Organization

1.Organizational Structure and Operation

Type of Organization Company with an Audit & Supervisory Board

Board Members

Number of Board Members under the Articles of Incorporation 15
Term for Board Members under the Articles of Incorporation 1 year
Chairperson of Board of Directors Chairman
(Unless double as the president)
Number of Board Members 6
Number of Outside Directors 3
Number of Independent Directors in Outside Directors 3

Relationship with our Company (1)

Name Former Status Relationship with company (*1)
a b c d e f g h i j k
Sadako Yasuoka Other                    
Yojiro Shiba From other company                    
Yumiko Ito Lawyer                      

(*1)
○: This person is currently or was recently placed in this category.
△: This person was previously placed in this category.
●: A relative of this person is currently or was recently placed in this category.
▲: A relative of this person was previously placed in this category.

  • An operating officer of our company or its subsidiary
  • An operating officer or non-executive Director of the parent company of our company
  • An operating officer of a fellow subsidiary of our company
  • An entity or an operating officer thereof that our company is a primary trading partner of
  • An entity or an operating officer thereof that is a primary trading partner of our company
  • A consultant, professional accountant or lawyer receiving a large sum of money or other properties other than Director compensation from our company
  • A major shareholder of our company (if such a major shareholder is a corporation, an operating officer of the corporation)
  • An operating officer of a trading partner of our company (not placed in the categories d, e or f) (Applies only to the said person)
  • An operating officer of an entity with which our company has a reciprocal outside officer appointment (Applies only to the said person)
  • An operating officer of an entity which our company makes donations to (Applies only to the said person)
  • Other

Relationship with our Company (2)

Name Independent Officer Additional Information Reasons of Appointment
Sadako Yasuoka A relative of Ms. Yasuoka previously served as an operating officer of Nippon Express Co., Ltd, our main operating company. Ms. Sadako Yasuoka is well qualified as outside Director, because she has excellent character and insight, as well as profound education and abundant experience, including educational activities, such as the study of the Analects of Confucius, with people of various ages. Meanwhile, her father has served as an operating officer of Nippon Express Co., Ltd, our main operating company in the past. However, it has been 27 years since he retired from the post and there is no special relationship that may affect our decisions in doing business.
For these reasons, there is considered to be no risk of conflict of interest with our general shareholders, and no problem with her independence, and she has been designated as an Independent Officer.
Yojiro Shiba Mr. Shiba previously served as an executive at Mizuho Bank, Ltd., a main transaction bank of the company Mr. Yojiro Shiba possesses outstanding character and insight, a wealth of experience and many years in corporate management, and broad knowledge cultivated through responding to a wide range of customer needs. Accordingly, we believe he is suitable to serve in a position as an outside director. Mr. Shiba has previously served as an executive at Mizuho Bank, Ltd., a main transaction bank of the company, through March 2005. However, he retired from said bank 18 years ago and maintains no special relationships that impact company decision-making. Given the preceding, we have determined there is no risk of conflict of interest with general shareholders and no issues related to independence. Therefore, we have designated Mr. Shiba as an independent director.
Yumiko Ito   Yumiko Ito is a person of outstanding character and insight, and as an attorney, has held important positions such as legal officer in several companies with diverse backgrounds. She is currently active as an attorney, mainly assisting companies with contractual matters, litigations, and disputes. As an Outside Director and Audit & Supervisory Board member of several companies, she not only provides advice as a legal expert, but also contributes to improving corporate value from various perspectives by offering her opinions from the perspective of a shareholder, making her an ideal candidate for an outside director. In addition, none of the conditions that are deemed by the Tokyo Stock Exchange to present a risk of a conflict of interest with general shareholders apply to her. Given the preceding, we have determined there is no risk of conflict of interest with general shareholders and no issues related to independence. Therefore, we have designated Ms. Ito as an independent director.
Discretionary Committee Equivalent to the Nomination Committee or Compensation Committee In Place

Establishment of Discretionary Committee, Composition of Committee, and Attributes of Head (Chairperson) of the Committee

  Name of Committee Members (persons) Full-time members (persons) Internal Directors (persons) Outside Directors (persons) Outside Experts (persons) Others (persons) Head (Chairperson) of the Committee
Committee Equivalent to the Nomination Committee Compensation and Nomination Advisory Committee 4 0 1 3 0 0 Internal Directors
Committee Equivalent to the Compensation Committee Compensation and Nomination Advisory Committee 4 0 1 3 0 0 Internal Directors

Additional Information

In order to obtain the opinions of independent outside Directors concerning important matters such as the compensation and nomination of Officers, our company has established a fair and transparent discretionary Compensation and Nomination Advisory Committee—with three out of four committee members as independent outside directors—as an advisory body to the Board of Directors. The Board of Directors makes decisions based on the opinions of the committee members to the maximum extent possible. The committee members are appointed via resolutions of the Board of Directors, and the committee functions as both the Nomination Committee and the Compensation Committee.
In these meetings, the committee members deliberated on matters related to the appointment of directors and executive officers, including candidates for directors and executive officers, as well as resolutions related to establishment of a skills matrix for the composition of the Board of Directors, compensation policy, and compensation structure, in response to consultation from the President and Representative Director, and submitted reports to board of directors based on their decisions (Seven meetings were held in the fiscal year ended December 31, 2022).

The chairperson and the members as of end of March 2023 are as follows:
<Chairperson>
Kenji Watanabe (Chairman and Representative Director)

<Members>
Director: Sadako Yasuoka (Independent Outside Director)
Director: Yojiro Shiba (Independent Outside Director)
Director: Yumiko Ito (Independent Outside Director)

Audit & Supervisory Board Members

Audit & Supervisory Board Formed
Number of Audit & Supervisory Board Members under the Articles of Incorporation 5
Number of Audit & Supervisory Board Members 5

Collaboration between Audit & Supervisory Board Members, Accounting Auditors, and Audit Division

We believe that sufficient cooperation is ensured through regular quarterly audit council meetings and monthly meetings between the accounting auditors and the Audit Division and Audit & Supervisory Board Members, attendance of internal control audits by Audit & Supervisory Board Members, and monthly meetings between the accounting auditors and the Internal Auditing Division. Additionally, when we establish an audit plan, the schedule for Audit & Supervisory Board Members’ audits and internal audits are determined after comparing schedules. Our company sets the date for an audit by the accounting auditors upon mutual discussion between the Audit Division and Audit & Supervisory Board Members. We will continue to strengthen the cooperation among the three parties, improve the effectiveness of audits, and maintain and develop the governance of our company group.

Outside Audit & Supervisory Board Members Selected
Number of Outside Audit & Supervisory Board Members 3
Number of Outside Audit & Supervisory Board Members who are Independent Directors 3

Relationship with our Company (1)

Name Former Status Relationship with company (*2)
a b c d e f g h i j k l m
Toshiaki Nojiri From other company                        
Yoshio Aoki From other company                        
Nobuko Sanui From other company                          

(*2)
○: This person is currently or was recently placed in this category.
△: This person was previously placed in this category.
●: A relative of this person is currently or was recently placed in this category.
▲: A relative of this person was previously placed in this category.

  • An operating officer of our company or its subsidiary
  • A non-executive Director or an accounting counselor of our company or its subsidiary
  • An operating officer or non-executive Director of the parent company of our company
  • An Audit & Supervisory Board Members of the parent company of our company
  • An operating officer of a fellow subsidiary of our company
  • An entity or an operating officer thereof that our company is a primary trading partner of
  • An entity or an operating officer thereof that is a primary trading partner of our company
  • A consultant, professional accountant or lawyer receiving a large sum of money or other properties other than Director compensation from our company
  • A major shareholder of our company (if such a major shareholder is a corporation, an operating officer of the corporation)
  • An executive officer of a trading partner of our company (not placed in the categories f, g or h) (Applies only to the said person)
  • An operating officer of an entity with which our company has a reciprocal outside Director appointment (Applies only to the said person)
  • An operating officer of an entity which our company makes donations to (Applies only to the said person)
  • Other

Relationship with our Company (2)

Name Independent Officer Additional Information Reasons of Appointment
Toshiaki Nojiri Mr. Toshiaki Nojiri previously served as an executive (researcher) at Nippon Express subsidiary Nittsu Research Institute and Consulting, Inc.(Current NX Logistics Research Institute and Consulting, Inc.) Mr. Nojiri is a person of integrity and insight with sufficient experience as a company Director to monitor the management of all aspects of corporate affairs. He has specialized in the study of Antimonopoly Law and transportation business policy and, with thorough knowledge especially in distribution-related policies, he has held many public offices as a person with relevant knowledge and experience at government offices and business organizations. Mr. Nojiri served as a researcher of Nittsu Research Institute and Consulting, Inc. (Current NX Logistics Research Institute and Consulting, Inc.), a subsidiary of our company, from April 1979 to March 1989. The period of his service was 10 years and it has been 34 years since he retired from the post. Therefore, there is no special relationship that can potentially influence our decision-making. Since June 2016, Mr. Nojiri has served as director of Nittsu Gakuen Educational Corporation, the operating entity of Ryutsu Keizai University. However, we assume that it has no impact on the Educational Corporation's operation, and therefore said Corporation's independence is sufficiently ensured.
For these reasons, there is considered to be no risk of conflict of interest with our general shareholders, and no problem with his independence, and so he has been designated as an independent officer.
Yoshio Aoki Mr. Yoshio Aoki previously served as a partner of Deloitte Touché Tohmatsu LLC, our company’s accounting auditor Mr. Aoki is a person of integrity and insight with sufficient experience as a company Director to monitor the management of all aspects of corporate affairs. He has a wealth of experience as a certified public accountant as well as specialized knowledge concerning finance and accounting. He was a partner of Deloitte Touché Tohmatsu LLC, our company’s accounting auditor, until November 2015. However, 7 years have already passed since she left the firm, and there is no special relationship that could influence the company’s decision making. For these reasons, there is considered to be no risk of conflict of interest with our company's general shareholders, and no problem with his independence, and so he has been designated as an independent officer.
Nobuko Sanui None. Ms. Nobuko Sanui possesses outstanding character and insight, as well as being well-versed in international and labor-related fields. She has experience in organizational management and we believe she is suitable to serve in a position to monitor management from a perspective on general business. Ms. Sanui is not subject to any matters considered to be a conflict of interest with general shareholders as established by the Tokyo Stock Exchange. Given the preceding, we have determined there is no risk of conflict of interest with general shareholders and no issues related to independence. Therefore, we have designated Ms. Sanui as an independent director.

Independent Officers

Number of Independent Officers 6

Other Matters Regarding Independent Officers

All outside Directors and outside Audit & Supervisory Board Members who satisfy the qualifications for Independent Officers are designated Independent Officers.

【Independence Criteria for Independent Outside Directors】

Taking into consideration the requirement for outside directors stipulated in the Companies Act and the criteria set by securities exchanges, our company has established our own standards; and we appoint outside directors and outside A & S Board Members in accordance with these standards.

When the following items do not apply to an outside director or an outside A & S Board Member candidate, we consider that they have the appropriate independence.

  • 1. An individual who is an executive officer* of our company or our group company or has been one ten years before the selection;
  • 2. An individual who is a shareholder or a representative of a shareholder who owns 10% or more of the total voting rights of our company shares;
  • 3. An individual who is the executive officer of a business partner of our group company with more than 2% of our consolidated sales;
  • 4. An individual who has received more than 10 million yen per business year from our company as remuneration as a consultant, a lawyer or a public accountant;
  • 5. An individual who works at the auditing firm of our company’s A & S Board Member.

*An “executive officer” signifies an executive director, a corporate officer or an employee.

When appointing independent outside directors, we strive to select candidates who can be expected to make effective proposals to the Board of Directors regarding the company’s management policies and management improvements.

【Outside Officers’ Status of Combined Offices】

  • Director Sadako Yasuoka concurrently serves as Representative of Sadako Yasuok Office. There are no special interests between our Company and the above entity where she concurrently serves.
  • Director Yojiro Shiba concurrently serves as an Outside director of Bridgestone Corporation. There are no special interests between our Company and the above entities where he concurrently serves.
  • Director Yumiko Ito concurrently serves as Representative of Ito Law Office, Outside Director of Kobe Steel, Ltd., Outside Corporate Auditor of Santen Pharmaceutical Co., Ltd., and Member of the Board of Trustees of Nihon University Educational Foundation. There is no special interests between our Company and the above companies where she concurrently serves.
  • Audit & Supervisory Board Member Toshiaki Nojiri concurrently serves as the Director of Nittsu Gakuen Educational Corporation. There are no special interests between our Company and the above entities where he concurrently serves.
  • Audit & Supervisory Board Member Yoshio Aoki concurrently serves as Representative of CPA Yoshio Aoki Office and an Outside Corporate Auditor of Nippon Denko Co., Ltd. There are no special interests between our Company and the above entities where he concurrently serves.

And Our company discloses the status of our outside directors and outside A & S Board Members holding additional posts through the Convening Notices of General Shareholder Meetings and annual Securities Reports.

Incentives

Incentives for Board Members Introduction of Performance-based Stock Compensation Plan

Additional Information

We have introduced stock options as part of director compensation. In addition, we have introduced a performance-based stock compensation plan.

Recipients of Stock Options ------

Additional Information

------

Compensation for Board Members

Disclosure of Individual Compensation for Directors Selected Directors

Additional Information

Total Amount of Compensation, etc. breakdown for Directors and Audit & Supervisory Board Members are being made available for public inspection in Business Report and Securities Report which are available on our website. And for directors who receive 100 million yen or more in compensation, the amount is disclosed in the Securities Report.

  • Total Amount of Compensation, etc. for Directors and Audit & Supervisory Board Members for the fiscal year ending December 31, 2022 (January 1, 2022 to December 31, 2022) are as follows.
    Classification Total Compensation
    (Million Yen)
    Total amount of remuneration, etc. by type (Million Yen) Number of people
    to be covered
    (People)
    Basic compensation Performance-based remuneration Other
    Bonuses Share-based
    remuneration
    Directors
    (Outside directors)
    354
    (39)
    265
    (39)
    67
    (-)
    14
    (-)
    6
    (-)
    9
    (3)
    Audit & Supervisory
    Board Members
    (Outside Members)
    90
    (32)
    87
    (32)
    -
    (-)
    -
    (-)
    3
    (-)
    5
    (3)

    *Note 1: Article 2, Paragraph 1 of the Supplementary Provisions of our Company’s Articles of Incorporation stipulated that the total amount of monetary remuneration to be paid to directors from the date of establishment of our Company until the close of the Ordinary General Meeting of Shareholders for the fiscal year ending on December 31, 2023 shall not exceed 660 million yen per year (not including the salary for directors who also serve as employees)

    Note 2: The stock compensation plan for our Company’s directors (excluding outside directors) covering the period from the date of establishment of our Company to the fiscal year ending December 31, 2023 is stipulated in Article 2, Paragraph 2 of the Supplementary Provisions of the our Company’s Articles of Incorporation, but the above stock compensation is the amount of allowance recorded for the current fiscal year under the plan, which differs from the actual total amount paid.

    Note 3: Article 3 of the Supplementary Provisions of our Company’s Articles of Incorporation stipulated that the total amount of remuneration, etc. for Audit & Supervisory Board members from the date of the establishment of our Company until the close of the Ordinary General Meeting of Shareholders for the fiscal year ending on December 31, 2023 shall not exceed 120 million yen per year.

    Note 4: Other compensation includes company housing expenses, etc. paid by our company to the officers.

  • The individual disclosures who receive 100 million yen or more in compensation for the fiscal year ending December 31, 2022 (January 1, 2022 to December 31, 2022) are as follows.

    Kenji Watanabe Chairman and Representative Director
    Total compensation: 109 million yen of which the basic compensation was 80 million yen and the company performance-based compensation was 29 million yen (Breakdown / Bonuses : 24 million yen /The performance and share-based remuneration: 5 million yen).

    Mitsuru Saito President and Representative Director
    Total compensation: 125 million yen of which the basic compensation was 80 million yen (Breakdown: 40 million yen from our company and 40 million yen from Nippon Express Co., Ltd.) ,the company performance-based compensation was 29 million yen (Breakdown/ Bonuses: 14 million yen from our company & 9 million yen from Nippon Express Co., Ltd./The performance and share-based remuneration: 2 million yen from our company & 3 million yen from Nippon Express Co., Ltd.) and other compensation was 14 million yen (Breakdown: 7 million yen from our company and 7 million yen from Nippon Express Co., Ltd.)

    *Note 1: The consolidated remuneration, etc. for each individual director is paid by the submitting company under the submitting company's system, but for directors who concurrently serve at Nippon Express Co., Ltd, the amount is shown for the amount borne by both companies according to the relative proportion of concurrent service.

    Note 2: The above information is limited to those whose total amount of consolidated remuneration is 100 million yen or more.

    Note 3: Article 2, Paragraph 1 of the Supplementary Provisions of our Company’s Articles of Incorporation stipulated that the total amount of monetary remuneration to be paid to directors from the date of establishment of our Company until the close of the Ordinary General Meeting of Shareholders for the fiscal year ending on December 31, 2023 shall not exceed 660 million yen per year (not including the salary for directors who also serve as employees)

    Note 4: The stock compensation plan for our Company’s directors (excluding outside directors) covering the period from the date of establishment of our Company to the fiscal year ending December 31, 2023 is stipulated in Article 2, Paragraph 2 of the Supplementary Provisions of the our Company’s Articles of Incorporation, but the above stock compensation is the amount of allowance recorded for the current fiscal year under the plan, which differs from the actual total amount paid.

    Note 5: Other compensation includes company housing expenses, etc. paid by our company to the officers.

Existence of Policies for Determining the Amount or Method of Calculating Compensation for Directors and Audit & Supervisory Board Members Yes

Disclosure of Policies for Determining Compensation and Methods of Calculation

In order to seek appropriate advice from independent outside directors on important matters including officers’ remuneration, we established a discretionary Remuneration and Nomination Advisory Committee—with three out of four committee members who are independent outside directors. Our board makes decisions based on the report from the committee. Our policy for officers’ remuneration is as follows:

(Policy for Officers’ Remuneration)

  • Basic Policy
    (1) The remuneration system should allow our company to employ excellent individuals who can achieve our corporate philosophy.
    (2) The remuneration system should provide a continuous improvement to our corporate value.
    (3) The remuneration system should be fair and rational since our company is required to disclose our remuneration system via corporate governance codes and security reports.
  • Remuneration Structure
    (1) Remuneration should consist of basic (fixed) remuneration and variable compensation based on performance.
    (2) Remuneration for outside directors should consist of basic remuneration based on their roles and independent status.
  • Basic Remuneration
    Basic remuneration is determined by taking into consideration industry standards based on surveys of external specialist institutions and also dependent on their roles.
  • Performance-Based Remuneration
    (1) As short-term performance-based remuneration, our company pay bonuses using the officers’ performance per year as the indicator.
    (2) As mid-term performance-based remuneration, our company pay share-based remuneration based on our company’s achievement of the mid-term business plan and improvement of corporate value (share price).

(Determining officers’ remuneration)

  • Basis(fixed) remuneration
    Remuneration (monthly amount) for each individual is determined according to their role, based on the standard amount for their position.
  • Bonuses
    Bonuses for individuals will be determined by assessing company performance for a single year and their contribution to such, in accordance with their role.
  • Performance-based stock compensation
    The degree to which the business plan has been achieved for each fiscal year during the mid-term business plan period and the degree to which the business plan has been achieved for the final year of the mid-term business plan period will be evaluated in accordance with the Group and the individual’s role. The shares to be granted and the amount equivalent to the cash value of the shares to be used for the payment of income taxes will then be determined on that basis.

Directors’ remuneration is determined by the board after the Remuneration and Nomination Advisory Committee hold an evaluation based on the directors’ duties and performance in accordance with the above policy and then submit a report to the board. The remuneration for A & S Board Members is determined via discussion among the members.

Specific amounts will be determined within the scope of the amount stipulated in the articles of incorporation, taking into consideration the company’s performance, the standards of other companies, employee salaries and other factors.
In addition to remuneration and bonuses for directors and corporate officers, the company has introduced a performance-based stock compensation plan using a trust for directors and corporate officers (excluding outside directors and those residing outside Japan). This plan aims to further enhance their awareness of their contribution to enhancing the company's corporate value and shareholder value over the medium to long term.This system is a medium- to long-term incentive system that uses a portion of the existing base compensation as a source of funds and delivers as compensation a variable number of company shares depending on the position of the recipient and the level of achievement of company-wide performance targets, etc. The system is currently being applied with five business years as the period subject to evaluation. This evaluation period is the same length as the mid-term business plan, and the KPIs are business targets set in the business plan. In particular, we evaluate performance based on indicators such as consolidated sales, consolidated operating income and consolidated return on equity (ROE) for each fiscal year and after the end of the evaluation period. The range of increase/decrease corresponding to the achievement of performance targets, etc., is from 0% to 150%, with 100% being the standard corresponding to achieving the performance targets set as the standards for the annual performance evaluation and the mid-term performance evaluation as a whole.
The actual performance of the indices related to performance-linked stock compensation for the fiscal year ending December 31, 2022 was 116.95% for consolidated net sales, 147.95% for consolidated operating income, and 163.27% for consolidated ROE, compared to the target figures throughout the period subject to evaluation.

The board has the right to determine the amounts which include officers’ remuneration and the calculation method. However, the discretionary Remuneration and Nomination Advisory Committee, which was established as an advisory body of our board, discusses the base amounts including officers’ remuneration and policies regarding the determination of officers’ remuneration. The board makes a decision with the utmost respect for the committee’s report based on its resolution.

[Outline of Performance-based Stock Compensation Plan]
This plan is a stock compensation system that is linked to the medium to long-term performance of our company using the Executive Compensation BIP (Board Incentive Plan) Trust (hereinafter the “BIP Trust”). The BIP Trust is an executive incentive plan based on US Performance Share Plans and Restricted Stock Plans, and is a system which grants benefits (hereinafter “grants etc.”) to Officers, etc. in the form of company stock or the cash equivalent of our company stock price based on business performance, etc.
In addition, NIPPON EXPRESS HOLDINGS is a new company established on January 4, 2022, and has inherited the status of the BIP Trust Contract from Nippon Express Co., Ltd. The details of the inherited BIP trust contract are as follows.

[Content of the trust agreement]

1 Type of trust Monetary trust other than a specified solely-administered monetary trust
(third-party beneficiary trust with beneficiaries yet to exist)
2 Purpose of trust To provide incentives to the Officers of our company
3 Entruster Our company (NIPPON EXPRESS HOLDINGS)
4 Trustee Mitsubishi UFJ Trust and Banking Corporation (Joint Trustee: The Master Trust Bank of Japan, Ltd.)
5 Beneficiaries Officers who satisfy the beneficiary requirements
6 Trust administrator Third party having no conflict of interest with our company (certified public accountant)
7 Initial Date of trust Agreement August 2016 (Plan to change to August 2019 to extend the trust period)
8 Trust term August 2019 to May 2024
9 Commencement of the plan September 2016
10 Exercise of voting Rights Voting rights will not be exercised
11 Class of shares to be acquired Common stock of our company
12 Upper limit of trust Money 800 million yen (including trust fees and trust expenses)
13 Rights holder Our company(NIPPON EXPRESS HOLDINGS)
14 Residual assets Our company, as the rights holder, may receive residual assets within the scope of the reserve for trust expenses after deducting funds to acquire our shares from trust money.

[Number of Shares Offered to Directors]
Maximum 115,000 shares (Trust period: five years)

[Individuals Eligible for Beneficial Interest and Other Interests]
Directors who meet the requirements.

Support Structure for Outside Directors / Outside Audit & Supervisory Board Members

The Secretarial Division as a secretariat of the Board of Directors, and other divisions, depend on the agenda, explains about our company's situation to outside directors appropriately. The Internal Auditing Division, in charge of internal auditing, provides the necessary job-related communication information that the occasion demands in order to support the duties of Audit & Supervisory Board Members, including outside Audit & Supervisory Board Members.

Status of Former President and Representative Director, etc.

The Total Number of Senior Advisors, Consultants, etc., Who Are Former President and Representative Director, etc. 0

Other Matters

-

2.Matters Regarding Functions of Execution of Duties, Auditing and Supervision, Appointment, Decisions on Compensation, etc. (Overview of Current Corporate governance)

  • (ⅰ) Overview of the Implementation of Corporate Governance
    • Our Company is a company based on an Audit & Supervisory Board structure. In addition to the Board of Directors and Audit & Supervisory Board, our company has introduced a Board of Officers system with the goal of ensuring rapid decision-making, business execution and strengthening the supervisory function of the Board of Directors.
  • (ⅱ) Bord of Directors
    • The Board of Directors, consisting of six directors including three outside directors, meets once a month in principle and as needed to make decisions on important business executions and statutory matters, and to supervise the execution of business operations.
    • The outline of the Board of Directors, etc. is as follows.

    [Board of Directors]

    • Authority: Resolving matters defined by laws, regulations and the Articles of Incorporation and matters concerning important business executions as well as supervising business execution.
    • Chairperson: Non-executive board director
    • Structure: 6 directors (as of end of March 2023, the number stipulated by the Articles of Incorporation: 15)

      *Breakdown of the Board of Directors: 3 internal directors (2 of them are also executive officers) and 3 outside directors (two of them are female)
      Attendance of Audit & Supervisory Board Members (to supervise directors’ business execution, 2 internal and 3 outside members)

    • Frequency of Meetings: Once a month and as necessary. The Board of Directors was hold 18 meetings in FY2022.
    • Director's attendance: The average attendance rate of the Directors at the end of the current business year was 99.4% (98.1% for outside Directors), and the average attendance rate of the Audit & Supervisory Board Members, who attend to supervise the Directors' business execution, was 100.0% (100% for outside members).

    <Major topics of discussion at Board of Directors meetings held in FY2022 (fiscal year ending December 2022)>

    • Resolution on:
      Items to be resolved on at the Board of Directors at the time of establishment of the Company (e.g., officer hierarchy, organizational structure and enactment of rules and regulations, business plans, basic policy on the development of internal control systems, conclusion of liability insurance contracts for corporate officers, conclusion of liability limitation contracts for outside directors and outside Audit & Supervisory Board members, measures to accommodate the Corporate Governance Code and others), conclusion of the company split agreement, acquisition of treasury stock, assessment of the propriety of cross-shareholdings, organizational reform, important restructuring of group companies, formation of CVC fund, endorsement of TCFD, establishment of the Board of Directors agendas for FY2023, etc.
    • Reports on:
      The progress of the business plan and business portfolio, status of sustainability initiatives, status of compliance, safety management, and system risk management, status of internal control audits, status of countermeasures against COVID-19, the Ukraine/Russia situation, the progress of Project ITS, and other important investment
    • Effort to invigorate board deliberations:
      In consideration of other matters to be discussed, including quarterly financial results, our company determines the annual schedule of board meetings before the beginning of each year and notifies the directors and Audit & Supervisory Board Members. As for proposals, since these are to be discussed at Board of Officers —the consultation organization for business execution—prior to the board meetings, executive directors and full-time Audit & Supervisory Board Members attend the meeting and are familiar with the contents of the agenda topics before attending Board of Directors Meeting. For outside directors and part-time Audit & Supervisory Board Members, our company strives to allocate sufficient time for question-and-answer sessions and discussions by providing briefings in advance and invigorating board deliberations.
    • Appropriate setting of the Board of Directors agenda:
      In addition to decision-making on individual business executions, the Board of Directors places emphasis on constructive discussions on management strategies and other matters that determine the company's major direction. And in order to enhance the supervisory function of the Board of Directors, the Board of Directors systematically organizes the agenda items to be discussed and sets the criteria for agenda items.
    • Effectiveness of the board:
      Our company conducts questionnaires regarding the effectiveness of the Board of Directors as a whole, including the Compensation and Nomination Advisory Committee, for directors and Audit & Supervisory Board Members—including outside directors and Audit & Supervisory Members—once a year using an outside institution and collects opinions. The results are evaluated, and the Board of Directors holds a discussion and reviews results. The board evaluates its effectiveness based on the congregated results from the institution. In addition, based on the issues and opinions extracted through the questionnaire, we are making improvements to improve the effectiveness of the Board of Directors.

    <Reference: Effectiveness evaluation in FY2022 (for the fiscal year ending in December 2022)>

    〇 Questionnaire by an outside institution, results of evaluation

    Time Period December 2022
    Participants 9 directors (including 3 outside directors [3 independent officers]), 5 Audit & Supervisory Board Members (including 3 outside members [3 independent officers]); 14 in total
    Evaluation method by selecting one in five levels (“5: Effective, Appropriate” to “1: Improvement required, Inappropriate”)
    Evaluation items (themes) “Structure and Management of the Board of Directors,” “Management and Business Strategies,” “Corporate Philosophy and Risk Management,” “Evaluation of Management, Remuneration Status,” “Dialogue with shareholders etc”.
    Evaluation based on the answers to a total of 21 questions and comments (optional)
    Evaluation results The Board of Directors evaluated the average score per question and the comments and confirmed that the efficiency of the board is roughly assured.

<Items highly evaluated>

    "Relationship between Management and Outside Directors / Audit & Supervisory Board Members," "Access to Information," "Active role of Outside Directors / Audit & Supervisory Board Members," and "Response to Issues Identified through Effectiveness Evaluation" (all themes related to " Structure and Management of the Board of Directors ") "Monitoring and Supervision of Compliance with Corporate Philosophy" (all themes related to "Corporate Philosophy and Risk Management")

  • Training for Directors and Audit & Supervisory Board Members:
    Our company provides opportunities for seminars and social gatherings for directors and A & S Board Members to deepen their understanding of our company’s business challenges and acquire the necessary knowledge of corporate governance, financial affairs and laws. We bear the expenses of these.
    In addition to internal orientation sessions upon appointment and as necessary, we help newly appointed directors and Audit & Supervisory Board members to acquire the necessary expertise for their roles and responsibilities, providing opportunities them to enhance their expertise in the performance of their duties, particularly with respect to corporate governance, such as external seminars and other training tailored to their needs.
    We also provide opportunities for seminars, exchange meetings, and other events where, after their appointment, outside Directors and Audit & Supervisory Board members can acquire essential knowledge on the company’s management issues, finance, legal compliance, etc., as appropriate.
    We expect our A & S Board Members to acquire wide knowledge through attending various meetings of the Japan Audit & Supervisory Board Members Association as its members and seminars held by the Japan Industrial Management & Accounting Institute.
    For our outside directors and outside A & S Board Members, we provide opportunities to acquire knowledge concerning our company’s business operations through participating in various internal events and site visits.
    In addition, in order to seek management judgment from an independent perspective, we also hold monthly “Outside Officers Seminar,” in which corporate officers and executives give presentations on the operational challenges facing the company as well as the management visions, goals, and challenges of the divisions under their jurisdiction, providing an opportunity for outside officers to develop an understanding of these topics.
    For our corporate officers and the candidates for our company’s senior managers who are candidates for Representative Director, we provide external training courses, such as a Master of Business Management, so that they can acquire knowledge necessary for executive managers including global business management, financial literacy, business strategies and governance.
    We consider the above trainings a good method for training successors of top management.
    In particular, in order to ascertain whether or not outside directors and outside members of the Audit & Supervisory Board are being appropriately accommodated, we conduct surveys regarding opportunities to provide them with information in its questionnaire for evaluating the effectiveness of the Board of Directors. The results of the questionnaire are reported to the Board of Directors, where discussions are held regarding future improvements, and reflected in the next round of activities.
  • (ⅲ) Compensation and Nomination
    • In order to obtain the opinions of independent outside directors concerning important matters such as the compensation and nomination of officers, our company has established a fair and highly transparent discretionary Compensation and Nomination Advisory Committee—with three out of four committee members as independent outside directors—as an advisory body to the Board of Directors. Our board greatly respects the committee’s report when making decisions.

      Please also refer to “Establishment of Discretionary Committee, Composition of Committee, and Attributes of Head (Chairperson) of the Committee” in this report.

  • (ⅳ) Audits
    • Audit & Supervisory Board and its members
      • The Audit & Supervisory Board consists of five members (including three outside members, as of the date this document was submitted). The members have meetings once every three months and as necessary. In FY2022, the Audit & Supervisory Board met a total of eight times, with 100% attendance by each member.
      • The Audit & Supervisory Board discusses and determines audit-related policies, plans, methods and division of work. The board also reviews its system to ensure the effectiveness of the board members’ audit.
      • The Audit & Supervisory Board Members attend important meetings, including Board of Directors meetings, and provide objective and fair opinions on overall management and individual matters. The board members also oversee business execution by the directors by investigating the legality and status of internal controls. In addition, the Audit & Supervisory Board Members examine important documents and the company’s correspondence with major offices as well as investigate subsidiaries. The members supervise the business execution of relevant divisions.
      • In appointing Audit & Supervisory Board Members, our company appoints individuals who have the appropriate character and diversified knowledge, skills and expertise in law and accounting and other fields. In particular, for outside members, we appoint individuals who have a reputable academic background and expertise in finance, accounting, and other fields in order to strengthen the function of the Audit & Supervisory Board.
      • The Internal Auditing Division is in charge of the A & S Board staff and helps ensure that the A & S Board members’ activities are carried out smoothly, as well as improving coordination with the internal audit division and other divisions.
      • Audit & Supervisory Board Members also collaborate with corporate auditors of group companies and others to exchange information and conduct efficient audits.
      • The specific focus of audit activities in FY2022 was as follows:
        1. Compliance status of laws, regulations, Articles of Incorporation and other internal rules, 2. Progress of the “NX Group Business Plan 2023—Dynamic Growth,” 3. Development and achievement of business projects, 4. Status of asset maintenance, 5. Establishment and operation of an internal control system, 6. Operational status of subsidiaries and affiliates (including those overseas)
      • The A & S Board deliberates on the policy for selecting the accounting auditor, and considers whether or not to reappoint the accounting auditor each fiscal year by obtaining necessary information and receiving reports from the directors, the relevant internal departments and the accounting auditor. Based on this consideration, the A & S Board confirms whether the accounting auditor's execution of duties, auditing system, and independence are appropriate, and make a decision accordingly.
        The evaluation of the accounting auditor is based on the following items: “1. Quality control of the auditing firm,” “2. Audit team,” “3. Audit fees, etc.,” “4. Communication with Audit & Supervisory Board Members, etc.,” “5. Relationship with management,” “6. Group audit,” “7. Risk of misconduct.”
      • Please refer to " Collaboration between Audit & Supervisory Board Members, Accounting Auditors, and Audit Division" for the status of cooperation with accounting auditors and the internal audit department.
    • Internal Auditing Division
      • For internal auditing, our company established the Internal Auditing Division. According to the annual audit plan, our company conducts internal audits of our subsidiaries (both in Japan and overseas) and internal control audits related to financial reporting based on Japan’s Financial Instruments and Exchange Act.
      • The Internal Auditing Division, in accordance with the "NX Group Audit Regulations," conducts internal audits, including on-site inspections and document audits, to evaluate the effectiveness of risk management, control, and governance processes for the governance system that our company and its subsidiaries should establish to achieve their management objectives and sustainable growth. It also conducts independent and objective assurance and advisory activities with the aim of contributing to the proper execution of operations, enhancing management efficiency, and contributing to operational efficiency and improvement.
      • In internal control audit activities, we set key audit items and strive to conduct effective audit activities. The following are the key audit items for the internal control audit in fiscal year 2022.
        Internal audit in Japan: Business operations, receipt and placement of illegal work orders, safety promotion, credit management and evidence-based accounting, and harassment prevention efforts
        Overseas internal audit: Credit and debt management, purchasing management, and outsourcing management
      • The result of the internal audit is sent to the president and the Audit & Supervisory Board Members via the Dual Reporting Line. In addition, the status of internal audits is reported to the Board of Directors every six months, and direct reports are made to the outside directors.
    • Accounting auditor
      • Deloitte Touche Tohmatsu LLC was selected as an accounting auditor. This audit firm conducts audits as an independent third party. The firm audits our company and its consolidated subsidiaries in accordance with the annual accounting audit plan and in collaboration with our internal Auditing Division and the Audit & Supervisory Board.
      • Our company has established a highly objective auditing system by conducting internal audits, Audit & Supervisory Board Member audits and accounting audits in an independent and complementary fashion.
  • (ⅴ) Execution of Duties
    • The business operations execution framework consists of five divisions under the leadership of the President and Representative Director, and a certain amount of authority is delegated to each division to allow them to quickly implement the business plan as single units. In conducting business, each group company fulfils its roles and responsibilities as delegated to them by our company as the group headquarters, and in this role, our company oversees the conduct of each group company’s business. The “NX Group Governance Regulations” and the "Group Approval Authority Table" accompanying the regulations stipulate the group management system and matters delegated to group companies, and are reviewed as necessary to promote efficient and effective group management.
    • The status of various meetings related to business execution is as follows.

[Board of Officers]

  • Roles: Discussion of policies related to overall business execution, resolution within the scope of delegation from the Board of Directors (Resolution of Representative Director), and instructions from the president and each chief managing officer
  • Chairperson: President
  • Structure: Board directors except outside directors and executive officers Participation of Full-time Audit & Supervisory Board Members and division general managers as observers
  • Frequency: Once a month and as necessary (16 meetings was held in 2022)

[Group Management committees]

  • Role: To enhance inter-group cooperation and foster a sense of unity by providing instructions and communication on group business policies, and reporting on business progress from operating companies.
  • Chairperson: President and Representative Director
  • Composition: Corporate officers, presidents of major group companies, senior management, etc.
    Attendance of full-time A & S board members, etc.
  • Frequency: Quarterly and as necessary (4 meetings was held in 2022)

[Summary of other executive division committees]

  • As committees involved with internal control, we established a Risk Management Committee, which is in charge of drawing up risk management policies and establishing the group’s risk management system and held four times a year; a Compliance Committee, which is in charge of establishing and implementing the group’s compliance system and held four times a year; a Crisis Management Committee, which is in charge of establishing a response in advance and taking action after the emergence of risks and crises and held two times a year; and a System Risk Countermeasures Committee, which is in charge of establishing a system for information system security and taking action when security incidents occur and held two times a year. Important matters discussed by each committee shall, depending on the relevant approval criteria, be submitted to the board of directors for approval, or reported to the board of directors on a regular basis, and the board of directors shall oversee these activities.
  • As committees involved in business strategy, we established a Sustainability Promotion Committee, which is responsible for addressing issues related to sustainability and planning group policies and held two times a year, an Investment Committee, which is responsible for discussing approaches to M&A projects and held as needed, and CVC Steering Committee, which is responsible for discussing investment intentions for selected investments in CVC funds in which the Board of Directors has made a resolution to make an investments and held as needed. Important matters discussed by the Sustainability Promotion Committee shall, depending on the relevant approval criteria, be submitted to the Board of Directors for approval, or reported to the board of directors on a regular basis, with the board overseeing these activities. In addition, projects discussed by the Investment Committee are, depending on the relevant approval criteria, submitted to the Board of Directors for approval, which decides on corporate acquisitions and other matters. The progress of investment projects is regularly reported to the board of directors, and necessary discussions are held among the relevant divisions and operating companies at meetings such as those of the PMI Joint Council. The investment status in the CVC fund shall also be reported regularly to Board of Directors.
  • In addition, the Group Management Committee and other committees have established subcommittees for individual themes such as human resources, DX, and safety, as well as councils with group companies to promote group-wide strategies and strengthen internal controls.
  • (ⅵ) Overview of Agreements to Limit Liability
    • In accordance with the Articles of Incorporation, our company and outside Directors Sadako Yasuoka, Yojiro Shiba, and Yumiko Ito, Audit & Supervisory Board Members Shigeki Arima, Koji Mizota, Toshiaki Nojiri, Yoshio Aoki, and Nobuko Sanui have entered into an agreement to limit their liability, providing that they satisfy conditions prescribed by laws. Under the agreement, the limit of liability shall be an amount stipulated by laws.

3.Reasons for Adopting Current Corporate Governance Structure

Although our Company is a company based on an Audit & Supervisory Board structure under the Japanese Companies Act, we have introduced the Board of Officers system with the goal of delegating business execution from Board of Directors, thereby separating execution and supervision, while strengthening the supervisory function of Board of Directors, of which three out of six members are from outside Director. In addition, we have voluntarily established a Remuneration and Nomination Advisory Committee, chaired by a non-executive director and consisting of three out of four committee members, all of whom are independent outside directors, in order to seek appropriate advice and involvement of independent outside directors regarding the remuneration policy, remuneration system, performance-linked system, and selection and dismissal of directors, excluding the independent outside directors. In addition, audits by Audit & Supervisory Board Members, including 3 outside Audit & Supervisory Board Members, are conducted. By adopting such structure, we determine that the objectivity and neutrality of management supervision functions are ensured at the sufficient level.
In order to ensure an appropriate governance system while continuously discussing ways to improve corporate governance and assessing its necessity in light of the future business environment, the company will continue to discuss the need for institutional changes and executive structure, including a review of the proportion of outside directors.

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