Corporate Governance

Governance system

Nittobo Group recognizes that the basic principle of corporate governance is to enhance corporate value by increasing the transparency of management and making all-out efforts to comply with laws and ordinances and has established an internal control system that enables it to respond swiftly to changes in the business environment.
Top management takes the initiative and sets good examples for others in accordance with the Group's Management Philosophy, Nittobo Declaration, which espouses shared values in order to become a company trusted by society, and Nittobo Behavior Program and Code of Conduct, both of which provide a set of action guidelines, and also endeavors to make them known to all executives and employees in the Group.
In addition, the Group appropriately manages various risks that surround its business and strives to preclude such risks from becoming tangible. It has also built a system to minimize damage should an unexpected situation occur.
Specific initiatives for ensuring corporate governance are as described below.

• A) With the approval of the Ordinary General Meeting of Shareholders on June 26, 2014, Nittobo shifted to a company with Nomination Committee, etc. By doing so, the company further clarified the separation of supervision from execution and has striven to strengthen supervisory functions, ensure highly transparent management, execute business swiftly, and increase the flexibility of management. By establishing a system that enables it to meet the expectations of stakeholders, such as customers, shareholders, suppliers, and employees, more precisely, the company will work to further enhance its corporate value. The term of office of directors is one year in accordance with Article 332 Paragraph 6 of the Companies Act.
• B) Four of the seven directors are external directors. Thus, the company has established a system to bolster the functions of the Board of Directors in supervising business execution organs.
• C) In accordance with relevant laws and ordinances, the company has established the Nomination Committee, Remuneration Committee, and Supervisory Committee in which the majority of members of each committee and each chairman are external directors. A highly transparent and fair management monitoring system has been established.
• D) To dismiss a director, an ordinary resolution must be adopted in accordance with the principle stipulated in the Companies Act (Article 339 Paragraph 1 and Article 341).
• F) The company abolished the advisor and special consultant system at the end of June 2017 and will establish an even more transparent governance system.

Internal control system

In order to ensure appropriate business execution throughout the entire group, Nittobo. as a group of companies including subsidiaries, has stipulated the matters listed below in its basic policy to establish an internal control system.

Basic policy to establish an internal control system

1. Matters required for the Audit Committee to perform its duties
   1. (1) Matters related to directors and employees that should assist the Audit Committee in performing its duties
   2. (2) Matters related to the independence of directors and employees stipulated in (1) above from executive officers, as well as to ensuring the effectiveness of directives to the directors and employees
   3. (3) Systems for directors, executive officers, and employees to report to the Audit Committee and for other reports to be made to the Audit Committee
   4. (4) Other systems to ensure that the Audit Committee conducts audits effectively
2. Matters required to ensure the appropriateness of Nittobo Group's operations
   1. (1) Systems to store and manage information on the performance of duties by executive officers
   2. (2) Systems to report to Nittobo matters related to the performance of duties by the directors and other executives of subsidiaries
   3. (3) Regulations and other systems for the management of risks of loss
   4. (4) Systems to ensure that executive officers as well as the directors and other executives of subsidiaries perform their duties efficiently
   5. (5) Systems to ensure that executive officers, employees, and the executives and employees of subsidiaries ("Group executives and employees") comply with laws and ordinances as well as the Articles of Association when they perform their duties
   6. (6) Other systems to ensure the appropriate business operations of the Group

Risk management and internal audits

Risk management system

Nittobo Group has established the Group's basic risk management policy and system in the Rules for Risk Management. Based on the basic policy and system, the Risk Management Committee chaired by the Representative and Chief Executive Officer appropriately manages various risks involved in our business and prevents such risks from becoming tangible. Nittobo is also striving to strengthen its legal risk management system by putting in place a system that enables it to receive various kinds of guidance as the occasion demands, such as opinions and advice from corporate attorneys and specialized lawyers regarding corporate management and daily operations.

Internal audits and audits by the Audit Committee

• (a) Internal audits
  The Audit Office of Nittobo is an audit organization independent of other departments and is under the direct control of the Representative and Chief Executive Officer. It consists of nine full-time officers (including two who also works for the Secretariat of the Audit Committee). The Audit Office not only audits Nittobo Group's entire operations but also fulfills functions such as those of compliance auditors.
  The company has a system for periodically reporting the results of audits to the Representative and Chief Executive Officer and the Audit Committee.
• (b) Audits by the Audit Committee
  The Audit Committee decides audit policies required for the performance of its duties and matters related to the formulation of audit plans and report the results of audits to the Board of Directors periodically. The members of the Audit Committee and the Audit Office hold meetings to report audits periodically, and in these meetings discuss audit plans, the status of audits conducted and their results, and so forth. In order to conduct effective and efficient audits in cooperation with accounts auditors, the Committee exchanges information and opinions with them at regular intervals

Executive remuneration

(1) Method of deciding policy

The Company determines policy related to the determination of individual remuneration of directors and executive officers on the basis of objective data, etc. from external consultants in the Remuneration Committee made up of a majority　of external directors and chaired by an external director, based on the provisions of the Companies Act related to a company with Nomination Committee, etc.
Furthermore, the policy is based on the approach of providing strong motivation for officers to achieve their performance targets while maintaining transparency and rationality, fostering awareness for medium to long term management, and conforming with the interests of stakeholders including shareholders and investors, and the performance targets used for calculating remuneration also reflect this approach.

(2) Outline of the policy

The Company’s executive remuneration (excluding external directors is made up of base remuneration determined by the　state of competency expected of each position (behavior evaluation) and the state of performance (performance evaluation), and performance-linked remuneration that varies within a range of 0% to 150% according to the level of achievement of individual performance targets based on company performance targets from the previous fiscal year and the activities and performance of the responsible departments, and the current fiscal year’s remuneration is based on a combination of these. Performance-linked remuneration has not been established for external directors due to the role of supervising management from an independent and objective perspective.

Acquisition defense measures

Nittobo has not introduced acquisition defense measures.