1.Basic Policy for Corporate Governance
Nippon Chemi-Con pursues its best corporate governance and continues to tackle for the enrichment, in order to materialize the corporate philosophy.
Nippon Chemi-Con also works for enrichment of the corporate governance from viewpoints of sustainable growth and enhancement of medium- and long-term corporate values. To this objective, the company is ensuring fair and transparent decision-makings and bolstering dynamic management through swift and decisive decision-makings based on an effective use of the corporate resources.
2.Our Corporate Governance System
- (a)Overview of our corporate governance system and reasons for introducing the system
- Nippon Chemi-Con is a company with a Audit & Supervisory Board. The company introduced an executive officer system in June 2014 in order to have a distinct separation between inspection and supervision of management and execution of operations. The company concurrently reduced the number of directors but appointed one outside director to strengthen the function of inspecting and supervising management. In June 2015, the number of outside directors was increased to two to reinforce the function.
Our Audit & Supervisory Board comprises four members. The board audits decisions made by directors and operational executions carried out by executive officers, the business and financial positions of Nippon Chemi-Con and its subsidiaries in Japan and overseas. In addition to the statutory function of the Audit & Supervisory Board members, the company has established the Internal Audit Department (seven members) that is specialized in internal audit. The Internal Audit Department carries out field audit of not only legal compliance but also the appropriateness of operational efficiencies and procedures.
The new audit system of the company has allowed the Board of Directors to reinforce the function of inspecting and supervising management, in addition to the existing Audit & Supervisory Board and the internal audit section. The company believes that these audit systems will lead to establishing a corporate governance system that enables to perform proper inspection and supervision and increase the effectiveness.
- (b)Details of the corporate organs
Board of Directors
Nippon Chemi-Con's Board of Directors comprises six members (Chairman: Ikuo Uchiyama (CEO), Norio Kamiyama, Shuichi Shiraishi, Minegishi Yoshifumi, Hideaki Takahashi, Kinya Kawakami). The Board of Directors with this small number has enabled to make swift decisions and appointed two independent outside directors (Hideaki Takahashi, Kinya Kawakami) who are disinterested in the company to reinforce the function of inspecting and supervising management. Furthermore, our Articles of Incorporation has limited the number of directors up to ten.
Besides, under the presence of the four members of the Audit & Supervisory Board, the Board of Directors has steered meetings by proactively seeking opinions the Audit & Supervisory Board members concerning resolutions on legal matters and those stipulated in the Articles of Incorporation, and other important management subjects including situations of executing operations, in order to make reports and resolutions while ensuring objectiveness in discussion.
Executive Officer System
Nippon Chemi-Con has introduced an executive officer system to make separation between the function of the Board of Directors' decision making in management and of directors' inspecting and supervising operations and the function of executive officers' executing operations. Executive officers swiftly execute operations based on decisions in management by executing matters determined by the Board of Directors.
Audit & Supervisory Board and Its Members
The Audit & Supervisory Board inspects the state of the corporate governance, the steering situations, and daily activities in management including those performed by directors. Specifically, the Audit & Supervisory Board comprises two in-house standing statutory members (Hiroyuki Yajima, Shinichi Shibata) and two outside members (Fumio Morita, Shuji Ota).Individual members of the Audit & Supervisory Board carry out examination, verification, etc. over the states of operational executions, management situations, etc. through mostly attending the Board of Directors' meetings and visiting business sites of Nippon Chemi-Con pursuant to the audit policies and plans determined by the Audit & Supervisory Board. Individual members also audit whether there is any infringement on the interest of shareholders and other stakeholders, including possible violation of law, ordinance, or the Articles of Incorporation.
The Audit & Supervisory Board regulary exchanges opinions with CEO and COO, and also makes separate opportunities to hear from executive officers and important employees and, in closer collaboration with accounting auditors, receive reports on the results of audit and steering situations in order to reinforce the audit function for the members of the Audit & Supervisory Board.
Furthermore, the Audit & Supervisory Board is collaborating with accounting auditors by exchanging opinions every quarter with them on their audit reports and states of audit plans and executions, etc. and by holding an extraordinary meeting, if necessary, during the term.
In this connection, since one standing member of the Audit & Supervisory Board, who has built the career within the company, and two outside members of the Audit & Supervisory Board has work experience of taking charge of finance and accounting, the two members have considerable knowledge in these fields.
Executive Committee Meeting
Nippon Chemi-Con has established the Executive Committee Meeting (Thirteen members; Chairman: Norio Kamiyama (COO), Ikuo Uchiyama, Shuichi Shiraishi, Minegishi Yoshifumi, Takayuki Ito, Osamu Ishii, Kenichi Konno, Kenji Tamamitsu, Kentaro Nakaaki, Takumi Iwata, Katsunori Nogami, Hiroyuki Yajima, Shinichi Shibata) for making swift decisions. The committee, which is the consultation organ on operational execution policies, holds weekly meetings, in principle, in order to examine important subjects in management. Decisions on particularly important subjects among those deliberated by the Executive Committee Meeting are determined by the Board of Directors.
Nomination Advisory Committee
Nippon Chemi-Con has set up the Nomination Advisory Committee (four members, Chairman: Hideaki Takahashi (independent outside director)), an advisory organ to the Board of Directors. The committee aims to reinforce the independence and objectivity of the function concerning nomination of directors and executive officers. The Nomination Advisory Committee consult with other members about the content of a draft to be proposal to a General Meeting of Shareholders concerning selection and dismissal of directors and members of the Audit & Supervisory Board and the content of a draft to be proposed to the Board of Directors concerning selection and dismissal of executive officers. Such consultations are conducted prior to determination of such proposals in light of the "Standards for Selection of Directors and Executive Officers" and the "Standards for Selection of Members of the Audit & Supervisory Board" set by the company, the conclusions of which are recommended to the Board of Directors.
Compensation Advisory Committee
Nippon Chemi-Con has set up the Compensation Advisory Committee (four members, Chairman: Kinya Kawakami (independent outside director)), an advisory organ to the Board of Directors. The committee aims to reinforce the independence and objectivity of the function concerning decision-makings on compensation of directors and executive officers. The Compensation Advisory Committee consult with other members about matters concerning compensation of directors and executive officers and expenses opinions and advice to the Board of Directors. Such consultations are conducted after the committee considers the business scale and levels of compensation of employees of the company, and decent third party's study conducted periodically on compensation of corporate management, etc. in addition to levels of compensation of other competitors, socio-economic conditions, etc.
Status of Accounting Auditing
Ernst & Young ShinNihon LLC is retained as Nippon Chemi-Con's accounting auditor for Nippon Chemi-Con to receive accounting auditing as required by the Corporate Law and auditing as required by the Financial Instruments and Exchange Law in a fair and independent manner. There are no special interests between Nippon Chemi-Con and this firm, as well as its assigned employees.
The following states the name of the certified public accountants that have provided auditing services and the number of assistant for auditing in the current period.
- Certified public accountants who have provided auditing services
- Yoshiyuki Nomizu, Syotaro Shimafuji
- Assistants for auditing
- Three CPAs and seventeen others
Note: others include CPA candidates, those who passed the Certified Public Accountant Examination, and those in charge of system auditing
- (c)Basic concept of internal control systems
Nippon Chemi-Con recognizes that it is essential to enforce thoroughgoing compliance and control risks to continuously enhance corporate value. Pursuant to basic policies for implementation of internal control systems, Nippon Chemi-Con proceeds with the measures to enhance risk management systems and compliance systems, as well as other various measures from the standpoints described below.
- System to ensure that the execution of duties by directors and employees of the company and its subsidiaries shall comply with the law and the Articles of Incorporation
- System to store and manage information related to execution of directors' duties
- Rules and other systems regarding the management of risks for losses that may be incurred by the company and its subsidiaries
- System to ensure efficient execution of duties by directors of the company and its subsidiaries
- System to ensure the appropriateness of business operations of the corporate group consisting of Nippon Chemi-Con and its subsidiaries and the system requiring that matters concerning execution of duties by directors of the subsidiaries be reported to Nippon Chemi-Con
- Matters related to employees of whom was requested by the Audit & Supervisory Board member for assisting its duties, matters related to the independence of such employee from directors , and matters related to ensuring the effectiveness of instructions to such employees
- System for directors and employees of Nippon Chemi-Con and its subsidiaries and auditors of the subsidiaries to make a report to the Audit & Supervisory Board members of Nippon Chemi-Con, and system for others to make a report to the Audit & Supervisory Board members
- System that ensures no unfavorable treatment to a person because of the report the person made to the Audit & Supervisory Board members
- Matters related to principles of treatment concerning advance payment of expenses or debt redemption procedures arising from the Audit & Supervisory Board members' execution of duties, and other expenses or debts arising from the Audit & Supervisory Board members' execution of duties
- Other systems to ensure the effectiveness of the Audit & Supervisory Board members' performances on audits
The "Internal Audit Department" which is controlled directly by the president is implementing internal control systems over financial reporting as stated in the Financial Instruments and Exchange Law.
- (d)Implementation of risk management system
Nippon Chemi-Con declared the "Basic Policy for Risk Management" to all of its employees as top management policies, aiming to eliminate various factors which hamper the company's business activities and realization of its corporate philosophy.
Based on this "Basic Policy for Risk Management", the company has laid down the "Basic Regulations for Risk Management" and established Risk Management Committee chaired by the risk management officer who is responsible for the risk management systems.
In addition, based on the "Basic Regulations for Risk Management", the company has established "Risk Management Regulations" and its subordinate rules as well as manuals, in order to prepare the system for emergency situations. As a part of the risk management systems, the company is going ahead with its approach to information security and environment.
For information security, the company manages information in accordance with "Basic Policy Regarding Information Security ", "Information Security Basic Regulations" and its subordinate regulations as well as manuals, in order to protect personal information, customer information and other information assets. In particular, the Information Security Committee appoints the chief information security officer and information security officer in each division to clarify responsibility of information management, takes physical measures, and raises all employees' awareness through educational activities.
For environment, the company has formulated "Environmental Policy", which is a code of conduct for its environmental management, expressing its basic philosophy regarding environment. In accordance with "Basic Regulations for Environment Management", the company has set up the Environmental Committee chaired by the chief environmental management officer to thoroughly boost environmental awareness of all employees, and to control group-wide environmental conservation activities.
Nippon Chemi-Con stands on the basis that corporate social responsibility is not only to pursue appropriate profits but also to contribute broadly to society through fair, transparent and free business transactions. Based on this recognition, the company ensures that every corporate activity is based on compliance with the law by repeatedly conveying the spirit of "Nippon Chemi-Con Group Charter of Corporate Behavior" to the company's officers and all employees by the president.
The company is also proceeding with the implementation of compliance systems for thorough adherence to "Nippon Chemi-Con Group Business Conduct Guidelines", which provides routine mind-sets the company should keep in mind.
In concrete terms, the company appoints the chief compliance officer who controls the compliance systems, and the Compliance Committee chaired by the chief compliance officer is promoting concrete measures for the penetration and firm establishment of compliance awareness. In addition, the company has implemented compliance education of employees by rank to improve their awareness of compliance.
In an effort to eliminate antisocial forces, the company has specified in "Nippon Chemi-Con Group Business Conduct Guidelines" that the company do not support any activities by any nations' antisocial forces or groups and take a resolute stance on these activities, and keep all employees informed of it.
As well as trying to collect information from outside specialized agencies including the police on a regular basis, the company has built a system to take prompt action in cooperation with outside specialized agencies if such cases occur.
3.Contract for Limitation of Liability with Outside Director or Outside Member of the Audit & Supervisory Board
Nippon Chemi-Con has concluded a contract, which limits compensation for damage that is provided for in Article 423 (1) of the Companies Act, with each of the outside officers pursuant to Article 427 (1) of the Companies Act so that the outside directors and outside members of the Audit & Supervisory Board can perform their expected roles adequately. The amount of limit of liability for damage compensation under such contract is limited to a sum stipulated in law.
4.Requirements for Special Resolution of General Meeting of Shareholders
Nippon Chemi-Con's Articles of Incorporation stipulate that a special resolution of General Meeting of Shareholders, as specified in Article 309, Paragraph 2 of the Corporate Law, shall be passed in a meeting attended by shareholders with more than one-third of the voting rights of shareholders able to exercise voting rights, and shall be passed by two-thirds of the voting rights represented. The objective of moderating the stipulation of resolution by a quorum is to allow for flexible operation of General Meeting of Shareholders.
5.Items for Resolution by General Meeting of Shareholders that May Be Resolved by the Board of Directors
- (a)Under the provisions of the Articles of Incorporation and pursuant to Article 165, Paragraph 2 of the Japanese Corporate Law, Nippon Chemi-Con may, in pursuit of conducting capital policies expeditiously, acquire its own shares through market transactions and other methods through the resolution of the Board of Directors,
- (b)Under the provisions of the Articles of Incorporation, pursuant to Article 454, Paragraph 5 of the Japanese Corporate Law, Nippon Chemi-Con may, through the resolution of the Board of Directors, pay an interim dividend to allow an expeditious distribution of profits to shareholders.
6.The Appointment of Directors
Nippon Chemi-Con's Articles of Incorporation stipulates that resolution for the appointment of directors requires attendance by shareholders with more than one-third of the voting rights of shareholders able to exercise voting rights, and is adopted by a majority of voting rights, and not the cumulative number of votes.