Basic Approach to Corporate Governance

We recognize our responsibility to society and offer beneficial products and services while maintaining the highest standards of integrity. Through our growth, we will contribute to society and enrich the lives of our employees.

Based on this philosophy, we created the NAGASE Vision, which is a promise to our stakeholders that each of us will embody our value proposition to Identify, Develop and Expand to realize a safe, secure, and humane world where people live with peace of mind, engaging in measures to improve corporate value over the medium and long term.

We believe that rapid decision-making, execution, and transparency are essential for us to accomplish these initiatives as we engage in strengthening our corporate governance.

Corporate Governance

Board of Directors & Executive Officers

Board of Directors & Executive Officers

Basic Policy on the composition of the Board of Directors

The basic policy of the Board of Directors is to consist of internal directors with business experience, knowledge, and expertise, and external directors who can raise issues based on the perspectives of stakeholders and society, so that the Board of Directors can appropriately understand the status of business execution, make decisions flexibly and promptly, and supervise the status of execution.

Under this basic policy, the Board of Directors currently consists of eight members, including three external directors who are independent officers. More than a third of the Board of Directors is composed of independent external directors. In addition, the Company promotes diversity in management regardless of gender, nationality, and race, and we believe that we have secured a certain level of diversity in terms of gender and internationality, as we have appointed one female director, and many directors have experienced working overseas for several years (average number of years of working overseas for internal directors: about six years).

At present, we believe that we are able to achieve both a certain level of diversity and an appropriate size of the Board of Directors. However, in order to ensure the effectiveness of the Board of Directors, we will aim to further improve the composition of the Board of Directors to achieve both diversity, including gender, and an appropriate size.

Corporate Governance System

Board of Directors The Board of Directors is clearly positioned as the body in charge of making decisions on management policies and strategies, and supervises the execution of operations. It holds a regular monthly meeting to make important decisions, track business performance and formulate measures.
Audit & Supervisory Board/Audit & Supervisory Board Members In accordance with the audit policy and audit plans set at Audit & Supervisory Board meetings, Audit & Supervisory Board members conduct audits of the execution of duties by directors by attending important meetings such as Board of Directors meetings and receiving reports solicited from subsidiaries on an as-needed basis.
Nomination Committee The Nomination Committee has five members, the majority being outside directors. It deliberates on appointment proposals for directors and executive officers and succession plans for the Chief Executive Officer. It then provides reports and recommendations to the Board of Directors with the aim of ensuring objectivity and transparency in nominations of NAGASE’s top management.
Compensation Committee The Compensation Committee has four members, the majority being outside directors. It enhances the objectivity and transparency of the decisionmaking process regarding compensation of directors and executive officers by screening the appropriateness of every compensation level and the compensation system to report and make recommendations to the Board of Directors.

Attendance of directors and audit and supervisory board members at Board of Directors, etc.

position Name Board of Director meetings Audit & Supervisory Board meetings Nomination Committee Compensation Committee
Director Hiroshi Nagase 17/17
(100%)
- 4/4
(100%)
-
Director Reiji Nagase 17/17
(100%)
- - -
Director Kenji Asakura 17/17
(100%)
- 4/4
(100%)
5/5
(100%)
Director Ichiro Wakabayashi 17/17
(100%)
- - -
Director Masaya Ikemoto 17/17
(100%)
- - -
Director Nobumasa Kemori 16/17
(94%)
- 4/4
(100%)
5/5
(100%)
Director Takahiko Ijichi 13/13
(100%)
- 4/4
(100%)
4/5
(80%)
Director Ritsuko Nonomiya 13/13
(100%)
- - 5/5
(100%)
Audit & Supervisory Board Nobuyuki Shirafuji 17/17
(100%)
17/17
(100%)
- -
Audit & Supervisory Board Gan Matsui 16/17
(94%)
17/17
(100%)
4/4
(100%)
-
Group Management Committee The Group Management Committee comprises executive officers appointed by the Board of Directors, and in principle, meets regularly twice a month to discuss management strategies, investment projects, and other important matters to support business decision-making. This committee serves as an advisory body that discusses matters resolved by the Board of Directors.
Risk Management & Compliance Committee The Risk Management & Compliance Committee establishes and strengthens risk management and compliance systems that cover not only legal compliance with also corporate ethics, ESG Risks. Risks related to the business operations of the NAGASE Group and regular supervision of the effectiveness of the management system are managed by the Risk Management and Compliance Committee under the supervision of the Board of Directors.
Sustainability Committee The Sustainability Committee is chaired by the President with executive officers and senior management of Group companies as members. This committee formulates policies for promoting sustainability throughout the Group, establishes and maintains the promotion system, monitors measures, and conducts educational activities within the Group.
Internal Control Committee The Committee deliberates on basic policies for the internal control system, builds frameworks established by the internal control system, and monitors the management of the frameworks to ensure the appropriateness of business operations.
Security Trade Control Committee The Security Trade Control Committee ensures compliance with export-related laws and regulations in relation to foreign currency exchange and foreign trade for the Company’s trading of cargoes and technologies covered by such laws and regulations.

As described above, the current corporate governance system, functioning in cooperation between outside directors, the Audit & Supervisory Board, and various committees with the aim of strengthening the Group's corporate governance function, acts in a supervisory and audit function from multifaceted perspectives, including from outside the company. At present, we have determined that this is the most reasonable system to realize this.

コーポレートガバナンス体制

Internal Controls

The NAGASE Group established an internal control system to build a stable and sustainable corporate foundation for the Group with the aim of enhancing corporate value through corporate activities. In line with the Management Philosophy of maintaining highest integrity, the internal controls of the NAGASE Group monitor the construction and operation of frameworks defined under the internal control system and ensures the propriety of operations.

Status of Internal Controls Systems

a) Systems to ensure that Directors and employees execute their duties in accordance with laws and regulations and the Articles of Incorporation

b) Systems for retaining and managing information relating to the execution of duties by Directors

c) Rules relating to management of loss-related risks and other systems

d) Systems for ensuring the efficient execution of duties by Directors

e) Systems for ensuring the proper implementation of business by the corporate group comprising a stock corporation and its subsidiaries

f) Matters pertaining to employees when Audit & Supervisory Board members request the appointment of employees to assist them in the execution of their duties

g) Matters pertaining to ensuring the independence of employees specified in the preceding paragraph from Directors and ensuring the effectiveness of instructions from Audit & Supervisory Board members

h) Systems for Directors and employees to report to Audit & Supervisory Board members and other systems for reporting to Audit & Supervisory Board members

i) Other systems to ensure that audits are conducted effectively by Audit & Supervisory Board members

Details

Corporate Governance Report (pdf:551 KB)

Compensation

Policy for Determining Level of Compensation

NAGASE CO., LTD. has established a policy for determining overall board member compensation and methods for calculating the actual amounts through consultation at the Compensation Committee, a majority of whom are outside directors, and deliberation at the Board of Directors. Our basic policy is to ensure that compensation is appropriate for the role and scope of responsibilities for each board member and motivates them to sustainably enhance corporate value in light of objective external data and Company earnings for the period in question, etc., and that a fixed basic salary for each position and performance incentives shall be 50-70% and 30-50%, respectively. Compensation for outside directors and auditors is limited to the basic compensation, a fixed basic salary, in view of their duties.

Our basic policy for a fixed basic salary is that annual compensation will be paid equally each month, and variable compensation will be paid in a lump sum at the end of June.

As for the indicator for the Company’s performance incentives, we selects profit attributable to owners of the parent, which is the ultimate profit, as an incentive to improve business performance. The calculation method for performance incentives involves determining the base amounts of performance incentives, multiplying the ratio of profit attributable to owners of the parent to the actual amount of the previous fiscal year and the achievement ratio to the consolidated earnings forecast at the beginning of the fiscal year, and adjusting them based on the individual evaluations. Profit attributable to owners of the parent for this fiscal year is 18.8 billion yen. Starting in fiscal 2021, ROE will be added to the index as an incentive to improve capital efficiency, in addition to the profit attributable to owners of the parent. The compensation based on ROE is calculated based on the degree of achievement of the final target set for each fiscal year.

The compensation for individual directors is entrusted to Kenji Asakura, Representative Director and President, by the Board of Directors, based on deliberations on the appropriateness of compensation systems, standards, etc. at the Compensation Committee. The content of the authority delegated to the Representative Director and President is the individual evaluations of performance incentives (bonuses) linked to the performance of each director's business, etc. The reason for delegating this authority is that the Representative Director and President is considered to be the most appropriate person to evaluate the relevant business while overviewing the overall performance of the Company. The Board of Directors has consulted with the Compensation Committee on the original proposal and received a report from the Committee to ensure that the Representative Director and President appropriately exercises this authority, and has determined that it is in accordance with the decision policy. The individual compensation of auditors is determined through discussions among auditors.

The General Meeting of Shareholders held on June 22, 2020 approved the maximum amount of compensation for directors of 450 million yen per year (annual amount of less than 40 million yen for outside directors) (excluding salaries of directors who concurrently serve as employees). The number of directors at the conclusion of this General Meeting of Shareholders is eight (three of them are outside directors).

The General Meeting of Shareholders held on June 21, 2019 approved the maximum amount of compensation for auditors of 100 million yen per year. The number of auditors at the conclusion of this General Meeting of Shareholders is four.

Breakdown of Compensation and Total Amounts(Fiscal year ending March 2021)

Title Number of Eligible Directors Total Compensation
(Millions of yen)
Total Compensation by Type (Millions of yen)
Basic Salary Performance Incentives (Bonuses) Non-monetary compensation, etc. of Amounts Shown on the Left
Board of Directors Internal Directors 5 286 192 93 -
Outside Directors 4 28 28 - -
Total 9 314 220 93 -
Audit & Supervisory Board Members Internal Audit & Supervisory Board Member 2 46 46 - -
Outside Audit & Supervisory Board Member 2 33 33 - -
Total 4 79 79 - -

Important Matters regarding Employee Bonuses for Employees Also Serving as Directors(Fiscal year ending March 2021)

Total Compensation
(Millions of yen)
Number of Eligible Directors Comments
12 1 Paid in an amount equivalent to employee bonus.

Compensation by Type

Compensation Type Compensation Content Fixed / Variable Payment Method
Basic salary ・ A fixed salary is paid commensurate with each director’s position Fixed Cash
Performance incentives (bonuses) ・ A basic payment amount is decided in line with performance for the period.
・ Incentives reflect individual evaluations based on the Goal Management System.
Variable (by fiscal year) Cash

Audit System

Status of Audit by Audit & Supervisory Board Members

The Audit & Supervisory Board of the Company consists of three full-time corporate auditors (of which one is an outside auditor) and one part-time corporate auditor (outside auditor). A total of four corporate auditors, including corporate auditors who have considerable knowledge of finance and accounting, perform corporate audits.

To ensure the effectiveness of audits by auditors, the Company has appointed one Audit & Supervisory Board staff from the Audit Office, which is the internal audit division, who has considerable knowledge of finance, accounting and internal audits.

In principle, the Audit & Supervisory Board holds a meeting once a month on a regular basis and whenever necessary. It has met 17 times in total this fiscal year. The average number of hours required for a meeting of the Audit & Supervisory Board is 1.5, and the attendance rate of each auditor is 100%.

At the Audit & Supervisory Board meetings, each auditor reports on audit activities and audit results, etc., and exchanges opinions on various aspects of auditing and communication of opinions.

After the end of the fiscal year, the Board reviews the annual audit activities for its audit policy and audit plan and makes efforts to improve the effectiveness of audits by auditors, reflecting the results in the audit plan for the following fiscal year and subsequent years.

Status of Audit by Internal Auditors

The Company has an Audit Office as an internal audit department, from which 11 employees, including certified internal auditors (CIA), qualified internal auditors (QIA) and persons with expertise in internal auditing, conduct audits on the appropriateness and efficiency of business activities of companies, including subsidiaries, in accordance with the Internal Audit Rules.

Furthermore, in response to the Company's internal control reporting system for financial reporting, the Audit Office evaluates internal controls as an independent internal auditor and reports on the status of implementation of internal controls to the directors, the Audit & Supervisory Board and the accounting auditor as appropriate.

Status of Audit by Independent Auditor

Independent audits are performed in a fair and impartial manner by the following specified limited liability partners.

Certified Public Accountants Auditing Firm
Specified limited liability partners
Managing partners
Yasuhiro Takada Ernst & Young ShinNihon LLC
Takafumi Mitsuki

Neither of the certified public accountants, who have executed the aforementioned duties, have performed audits continuously for more than seven years.

Outside Officers

Through participation in the Board of Directors, outside directors receive reports on the implementation plans of audits by the auditors, the results of audits by the auditors and the accounting auditor, the evaluation results of the Company relating to the internal control in accordance with the Financial Commodity Exchange Act, and the status of the development and operation of the internal control system, etc. in accordance with the Companies Act.

Outside auditors exchange information on internal audits and audits of domestic and overseas affiliates at the Audit & Supervisory Board, and receive reports on audit results from corporate auditors and exchange opinions. In addition, the outside auditors receive a direct explanation of an audit plan and results from the accounting auditor, exchange opinions on risk recognition, and receive reports on the status of the accounting auditor's execution of duties from the full-time auditors.

In addition, outside directors and the Audit & Supervisory Board members exchange opinions through regular meetings.

Outside Director

NAGASE has three outside directors, Mr. Nobumasa Kemori, Mr. Takahiko Ijichi and Ms. Ritsuko Nonomiya. All three are independent outside directors based on the definition set forth by the Financial Instruments Exchange.

Name Reasons of Appointment
Mr. Nobumasa Kemori
Assumed office in June 2016

< Attendance at Board of Director meetings in fiscal 2020 >
16/17 (94%)
Mr. Kemori has long been involved in the management of Sumitomo Metal Mining Co., Ltd. and has a deep insight and abundant experience in corporate management. We expect Mr. Kemori to enhance the Company’s corporate governance through his knowledge and experience, offering proposals concerning the Company’s overall management from a perspective of familiarity with the industry. Accordingly, we have appointed Mr. Kemori as an outside director.
Mr. Takahiko Ijichi
Assumed office in June 2020

< Attendance at Board of Director meetings in fiscal 2020 >
13/13 (100%)
Mr. Ijichi has been involved in management of Toyota Motor Corporation for many years and possesses advanced knowledge and extensive experience regarding corporate management. We expect Mr. Ijichi to use this knowledge and experience to make proposals concerning the Company's overall management, including that of production activities underway both within Japan and overseas, and to strengthen the Company's corporate governance. Accordingly, we have appointed Mr. Ijichi as an outside director.
Ms. Ritsuko Nonomiya
Assumed office in June 2020

< Attendance at Board of Director meetings in fiscal 2020 >
13/13 (100%)
Having experience in accounting and similar areas at the KPMG Group, and in M&A and business development at the UBS Group and the GE Group, Ms. Nonomiya has high levels of financial and accounting knowledge, together with ample insight into and experience in corporate management. We expect Ms. Nonomiya to use this knowledge and experience to make proposals concerning the Company's overall management, and to strengthen the Company's corporate governance. Accordingly, we have appointed Ms. Nonomiya as an outside director.

Details (Outside Directors’ Relationship with the Company)

Corporate Governance Report (pdf:551 KB)

Outside Auditors

NAGASE has two outside Audit & Supervisory Board members, Mr. Nobuyuki Shirafuji and Mr. Gan Matsui. Both are independent members based on the definition set forth by the Financial Instruments Exchange. Reason for Appointment of Outside Directors, Conc

Mr. Nobuyuki Shirafuji is a full-time auditor, and Mr. Gan Matsui is a part-time auditor.

Name Reasons of Appointment
Mr. Nobuyuki Shirafuji
Assumed office in June 2016

< Attendance in fiscal 2020 >
Board of Directors meetings: 17/17 (100%)
Audit & Supervisory Board meetings: 17/17 (100%)
He has extensive insight based on his many years of overseas experience in financial institutions. In addition, he has been engaged in the credit screening and auditing divisions for many years and has considerable knowledge of finance and accounting. Therefore, we have determined that he is qualified to appropriately perform his duties as an outside auditor and have appointed him accordingly.
Mr. Gan Matsui
Assumed office in June 2018

< Attendance in fiscal 2020 >
Board of Directors meetings: 16/17 (94%)
Audit & Supervisory Board meetings: 17/17 (100%)
Although he has no experience of being directly involved in management, we have determined that he will be able to appropriately perform his duties as an outside auditor based on his abundant experience and deep insight in the legal profession and have appointed him as an outside auditor.

Details (Outside Directors’ Relationship with the Company)

Corporate Governance Report (pdf:551 KB)

Criteria for appointment of external officers

The candidate for external director is a person who can raise issues based on his or her honest personality, high insight and ability, and the perspectives of stakeholders and society. The Representative Director selects those candidates, and after deliberation by the independent Nominating Committee, the Board of Directors deliberates and makes a resolution, which is then submitted to the Shareholders’ Meeting.

With regard to audit and supervisory board members, the Representative Director selects candidates from among those who meet the requirements set forth in the Corporate Auditor Auditing Standards, and after prior consultation with the Audit and Supervisory Board and obtaining their consent, the Board of Directors deliberates and makes a resolution, and the matter is submitted to the Shareholders’ Meeting. In addition, our Company discloses the reasons for the nomination of each candidate for director and each candidate for audit and supervisory board member in the reference documents of the Notice of Convocation of the Shareholders’ Meeting.

Directors' own transactions and transactions with conflicts of interest

The regulations of the Board of Directors stipulate that directors or executive officers must obtain the approval of the Board of Directors in the event that they engage in own transactions or transactions with conflicts of interest.

Directors' compensation and shareholder voting rights

The Company's Articles of Incorporation stipulate that the total amount of remuneration for Directors, etc. shall be determined by a resolution of the Shareholders’ Meeting.

Board of Directors Effectiveness Evaluation

[Board of Directors Effectiveness Evaluation]

The Company believes that it is important to analyze and evaluate the effectiveness of the Board of Directors every year to enhance its effectiveness. For this reason, we conduct a questionnaire survey of all directors and audit and supervisory board members, and analyze and evaluate the results at the Board of Directors. The results are summarized in the Corporate Governance Report every year. The results for the fiscal year ended March 2021 are disclosed in Supplementary Principle 4 -11 (3) in “Disclosure Based on the Principles of the Corporate Governance Code” of this report.

[Summary of Effectiveness Evaluation Results]

As a result, the Company confirmed that our Board of Directors conducts appropriate and timely deliberations and decision-making, functioning effectively.
Furthermore, in response to the requirement to further expand deliberations on medium- to long-term management policies, company-wide strategies and important matters identified in the evaluation from the previous year's Board of Directors' meeting, we carried out a review of resolutions of the Board of Directors and made improvements.
At the same time, from the perspective of further improvement of effectiveness, we confirmed the issues that need to be addressed in order to optimize the provision of information in the preliminary examination to make the deliberations more effective, to expand feedback and follow-up, and to ensure diversity in the composition of the Board of Directors over the medium and long term.
The Company intends to continue with initiatives for improving the effectiveness of the Board of Directors.

Policies Related to Information Disclosure

Pursuant to the NAGASE Group Compliance Behavior Standards, we engage in ongoing communications with society and our stakeholders through timely disclosure of truly important information over appropriate channels. We are mindful that all corporate activities remain within the bounds of socially accepted norms.

This basic philosophy guides us as we conduct timely, appropriate, and fair disclosure of information through investor relations activities, public relations programs, and websites for our shareholders and investors to improve management transparency and accountability.

Timely Disclosure System

The Company has established Basic Compliance Policy. In pursuit of compliance with laws, regulations, and internal regulations/rules and public disclosure to stakeholders (interested parties), the company actively and fairly discloses corporate information striving to ensure transparency.

Under this basic approach, the company has created the following structure for identifying and managing information subject to timely disclosure which functions as an internal system for providing me timely and appropriate disclosure of company information to investors.

適時開示体制の概要

■ Information Related to Material Facts

The relevant headquarters general managers and division managers report information collected from departments and subsidiaries to the individual designated to handle such information. The individual designated to handle information coordinates with the relevant internal departments, summarizes information, and submits a report to the representative director and president.As necessary, a report is submitted to the board of directors, after which the Corporate Management Department (body responsible for timely disclosures) promptly issues a timely disclosure.

■ Information Related to Decision-Supporting Facts

Each department or subsidiary circulates a proposal draft, based on which the Corporate Management Department and related departments hold consultations. After a decision by the president, the board of directors makes a final approval, after which the Corporate Management Department promptly issues a timely disclosure.

■ Financial Information

The Corporate Management Departments receive financial information from each consolidated subsidiary, accepting advice and guidance from members of the Audit & Supervisory Board and outside experts as necessary to ensure the reliability of financial information received. These divisions then prepare financial reports and drafts of public announcements. After decision by the president, the board of directors makes a final approval, after which the Corporate Management Department promptly issues a timely disclosure.

Information Dissemination and Communication to Shareholders and Investors

Communication with Analysts and Institutional Investors

By providing briefings on medium-term management plans and financial results, we offer forums where analysts and institutional investors can directly interact with management. Briefing session materials are published both in Japanese and English. In addition, members of management, including the President, regularly visit institutional investors and engage in active dialogue.

Communication with Individual Investors and Shareholders

In order to help outside parties gain an understanding of the NAGASE Group, we have set up a subsection of the investor relations section of our website, called “Individual Investors.” In addition, we hold briefings for individual investors to provide an easy-to-understand introduction of our global business activities, as well as NAGASE Group management strategies and performance reports.