Corporate Governance

Basic Approach to Corporate Governance

Since the company’s founding, Nissha continues to execute strategies that accurately address changes in the business environment under the leadership of a strong management. We believe that fortifying corporate governance under this strong leadership promotes swift, bold decision-making and ensures transparency and fairness in our business activities. We recognize corporate governance as a top management priority and strive to maintain and improve our structure toward realizing sustainable growth and enhancing our corporate value over the medium to long term.
In an effort to clarify the Nissha Group’s basic approach to and policy for implementing corporate governance, in October 2015 we established a Corporate Governance Policy.

Overview of Corporate Governance

We have established a corporate governance structure as shown in the figure below.

Corporate Governance Structure

Nissha’s Management and Business Execution System

The Company's Board of Directors makes major business judgments and oversees the execution of the duties of the Directors, and as a company with an Audit and Supervisory Board, will strive to maintain and improve the oversight and checking functions by Audit and Supervisory Board Members and an Audit and Supervisory Board which are independent from the Board of Directors.
The Company adopts a corporate officer system in an effort to clarify the powers and authority in the speedy decision making and the implementation of decisions, under which the Board of Directors will be in charge of the formulation of strategies and business oversight, and the Corporate Officers will be in charge of the execution of business. In addition, the Company establishes a Nomination and Remuneration Committee as an advisory panel for the Board of Directors.
The President and CEO organize three meetings, namely the Management Meetings, Monthly Business Review (MBR), and Investment Committee, in order to implement appropriate and effective business execution. The Management Meetings include Inside Directors as core members and deliberate on matters relating to the direction of important managerial issues within the scope of the President’s authority. The MBR is a meeting to determine the progress of business strategies based on KPI (Key Performance Indicators) and what actions to take over the short term. The purpose of the MBR is to oversee business execution by the Corporate Officers and to quickly respond to changes in the business environment. The Investment Committee reviews particularly important investment matters prior to submitting to the Board of Directors for approval.
The Board of Directors has formulated the Policy for Internal Control and supervises establishment and operation of the internal control system based on this Policy to enhance management oversight functions and ensure effective business execution.
We have in place a CSR Committee and a Disclosure Control Committee, both chaired by the President, as organizations for demonstrating leadership in dealing with risks to legal and appropriate business execution. Internal Audit, under the direct control of the President, conducts audits to ensure that activities of the Nissha Group including these committees are carried out appropriately and efficiently.

Directors and the Board of Directors

Our Board of Directors, currently consisting of eight members, makes important management decisions and receives reporting on and oversees the execution of business activities.
The Board of Directors convenes for regular meetings once a month and for extraordinary meetings as needed. The meetings are chaired by the President and kept dynamic through brisk, substantive discussions.
To ensure that the Board of Directors fulfills its role of making important management decisions and overseeing business execution by directors and corporate officers, we nominate directors taking into consideration diversity and balance between the knowledge, experience, and skills of the individual. Of our eight directors, four are independent directors with one being a woman (independent director account for 50% of the board, and women 12.5%). These independent directors draw on their insight into the fields of corporate management, corporate governance, management strategy, business strategy, IT, and macroeconomics to provide accurate advice and opinions, contributing to the enhancement of management transparency as well as of the board’s oversight functions. We consider that the four Independent Directors satisfy Standards for Independence Standards for Independent Directors and Audit and Supervisory Board Members prescribed by us and standards for independence of outside officers stipulated in the “Guidelines concerning Listed Company Compliance, etc.” by the Tokyo Stock Exchange, hence they have sufficient independence and there is no risk of conflict of interest with general shareholders. Therefore, we have designated them as Independent Officers.
To respond flexibly to changes in the management environment and to promote the clarification of management responsibility for each fiscal year, the term of office of a Director has been set at one year.
In April 2016, we launched efforts to evaluate the effectiveness of our Board of Directors. A questionnaire covering board meetings held in FY2016 was distributed to all directors and audit and supervisory board members. The Board of Directors then analyzed and assessed the results, identified issues, and set out to address these issues toward further improving the effectiveness of the board of directors.
We have established a policy to check for transactions between the company and interested parties such as directors, audit and supervisory board members, corporate officers, and their relatives. In the event any material fact exists, the Board of Directors duly deliberate on the justifiability of the transaction and resolve the matter. The company is required to obtain approval from the Board of Directors when engaging in transactions with a director that present a conflict of interest as prescribed by laws and regulations.

Nomination and Remuneration Committee

We have in place a Nomination and Remuneration Committee as an advisory panel for the Board of Directors to ensure objectivity and fairness in the nomination of directors and audit and supervisory board members, and in determining remuneration of directors. The chairman and at least half of the members are selected from independent directors. With consultation from the Board of Directors, the committee deliberates on and provides a response regarding 1) criteria for nominating directors and audit and supervisory board members as well as policies for determining remuneration of directors, and 2) proposals for director and audit and supervisory board member candidates as well as remuneration of directors.

Audit and Supervisory Board Members and the Audit and Supervisory Board

Our Audit and Supervisory Board, currently consisting of four members, determines the duties of Audit and Supervisory Board Members, the audit structure, and the audit standards that describe the evaluation basis for audits and the action guidelines. In accordance with these, the Board develops auditing policies and Nissha Group's Corporate Governance auditing plans. Complying with these, each member attends the meetings of the Board of Directors and other important meetings, reviews approval documents and other important documents, performs visiting audits at major offices and affiliated companies, and conducts audits by exchanging opinions regularly with the President and CEO, Directors, and General Managers. The Board holds regular meetings with the Accounting Auditor, Internal Audit, and corporate division including the Corporate Finance and Corporate Legal Affairs to closely cooperate with each other and increase the audits’ efficiency. In addition, the Board regularly holds the Group Meeting of Audit and Supervisory Board Members, consisting of full-time Audit and Supervisory Board Members of the Company and Audit and Supervisory Board Members of its affiliated companies, in order to strengthen and enhance audits throughout the whole Nissha Group.
We nominate Audit and Supervisory Board Members taking into consideration the individual’s knowledge of financial matters, accounting, and legal affairs.
Of four members, two are full-time Audit and Supervisory Board Members, and the others are Independent Audit and Supervisory Board Members. We aim to maintain and improve the corporate governance structure by appointing certified public accountants or attorneys as Independent Audit and Supervisory Board Members and utilizing their highly professional knowledge for audits. We consider that the two Independent Audit and Supervisory Board Members satisfy Standards for Independence Standards for Independent Directors, and Audit and Supervisory Board Members prescribed by us and standards for independence of outside officers stipulated in the “Guidelines concerning Listed Company Compliance, etc.” by the Tokyo Stock Exchange, hence and they have sufficient independence and there is no risk of conflict of interest with general shareholders. Therefore, we have designated them as Independent Officers.

Officers Remuneration

Remuneration for the Officers is determined within the upper limit of total remuneration approved at the General Meeting of Shareholders (not exceeding \430 million in total for the Directors and \60 million in total for the Audit and Supervisory Board Members per year).

Remuneration of Directors and Audit and Supervisory Board Members

Remuneration of directors consists of basic compensation and bonuses determined by the Board of Directors. Basic compensation is set according to the individual’s position and the significance of his or her role, and reflects evaluation of the individual’s degree of contribution and performance. Bonuses are based on consolidated business results (net sales, operating margin, performance of the business for which the individual is responsible, etc.) in the relevant fiscal year, and reflect evaluation of the level of target achievement. Remuneration of independent directors consists of basic compensation only, based on factors such as the individual’s career. Remuneration linked to business results is not provided, as the role of independent directors is separated from business execution.
In addition to this, we are set to introduce a stock compensation plan called the Board Benefit Trust (BBT) for directors excluding independent directors. The resolution was approved at the 97th Ordinary General Meeting of Shareholders, held on June 17, 2016.
The BBT is a system linked to business results in which Nissha shares are acquired through a trust using funds contributed by Nissha, and these shares are paid to directors through the trust in accordance with a Policy on Directors’ Stock Compensation established by the Board of Directors. By further clarifying the link between directors’ compensation and the value of the company’s shares, and having our directors experience together with our shareholders not only the benefits of a rise but also the risks of a decline in share prices, the system aims to increase awareness in directors of the importance of improving business results and enhancing the Nissha corporate value over the medium to long term. The system starts in September 2016.
Policies regarding the compensation plan above are determined by the Board of Directors in consultation with the Nomination and Remuneration Committee, in which the chairman and at least half of the members are selected from independent directors and which serves as an advisory panel for the Board of Directors to ensure objectivity and fairness.

Remuneration for Audit and Supervisory Board Members is determined through discussions among Audit and Supervisory Board Members within the upper limit of total remuneration approved at the General Meeting of Shareholders.
Title Total Remuneration
(Million yen)
Remuneration by Category(Million yen) Number of
Board Members
Basic Remuneration Bonuses
Directors (Excluding Independent Directors) 202 141 60 4
Audit and Supervisory Board Members(Excluding Independent Audit and Supervisory Members) 27 27 - 2
Independent Directors and Independent Audit and Supervisory Board Members  36 36 - 6
Total Remuneration and Number of Board Members (FY2016)

Corporate Officers

At present we have 18 Corporate Officers, each appointed taking into consideration diversity in order to flexibly adapt to changes in the business environment. Eight of the Corporate Officers have work experience outside the Nissha Group, and two are foreign national. The term of office of a Corporate Officer has been set at one year.

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