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 sustainable world where people live with peace of mind.
To execute this Vision, we created a long-term management plan that guides us in becoming a corporate group capable of sustainable growth in the face of dramatic changes in the external environment. This plan calls for our willingness to undertake challenges for growth and to work toward the reinforcement of our business base, 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 Govenance 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 it supervises the execution of operations. Holding a regular monthly meeting, the Board of Directors makes important decisions, tracks business performance and formulates measures.|
|Audit & Supervisory Board / Audit & Supervisory Board Members||In accordance with audit policy and audit plans set at Audit & Supervisory Board meetings, Audit & Supervisory Board Members attend important meetings, such as Board of Directors meetings, and conduct audits of the execution of duties of directors based on reports solicited from subsidiaries on an as-needed basis.|
|General Managers’ Meeting||Executive officers attend General Managers’ Meetings, where each department provides a status report. Meeting attendees discuss and formulate specific measures.|
|Nomination Committee||A majority of the members are outside directors and Audit & Supervisory Board Members. The committee deliberates on appointment proposals for directors and executive officers, and succession plans for the Chief Executive Officer. 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||With the majority of its members made up of outside directors, the Compensation Committee ensures the objectivity and transparency of the decision-making 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.|
|Risk Management & Compliance Committee||The Risk Management & Compliance Committee establishes and strengthens risk management and compliance systems that cover not only legal compliance but also corporate ethics. The committee also maintains ISO environmental management standards and promotes energy conservation initiatives.|
|Internal Control Committee||The committee deliberates on the 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 thoroughly complies with export related laws and regulations in relation to foreign currency exchange and foreign trade for its 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.
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
The Company adopted Basic Compliance Policy setting forth a code of conduct with which all officers and employees must comply, conducts all business activities in accordance with the Nagase Group Compliance Code of Conduct, and complies with laws and regulations and the Articles of Incorporation. Furthermore, regarding the internal reporting system, the Company operates it in an appropriate and proper way that ensures the information management of the contents of the report and ensures people reporting incidents or concerns regarding non-compliance will not suffer any disadvantage. Courses and other programs contributing to legal compliance are conducted as necessary for officers and employees including those of Group companies.
b) Systems for retaining and managing information relating to the execution of duties by Directors
Information relating to the execution of duties by Directors is recorded on paper or electromagnetically in accordance with internal rules and is retained and managed. Directors and Audit & Supervisory Board members can access and view these documents at any time.
c) Rules relating to management of loss-related risks and other systems
The Company has established the Risk Management & Compliance Committee as the organization that performs comprehensive management relating to loss-related risks for the Company and Group companies, determined the committee’s functions and authority, and created a system that clarifies its roles and responsibilities. Under this system, each responsible division establishes rules and guidelines, conducts training, prepares and distributes manuals, and takes other measures concerning individual risks relating to the business activities of the Company and Group companies. When new risks arise, the Committee promptly designates the responsible division to address the risks, and also develops a system for prompt and appropriate communication and emergency procedures in case that an incident occurs within the Group.
d) Systems for ensuring the efficient execution of duties by Directors
The Board of Directors is clearly positioned as the body in charge of making decisions on management policies and strategies, and it supervises the execution of operations as the foundation for ensuring that Directors efficiently execute their duties. The Board of Directors holds regular monthly meetings as well as extraordinary meetings when necessary. With regard to the performance of business in accordance with the decisions of the Board of Directors, organizational operations rules and divisions of work responsibilities established under an executive officer system specify responsible parties, their responsibilities, and procedures for carrying out those responsibilities.
e) Systems for ensuring the proper implementation of business by the corporate group comprising a stock corporation and its subsidiaries
In principle, the Company dispatches officers to Group companies and ensures the proper conduct of business by those companies by establishing operational standards and establishing a system that requires approval from or reporting to the Company before Group companies make decisions on certain matters. The Audit Office of the Company conducts audits of the Company and its Group companies in accordance with the Internal Audit Rules. Under the mid-term management plan and a system of annual budgets, clear targets are set and budget and results management is performed for the Company and each Group company. In order to enhance the reliability of financial reports, the status of company-wide internal controls as well as the process for preparing financial statements have been codified in light of the Financial Instruments and Exchange Act and evaluation and improvement efforts are made on a consolidated basis. The Company and Group companies perform Group-wide risk management with the Risk Management & Compliance Committee mentioned above playing a central role. Important matters relating to Group-wide compliance are discussed and decisions are made based on deliberations and determinations regarding issues relating to implementation and countermeasures addressing those issues. Updated
f) Matters pertaining to employees when Audit & Supervisory Board members request the appointment of employees to assist them in the execution of their duties
Upon request from Audit & Supervisory Board members, in order to ensure their auditing effectiveness, the Company appoints employees to support the Audit & Supervisory Board members’ work. Such employees are assigned to the Audit Office.
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
In order to ensure the independence of the employees specified in the preceding paragraph from the Directors, when such employees are transferred, evaluations are conducted, and so on, prior consultations are conducted with Audit & Supervisory Board members and their opinions are sought. In addition, efforts are made to ensure the effectiveness of instructions to such employees, adequately taking into consideration the selection of such employees and the period for which they will work supporting the execution of duties by 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
Audit & Supervisory Board members attend the Board of Directors meetings and other important meetings, exchange opinions with managers, review requests for decisions, reports, and so on so that they can understand the status of operations of the Company and Group companies at all times. Furthermore, the directors, employees, and so on of the Company and Group companies can report to Audit & Supervisory Board and its members regarding the following matters individually or through the Risk Management & Compliance Committee or the Board of Directors as necessary.
i. Improper implementation, violations of laws and regulations or the Articles of Incorporation, or other compliance-related issues regarding the performance of duties by Directors;
ii. Facts that pose a risk of substantial harm to the Company;
iii. Disclosure of material information; and
iv. Facts reported to internal reporting system and other matters.
Detrimental treatment of persons who make reports is prohibited in cases where a report is made by a Company Director or employee directly to an Audit & Supervisory Board member of the Company. This information is distributed throughout the Group and is clearly stated within internal reporting system.
i) Other systems to ensure that audits are conducted effectively by Audit & Supervisory Board members
In order to raise awareness and understanding of the importance and usefulness of audits by Audit & Supervisory Board members, Audit & Supervisory Board members hold periodic meetings for the exchange of opinions with the Representative Director and the outside Director. There are also systems that allow for close collaboration and mutual support among the independent auditor, Audit Office, and Audit & Supervisory Board members of affiliated companies so that Audit & Supervisory Board members can efficiently and effectively perform audit operations. When advice is sought from attorneys, certified public accountants, and other outside professionals or expenses are requested for outsourcing investigations, appraisals, or other administrative tasks so that the Audit & Supervisory Board or its members can perform audits, the Company may not refuse such requests except when the expenses relating to a request are not necessary for the performance of duties by the Audit & Supervisory Board or its members.
NAGASE CO., LTD. has established a policy for determining overall board member compensation and methods for calculating the actual amounts. Our basic policy is to ensure compensation is appropriate for the role and scope of responsibilities for each board member and motivates them to sustainably enhance corporate value.
In line with this policy, board member compensation (excluding outside directors and Audit & Supervisory Board Members) consists of a fixed basic salary commensurate with the position and performance incentives (bonuses). Performance incentives (bonuses) reflect individual performance based on the Goal Management System after a basic payment amount is decided, based on Company earnings for the period in question.
Compensation for outside directors and Audit & Supervisory Board Members consists only of a fixed basic salary calculated to reflect their work duties. In addition, NAGASE CO., LTD. established the Compensation Committee, a majority of whom are outside directors.
This committee deliberates on the validity of compensation standards and systems, reporting to and advising the Board of Directors. This ensures improved objectivity and transparency in the compensation decision-making process.
Breakdown of Compensation and Total Amounts（Fiscal year ending March 2019）
(Millions of yen)
|Total Compensation by Type (Millions of yen)||Number of
|Basic Compensation||Stock Options||Bonus||Retirement Benefits|
(excluding Outside Directors)
|Audit & Supervisory Board Members
(excluding Outside Audit & Supervisory Board Members)
|Outside Directors and Audit & Supervisory Board Members||52||52||-||-||-||5|
Important Matters regarding Employee Bonuses for Employees Also Serving as Directors（Fiscal year ending March 2019）
(Millions of yen)
|Number of Eligible Directors||Comments|
|40||4||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|
Status of Audit by Audit & Supervisory Board Members
The Audit & Supervisory Board comprises three full-time members (one of whom is an outside member) and one part-time member (who is an outside member). Each Audit & Supervisory Board Member conducts auditing activities and reports audit results to the other members. The Audit & Supervisory Board exchanges a wide range of opinions and information.
Full-time members conduct auditing activities throughout the year in line with the Audit & Supervisory Board’s audit policies and plans. They attend Board of Directors meeting and other important meetings, review important accounting documents, and audit the performance of directors’ duties through hearings from directors, executive officers, and operational departments, including the Audit Office. In addition, full-time members also serve as Corporate Auditors of major subsidiaries and monitor the status of internal control systems in corporate groups. This is done through on-site audits of domestic and overseas subsidiaries and information exchanges with Corporate Auditors of affiliates.
While independent auditors perform on-site audits of subsidiaries and on-site asset inspections, Audit & Supervisory members monitor and verify whether independent auditors maintain an independent position and appropriate audits are being performed. In addition, after the end of a fiscal year, the Audit & Supervisory Board conducts an annual auditing activity review in regard to the Audit & Supervisory Board’s audit policies and plans. The results of the review are reflected in audit plans in the following fiscal years to enhance the effectiveness of the Audit & Supervisory Board.
Status of Audit by Internal Auditors
The Audit Office is in charge of internal audits, including audits to assess the appropriateness and efficiency of the Company’s business activities, including those of subsidiaries, based on internal auditing rules. The Audit Office is staffed by nine employees, including certified internal auditors (CIA), qualified internal auditors (QIA), and other individuals who possess specialized knowledge in internal audits. In addition, in line with the Internal Control Over Financial Reporting system, the Audit Office evaluates internal controls as an independent internal auditor and provides reports regarding the status of internal controls to directors, the Audit & Supervisory Board, and independent auditors, 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
|Hiroyuki Koichi||Ernst & Young ShinNihon LLC|
None of the certified public accountants, who have executed the aforementioned duties, have performed audits continuously for more than seven years.
Through participation in meetings of the Board of Directors, outside directors receive reports on a variety of topics pertaining to audits and controls, including: auditing plans by Audit & Supervisory Board members, audit results by Audit & Supervisory Board members and the independent auditor, results of evaluations of the company regarding internal controls based on the Financial Instruments and Exchange Act, and upkeep/operation of internal control systems based on the Companies Act.
Outside members of the Audit & Supervisory Board exchange information on internal audits, as well as audits of domestic and overseas affiliated companies, at meetings of said board. At these meetings, they also receive reports on the results of Audit & Supervisory Board Member audits and exchange opinions accordingly. In addition, they receive direct explanations on the independent auditor's audit plan and results, exchange opinions on risk recognition, and receive reports from the full-time auditors on the status of the independent auditor's execution of its duties.
Further, the Articles of Incorporation stipulates that the Company can conclude contracts with outside officers to limit their liability for damages to the Company to a certain scope in order for said outside officers to be able to fulfill their expected roles.
As allowed in the Articles of Incorporation, Hidenori Nishi and Nobumasa Kemori, Outside Directors of the Company, as well as Nobuyuki Shirafuji and Gan Matsui, Outside Audit & Supervisory Board Members, concluded liability limitation agreements with the Company. The outline of these contracts is as follows.
-In the event that outside officers fail to perform their duties and cause damage to the Company, if the outside officers have performed their duties in good faith and without gross negligence, they shall be liable for damages to the Company up to the minimum liability amount set forth in Article 425, Paragraph 1 of the Companies Act. Note that the Company has not concluded liability limitation agreements with any Non-Executive Directors, Non-Outside Audit & Supervisory Board Members, or independent auditors.
Mr. Nishi has been involved in management of KAGOME CO., LTD. for many years and possesses advanced knowledge and extensive experience regarding corporate management. We expect Mr. Nishi 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 industry. Accordingly, we have appointed Mr. Nishi as an outside director. Mr. Nishi is the former chairman of the board of KAGOME CO., LTD. As the Company has no business transactions with this company, we consider Mr. Nishi to be an independent director having no potential conflicts of interest with our general shareholders. Further, with the exception of his stock ownership in the Company, Mr. Nishi has no personal relationships, equity relationships, business relationships, or other interests in the Company.
Mr. Kemori has been involved in management of Sumitomo Metal Mining Co., Ltd. for many years and possesses advanced knowledge and extensive experience regarding 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 industry. Accordingly, we have appointed Mr. Kemori as an outside director. Mr. Kemori is a Executive Adviser to Sumitomo Metal Mining Co., Ltd. with whom the Company conducts business transactions, we do not believe any significant special interest between Mr. Kemori and the Company exists when considering the scope of Company sales to Sumitomo Metal Mining. Accordingly, we consider Mr. Kemori to be an independent director having no potential conflicts of interest with our general shareholders. Further, with the exception of his stock ownership in the Company, Mr. Kemori has no personal relationships, equity relationships, business relationships, or other interests in the Company.
Mr. Shirafuji possesses a wide range of knowledge based on his many years of experience at overseas financial institutions. He also has many years of experience related to audits and working in audit departments, earning considerable knowledge regarding finance and accounting. Accordingly, it is our judgment that Mr. Shirafuji has the ability to execute the duties of an outside member of the Audit & Supervisory Board and we have consequently appointed him to this role. In the past, Mr. Shirafuji worked for the Sumitomo Mitsui Banking Corporation, one of the Company’s banks; however, Mr. Shirafuji did not manage Company accounts during his service at the bank in question. Furthermore, the Company maintains a high shareholder’s equity ratio and a sound financial structure. We do not rely heavily on borrowings from financial institutions, resulting in minimal impact of financial institutions on Company management. Accordingly, we do not believe any significant special interest between Mr. Shirafuji and the Company exists, and we consider Mr. Shirafuji to be an independent director having no potential conflicts of interest with our general shareholders. Further, with the exception of his stock ownership in the Company, Mr. Shirafuji has no personal relationships, equity relationships, business relationships, or other interests in the Company.
Mr. Matsui has a wealth of experience in legal circles and considerable knowledge of compliance and governance. Accordingly, it is our judgment that Mr. Matsui has the ability to execute the duties of an outside member of the Audit & Supervisory Board and we have consequently appointed him to this role. The Company has no business transactions with Mr. Matsui nor with the Yaesu Sogo Law Office where he serves as an attorney. Accordingly, we consider Mr. Matsui to be an independent director having no potential conflicts of interest with our general shareholders. Further, with the exception of his stock ownership in the Company, Mr. Matsui has no personal relationships, equity relationships, business relationships, or other interests in the Company.
Criteria for Appointing Outside Officers
Outside directors are candidates who can raise and address issues based on a number of traits: sincere personality, high levels of insight and capability, and possession of perspectives demanded by both our stakeholders and our society. Candidates for these positions are selected by the representative directors, deliberated by an independent nominating committee, deliberated and resolved in meetings of the Board of Directors, and resolutions are submitted to the General Meeting of Shareholders.
As for Audit & Supervisory Board Members, representative directors select candidates from among those who meet the requirements stipulated in the audit standards set by the Audit & Supervisory Board, consulting with and obtaining consent from the Audit & Supervisory Board in advance. These candidates are deliberated and resolved in meetings of the Board of Directors, and resolutions are submitted to the General Meeting of Shareholders. In addition, the Company discloses the reasons for nomination of each candidate for the positions of Director and Audit & Supervisory Board Member in the reference documents in the notice of convocation of the General Meeting of Shareholders.
Board of Directors Effectiveness Evaluation
To evaluate the effectiveness of the Board of Directors, we conduct a survey of all directors and Audit & Supervisory Board Members pertaining mainly to the composition, operation, and deliberations of the Board of Directors. The results of the survey are used to evaluate effectiveness at the Board of Directors meetings. The Board of Directors in the fiscal year ended March 31, 2019, was confirmed to have functioned effectively because it deliberated and made decisions appropriately and in a timely manner.
In addition, one issue raised in the previous fiscal year’s Board of Directors evaluation was the need to enhance the reporting from each committee in order to strengthen governance. We confirmed that this issue improved as evidenced in part by the annual report from the Risk Management & Compliance Committee. We confirmed two issues this year: 1. the need to enhance deliberations regarding management strategies and important matters and 2. the need to realize a diverse and appropriately sized Board of Directors from a mid- to long-term perspective.
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.
■ 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 Planning 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 Planning Department and related departments hold consultations. After a decision by the president, the board of directors makes a final approval, after which the Corporate Planning Department promptly issues a timely disclosure.
■ Financial Information
The Accounting, Finance, and Corporate Planning 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 Planning 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.