Basic Approach

Corporate Governance Structure

NSG Group adopts “Company with Three Committees” governance structure, and has in place, as statutory corporate organizations, Board of Directors and —Nomination Audit and Compensation Committees, and an office of Executive Officer. Currently, the Chairman of the Board as well as chairpersons of all three Committee are all appointed from among the Independent External Directors.

Various steps have been taken to date so that NSG Group has enhanced management transparency by further separation of functions between business execution and its supervision and strengthened role of independent external directors. For example, according to the NSG Group Corporate Governance Guidelines, the roles of Chairman of the Board and CEO are clearly distinguished. In the event that Chairman of the Board is not an Independent External Director, a Lead Director whose role is to advise Chairman of the Board on matters concerning corporate governance shall be appointed from among Independent External Directors. Independent External Directors meet on an as-needed basis, even without presence of executives, for discussion concerning matters such as corporate governance and businesses.

As regards executive function, the Group also has Management Committee, Sustainability Committee, and Strategic Risk Committee. Currently, thirteen(13) Executive Officers are responsible for the business execution. One(1) of them is Representative Executive Officer performing the duties of CEO.

Overview of Corporate Governance Structure (As of 1 July 2021)
Key items Description
Type of Governance structure Company with Three Committees
Number of Directors / term of office 6(5) / 1 year
Number of Independent External Directors 4
Chair of the Board Mr. Yasuyuki Kimoto (Independent External Director)
Chair of Three Committees Nomination: Mr. Hiroshi Ishino (Independent External Director),
Audit: Mr. Kunihito Minakawa (Independent External Director),
Compensation: Dr. Jörg Raupach Sumiya (Independent External Director)
Number of Executive Officers (Representative Executive Officers) /
term of office
13(1) / 1 year
Compensation system Executive Officer (including those who concurrently serve as Directors) (1) Fixed salary(Basic salary)
(2) Performance-linked compensation
ⅰ Management Incentive Plan (annual bonus)
ⅱ Long- term Incentive plan
(3)Stock Compensation
External Director The level of compensation set at the appropriate level based on comparisons with other companies using benchmark data provided by specialist external advisers(Fixed salary)
Accounting Auditor Ernst & Young ShinNihon LLC
Corporate governance mechanism(As of 1 January 2021)

Supervisory Function

Diverse and highly independent in its structure, the Board of Directors is responsible for making decisions on the Group’s material matters and supervising the execution of business.

【Board of Directors】
Role Board of Directors is responsible for making decisions on the Group’s material matters such as basic policies for business management, internal control system and duty allocation among Executive Officers, and supervision over business execution by executives.
Composition
  • 4 Independent External Directors and 1 Director who concurrently serves as Representative Executive Officer
  • Chaired by Mr. Yasuyuki Kimoto, Independent External Director
Number of times met in FY2021 15
Secretariat Company Secretary Office
Composition of Nomination Committee, Audit Committee, and Compensation Committee as of 1 July 2021
Name Position Nomination
Committee
Audit Committee Compensation
Committee
Yasuyuki
Kimoto
Independent External Director
Jörg
Raupach
Sumiya
Independent External Director ◎( Chair )
Hiroshi
Ishino
Independent External Director ◎( Chair )
Kunihito
Minakawa
Independent External Director ◎( Chair )
Shigeki
Mori
Director Representative Executive Officer -
(5) (4) (5)
【Nomination Committee】
Role Nomination Committee is responsible for making decisions on the General Meeting of Shareholders agenda items regarding the appointment and removal of Directors. It also oversees the succession plans for key executives, including President and CEO, and provides advice and recommendations for the Executive Officer candidates.
Composition
  • 4 Independent External Directors and 1 Director who concurrently serves as Representative Executive Officer
  • Chaired by Mr. Hiroshi Ishino, Independent External Director
Number of times met in FY2021 10
Secretariat Human Resources Department
Legal adviser Legal Department
【Audit Committee】
Role Audit Committee is responsible for auditing the execution of duties by Directors and Executive Officers, preparing audit reports, and deciding details of proposals concerning appointment, removal or not reappointing the Accounting Auditor.
Composition
  • 4 Independent External Directors
  • Chaired by Mr.Kunihito Minakawa, Independent External Director
  • Mr. Kunihito Minakawa has the career and experiences of serving as Corporate Senior Vice President (in charge of accounting) and Corporate Auditor of RICOH CO.,LTD., currently, he is a member of the Financial Services Agency Certified Public Accountant and Auditing Oversight Board Commissioner.
Number of times met in FY2021 11
Secretariat and how to ensure its independence
  • Audit Committee Office
  • Any personnel affairs relating to staff of Audit Committee Office require a prior notice to Audit Committee and its consent.
  • The head of Audit Committee Office shall not concurrently hold any position that may be involved in the execution of businesses and affairs of the Group, and shall report only to Audit Committee.
Audit methodology and cooperation with others
  • Audit by Audit Committee is such that it interviews executives, attends material executive meetings such as Management Committee, and inspects business operations and financial status of the company and major subsidiaries, being assisted by Audit Committee Office, in accordance with its audit policy and plans, as well as periodically monitors and reviews status of development and operation of the Group’s internal control system.
  • Audit Committee meets with Accounting Auditor and internal audit function on a regular and as needed basis to receive reports on such as progress of audits, exchange views and gather information.
【Compensation Committee】
Role Compensation Committee is responsible for making decisions on a compensation policy for Directors and Executive officers as well as individual elements of compensation for Directors and Executive Officers.
Composition
  • 4 Independent External Directors and 1 Director who concurrently serves as Representative Executive Officer
  • Chaired by Dr. Jörg Raupach Sumiya, Independent External Director
Number of times met in FY2021 6
Secretariat Human Resources Department
Legal adviser Legal Department

Board Effectiveness Evaluation

NSG Group started an annual evaluation process for the Board effectiveness since FY2016, in order to further and constantly improve performance and effectiveness of the Board of Directors and Nomination, Audit and Compensation Committees.

The overall summary of the results from the review made in relation to FY ended March 2020 is as follows:

[Our Effectiveness Review Process]
The Board confirmed the progress of the action plans effective from prior years for improvement realized during FY ended March 2020. The effectiveness review of the Board and Committees was conducted with reference to feedback and views taken from each Director in terms of composition, status of meeting management, agenda setting, manner and substance of deliberation and direction in the role of each such organization. The entire process for such review was led and supervised by the Independent External Directors under the leadership of the Chairman of the Board of Directors.

[Evaluation Summary]
The effectiveness review endorsed that the Board and the Committees were all properly and soundly operated to ensure their effectiveness. On the other hand, the comprehensive evaluation of the medium-term management plan and MTP phase 2 in which the target was not achieved in the final year of the fiscal year ending March 2020, the deepening of discussions on important management issues in the process of formulating the next medium-term management plan, and the drastic change in the market. However, the formulation of action plan has been suspended concerning the discussion on the New Mid-term Plan to be commenced in FY2021 due to the repercussions of the worldwide pandemic of COVID-19. The Board decided to have thorough discussion on the next MTP when the Board can figure out a more clear-cut business outlook. While analyzing and evaluating the effectiveness of the Board of Directors, etc. for the fiscal year ending March 2021, the Board of Directors will further discuss the new medium-term management plan (RP24) with the fiscal year ending March 2022 as the first year. The Board will dig deeper and further deepen opportunities for discussion and verification of strategic issues.

Executive Function

Seventeen Executive Officers (as of 1 July 2021), a professional group furnished with diverse backgrounds, are responsible for the business execution of NSG Group

【Executive Officer】
Role Business execution of NSG Group
Composition 1 Representative Executive Officers(Chief Executive Officer(CEO)) and 12 Executive Officers
【Management Committee】
Role Management Committee leads the Group’s business operation and oversees the implementation status of businesses in order to realize the policies and targets set forth by the Board of Directors efficiently and appropriately.
Composition The Management Committee is composed of executive officers with executive officers and above, other executive officers who supervise major businesses and functions, and general manager of the Corporate Planning Department as permanent members.
Number of times met in FY2021 11
【Sustainability Committee】
Role Sustainability Committee builds the sustainability strategies, presides over all of the Group’s sustainability related activities, and ensures effective communication with various stakeholders.
Composition Group Sustainability Committee is chaired by CEO or a person who is nominated by CEO and composed of CEO, CFO, Chief Legal Officer (CLO), Chief Human Resources Officer (CHRO), Group Sustainability Director, the Heads of relevant Group Functions and the Heads of each Strategic Business Unit.
Number of times met in FY2021 2
【Strategic Risk Committee】
Role Strategic Risk Committee is chaired by CRO and composed of CEO, CFO, CLO and CRO (Chief Risk Officer), CHRO, the Heads of relevant Group Functions and the Heads of each Strategic Business Unit.
Composition Strategic Risk Committee is chaired by CRO and composed of CEO, CFO, CLO and CRO (Chief Risk Officer), CHRO, the Heads of relevant Group Functions and the Heads of each Strategic Business Unit.
Number of times met in FY2021 3

External Director

Criteria of Independency for External Director at NSG

An External Director is a director who has never been a director, executive officer nor employee of the company nor its subsidiary.

To enhance the transparency of business management, the Company has appointed five External Directors out of the six Directors, four of whom are designated as Independent Directors under the TSE.

In addition to the criteria for independency defined by the TSE, the Company has established its own criteria of independency for External Directors, taking into consideration their relationship with the Group including such with its officers and major shareholders. All of the four External Directors satisfy the criteria of independency., its officers, major shareholders, etc. These all five External Directors meet the relevant criteria of independency.

Please refer to the Group's Criteria of independency for External Ddirectors.

Background , concurrent offices and activities of External Directors

Mr. Yasuyuki Kimoto
* Independent External Director
Background
    Mr. Kimoto has a career and experience leading in his capacity as then president, director and chairman of the Board of a UK subsidiary of Sumitomo Mitsui Banking Corporation along with his experience serving as chairman and director and thus leading the Board of Olympus Corporation whose majority consisted of independent external directors. He has abundant international experience and broad knowledge and perspectives with regard to business management.
Concurrent offices
    n/a
Activities
    Attended all of the 15 meetings of Board of Directors held in the fiscal year ended March 2021, all of the 10 meetings of the Nomination Committee, all of the 11 meetings of the Audit Committee  and all of the 6 meetings of the Compensation Committee, and made remarks mainly from the perspective of experienced business management, as necessary.It is expected that he should to contribute to the supervisory function of the Board including in overseeing performance of Executive Officers from an independent and objective standpoint. In FY2021, well performed as Chairperson of the Board of Directors and led the meeting of the Board of Directors with a majority of independent external directors to enhance constructive discussion. At the Board, he led discussions on internal control, risk management, etc., based on his abundant management experience in global companies. And also well performed as Chairperson of the Nomination Committee and led the committee about Group’s human resource strategy mainly based on deep knowledge from abundant international experience.
Dr.Jörg Raupach Sumiya
※Independent External Director
Background
    Dr. Jörg Raupach Sumiya has international experience in the field of both business and academia, and is currently a professor at the collage of business administration, Ritsumeikan University, one of the Japan's famous private university. He has abundant experience and broad knowledge and perspectives with regard to an academic expert and business management.
Concurrent offices
    Professor at the college of business administration, Ritsumeikan University.
Activities
    Attended all 15 Board of Directors meetings, all 11 Audit Committee meetings, and all 6 Compensation Committee meetings held during the fiscal year ended March 2021 ,and all 9 Nomination Committee meetings held after his assumption of the member of the Nomination Committee on 16 July 2020 during the fiscal year ended March 2021 under review,, and made necessary contribution to the deliberation mainly from a specialized viewpoint of an experienced academic expert and business manager. It is expected that he should to contribute to the supervisory function of the Board including in overseeing performance of Executive Officers from an independent and objective standpoint. At the board, he led discussions on sustainability (environment, climate change, etc.) and intellectual property management, especially from the standpoint of management experience in a global company and academic experience. In FY2021, well performed as Chairperson of the Compensation Committee and led the committee about the design of the executive compensation system and evaluation system.
Mr.Hiroshi Ishino
* Independent External Director
Background
    Mr. Hiroshi Ishino was in charge of overseas operations at Mitsubishi Corporation, and since then has been promoting the Group's global strategy as president and CEO of Kansai paint Co.,Ltd.He has abundant experience and broad knowledge and perspectives with regard to business management.
Concurrent offices
    Senior Corporate Advisor,Kansai paint Co.,Ltd.
Activities
    Attended all 10 Board of Directors meetings, all 9 Nomination Committee meetings, and all 8 Audit Committee meetings, and all 5 Compensation Committee meetings, held after his assumption of the office of Director on 16 July 2020 during the fiscal year ended March 2021 under review, and made necessary contribution to the deliberation mainly from a specialized viewpoint of an experienced business manager. It is expected that he should to contribute to the supervisory function of the Board including in overseeing performance of Executive Officers from an independent and objective standpoint. At the board, he led discussions, especially on strategic marketing and business alliances, based on its in-depth knowledge of global management strategy. As a member of the Nomination Committee, Audit Committee, and Compensation Committee, contributed to the construction of a highly transparent governance system.
Mr. Kunihito Minakawa
* Independent External Director
Background
    Mr. Kunihito Minakawa has been a Managing Executive Officer and an Audit & Supervisory Board Member at RICOH CO.,LTD., and has global experience, a wide range of insights and practical experience in finance and auditing. He has abundant experience and broad knowledge and perspectives with regard to business management and finance and accounting.
Concurrent offices
    External Director, Santen Pharmaceutical Co., Ltd.
    Financial Services Agency Certified Public Accountants and Auditing Oversight Board Commissioner
Activities
    Attended all 10 Board of Directors meetings, all 9 Nomination Committee meetings, and all 8 Audit Committee meetings, and all 5 Compensation Committee meetings, held after his assumption of the office of Director on 16 July 2020 during the fiscal year ended March 2021 under review, and made necessary contribution to the deliberation mainly from a specialized viewpoint of an experienced business manager. It is expected that he should to contribute to the supervisory function of the Board including in overseeing performance of Executive Officers from an independent and objective standpoint. At the Board, he led discussions on finance, accounting, auditing, internal control, etc., based on his deep knowledge of finance and accounting.As a member of the Nomination Committee, Audit Committee, and Compensation Committee, contributed to the construction of a highly transparent governance system.
Mr. Yoshihiro Kuroi Background
    Mr. Yoshihiro Kuroi has been a president of an overseas subsidiary at Mitsubishi Corporation, and has a wealth of practical experience in overseas business, IR departments and risk management, etc. as an executive officer at Mitsubishi Motors Corporation and Kasai Kogyo Co., Ltd.He has abundant experience and broad knowledge and perspectives with regard to business management.
Concurrent offices
    Advisor, Japan Industrial Solutions Co., Ltd.
Activities
    Attended all 10 Board of Directors meetings held after his assumption of the office of Director on 16 July 2020 during the fiscal year ended March 2021 under review, and made statements as necessary mainly from a specialized viewpoint of an experienced business manager.As an External Director, it is expected that he should to contribute to the supervisory function of the Board including in overseeing performance of Executive Officers. At the Board, based mainly on his extensive experience and insight in overseas business, IR, and risk management, he led discussions on risk management in particular and contributed to the establishment of a highly transparent governance system.

Our actions to date aiming for an advanced level of corporate governance

2008
  • Changed the company's fundamental governance structure from the traditional StatutoryAuditor system to the current three-Committee structure
  • Four Independent External Directors were elected accordingly
2010
  • Created and adopted our original and stringent criteria for the independency of External Director, taking into account not only the standard of Tokyo Stock Exchanges but also those similar rules in other major jurisdictions
2012
  • All three (Nomination, Audit and Compensation) Committees became to be chaired by Independent External Directors respectively
2013
  • Board of Directors became to be chaired by an Independent External Director
2014
  • Made the independency criteria for External Directors more specific and publicly disclosed it
  • Incorporated the share purchase element into Long Term Incentive Plan
  • Set shareholding targets of Executive Officers
2015
  • Established NSG Group Corporate Governance Guidelines
2016
  • Started annual board effectiveness evaluation process
2018
  • Revised the "NSG Group Corporate Governance Guidelines" (December 2018) in response to the June 2018 revision of the Corporate Governance Code.
2019
  • Of the nine members of the Board of Directors(at that time), the majority of the Independent External Directors were five (5)

Corporate Governance Report

The Group has filed the Corporate Governance Report in accordance with the TSE Corporate Governance Code revised in June 2018.

Please refer to the Group's Corporate Governance Report (as of 13 July 2021).

Disclosure based on the principles of the Corporate Governance Code

Compensation for Directors and Executive Officers

The Company adopts a company with three committees structure and the Compensation Committee, which holds a majority of Independent External Directors, decides the following matters.

  • The policy on compensation and perquisites to be offered to the Directors and Executive Officers of the Company
  • Individual compensation and perquisites to be offered to the Directors and Executive Officers of the Company.

Compensation Policy for Executive Officers

NSG Group is a global business, operating in around 30 countries worldwide. The objectives of the compensation policy are to ensure that packages of employment terms and conditions are market competitive and designed in such a way as to attract, retain and motivate Executive Officers of the highest world-class caliber in an international business.

The policy aims to ensure that each individual’s basic salary and incentives are aligned with the performance of the Group and the interests of shareholders as well as reflecting the commitment and achievements of the individuals concerned. While some elements of the packages of the Executive Officers may vary depending on the market conditions in the countries in which they are directly employed, annual bonus and long-term incentive plans follow a global policy and are structured, designed and coordinated at the Group level.

Compensation Policy for Independent External Directors

The role of Independent External Directors is to supervise all Group business from their independent and objective standpoint as well as to engage in the material decision-makings as members of the Board of Directors. In order for them to fulfill this role adequately and effectively, and for the Group to retain individuals with the capability and experience required, the appropriate compensation level of Independent External Director is set based on comparisons with other companies using benchmark data provided by external specialists.

Independent External Directors receive compensation for the performance of their duties. They are not eligible for performance-linked bonuses or awards under long-term incentive plans.

For details, please see the following.