Basic Policy

On the basis of our corporate philosophy of providing safety, comfort and a sense of security in daily lives as well as any form of transportation with our unique motion control technology, the Nabtesco Group will endeavor to strengthen its corporate governance by practicing the Nabtesco Way, in order to achieve sustained growth of the group, enhance corporate value over the medium and long term and earn greater trust from our stakeholders.

We have developed the “Nabtesco Corporate Governance Basic Policy” by taking fully into account the intent and spirit of the Corporate Governance Code prescribed by Tokyo Stock Exchange, Inc.

We are implementing all general principles provided for in the revised Corporate Governance Code released on June 11, 2021, including those to be applied to companies listed on the Prime Market following the launch of the Tokyo Stock Exchange’s new market segments in April 2022.

Decision made by: Board of Directors
Enactment date: October 30, 2015
Effective date: October 30, 2015
Amendment date: December 1, 2023

Based on the resolution of the Board of Directors, Nabtesco has enacted the following basic policy (hereinafter referred to as the “Policy”) to set out its basic approach, framework and policy with regard to corporate governance.

Based on its corporate philosophy, which states, “The Nabtesco Group, with our unique motion control technology, will provide safety, comfort and a sense of security in daily lives as well as any form of transportation,” Nabtesco shall endeavor to enhance its corporate governance with the aim of realizing its sustainable growth, enhancing its medium- to long-term corporate value and earning the greater trust of its stakeholders through the implementation of “The Nabtesco Way”(Appendix).

(1) Nabtesco shall treat its shareholders equally in accordance with the class and number of shares which they hold and shall take appropriate action in order to substantially ensure equal shareholder rights including the exercise of voting rights at the General Meeting of Shareholders.

(2) Nabtesco shall endeavor to develop an environment in the following way, whereby its shareholders are ensured a sufficient period of time to consider proposals submitted to the General Meeting of Shareholders and can appropriately exercise their voting rights.

1. (i)Nabtesco shall send the notice of convocation of the Ordinary General Meeting of Shareholders three weeks prior to the Meeting.
2. (ii)Nabtesco shall make the content of the notice of convocation available at the Tokyo Stock Exchange, its website and other places prior to sending it to shareholders.
3. (iii)Nabtesco shall develop an environment whereby it is ensured that all shareholders who cannot attend the General Meeting of Shareholders can appropriately exercise their voting rights through the online voting system and an electronic platform for exercising voting rights.
4. (iv)Nabtesco shall disclose English translations of the notice of convocation and reference materials for the General Meeting of Shareholders, business reports and financial statements available at the Tokyo Stock Exchange, its website and other places as a reference for its shareholders in Japan and overseas in exercising their voting rights.

(3) With regard to a proposal submitted by the company against which a considerable number of dissenting votes are cast at the General Meeting of Shareholders, Nabtesco shall analyze the cause of the voting trend and share the result of the analysis at its Board of Directors’ Meeting and shall consider the necessity of having a dialogue with its shareholders or taking other responses as necessary.

(1) Nabtesco shall work to maintain a sound financial foundation and, in order to increase its corporate value based on sustainable growth, shall return profit to shareholders in a flexible manner in comprehensive consideration of capital cost-conscious growth investment, the market environment and Nabtesco’s financial situation.

(2) With regard to capital policies that may result in a change of control or significant dilution, Nabtesco’s Board of Directors shall make rational decisions, with sufficient consideration given to their effects.

(3) In implementing capital raising that may result in significant dilution, Nabtesco shall make resolutions after sufficient deliberation by the Board of Directors on the use of capital and collection programs and shall provide explanations to its investors and shareholders.

(1) “Strategically-held shares” provided in paragraphs (2) and (3) of this Article shall mean listed shares which Nabtesco strategically holds with the aim of maintaining and strengthening business relationships with its business partners etc. (excluding its affiliated companies).

(2) Nabtesco shall hold strategically-held shares only in cases where such shareholdings contribute to maintaining and enhancing its corporate value. Under a basic policy under which it shall as soon as possible dispose of and reduce strategically-held shares which it finds little significance to holding in light of circumstances as of the end of an immediate fiscal year, Nabtesco shall verify various points concerning each individual stocks, such as whether the purpose of holding the stock is appropriate and whether the benefits and risks accompanied with holding the stock are balanced with capital costs, based on a certain criterion and shall review whether it should continue to hold the stock and the number of shares of the stock which it holds at the Board of Directors’ Meeting every year. Nabtesco shall without delay sell a stock which it finds it inappropriate to continue to hold as a result of the verification in consideration of the stock price, market trends, etc.

(3) With regard to voting rights concerning its strategically-held shares, Nabtesco shall examine the details of proposals and shall exercise its voting rights after making decisions comprehensively from the viewpoint of whether or not such proposals contribute to the enhancement of the corporate value of the issuers and Nabtesco. With regard to a proposal which has a great influence on the corporate value and shareholders’ common benefits (for example, (i) a proposal to elect an officer when a major scandal occurs or a deficit consecutively continues for a certain period, (ii) a proposal for organizational restructuring including merger, (iii) a proposal for takeover defense measures, etc.), Nabtesco shall confirm its purpose and view for enhancing the corporate value and shall decide whether it votes for the proposal or not; provided, however, that it shall vote against a proposal which would clearly damage the corporate value of Nabtesco as a shareholder.

(4) Nabtesco shall not conduct economically irrational transactions with business partners which strategically hold Nabtesco shares. If those business partners indicate their intention to sell Nabtesco shares, Nabtesco shall not engage in acts designed to prevent their sales, such as suggesting a possible reduction of its transactions with them.

(1) Nabtesco shall obtain the approval of the Board of Directors when conducting competing transactions and transactions involving any conflict of interest, which are stipulated in laws and regulations, with its Officers (Directors and Executive Officers). In addition, when conducting such transactions, Nabtesco shall disclose material facts pursuant to laws and regulations.

(2) In order to prevent insider trading of Nabtesco shares etc. by its related parties, Nabtesco shall specify matters that shall be adhered to with regard to the management of its material facts as well as the trading etc. of Nabtesco shares etc. by its officers and employees etc. and shall ensure strict compliance with them.

Nabtesco shall make appropriate responses to those making or intending to make a large-scale purchase of its shares, including requesting them to provide explanations on measures to realize the sustainable growth of the company as well as to enhance its medium- to long-term corporate value, while also disclosing related information such as its Board of Directors’ recommendations regarding the purchase and working to provide shareholders with adequate time and information to make an appropriate assessment of the pros and cons of any such purchase.

(1) Nabtesco shall endeavor to engage in appropriate collaboration with its stakeholders by fully recognizing that its sustainable growth and the generation of medium- to long-term corporate value are the results of resources provided by and contributions made by various stakeholders (customers, employees, business partners, local communities, shareholders, etc.).

(2) Based on its management materiality (material management issues), Nabtesco shall proactively work for the continuous creation of economic, environmental and social value from a long-term viewpoint.

Having formulated the “Nabtesco Group Code of Ethics” with the objective of ensuring that corporate activities are conducted in accordance with even higher ethical standards, Nabtesco shall strictly implement corporate ethics.

Nabtesco shall issue an integrated report once a year as a means of reporting in a multifaceted manner to its stakeholders its initiatives for solving ESG challenges and activities for achieving sustainable development in addition to information on its management strategies, business situation, management system and financial performance.

(1) Nabtesco shall endeavor to attain a diverse workforce through non-discriminatory hiring in terms of sex, nationality and disability.

(2) Nabtesco shall make efforts to develop an environment where each individual employee can fully demonstrate his/her capabilities and unique personal characteristics.

Nabtesco shall disclose information pursuant to the Companies Act, the Financial Instruments and Exchange Act and other laws and regulations as well as the Timely Disclosure Rules stipulated by the Tokyo Stock Exchange, on which Nabtesco shares are listed. In addition, Nabtesco shall endeavor to disclose both financial and non-financial information that is not necessarily subject to the above-mentioned disclosure, including non-financial information about sustainability, in cases where such information is deemed to be useful in helping investors make decisions.

Nabtesco shall have the Audit & Supervisory Board and the accounting and finance department cooperate with each other in securing an audit schedule and audit structure in order to ensure that audits by the Accounting Auditors are adequately conducted.

Nabtesco shall choose the Company with Audit & Supervisory Board as its organizational structure under the Companies Act.

To recognize fiduciary responsibilities to shareholders and enhance its sustainable medium- to long-term corporate value as well as its earnings power, capital efficiency, etc., the Board of Directors shall have the roles and responsibilities specified in the following items:

1. (i) to establish the corporate philosophy, corporate strategy, etc. and determine its strategic directions;
2. (ii)to develop an environment to support adequate risk-taking by management; and
3. (iii) to supervise the Directors, the Executive Officers, etc. effectively from an independent and objective standpoint.

Nabtesco shall establish the “Group Regulations for Responsibility and Authority” and shall specify matters to be resolved, deliberated and reported at the Board of Directors’ Meeting as well as matters to be delegated to management personnel. Specifically, matters that require resolutions by the Board of Directors and significant management-related matters pursuant to the provisions of laws and regulations and the Articles of Incorporation shall be determined by the Board of Directors and all other matters shall be delegated to management personnel.

(1) The Board of Directors shall comprise no more than ten Directors, of whom at least one-third shall be Independent Outside Directors.

(2) With the aim of maximizing the functions to fulfill the roles and responsibilities of the Board of Directors, Nabtesco shall have it comprised of highly diverse members in terms of business backgrounds, areas of expertise, gender, international experience, age, etc., and shall, from both inside and outside of the company, elect candidates who have superior character, insights, capabilities, a high level of expertise and ethics as well as ample experience as Directors.

The Board of Directors shall endeavor to foster a culture that respects free and open-minded constructive discussions and opinion exchange. Details of its operations shall be specified in the “Regulations of the Board of Directors”. In order to ensure that Outside Directors can participate actively in discussions, the Secretariat for the Board of Directors shall provide sufficient information by determining handouts, deliberation matters, the annual schedule, etc. in advance while ensuring appropriateness in terms of frequency of meetings, deliberation time, the number of items to be deliberated, etc.

(1) Nabtesco shall ensure that at least one-third of the members of its Board of Directors are Independent Outside Directors who can provide advice that contributes to the enhancement of its sustainable medium- to long-term corporate value as well as supervise management etc. Moreover, at least one of them shall have management experience outside of Nabtesco.

(2) All Independent Outside Directors shall be those who have ample experience, broad insights and diverse stakeholder perspectives as well as shall meet all of the in-house “Criteria for the Impartiality of Outside Directors/Audit & Supervisory Board Members” (Appendix).

(3) Independent Outside Directors shall convene and hold meetings comprising only Independent Outside Directors/Audit & Supervisory Board Members as required and shall endeavor to exchange information and share awareness through free discussions based on their objective standpoints, which are independent from business execution.

(1) The Audit & Supervisory Board shall recognize fiduciary responsibilities to shareholders, shall proactively exercise its authority concerning audits on the execution of Directors’ duties, election and dismissal of Audit & Supervisory Board Members and External Accounting Auditors and remuneration for audit services from an independent and objective standpoint and shall adequately express opinions at the Board of Directors’ Meeting etc.

(2) The Audit & Supervisory Board shall aim to collaborate with the Group’s internal audit department through the “Audit Council”, and shall collaborate with Independent Outside Directors to share information and exchange opinions as required.

(3) The Audit & Supervisory Board shall fulfill its roles and responsibilities in accordance with procedures, audit criteria, etc. stipulated in the “Regulations of the Audit & Supervisory Board” and the “Criteria for Audits by Audit & Supervisory Board Members”.

(1) The Audit & Supervisory Board comprises five and fewer Audit & Supervisory Board Members, more than half of whom shall be Independent Outside Audit & Supervisory Board Members.

(2) With the aim of maximizing the functions of Audit & Supervisory Board Members to fulfill the roles and responsibilities of the Audit & Supervisory Board, Nabtesco shall, from both inside and outside of the company, elect candidates who have excellent characters, insights, capabilities, financial, accounting and legal knowledge necessary for audit, a high level of expertise and ethics as well as ample experience; one or more of whom shall have a sufficient degree of knowledge and experience in the fields of finance and accounting.

(3) The Audit & Supervisory Board shall ensure its effectiveness by organically combining the strong independence of Independent Outside Audit & Supervisory Board Members with the advanced information-gathering capability of Audit & Supervisory Board Members in order to fulfill the roles and responsibilities of the Audit & Supervisory Board specified in the preceding paragraph.

(4) All Independent Outside Audit & Supervisory Board Members shall meet all of the in-house “Criteria for the Impartiality of Outside Directors/Audit & Supervisory Board Members” (Appendix).

(1) Nabtesco shall establish the Nomination Committee as a consultative body of the Board of Directors to deliberate the nomination of candidates for Director, Audit & Supervisory Board Member, CEO and Representative Director positions as well as a plan for successor to the CEO etc., and to report to the Board of Directors.

(2) The Nomination Committee shall comprise five and fewer members, including one Internal Director and three or more Independent Outside Directors/Audit & Supervisory Board Members.

(3) The Nomination Committee shall establish fair and transparent basic policies and rules in order to execute its duties.

(1) Nabtesco shall establish the Remuneration Committee as a consultative body of the Board of Directors to deliberate the remuneration etc. of management personnel and to report to the Board of Directors.

(2) The Remuneration Committee shall comprise five and fewer members, including one Internal Director and three or more Independent Outside Directors/Audit & Supervisory Board Members.

(3) The Remuneration Committee shall establish fair and transparent basic policies and rules in order to execute its duties.

(1) In nominating candidates for Director positions and electing the CEO and appointing the Representative Director, the Board of Directors shall, in accordance with Articles 16 and 18, nominate, elect and appoint those who can contribute to the growth of the entire Nabtesco Group and the enhancement of its management as members of the management team in light of their experience and capabilities, etc. The Board of Directors shall nominate candidates for Audit & Supervisory Board Members upon the approval of the Audit & Supervisory Board in accordance with Article 20.

(2) The Board of Directors shall receive reports from the Nomination Committee in order to strengthen the independence, objectivity and accountability of the election etc. specified in the preceding paragraph.

(3) The Board of Directors shall develop a plan for a successor to the CEO considering the reports from the Nomination Committee and shall supervise its implementation.

(4) If the CEO or Representative Director commits any wrongdoing such as a violation of laws and regulations or finds it difficult to execute his/her duties due to mental or physical disability or if there is any reasonable ground to believe that he/she is disqualified as CEO or Representative Director, the Board of Directors shall make a decision on his/her dismissal or removal after deliberation by the Nomination Committee.

(1) In deciding the remuneration etc. of management personnel, the Board of Directors shall receive reports from the Remuneration Committee and shall make concrete decisions at its meetings in order to strengthen independence, objectivity and accountability.

(2) In order to ensure that remuneration etc. of management personnel functions as a sound incentive toward the its sustainable growth, the following policies have been set out:

1. (i)The compensation structure of management personnel shall comprise “monthly compensation,” which is made up of fixed compensation and performance-linked compensation that reflects short-term performance, and a “stock compensation,” which are offered in consideration of medium- to long-term performance. ROIC and current income for improving ROE shall be key indicators as performance indicators. With regard to the operating divisions, the amount of remuneration to be paid shall be decided according to the degree of achievement of targets, such as net sales, operating profit, R&D indicators, environmental indicators, etc. However, the compensation standard and its configuration shall be reviewed as necessary and as appropriate according to changes in the business environment.
2. (ii)Remuneration of Independent Outside Directors shall be fixed compensation only, due to their roles and from the perspective of upholding independence.

(3) Remuneration etc. of Audit & Supervisory Board Members shall be decided in consultation with Audit & Supervisory Board Members. The compensation structure of Audit & Supervisory Board Members shall be fixed compensation only, with no performance-based compensation, due to the nature of the audit functions.

The Board of Directors shall conduct analysis and assessment of the effectiveness of the Board of Directors every year based on the self-assessment etc. of each Director and shall disclose a summary of the results of such analysis and assessment.

(1) Nabtesco shall proactively develop a support system for Directors and Audit & Supervisory Board Members in order to ensure that Directors and Audit & Supervisory Board Members can fulfill their roles and responsibilities effectively.

(2) Directors and Audit & Supervisory Board Members shall proactively obtain information in the form of information provided by the company and advice etc. from external specialists in order to fulfill their roles and responsibilities effectively.

(1) Prior to joining the Group, newly appointed Directors and Audit & Supervisory Board Members shall receive training provided by the company’s legal and compliance officers or external training organizations with regard to their roles and responsibilities including corporate governance and legal responsibilities. However, Independent Outside Directors and Independent Outside Audit & Supervisory Board Members shall receive such training as necessary in light of their own knowledge, capabilities, expertise, etc.

(2) When joining the company, newly appointed Independent Outside Directors and Independent Outside Audit & Supervisory Board Members shall be provided with explanations on the Nabtesco Group’s corporate philosophy, businesses, finance, organization, etc. in order to deepen their understanding of the Group’s business operations. In addition, Nabtesco shall provide newly appointed Independent Outside Directors and Independent Outside Audit & Supervisory Board Members with opportunities to visit and inspect its plants or offices as necessary.

(3) All Directors and Audit & Supervisory Board Members shall participate in training sessions that are held regularly in order to update their knowledge.

(1) Nabtesco shall develop the “Basic Policies for the Construction of an Internal Control System” pursuant to the Companies Act. The Board of Directors shall regularly check whether such policies are implemented effectively.

(2) Nabtesco shall establish the Compliance Committee as a consultative body of the Board of Directors and shall have such body formulate and amend the “Nabtesco Group Code of Ethics”, deliberate on key issues concerning the Nabtesco Group's compliance system and report to the Board of Directors. The Compliance Committee shall comprise members including Independent Outside Directors/Audit & Supervisory Board Members and external experts.

(3) Nabtesco shall develop and appropriately operate a whistle-blower system with the aim of discovering and correcting violation of laws and regulations by the Nabtesco Group at an early stage.

(1) Nabtesco shall, from among management personnel, appoint a person who oversees and is responsible for the entirety of communications with shareholders and investors and shall endeavor to realize constructive dialogue with its shareholders and investors, which contributes to its sustainable growth and the enhancement of medium- to long-term corporate value, through collaboration among relevant departments led by an IR department. As efforts to increase a means of dialogues other than individual interviews, Nabtesco shall proactively offer opportunities for dialogues with shareholders and investors through the issuance of a range of publications, which complements timely information disclosure, or the holding of explanatory meetings on performance and business.

(2) In holding dialogues with shareholders and investors, Nabtesco shall not only disclose information in a timely, appropriate and fair manner but also shall announce the its efforts to enhance shareholder value, while aiming to understand the views of shareholders and investors about the company and share them internally through feedback to management personnel and relevant departments.

(3) Nabtesco shall appropriately manage insider information in accordance with the internal regulations.

Amendments and abolition of the Policy shall require a resolution by the Board of Directors.