Approach to Corporate Governance

Our governance structure

The NSG Group is governed by its Board of Directors, appointed by resolution at the General Meeting of Shareholders. The Board comprises the Chairman of the NSG Group, the Vice-Chairman, five executive officers and four external directors. In the fiscal year 2011, the Board of Directors met 14 times.

The Board of Directors oversees the Group’s economic, social and environmental performance and compliance with internal and internationally agreed standards, codes of conduct and principles.

Company with Committees

In June 2008, shareholders approved the adoption by the Group of the Company with Committees model, replacing the former Corporate Statutory Auditors model. Three committees were established.

The Nomination Committee decides the details of the agenda items to be submitted to the General Meeting of Shareholders concerning the appointment and removal of directors. The Committee consists of seven directors, including four external directors. Its chairman is Katsuji Fujimoto, Chairman of the NSG Group.

The Audit Committee is chaired by the Vice-Chairman of the Group, Tomoaki Abe, and comprises six directors, including four external directors. It conducts audits of the execution of duties by directors and executive officers and ensures that adequate risk management processes are followed. It also decides details of agenda items to be submitted to the General Meeting of Shareholders concerning the appointment and removal of independent auditors.

The Compensation Committee makes decisions on compensation of individual directors and executive officer. The Committee is chaired by an external director, George Olcott, and comprises five directors, including three external directors.

Adoption of IFRS

On 1 April 2011, the Group formally adopted International Financial Reporting Standards (IFRS) for its consolidated financial statements. Our consolidated financial results for the financial year FY2012 and thereafter will be presented in IFRS.

We believe that the use of IFRS in the preparation of our consolidated financial statements is consistent with our international spread of operations and shareholder base.

Behind our decision to be an early adopter is our determination to build a truly international company headquartered in Japan. Enabling the whole Group to use the same accounting language has clear benefits for the Company’s internal decision-making processes and further enhances our corporate governance structure.

Risk management

The scope of our operations introduces potential risks to our business activities, requiring effective risk management. These include the effects of changes in debt market prices, foreign currency exchange rates, credit risks, energy prices, liquidity, interest rates and business disruption. Our enterprise risk management process enables the impact and likelihood of the most important risks to be assessed in a standard format.

The information is used to assess the cumulative risk exposure of the Group and promote effective global risk responses, thus strengthening our overall risk management structure. For further discussion on our risks and opportunities associated with climate change, click here.

View on screen a diagram of our Open Management system

Compliance

Our Code of Conduct sets out the values on which the NSG Group has been built and on which the Group and its member companies must depend for future success. It defines the conduct expected of both the Group and its employees across all areas of our business and applies to relationships with employees, customers, suppliers, business partners, the community and all others with whom we have contact in daily business life (our stakeholders).

We have over the past year further strengthened our organization to ensure that we have the resources to formalize our policies, procedures, and guidelines in this area and to conduct the necessary training and checks to make sure that we meet the increasingly stringent legal and regulatory environment in which we operate. This has included the establishment of a Compliance function and the appointment of Alan Graham as Group Chief Compliance Officer, reporting to the Head of Group Legal and the Audit Committee.

We are committed to free and open competition and will compete vigorously, but with integrity and honesty. Competition Compliance issues are managed by the Group Competition Compliance Officer who reports to the Group Compliance Officer. Compliance activities have included a training program for people in ‘key roles’, seen as those most likely to face competition compliance issues in their work, which is in operation Group-wide.