the composition of subsidiary boards of directors and ensure the involvement of individuals with a degree of independence from local management, Require formal approval by the board of directors for executive compensation, Establish a compensation committee and clarify its authority and procedures, Ensure thorough documentation of minutes, approval records, the basis for allocations and other matters, and maintain auditability, Clearly separate the functions of proposal, financial verification, independent review and final approval, exclude interested parties from the process, and eliminate reciprocal decision-making structures, Strengthen education and monitoring for the Company's officers, Provide systematic training on the principles that compensation determined by the Company is total compensation including the subsidiary portion, compensation must be managed on a consolidated basis, officers owe a duty of care and a duty to report, and informal approvals and practices are not permitted, Establish functions responsible for confirming the legality of compensation and the appropriateness of approval processes, Based on the Three Lines Model, ensure the effectiveness of day-to-day monitoring through self-assessments by the first line and reviews by the second line, Strengthen the global whistleblowing system and ensure anonymity, accessibility and whistleblower protection, as well as thorough awareness of the system, Improve the quality of the internal audit framework, Conduct regular audits focused on compensation governance and reporting and approval processes between the parent company and its subsidiaries, Introduce risk-based audits covering executive compensation and other benefits of high importance, Ensure thorough reporting of audit results to the Board of Directors and strengthen follow-up on corrective actions for identified matters |
| Directors' and officers' liability | At the Board of Directors meeting held on 29 May 2026, the Company accepted the managing director's resignation offer, and the resignation took effect on the same date. The Representative Director and President will repay 30% of monthly compensation for 3 months, and the executive vice president will repay 10% of monthly compensation for 1 month. The Company's response concerning a former officer of the U.S. subsidiary is under consideration. |
| Outlook | Once the calculation and review of any additional compensation amounts to be disclosed have been completed, the Company will promptly file amended reports for prior years' annual securities reports. The preventive measures will be implemented sequentially. The financial results for the fiscal year ended March 2026 will be announced in late June 2026, subject to confirmation of the audit status. |
| Planned follow-up disclosure | The Company will promptly announce the formal announcement date for its financial results once determined. The amended reports will be filed promptly once the calculation and review have been completed. |
Items this document does not state (11)
These are items the company does not state in this document. We do not leave them blank, nor fill them in from other sources or by inference.
The reasons the company gives
The company's own explanation, not something inferred from the numbers.At the individual level, control procedures were bypassed based on the subjective justification that COLA did not constitute compensation. At the systems level, rules governing compensation controls and information sharing between the parent company and its subsidiaries were unclear. At the organizational level, the management executives of the U.S. subsidiary were prone to making discretionary decisions, while opportunities for corrective action were limited.