Nabtesco Corporate Governance Basic PolicyOpenClose
Decision made by: Board of Directors
Person in charge of administration: General
Manager, General Administration Dept.
Enactment date: October 30, 2015
Effective date: October 30, 2015
Amendment date: October 31, 2018
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.
Chapter 1: General Provisions
Basic Approach 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”.
Chapter 2: Ensuring Shareholder Rights and Equality
General Meeting of Shareholders
(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.
- (i) Nabtesco shall send the notice of convocation of the Ordinary General Meeting of Shareholders three weeks prior to the Meeting.
- (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.
- (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.
- (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.
Basic Capital Policy
(1) Nabtesco shall engage in capital cost conscious business management in consideration of return on assets (ROA) and return on equity (ROE) targets in order to maintain and enhance shareholder value. In addition, to prepare for sudden changes in the economic environment, Nabtesco shall aim at keeping a capital-to-asset ratio whereby it can maintain a high credit rating so that it can raise capital irrespective of financial situations.
- (2) With regard to capital policies that may result in a change of control or significant dilution, Nabtesco shall make rational decisions in sufficient consideration of their effects on the above-mentioned targets at the Board of Directors.
- (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.
- (4) Nabtesco shall pay out dividends by setting a certain consolidated dividend payout ratio. Nabtesco shall acquire its treasury shares at an appropriate time with the aim of enhancing its capital efficiency in view of comprehensive circumstances such as the market environment and its financial performance.
Basic Policy on Strategic Shareholdings and Exercising of Voting Rights Concerning Strategically-held Shares
(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.
Related Party Transactions
(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.
Takeover Defense Measures
(1) Nabtesco has not adopted takeover defense measures.
- (2) In cases where Nabtesco shares become the target of a tender offer, the Board of Directors shall request such tender offerors etc. to provide explanations on measures to realize sustainable growth of the company as well as to enhance its medium- to long-term corporate value.
Chapter 3: Appropriate Collaboration with Stakeholders
Collaboration with Stakeholders
(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, etc.).
- (2) Nabtesco shall proactively deal with challenges concerning sustainability including social and environmental issues in accordance with the “Nabtesco Group’s CSR Basic Policy,” the “Nabtesco Group Environmental Philosophy/Environmental Action Plan,” the “Nabtesco Group Human Rights Policy,” etc.
Code of Ethics
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.
Promotion of Diversity
(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.
Chapter 4: Adequate Information Disclosure and Securing Transparency
Criteria for Information Disclosure
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 in cases where such information is deemed to be useful in helping investors make decisions.
External Accounting Auditors
Nabtesco shall have the Board of Corporate Auditors 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.
Chapter 5: Enhancement of Corporate Governance System
Nabtesco shall choose the Company with Board of Corporate Auditors as its organizational structure under the Companies Act.
Roles and Responsibilities of the Board of Directors
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:
- (i) to establish the corporate philosophy, corporate strategy, etc. and determine its strategic directions;
- (ii) to develop an environment to support adequate risk-taking by management; and
- (iii) to supervise the Directors, the Executive Officers, etc. effectively from an independent and objective standpoint.
Delegation to Management Personnel
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.
Composition of the Board of Directors
(1) The Board of Directors shall comprise no more than ten Directors, two or more of who 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 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.
Operations of the Board of 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.
Independent Outside Directors
(1) Nabtesco shall elect two or more 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.
- (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 Officers”.
- (3) Independent Outside Directors shall convene and hold meetings comprising only Independent Outside Officers 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.
Roles and Responsibilities of the Board of Corporate Auditors
(1) The Board of Corporate Auditors shall recognize fiduciary responsibilities to shareholders, shall proactively exercise its authority concerning audits on the execution of Directors’ duties, election and dismissal of 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 Board of Corporate Auditors 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 Board of Corporate Auditors shall fulfill its roles and responsibilities in accordance with procedures, audit criteria, etc. stipulated in the “Regulations of the Board of Corporate Auditors” and the “Criteria for Audits by Corporate Auditors”.
Composition of the Board of Corporate Auditors
(1) The Board of Corporate Auditors comprises five and fewer Corporate Auditors, more than half of whom shall be Independent Outside Corporate Auditors.
- (2) With the aim of maximizing the functions of Corporate Auditors to fulfill the roles and responsibilities of the Board of Corporate Auditors, 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 Board of Corporate Auditors shall ensures its effectiveness by organically combining the strong independence of Independent Outside Corporate Auditors with the advanced information-gathering capability of Corporate Auditors in order to fulfill the roles and responsibilities of the Board of Corporate Auditors specified in the preceding paragraph.
- (4) All Independent Outside Corporate Auditors shall meet all of the in-house “Criteria for the impartiality of Outside Directors and Outside Corporate Auditors” (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, Corporate Auditor, 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 three to five members, with a majority being Independent Outside Officers.
- (3) The Nomination Committee shall establish fair and transparent basic policies and rules in order to execute its duties.
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 three to five members, with a majority being Independent Outside Officers.
- (3) The Remuneration Committee shall establish fair and transparent basic policies and rules in order to execute its duties.
Nomination of Directors, Corporate Auditors and CEO
(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. The Board of Directors shall nominate candidates for Corporate Auditors upon the approval of the Board of Corporate Auditors 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.
Remuneration of Management Personnel
(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:
(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.
(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 Corporate Auditors shall be decided in consultation with Corporate Auditors. The compensation structure of Corporate Auditors shall be fixed compensation only, with no performance-based compensation, due to the nature of the audit functions.
Assessment of Effectiveness of the Board of Directors
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.
Information-gathering by Directors and Corporate Auditors and Support System
(1) Nabtesco shall proactively develop a support system for Directors and Corporate Auditors in order to ensure that Directors and Corporate Auditors can fulfill their roles and responsibilities effectively.
- (2) Directors and Corporate Auditors 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.
Self-improvement and Training for Directors and Corporate Auditors
(1) Prior to joining the Group, newly appointed Directors and Corporate Auditors 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 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 Corporate Auditors 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 Corporate Auditors with opportunities to visit and inspect its plants or offices as necessary.
- (3) All Directors and Corporate Auditors 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 Officers 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.
Chapter 6: Constructive Dialogue with Shareholders
(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.
Chapter 7: Amendments and Abolition of the Policy
Amendments and Abolition of the Policy
Amendments and abolition of the Policy shall require a resolution by the Board of Directors.
The Nabtesco Way
Nabtesco has been conducting business across a number of sectors, capitalizing on its motion control technology to make significant advances within the areas of transportation (railroad vehicles, aircraft, automobiles, etc.), industry, livelihood-related fields and the environment (robots, construction machinery, automatic doors, etc.).
We contribute to the creation of a safe and comfortable society through the provision of highly reliable products, many of which enjoy large market shares.
We have established The Nabtesco Way in October 2012. The Nabtesco Way is a collective term that means our Corporate Philosophy, Our Promises, and Action Guidelines. We have set these Guidelines by examining the uniqueness of the Nabtesco Group, borne by our predecessors from their efforts and wisdom in developing the Group, and also by incorporating new values to be implemented by Group members toward the future, in order to clearly show the management approach to be taken by our top executives and general managers as well as our strong commitment to quality manufacturing.
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.
- 1 .Value close communications with our customers worldwide
- 2. Value each individual's spirit of challenge and innovation
- 3. Continue to expand our business and profit
- 4. Continue to reinforce our sense of ethics and highly transparent business activities
- 5．Value the environment and promote harmony with local communities and cultures
【〜Action Guidelines for Top Management〜】
We shall manage the Nabtesco Group, focusing on the following four points to ensure its sustainable growth as a global corporate group.
- 1．Communicate the Present Situation and Future Vision of the Company (Organization) to Employees.
- 2．Encourage Active Discussions and Align All Members to a Common Direction.
- 3．Ensure Succession.
- 4．Manage in a Manner that Increases the Nabtesco Brand and Corporate Value.
【〜Action Guidelines for All Group Members〜】
- ・Build Trust:Work diligently (kotsukotsu) and expeditiously
- ・Provide Value:Think ahead from customer's perspectives
- ・Take on Challenges:Enhance our skills
- ・Develop Human Resources:Employees are essential assets
- ・Foster Teamwork:Discuss fully (tokoton) among all members ・Realize our Dreams:Pursue higher reliability and quality
- ・Make Daily Improvement:Step forward for future growth
- ・Ensure Transparency:Be open, fair and honest
- ・Hold a High Work Ethic:Make individual conscientious effort
- ・Be Considerate of the Global Environment:Do not waste (mottainai)
- ・Keep Harmony with Local Communities and Cultures:Engage in local activities
By implementing these promises, we will realize "All Stakeholders' Dreams.'
Criteria for the Impartiality of Outside Officers
Nabtesco considers an Outside Officer (Outside Director and Outside Corporate Auditor) to be impartial if all of the following requirements are met in addition to the criteria for independent officers set by the Tokyo Stock Exchange.
- (1) The Outside Officer is not a current major shareholder*1 or an executive of the Group;
*1 Person who directly or indirectly holds more than 5% of all voting rights or a person who is listed among the top 10 shareholders in the most recent shareholder registry
- (2) The Outside Officer is not an executive of a major lender*2 of the Group;
*2 A financial institution group (person who belongs to the consolidated group to which the Group’s direct lender belongs) from which the Group borrows funds, and from which the Group’s total amount of borrowing exceeds 2% of the Group’s consolidated total assets as of the end of the previous fiscal year
- (3) The Outside Officer is not a major business partner of the Group (defined by a yearly transaction amount that exceeds 1% of consolidated net sales) or its executive;
- (4) The Outside Officer is not a person for whom the Group is a major business partner (defined by a yearly transaction amount that exceeds 1% of the counterparty’s consolidated net sales) or its executive;
- (5) The Outside Officer is not a consultant, accounting professional, or legal professional who receives a large amount of remuneration (more than ¥6 million yearly) from the Group other than officers’ remuneration (including a case where an organization such as a corporation or an association to which the Outside Officer belongs receives remuneration);
- (6) The Outside Officer is not an executive of an organization such as a corporation or an association that receives a large amount of donations (more than ¥6 million yearly) from the Group;
- (7) The Outside Officer is not a spouse or a relative within the second degree of consanguinity of the Group’s executive; and
- (8) The Outside Officer does not fall under any of the above-mentioned items from (1) through (6) for the past three years.
- (9) The Outside Officer holds his/her office as an outside officer of Nabtesco for a period not exceeding eight years in total.
Corporate Governance System
Nabtesco is conducting business by promoting transparent business management and maintaining high ethical standards, as well as ensuring the observation of laws and regulations, so that Nabtesco Group can increase corporate value in a sustainable manner and become a company capable of winning the trust of stakeholders.
Given the content of business operations covered by our group and their characteristics, our company has adopted an executive officer system and an in-house company system as a means of expediting decision-making and clarifying who is responsible for executing certain business operations. As a means of controlling these systems, we have established corporate governance under which the Board of Directors, Audit & Supervisory Board Members/the Audit & Supervisory Board and Accounting Auditors have been set up to clearly divide the functions of business execution; managerial decision-making and supervision; and the supervision of management.
In addition, our company has established the Management Committee, an organization tasked with carrying out the deliberation of important issues relating to executing the business operations of the company and its group companies. Audit & Supervisory Board Members are supposed to attend a meeting sponsored by the Management Committee. This committee will deliberate over important issues to be discussed at the Board of Directors and clarify focal points, before presenting these issues to the Board of Directors. The prior deliberations are meant to promote appropriate decision-making and enhance the efficiency of decision-making at the Board of Directors.
By improving and reinforcing the corporate governance systems mentioned above, we will maintain expeditiousness and flexibility in business execution, strengthen our overall corporate governance, and clarify where responsibility lies, thus realizing efficient and transparent business management, which is considered helpful in enhancing the corporate value of the Nabtesco Group.
Basic Policies for the Construction of an Internal Control SystemOpenClose
Revised on May 28, 2015
The Basic Policies for the Construction of an Internal System for the Nabtesco Group shall be stipulated as follows.
The Chief Executive Officer (CEO) shall be the top executive responsible for the promotion of internal control.
The Board of Directors shall examine the maintenance of internal control systems on a continual basis in line with changes in the business environment and social needs, revisions to laws and regulations, risk diversification and other factors, and shall conduct a review yearly and whenever else necessary.
1. The System ensuring that Directors and employees perform their duties in compliance with laws and the Articles of Incorporation
- (i) Directors and employees shall comply with the Nabtesco Way and the Nabtesco Group Code of Ethics as the basis of appropriate and fair business activities, shall behave in accordance with social norms/ethics as members of society, and shall endeavor to establish and maintain a sound corporate culture.
- (ii) (The Board of) Directors shall make proper decisions on important management matters stipulated in laws and regulations, the Articles of Incorporation, the Board of Directors’ rules, the Responsibility and Authority Regulations, etc.
- (iii) Directors shall perform their respectively delegated duties in accordance with proper decisions by the Board of Directors, and shall report on the execution of their duties to the Board of Directors. Should a Director have any doubts on whether the execution of the duties by himself or herself or other Directors are in compliance with laws and regulations and the Articles of Incorporation, the Director shall report these doubts to the Board of Directors and the Audit & Supervisory Board (Members).
- (iv) Directors and employees shall ensure the rationality, adequacy and legality of their decisions by actively and thoroughly hearing the expert opinions of expert staff members of the Head Office and/or outside experts during decision-making and performance of duties.
- (v) The Board of Directors shall make use of the multifaceted and impartial advice provided by Outside Directors and Audit & Supervisory Board Member (Independent) to make appropriate decisions.
- (vi) In order to promote the compliance of the Group, the Compliance Committee shall be set up as an advisory body of the Board of Directors. The Committee shall deliberate important matters, etc. concerning compliance and report to the Board of Directors.
- (vii) To assist the CEO in promoting compliance, organizations responsible for promoting compliance shall be set up to review compliance systems in accordance with social conditions, revision of laws, etc., and to provide training on compliance to Directors and employees.
- (viii) Directors and employees shall be obliged to report any misconduct within the Group, and a corporate ethics hotline shall be established and operated as one of the methods to achieve this. The person who used this corporate ethics hotline will not be treated unfavorably on the grounds of having made such reports.
- (ix) To ensure the adequacy of financial reports, an internal control system over financial reports and a system to evaluate its validity shall be developed and operated.
2. The System for storing and managing information on the performance of duties by Directors
- (i) Directors shall properly prepare, store and manage the following information (in written form or on electromagnetic record; the same applies hereinafter) on the performance of their duties in keeping with their respective duties and in accordance with laws and company regulations.
- (a) Minutes of general shareholders’ meetings and related documentation
- (b) Minutes of Board of Directors’ meetings and related documentation
- (c) Records of the proceedings at other important meetings hosted by Directors (e.g., Management Committee meetings) and related documentation
- (d) Notices of decisions made by Directors and appended documentation
- (e) Other important documentation related to Directors' performance of their duties
- (ii) The parties responsible for the preparation, storage and management of the information set forth in (i) above shall be the chairmen of the respective meetings or a separately assigned Director, decision-maker, or the Director responsible for performing the duties in question.
- (iii) Efforts shall be made to establish and continually strengthen and improve adequate security for electromagnetic records to combat the risks of unauthorized disclosure posed by the increasing sophistication of information technology.
3. The Regulations and other systems for managing the risk of loss.
- (i) The system shall be developed so that a scheme shall be put in place to ensure that profits and losses, asset efficiency, quality issues, accidents, and other matters concerning the execution of operations are reported to the Board of Directors in a suitable and timely fashion, and to ensure that Directors and employees who became aware of matters that could have a seriously adverse impact on Nabtesco and its Group report these promptly and precisely to (the Board of) Directors, and efforts shall be made to discover risks early so as to minimize losses.
- (ii) To manage various risks and prevent losses with regard to business activities of Nabtesco and its Group, the Risk Management Committee, Quality & PL (Product Liability) Committee, ESH (Environment, Safety and Health) Committee and etc., shall be established as cross-group organizations, and the rules for information security and business continuity plan at the time of a critical accident and disaster, and other relevant company regulations shall be established.
- (iii) Risk management shall be conducted while ensuring rationality, adequacy and legality of decision-making through deliberation on the performance of important matters concerning the execution of operations by the Board of Directors and Management Committee and compliance with, and thoroughgoing implementation of, the Responsibility and Authority Regulations.
- (iv) Reporting requirements in the event of accidents, disasters or critical quality problems and other events that may have serious adverse effects on the Group’s business performance, financial condition and credibility shall be set forth within company regulations, and steps shall be taken to ensure that information is promptly and suitably conveyed and that contingency measures are implemented during emergencies in accordance with these regulations.
- (v) Expert members of the Head Office, particularly in the Business Auditing Department, shall conduct cross-organizational audits of operational risk management, and shall offer necessary and appropriate advice with regard to operational improvements.
4. The System ensuring that Directors perform their duties efficiently
- (i) The necessary organizations shall be formed to ensure that Directors perform their duties efficiently, and the respective responsibilities of these organizations shall be stipulated. Responsibility for operations shall be divided among Directors in accordance with Board of Directors' resolutions, and Directors shall perform their duties in keeping with these divisions of responsibility.
- (ii) An Executive Officer system and a company system shall be adopted in view of the nature and characteristics of the Nabtesco’s business
- (a) Executive Officers shall perform the duties delegated by the Board of Directors and shall report on the same.
- (b) A company shall be established as a strategic business unit. Each company shall perform operations in accordance with the Responsibility and Authority Regulations and report on the same.
- (iii) Efforts shall be made to ensure the suitability and efficiency of decision-making by the Board of Directors with regard to the performance of operations to be submitted for consideration to the Board of Directors by having the Management Committee conduct preliminary examinations to clarify the points of issue before passing the matter on to the Board of Directors.
5. The System ensuring the suitability of operations by the Company and the Group
- (i) All principles and policies for internal control shall be applied to the whole Nabtesco Group, and efforts shall be made to disseminate and standardize these throughout the Group as a whole.
- (ii) Group Companies Management Regulations shall be established to stipulate, management classifications and management items for subsidiaries, and the Responsibility and Authority Regulations shall be set up, taking into account the scale and importance (impact onto the Group) of subsidiaries as well as their autonomy. Furthermore, a system shall be developed so that subsidiaries shall report their important matters with regard to the performance of operations to the Company.
- (iii) Efforts shall be made to improve the suitability and efficiency of business operations at subsidiaries as well as to make qualitative improvements to financial reports by adopting a fully-consolidated basis and appropriately reflecting the performance of all subsidiaries into the consolidated performance of the company and by conducting performance assessment of the management of companies on a consolidated basis.
- (iv) Efforts shall be made to dispatch its personnel as Directors and Audit & Supervisory Board Member to subsidiaries from the Company to ensure more suitable decision-making and performance of operations and to homogenize and improve audits of subsidiaries through the Group Audit & Supervisory Board.
- (v) Internal audits of subsidiaries shall be performed by our Business Auditing Department. Advice regarding improvements shall be provided as necessary and appropriate as part of these audits.
- (vi) Efforts shall be made to thoroughly communicate the Nabtesco Group Code of Ethics to subsidiaries and to develop and strengthen compliance systems at subsidiaries by means of training on compliance and information sharing.
6. Items on employees to support Audit & Supervisory Board Member (“support personnel”), when Audit & Supervisory Board Members requested to assign employees to support Audit & Supervisory Board Members
- (i) Should Audit & Supervisory Board Members (or Audit & Supervisory Board) request that support personnel be assigned, the appropriate personnel shall be promptly secured after preliminary discussions with Audit & Supervisory Board Member (or Audit & Supervisory Board).
- (ii) To ensure the independence of support personnel from Directors, reassignments and evaluations of these support personnel shall be made only after prior consultation with Audit & Supervisory Board Member (or Audit & Supervisory Board).
- (iii) Support personnel shall be subject to the instructions and orders of Audit & Supervisory Board Member (or Audit & Supervisory Board) in engaging in such support tasks.
7. The System enabling Directors and employees to report to Audit & Supervisory Board Member; other systems for reporting to Audit & Supervisory Board Member
- (i) Directors aware of matters that could have a seriously adverse impact on the Company and its Group shall immediately report these to Audit & Supervisory Board Member (or Audit & Supervisory Board)
- (ii) Directors and employees shall respond promptly and appropriately to requests by Audit & Supervisory Board Member for reports on the Company’s business or for cooperation in investigating the status of the Company’s operations and assets.
- (iii) With the aim of enhancing cooperation between Audit & Supervisory Board Members and departments associated with internal control, efforts shall be made to carry out consultations and exchange of information and views concerning issues relating to internal control (including reports from Directors and employees, etc of subsidiaries to the relevant departments) through the Audit Council, etc. Furthermore, Group Audit & Supervisory Board shall conduct consultations and report and exchange information and views with Audit & Supervisory Board Member and Audit & Supervisory Board Member of subsidiaries with regard to audits.
- (iv) Information on “Audit & Supervisory Board hotline” established by Audit & Supervisory Board shall be noticed to directors and employees.
- (v) The person who reported the relevant matter to an Audit & Supervisory Board Member (including those who reported the same to ”Audit & Supervisory Board hotline”) will not be treated unfavorably on the grounds of having made such reports.
8. The Systems to ensure that audits by Audit & Supervisory Board Members are carried out effectively
- (i) A certain amount of the budget shall be set yearly for paying expenses, etc., with respect to the performance of duties of the Audit & Supervisory Board Members. In the event that an Audit & Supervisory Board Member request from the Company advance payment of expenses associated with the performance of their duties, the Company shall account for such expenses, etc., immediately according to laws and regulations, regardless of whether or not the expenses requested are within the budget.
- (ii) Audit & Supervisory Board Members shall be permitted to attend Management Committee meetings and all other important meetings and to view all management information, to enable themselves to implement audits and check the decision-making process on the important matters in the performance of operations, based on the information equivalent to information available to Directors.
- (iii) Audit & Supervisory Board Members may hold regular meetings to exchange views with CEO and the Representative Directors.
- (iv) Audit & Supervisory Board Members may request Executive Officers and other important employees to report on the performance of duties
- (v) A system shall be ensured to enable Audit & Supervisory Board Members to exchange views with financial auditors and the Accounting & Finance Department regularly and confirm the adequacy of financial reports.
- (vi) A system shall be ensured to improve the tasks of Audit & Supervisory Board Members through facilitation of reporting on audit status to Business Auditing Department and other relevant departments, and promotion of consultation and exchange of information and opinions between such departments on audit matters on a regular basis.