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 9
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
Masahiro Sugiyama Professor                  
Shigeo Nakayama Lawyer                  
Sadako Yasuoka Other                

(*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.

  1. An operating officer of our company or its subsidiary
  2. An operating officer or non-executive Director of the parent company of our company
  3. An operating officer of a fellow subsidiary of our company
  4. An entity or an operating officer thereof that our company is a primary trading partner of
  5. An entity or an operating officer thereof that is a primary trading partner of our company
  6. A consultant, professional accountant or lawyer receiving a large sum of money or other properties other than Director compensation from our company
  7. A major shareholder of our company (if such a major shareholder is a corporation, an operating officer of the corporation)
  8. 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)
  9. An operating officer of an entity with which our company has a reciprocal outside officer appointment (Applies only to the said person)
  10. An operating officer of an entity which our company makes donations to (Applies only to the said person)
  11. Other

Relationship with our Company (2)【Updated】

Name Independent Officer Additional Information Reasons of Appointment
Masahiro Sugiyama   Mr. Masahiro Sugiyama is well qualified as outside Director, because he has excellent character and insight, as well as abundant experience, including many years of research in the area of transport and freight as a university professor. He does not fall under any of the cases of potential conflict of interest with ordinary shareholders as specified by the Tokyo Stock Exchange.
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 he has been designated as an Independent Officer.
Shigeo Nakayama   Mr. Shigeo Nakayama is well qualified as outside Director, because he has excellent character and insight, as well as expert knowledge in legal affairs and abundant business experience acquired through many years of activities as a lawyer. He does not fall under any of the cases of potential conflict of interest with ordinary shareholders as specified by the Tokyo Stock Exchange.
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 he has been designated as an Independent Officer.
Sadako Yasuoka   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 our company in the past. However, it has been 24 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.
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【Updated】

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 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 2019, the committee had eight meetings. The members submitted reports when the Board of Directors requested their opinions on matters to be resolved, including human resources regarding candidates for the board of directors and executive officers, officers’ compensations and bonuses. The attendance rate of the members has been 100 percent so far.
The chairperson and the members are as follows:

<Chairperson>
Kenji Watanabe (Chairman and Representative Director)

<Members>
Director: Masahiro Sugiyama (Independent Outside Director)
Director: Shigeo Nakayama (Independent Outside Director)
Director: Sadako Yasuoka (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【Updated】

Our company holds quarterly meetings with accounting auditors. The Audit & Supervisory Board members and the General manager of the Audit Division receive reports on current audit statuses and past audit results from accounting auditors. They exchange opinions and strengthen mutual collaboration. 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 of these three divisions, 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
Tadashi Kanki From other company                        
Toshiaki Nojiri From other company                        
Yoshio Aoki 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.

  1. An operating officer of our company or its subsidiary
  2. A non-executive Director or an accounting counselor of our company or its subsidiary
  3. An operating officer or non-executive Director of the parent company of our company
  4. An Audit & Supervisory Board Members of the parent company of our company
  5. An operating officer of a fellow subsidiary of our company
  6. An entity or an operating officer thereof that our company is a primary trading partner of
  7. An entity or an operating officer thereof that is a primary trading partner of our company
  8. A consultant, professional accountant or lawyer receiving a large sum of money or other properties other than Director compensation from our company
  9. A major shareholder of our company (if such a major shareholder is a corporation, an operating officer of the corporation)
  10. 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)
  11. An operating officer of an entity with which our company has a reciprocal outside Director appointment (Applies only to the said person)
  12. An operating officer of an entity which our company makes donations to (Applies only to the said person)
  13. Other

Relationship with our Company (2)【Updated】

Name Independent Officer Additional Information Reasons of Appointment
Tadashi Kanki Mr. Tadashi Kanki has, in the past, served as a business executive at Mizuho Financial Group, Inc., the parent company of Mizuho Bank, Ltd., which is one of our company's main trading banks, and companies in the Mizuho Group (Mizuho Bank, Ltd., Mizuho Corporate Bank, Ltd. (currently Mizuho Bank, Ltd.), Mizuho Trust & Banking Co., Ltd., Mizuho Securities Co., Ltd. and Mizuho Research Institute Ltd.) Mr. Tadashi Kanki 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 an extensive experience and broad expertise as a manager of other companies. He has, in the past, served as a business executive at Mizuho Financial Group, Inc., the parent company of Mizuho Bank, Ltd., which is one of our company's main trading banks, and companies in the Mizuho Group (Mizuho Bank, Ltd., Mizuho Corporate Bank, Ltd. (currently Mizuho Bank, Ltd.), Mizuho Trust & Banking Co., Ltd., Mizuho Securities Co., Ltd. and Mizuho Research Institute Ltd.) However, the amount of borrowings from Mizuho Bank, Ltd. is about 7% of consolidated total assets in the fiscal year ended March 31, 2020 and the amount is a little less than 30% of the Group's overall borrowings. We also have transactions with Financial institution. Therefore, we recognize that this level of dependence is not high.
We have business transactions with Mizuho Financial Group, Inc., Mizuho Bank, Ltd., Mizuho Trust & Banking Co., Ltd., Mizuho Securities Co., Ltd. and Mizuho Research Institute Ltd. However, the amount of these transactions for the fiscal year ended March 31, 2020 is less than 1% of respective overall net sales and is regarded as having minimal impact.
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.
Toshiaki Nojiri Mr. Toshiaki Nojiri, in the past, served as an operating officer (researcher) of Nittsu Research Institute and Consulting, Inc., a subsidiary of our company 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., a subsidiary of our company, from April 1979 to March 1989. The period of his service was 10 years and it has been 31 years since he retired from the post. Therefore, there is no special relationship that can potentially influence our decision-making. Currently, he serves as President of Ryutsu Keizai University, and on June 1, 2016, he assumed the office of 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 None. 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. In addition, he does not fall under any of the cases of potential conflict of interest with ordinary shareholders as specified by the Tokyo Stock Exchange. 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.

Independent Officers

Number of Independent Officers 6

Other Matters Regarding Independent Officers【Updated】

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; or
  • 6. An individual who belongs to one of the groups which received an average of 10 million yen of donations during the last three business years from our company or our group company.

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

【Outside Officers’ Status of Combined Offices】

  • Director Masahiro Sugiyama concurrently serves as the Vice Chairman of the Japan Automobile Federation and Director and Auditor of the Japan Automobile Manufacturers Association. There are no special interests between the Company and the above entities.
  • Director Shigeo Nakayama concurrently serves as an Outside Corporate Auditor of Shizuoka Daiichi Television Corporation. There are no special interests between the Company and Shizuoka Daiichi Television Corporation.
  • Audit & Supervisory Board Member Toshiaki Nojiri concurrently serves as the Director of Nittsu Gakuen Educational Corporation and the President of Ryutsu Keizai University There are no special interests between the Company and the above entities.
  • Audit & Supervisory Board Member Yoshio Aoki concurrently serves as an Outside Corporate Auditor of NIPPON DENKO CO., LTD. and Polyplastics Co., Ltd(scheduled to retire on June 29,2020). There are no special interests between the Company and the above entities.

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.

【Board Meeting Attendance】

Directors Masahiro Sugiyama, Shigeo Nakayama and Sadako Yasuoka attended all board meetings held in 2019.
A & S Board Members Tadashi Kanki, Toshiaki Nojiri and Yoshio Aoki attended all board meetings and A & S Board Meetings held in 2019.

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, from the fiscal year ended March 31, 2017 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【Updated】

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 114th fiscal year are as follows.
    • 114th term (April 1, 2019 - March 31, 2020)
    • Compensation for Directors and Audit & Supervisory Board Members
    • Directors: 497 million yen for 14 Directors (including 38 million yen for 3 outside Directors)
    • Audit & Supervisory Board Members: 103 million yen for 5 Audit & Supervisory Board Members (including 48 million yen for 3 outside Audit & Supervisory Board Members)
  • The individual disclosures who receive 100 million yen or more in compensation for the 114th fiscal year are as follows.

    Mitsuru Saito President and Representative Director
    Total compensation: 109 million yen of which the basic compensation was 77 million yen and the company performance-based compensation was 21 million yen (Breakdown: Bonuses 14 million yen/The performance and share-based remuneration: 7 million yen) and other compensation was 10 million yen.

    Remark: Directors’ bonuses to be submitted to the 114th Ordinary General Meeting of Shareholders to be held on June 26, 2020. The performance and share-based remuneration during the current business year. This plan was introduced at the 110th Annual Shareholder Meeting on June 29, 2016. It differs from the actual amount paid.
    Other compensation includes company housing expenses, etc. paid by our company to the officers.

    And considering other compensation, the total amount of consolidated remuneration, etc. totaling 100 million yen or more in the fiscal year ended March 31, 2019 was as follows, so we announce it.

    Mitsuru Saito President and Representative Director
    Total compensation: 104 million yen of which the basic compensation was 71 million yen and the company performance-based compensation was 21 million yen (Breakdown: Bonuses 17 million yen/ The performance and share-based remuneration: 4 million yen) and other compensation was 10 million yen.

    Remark: Directors’ bonuses to be submitted to the 113th Ordinary General Meeting of Shareholders to be held on June 28, 2019. The performance and share-based remuneration during the current business year. This plan was introduced at the 110th Annual Shareholder Meeting on June 29, 2016. It differs from the actual amount paid.
    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【Updated】

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.
  • Remuneration Structure
    (1) Officers’ remuneration consists of monthly fixed remuneration and performance-based remuneration.
    (2) Outside directors receive a monthly fixed remuneration since they are independent and their roles are limited.
    (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.
  • Basic Remuneration
    Officers’ basic remuneration is determined by their roles, while taking into consideration industry standards, and is based on an investigation by an outside specialist institution.
  • Performance-Based Remuneration
    (1) As short-term performance-based remuneration, we pay bonuses using the officers’ performance per year as the indicator.
    (2) As mid-term performance-based remuneration, we pay share-based remuneration based on our company’s achievement of the mid-term business plan and improvement of corporate value (share price).

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 within those limits—the maximum is 55 million yen per month for a director (excluding a portion of the employee’s salary for directors who concurrently serve as employees), and the maximum is 1 million yen for an A & S Board Member—as resolved by the 100th Annual Shareholder Meeting held on June 29, 2006, while taking into consideration company performance, industry standards and employee salary levels.
Bonus amounts were determined at the 114th Annual Shareholder Meeting on June 26, 2020. A total of 64 million yen will be paid to the six directors, excluding the three outside directors, (as of the end of the business year) by taking into consideration our normal bonus payments and their performance during the year.
Separate from the above remuneration, the introduction of a performance and share-based remuneration system for directors and corporate officers (excluding outside directors and those who do not reside in Japan) with a goal to further enhance the motivation of officers to contribute to the improvement of our company’s performance and corporate value over the mid to long-term was determined at the 110th Annual Shareholder Meeting on June 29, 2016. Both the continuation and partial amendment of this system were resolved at the 113th Annual Shareholder Meeting on June 27, 2019.
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 based on the committee’s report.

[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.

[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)
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 August 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)
(Plan to change to 800 million yen by changing the August 2019 trust agreement)
13 Share acquisition period August 8, 2019 to August 9, 2019
14 Share acquisition method Purchased from the stock market
15 Rights holder Our company(Nippon Express)
16 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.

Regarding indicator of Performance-based Compensation plan, as short-term performance-based remuneration, we pay bonuses using the officers’ performance per year as the indicator, and as mid-term performance-based remuneration, we pay share-based remuneration based on our company’s achievement of the mid-term business plan including consolidated Revenues, Operating income and ROA (ROE, upon approval at the annual shareholder meeting in June 2019) and, etc. These are the same target of our company`s business plan and we select them as performance evaluation indicators because the remuneration plan is for incentive to achievement of business plan`s numerical target.
Our performance and share-based remuneration is managed by a point system with one company share per point. (We adjusted the points after the reverse stock split on October 1, 2017.) In July each year, the “share-based remuneration per role” divided by the “system-standard share price” is given as the standard point for the individual entitled to receive it.
The evaluation period is the same time period as our company’s business plan. We set performance evaluation indicators in accordance with the business plan and conduct an evaluation each business year. As the level corresponding to the achievement of performance goal set as the standard at 100 percent, we adjust the points between 0 and 150 percent for all the mid-term evaluations at the end of each business year and the evaluation period. After conducting a final evaluation, we determine the number of points.
After the end of each business plan, we grant the same number of shares as the points. Half of the shares each eligible individual holds is delivered in the form of a company share, rounding down any share less than one unit. Our company’s shares corresponding to the remaining points are sold in order to use a portion for tax payments, including income taxes. The individual receives the amount after taxes in the form of cash.
In the current business year, an achievement of indicators related to the performance and share-based remuneration are 99.5 percent in consolidated sales, 106.1 percent in consolidated operating income and 115.4 percent in consolidated return on assets (ROA) against the business plan`s numerical target.

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

The General Affairs 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 Audit 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 Names, etc. of Consultants, Advisors, etc. Who Are Former President and Representative Director, etc.

Name Roles and Positions Work Description Work Style and Condition
(Full-time/Part-time, with or without Compensation, etc.)
Date of Retirement as President, etc. Term
Shoichiro Hamanaka Senior Advisor External activities and such at industry organizations, etc. Part-time,with compensation June 27, 2003 Undetermined
Masahiko
Okabe
Senior Advisor External activities and such at industry organizations, etc. Part-time,with compensation June 29, 2011 Undetermined
Masanori
Kawai
Senior Advisor External activities and such at industry organizations, etc. Part-time,with compensation June 29, 2017 Undetermined
The Total Number of Senior Advisors, Consultants, etc., Who Are Former President and Representative Director, etc. 3

Other Matters

  • Our Company does not provide an advisor and consultant system in its Articles of Incorporation. Though we have established internal rules regarding the treatment of advisors and consultants who are not involved in management, we currently have no consultants in office.
  • Although advisors are involved in external activities at industry organizations, etc., that would bring value to the development of our company and the logistics industry utilizing their experience and knowledge obtained through engagement in the management and sales of our company, they do not have any authority that may have an impact on management judgment and are not involved in any managerial decision-making.
  • "Date of Retirement as President, etc." in the above table shows the date of retirement as the Chairman and Representative Director, Chairman and Director, or Director of our company.

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

  • (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 and business execution.
  • (ⅱ) Business Execution and Supervision
    • To guarantee transparency and legality through deliberation, decisions concerning company operations will be made at Meetings of the Board of Directors at which 3 outside Directors and 5 Audit & Supervisory Board Members, including 3 outside Audit & Supervisory Board Members are present. Alternatively, such decisions can be made at Board of Executive or Board of officers at which 3 full-time Audit & Supervisory Board Members, including 1 outside Audit & Supervisory Board Member, are present—or at division manager meetings at which the division managers of the Head Office are present.
    • Duties will be carried out by the executive officers selected by the Board of Directors to perform the duties in accordance with Board of Directors resolutions, and the Board of Directors will oversee the performance of the duties.
    • The Board of Directors resolves matters defined by laws, regulations and the Articles of Incorporation, as well as matters concerning important business executions. However, with the aim of facilitating a rapid decision-making process and enhancing the supervisory function of the Board of Directors, we have established management meetings as the location to discuss overall execution policies, and decision on matters concerning each business to be executed is delegated as much as possible, to an Executive Officer who is responsible for the execution of business.
    • Our business execution system consists of four sections and seven headquarters under the president. A certain level of authority is given to each section and headquarters, and our company executes business plans swiftly as a single management unit.

    [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: 9 directors (as of June 2020, the number stipulated by the Articles of Incorporation: 15)

      Breakdown of the Board of Directors: 6 internal directors (5 of them are also executive officers) and 3 outside directors (one of them is 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. (Seventeen meetings were held in 2019.)
    • Attendance Rates (Average): Directors 100%/Audit & Supervisory Board Members 100%
    • 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 management meetings—the consultation organization for business execution—prior to the board meetings, executive directors and full-time Audit & Supervisory Board Members should attend each board meeting with full understanding of the proposals. 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 and invigorating board deliberations.
    • Major Proposals of 2019:
      Matters designated by laws including the Companies Act (Resolutions of general shareholder meetings, selection of executive officers, etc.), management plan progress reports (our company was summarizing the previous management plan in 2019), progress reports on discussions and negotiations of important investment-related matters such as resolutions of stock acquisitions via M&A, policies on cross-shareholdings and verifications of the companies our company is still holding shares for, amendments of our corporate governance system and other company rules, reports from each executive officer, etc.
    • Effectiveness of the board:
      Our company conducts questionnaires regarding the effectiveness of the Board of Directors 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.

    <Status of handling issues extracted from the questionnaires (Examples of recent improvements)>

    • Strengthening monitoring over business execution by reviewing the management plan, important investment matters and progress reports of each strategy
    • Reviewing the structure of the Board of Directors (at least one third of them are outside directors), etc.

    <Effectiveness evaluation in 2019 (for the fiscal year ending in March 2020)>

    〇 Questionnaire by an outside institution, results of evaluation

    • Time Period: March to April 2020
    • 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 Ethics and Risk Management,” “Evaluation of Management, Remuneration Status,” etc.
      Evaluation based on the answers to a total of 19 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.
      (Compared with last year’s results, the majority of the matters brought up last year have been improved upon or resolved.)

    <Items highly evaluated>

    • The proportion of outside directors within the Board of Directors is one third. (Board structure)
    • The chairperson of the board is a non-executive officer and runs the board fairly and effectively (Board management)
    • The board provides briefing to outside officers before each meeting, and this is a great opportunity for officers to understand each proposal (Board management)
    • The board provides detailed explanations on management’s opinions of important matters and strategies. (Management strategies)
    • The board pays attention to capital costs when it makes decisions on management and business strategies. (Management strategies)
    • The management places importance on compliance of corporate ethics and risks. (Corporate ethics)

    〇 Reporting to the board and discussions for improvement
    In order to improve efficiency further: In order to improve the efficiency of the board further, our board will continue to review its management and system development.
    The board will strengthen its supervisory function through a review of essential topics—out of those the board is continuously dealing with—and determine how these should be reported.

    [Board of Executive]

    • Roles: Discussion of policies related to overall business execution, decision making when requested by the Board of Directors
    • Chairperson: President
    • Structure: Board directors and executive directors working in the metropolitan Tokyo area (6 board directors and 19 executive officers, as of the date this document was submitted)
      Full-time Audit & Supervisory Board Members and division general managers
    • Frequency: Twice a month and as necessary

    [Board of Officers]

    • Roles: Notifying resolutions of the Board of Directors and instructions from the president and each division manager of the Head Office to all executive officers, reporting on business execution status, and discussing important matters
    • Chairperson: President
    • Structure: 34 executive officers (5 of them are also board directors)
      Full-time Audit & Supervisory Board Members and division general managers
    • Frequency: Once a month and as necessary
  • (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. The board had eight meetings in 2019, and the attendance rate of the members was 100 percent. The Audit & Supervisory Board 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 audit items the Audit & Supervisory Board focused on in 2019 were as follows:
        Compliance status of laws, regulations, Articles of Incorporation and other internal rules, progress of the “Nippon Express Group Business Plan 2023—Dynamic Growth,” development and achievement of business projects, status of asset maintenance, establishment and operation of an internal control system, operational status of subsidiaries and affiliates (including those overseas)
    • Internal Auditing Division
      • For internal auditing, our company established the Auditing Division in the Head Office. According to the annual audit plan, our company conducts internal audits of our branches and subsidiaries (both in Japan and overseas) and internal control audits related to financial reporting based on Japan’s Financial Instruments and Exchange Act. The result of the internal audit is sent to the president and the Audit & Supervisory Board Members via the Dual Reporting Line.
    • Accounting auditor
      • Ernst & Young ShinNihon 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.
      • The names of the certified public accountants who performed the audit operations at the aforementioned audit firm in FY2019 and the individuals who assisted in these audit operations are listed below:

        <Names of certified public accountants who performed audit operations>
        Designated limited liability partners and engagement partners: Yasuharu Nakajima, Ichiro Ogawa, Chihiro Yasunaga

        The lengths of these auditors’ consecutive audit periods have been omitted as the above auditors have conducted audits for less than seven years.
        Number of persons assisting auditing operations: 25 certified public accountants, 72 others

  • (ⅴ) Overview of Agreements to Limit Liability
    • In accordance with the Articles of Incorporation, our company and outside Directors Masahiro Sugiyama, Shigeo Nakayama, Sadako Yasuoka, outside Audit & Supervisory Board Members Tadashi Kanki, Toshiaki Nojiri, and Yoshio Aoki 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

By including 3 outside Directors among 9 Directors, our company aims to draw on the knowledge of outside experts in making important management decisions, and to strengthen the function of the Board of Directors in supervising business execution.
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.

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