Corporate Governance Report (Last updated on July 14, 2021)
Fundamental policy of corporate governance
We want to be a valuable presence for all stakeholders, including shareholders and investors, business partners, employees, local communities, and everyone who uses our products.
To achieve this goal, we believe that corporate governance must be implemented as a corporation not only by ensuring strict compliance with laws and regulations, but also by implementing appropriate risk management measures so as to act flexibly and sufficiently according to the ever-changing socio-economic environment. Thoroughly disseminating and putting into practice this policy is exactly what we believe corporate governance is all about.
Based on this fundamental policy mentioned above, we endeavor to implement corporate governance to the fullest extent as a priority issue and to promote reinforcement of Group management.
Nifco's Corporate Governance
(1) Brief explanation of the organizations within the company
With approval obtained at the general meeting of shareholders on June 24, 2021, Nifco has transitioned from a company with a board of auditors to a company with an audit and supervisory committee.
As of the date above, there are nine directors (including five outside directors). Three of these directors (including two outside directors) are also members of the audit and supervisory committee.
Five of the nine directors on the board of directors are from outside the organization so that they can bring new perspectives and opinions differing from those within the company which can then be reflected and used in management.
In addition, our company has an executive officer system for the purpose of ensuring a clear awareness and effectiveness of the management decision-making and supervisory functions as well as the business execution function.
Furthermore, to ensure that business operations are conducted appropriately, we have established various committees under the board of directors, including the risk management committee, the compliance committee, and the information security committee.
These committees are responsible for verifying whether the execution of business by the executive officers is being carried out appropriately and for ensuring efficient business execution.
We will explain the function of the board of directors, the audit and supervisory committee, and outside auditor as follows.
1) Board of Directors
The board of directors holds a regular meeting once a month in principle and other meetings from time to time as necessary to make corporate decisions and draw up strategies for business management of subsidiaries.
The board of directors endeavors in this way to enhance the business performance and drive the growth of the entire Group as well as reinforce corporate governance.
In addition to the board meetings, the directors also consult thoroughly on important management matters at the monthly management meeting and ensure that these decisions are quickly and smoothly performed.
Furthermore, when necessary, the directors have the relevant executive officer and general manager of the division attend the management meetings to receive reports on the status of execution and management of pending matters and provide appropriate instructions, thereby improving the efficiency of the execution of duties.
Through such communication, we have established a system that enables the decisions, policies, and instructions of directors to be communicated to all of the organization and that enables executive officers and other executives to perform their duties in an integrated and efficient manner.
2) Audit and Supervisory Committee
The audit and supervisory committee is responsible for auditing and supervising the execution of duties by the directors on the board of directors and other committees in accordance with the audit and supervisory committee’s standards.
Unlike conventional auditors, directors who are also members of the audit and supervisory committee have voting rights on the board of directors.
By giving a director in charge of auditing greater authority than a conventional auditor, we will enhance the auditing and supervisory functions of the company and further strengthen corporate governance.
3) Outside Auditor
Our company is subject in a fair and legal manner to accounting audits conducted by KPMG AZSA LLC, which acts as the outside auditor of our company under the audit contract.
To increase the independence, objectivity, and transparency of the procedures for determining compensation, the nomination, compensation, and governance committee, run by the chairman and the majority of committee members acting as independent outside directors, was established as an advisory body to the board of directors.
The nomination of directors is in accordance with the advice and recommendations of the nomination, compensation, and governance committee.
(2) Corporate Governance Framework
(3) Basics of the internal control systems
We have passed resolutions on the following items to ensure that the execution of duties by directors is in compliance with laws, regulations and, the articles of incorporation and to ensure other systems are in place to assure the appropriateness of business operations.
These revisions were made to accommodate the transition to being a company with an audit and supervisory committee and resolved at the board of directors meeting held on June 24, 2021.
System to ensure that the execution of duties by directors and employees complies with laws, regulations, and the articles of incorporation.
System for the storage and management of information related to the execution of duties by directors
Regulations and other systems for managing the risk of loss
System to ensure the efficient execution of duties by directors
System to ensure appropriate operations within the Nifco Group
System concerning directors and employees who are to assist the audit and supervisory committee in its duties, matters concerning the independence of these employees from the directors, and matters concerning the execution of instructions concerning such employees
Systems for employees and directors, excluding those who are on the audit and supervisory committee, to report to the aforementioned committee
System to ensure that audits by the audit and supervisory committee are conducted effectively
In the event that anti-social forces approach, such forces will be blocked and eliminated under the supervision of the compliance committee without responding to unreasonable demands, etc.
We have also concluded a memorandum of understanding with our business partners involving the strict adherence to exclude antisocial forces from any business relationship.
(4) Reason for choosing the current system of corporate governance
At the board of directors meeting held on June 24, 2021, the company resolved to amend the articles of incorporation regarding the transition to a company with an audit and supervisory committee, and the company officially transitioned on the same date from a company with a board of auditors to a company with an audit and supervisory committee.
This is to enhance the auditing and supervisory function of the board of directors and further enhance corporate governance by making members of the audit and supervisory committee, who are responsible for auditing the execution of duties by directors, members of the board of directors and granting them voting rights on the board of directors.
At Nifco, the majority of directors are outside directors. In this case, a company with an audit and supervisory committee will be able to delegate decision making on important business matters from the board of directors to executive directors (those directors who are not members of the audit and supervisory committee). This will enable expeditious decision making led by executive directors.
By transitioning to a company with an audit and supervisory committee, Nifco will further strengthen its management base and aim to become a company that continues to grow in a stable manner.