Corporate Governance

Basic Approach to Corporate Governance

Nissha, since its foundation, has been executing strategies that promptly address external challenges, under committed leadership. The Company believes that strengthening corporate governance along with such leadership will promote agile and decisive decision making, as well as ensuring management transparency and fairness. Based on this recognition, the Company places corporate governance as one of the key management issues, strives to maintain and improve it, and seek out sustainable corporate growth and an increase in 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.
*as of January 1, 2020

Corporate Governance Structure

Nissha’s Management and Business Execution System

We make major business judgments and oversees the execution of the duties of the Directors of the Board at meetings of the Board of 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.
We adopt 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, we also establish a Nomination and Remuneration Committee as an advisory panel for the Board of Directors.

The Board of Directors formulates our Policy for Internal Control, and prepares and oversees the operation of systems designed to ensure appropriate business execution in the Nissha Group.
The Chairman of the Board, President and CEO chairs the following meetings toward appropriate and efficient business execution.

● Management Meeting: Comprises Inside Directors of the Board as core members. Deliberates on matters relating to the direction of important managerial issues within the scope of the President’s authority.
● Monthly Business Review (MBR): Reviews the progress of business strategies based on key performance indicators (KPI) and determines actions to take over the short term. The purpose of the MBR is to monitor business execution by Corporate Officers and quickly respond to changes in the business environment.
● Investment Committee: Reviews particularly important investment matters prior to submission to the Board of Directors for approval.

We also have in place the following organizations in order to enhance the management monitoring function, ensure that business execution complies with laws and regulations as well as our Articles of Incorporation, and to manage risks.

● Sustainability Committee: Chaired by the President and CEO, the Committee prioritize business opportunities for the Nissha Group to survive and grow over the long term and non-financial risks that would hamper business continuity. It demonstrates leadership to fulfill and resolve these materialities.
● Disclosure Control Committee: Chaired by the Chairman of the Board, President and CEO. Discusses the necessity of timely disclosure of corporate information and the contents of disclosure, and discloses important information on the Nissha Group in a timely, proper manner.
● Internal Audit: Under the direct control of the Chairman of the Board, President and CEO, audits the internal control systems of the Nissha Group, analyzes and evaluates their status of establishment and operation, and offers suggestions for improvement.

Directors of the Board and the Board of Directors

Policy and Procedures for Appointment/Dismissal of Directors of the Board

Our Board of Directors comprises an appropriate number of 12 or fewer members, taking into account diversity and balance between the knowledge, experience, and skills of the individual to ensure that the Board fulfills its role of making important management decisions and overseeing the execution of duties by Directors of the Board and Corporate Officers.
Inside Directors of the Board are elected for their acquaintance with our operations and suitability for carrying out sound growth strategies and overseeing business execution. Several Independent Outside Directors of the Board are elected who satisfy the requirements of not only the Companies Act but also the “Standards for Independence of Independent Officers”, established by our Board of Directors.
In the event a Director of the Board engages in behavior that damages the trust or honor of the Company, engages in behavior that markedly diminishes the Company’s corporate value, or other just grounds are found which give rise to a finding that the Director of the Board is unfit for the performance of his or her duties, the Board of Directors will make the corresponding Director of the Board the subject of a proposal for dismissal.
To ensure clarity in management responsibilities for each fiscal year, the term of office of Directors of the Board is set at one year.
The Board of Directors makes decisions on a proposal for the appointment/dismissal of a Director of the Board to be submitted for deliberation to the general meeting of shareholders, based on the reports of the Nomination and Remuneration Committee based upon the above stated policy.

Diversity of the Board of Directors *as of March 22, 2019

Diversity of the Board of Directors

Diversity of the Board of Directors

At present, our Board of Directors consists of nine members, of which four are Independent Outside Directors of the Board with one being a woman.
The Board includes individuals with experience abroad or at another company, or holding a master’s degree in business administration. Each of our four Independent Outside Directors of the Board has experience into general corporate management and business management in manufacturing industry, specialized knowledge in corporate governance, business strategies, management strategies, legal affairs and compliance, and broad insight into monetary economics.
We consider that the four Independent Directors satisfy 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.

Role of the Board of Directors

Our Board of Directors convenes for regular meetings once a month and for extraordinary meetings as needed. The meetings are chaired by the Chairman of the Board, President and CEO.
We build a system which enables the Board of Directors to make decisions regarding the distribution of surpluses, the acquisition of treasury stock and other matters to be decided by general meeting of shareholders in order to ensure maneuverability and expertise in business judgment.
The Board makes decisions on matters that require resolution by the Board as stipulated by legislation and our Articles of Incorporation, as well as on important managerial matters as stipulated by the Regulations of the Board of Directors and other internal regulations, and overseas business execution by Directors of the Board and Corporate Officers.
We confirm an investigation into the existence of any transactions between the Company and related parties such as the Directors of the Board and Audit & Supervisory Board Members, Corporate Officers, and their relatives, and if any material facts exist, they will be resolved by the Board of Directors, which will make a decision after duly deliberating the reasonableness of the transaction. In addition, we must obtain the approval of the Board of Directors when engaging in conflict of interest transactions as prescribed by laws and regulations with the Directors of the Board.

Initiatives to Enhance the Content of Discussions

Our Board of Directors meetings involve brisk, substantive discussions. Independent Outside Directors of the Board draw on deep insight into their respective fields of specialty to provide accurate advice and opinions, contributing to the enhancement of both management transparency and the Board’s oversight functions.
Toward improving the quality of discussions, we distribute a meeting agenda and related materials in advance, and explain particularly important matters to Independent Outside Directors of the Board and Independent Audit and Supervisory Board Members beforehand. Toward thoroughness, important issues such as the medium-term business plan and major M&A deals are discussed once or twice as matters to be reported prior to being listed as matters to be resolved. By allotting times for briefing and discussion in accordance with the degree of importance of the matter, we aim for sharp, focused meeting operation.
In an effort to enhance the Board’s monitoring function, the status of matters such as major M&A deals and establishment of subsidiaries and joint ventures are reported in meetings after a certain amount of time has passed since the resolution at the Board.
To secure attendance by as many Directors of the Board and Audit and Supervisory Board Members as possible, the secretariat of the Board of Directors creates an annual schedule of board meetings and notifies members in advance.

Evaluation of Effectiveness of the Board of Directors

Once a year since April 2016, our Board of Directors analyzes and evaluates board membership and operation in the previous fiscal year toward continuous improvement in the effectiveness of corporate governance.
From January to March 2019, we distributed the results of a questionnaire covering all board meetings held in FY2018.12 and disclosed an outline of the results in a Corporate Governance Report submitted to the Tokyo Stock Exchange in March.

Nissha Corporate Governance

Nomination and Remuneration Committee

Purpose

We establish a Nomination and Remuneration Committee as an advisory panel for the Board of Directors in order to ensure the objectiveness and fairness of the appointment/dismissal of Directors of the Board and the appointment of Audit & Supervisory Board Members, as well as the remuneration of the Directors of the Board.
The chair and the majority of the members are selected from Independent Outside Directors of the Board.

Membership *as of January 1, 2020

(1) Four independent members: Kazuhito Osugi (Independent Outside Director of the Board and Committee Chair), Makoto Ando (Independent Outside Director of the Board), Asli M. Colpan (Independent Outside Director of the Board), and Kazumichi Matsuki (Independent Outside Director of the Board)
(2) Two inside members: Junya Suzuki (Chairman of the Board, President and CEO), Wataru Watanabe (Director of the Board and Executive Vice President)

Audit and Supervisory Board Members and the Audit and Supervisory Board

Policy and Procedure for Electing Auditors

Our Audit and Supervisory Board comprises an appropriate number of four or fewer members.
Inside Audit and Supervisory Board Members are elected for the wealth of experience required in auditing. Independent Audit and Supervisory Board Members are elected from attorneys and certified public accountants with a focus on specialized knowledge in legal affairs, financial matters, and accounting, who satisfy the requirements of not only the Companies Act but also the “Standards for Independence of Independent Officers”, established by our Board of Directors.
The Board of Directors, upon gaining the consent of the Audit & Supervisory Board, make decisions on a proposal for the appointment of Audit & Supervisory Board Members to be submitted for deliberation to the general meeting of shareholders, based on the reports of the Nomination and Remuneration Committee based upon the above stated policy. At present, our Board consists of four members, of which two are Full-time Audit and Supervisory Board Members and two are Independent Audit and Supervisory Board Members.

Role of Audit and Supervisory Board Members and the Audit and Supervisory Board

Our Audit and Supervisory Board Members and Audit and Supervisory Board audit the execution of duties by Directors, Members of the Board and Corporate Officers as stipulated by legislation, our Articles of Incorporation, and internal regulations, and make appropriate decisions from an independent, objective standpoint on electing and dismissing accounting auditors and exercising their authority relating to audit fees, etc. Independent Audit and Supervisory Board Members draw on their highly specialized knowledge as attorneys and certified public accountants to contribute to the maintenance and improvement of our corporate governance structure.
Our Audit and Supervisory Board 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 Audit and Supervisory Board 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 Audit and Supervisory 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.

Corporate Officers *as of January 1, 2020

In order to adapt flexibly to changes in the business environment, we appoint Corporate Officers also taking into account diversity and balance between the knowledge, experience, and skills of the individual. The term of office of Corporate Officers is set at one year.

Nissha Corporate Officers

Nissha Corporate Officers

At present, we have 16 Corporate Officers, of which two are foreign nationals.
These include individuals with experience abroad or at another company, or holding a master’s degree in business administration.

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