Board of Directors and Stock Information

Structure of the Board of Directors

Directors

Committee Membership (as of June 30, 2022)

Expertise of Directors (as of June 30, 2022)

Ratio of Independent Outside Directors

Target ratio of Independent Outside Directors	Result	Name
One-third of the Board of Directors	1/3	Hiroyuki Kamano, Emiko Hamada, and Kazuo Furukawa

Board of Directors Diversity Policy

The Articles of Incorporation specify a maximum of 15 directors on the NGK Board of Directors. NGK does not discriminate on the basis of gender, age, nationality, and race. Based on this policy, NGK strives to achieve diversity in both gender and internationality of the Board of Directors by electing women directors and directors who possess experience in the management of overseas subsidiaries. NGK also strives to ensure independence of the Board of Directors by specifying that one-third or more of directors be independent directors.
NGK deems the following director skills necessary: Practical experience and demonstration of leadership in areas in which the NGK Group operates its business; professional expertise in finance, legal affairs, human resources and labor, information and communications, and other areas. We also think it is necessary to have highly independent outside directors who possess a high degree of expertise in legal affairs or corporate finance, or who possess knowledge of international affairs, trends in technology, and corporate management. The skill matrix (expertise) of the current Board of Directors is shown above.

Outside Directors / Outside Audit & Supervisory Board Members

Standard and Policy for Independence of Outside Directors and Outside Audit & Supervisory Board Members

Outside Directors

In addition to the requirements for an outside director under the Companies Act and for an independent director specified by the Tokyo Stock Exchange, NGK may not designate a person who falls under any of the following items as an outside director with independence (hereinafter referred to as the “Independent Outside Director”). Even if a person falls under one or more of these items, the Company may make an exception and deem a person suitable for serving as an Independent Outside Director of NGK in light of his or her character, knowledge, and other attributes. However, the person must still meet the requirements of the Companies Act and Tokyo Stock Exchange and the Company must provide an external explanation of why such person is suitable to serve as an Independent Outside Director.
In these standards for determining independence, a business executive refers to an executive director, executive officer, corporate officer or other employee, and the NGK Group refers to NGK and its subsidiaries or affiliates.

• A major shareholder who holds 10% or more of current voting rights in NGK, or who was a business executive of the corporation if the major shareholder is a corporation during the last three fiscal years, including the most recent fiscal year.
• A current business executive of a business partner of the Company which has engaged in transactions with the NGK Group totaling 2% or more of consolidated net sales for either party in any of the last three fiscal years, including the most recent fiscal year.
• A person who was a business executive in a corporation that is a financial institution or other major creditor which is absolutely essential in financing the NGK Group and for which no alternatives exist, in the past three fiscal years, including the most recent fiscal year.
• A current director or officer of an organization that has received donations or grants totaling 10 million yen/year or 30% of total average annual expenses of the organization, whichever is greater, from the NGK Group in any of the past three fiscal years, including the most recent fiscal year.
• A certified public accountant (CPA) or tax accountant, or a current employee of an accounting firm or tax accounting firm who served as an accounting auditor or accounting advisor of the NGK Group in the past three years, including the most recent fiscal year.
• An attorney, certified public accountant, tax accountant, or other consultant who does not correspond to any of the individuals mentioned above in 5, who received 10 million yen/year or more in cash and other assets in addition to officer compensation in any of the past three years, including the most recent fiscal year, or who does not correspond to any of the individuals mentioned above in 5 and is a current employee, etc. of a law firm, accounting firm, tax accounting firm, consulting firm, or other organization that provides expert advice, and that organization has received payments from the NGK Group totaling 2% or more of total consolidated net sales in any of the past three fiscal years, including the most recent fiscal year.
• A person who was a business executive in a company in which NGK is currently a major shareholder, in the past three fiscal years, including the most recent fiscal year.
• A spouse or relative within the second degree of kinship of a person mentioned above in 1 through 7.

Outside Audit & Supervisory Board Members

In order to ensure that outside Audit & Supervisory Board members are impartial and that there is no conflict of interest with our general shareholders, NGK makes comprehensive decisions based on the Securities Listing Regulations of the Tokyo Stock Exchange.

Reasons for Appointment of Outside Directors and Outside Audit & Supervisory Board Members

Outside Directors

Outside Audit & Supervisory Board Members

We have submitted written notification to the Tokyo Stock Exchange and Nagoya Stock Exchange of the appointment as independent officers of the above five individuals.

Effectiveness of the Board of Directors

Election of Board Members, Executive Officers, and Audit & Supervisory Board Members

When nominating candidates for the positions of director and Audit & Supervisory Board member, all representative directors discuss each candidate and obtain consent from the Audit & Supervisory Board for Audit & Supervisory Board member candidates. In addition to this, NGK strives to ensure fairness, transparency, and timeliness in the process of nomination, election/appointment, and dismissal. This is accomplished through deliberation of the nomination of each candidate for director and Audit & Supervisory Board member, and appointment and dismissal of representative directors and executive directors by the Nomination and Compensation Advisory Committee, which has independent outside directors as a majority of its members. The committee then reports its detailed conclusions to the Board of Directors. After the Board of Directors has sufficiently considered the conclusions of the committee, the Board nominates candidates for the positions of director and Audit & Supervisory Board member, and approves this as an agenda item (resolution) for the General Meeting of Shareholders. After directors are elected by the General Meeting of Shareholders, the Board of Directors appoints representative directors and executive directors, based on the report by the Nomination and Compensation Advisory Committee.

Training policies for officers

Directors and Audit & Supervisory Board members have been tasked with the responsibility of exercising the due care of a good manager. The Company therefore has established a training policy of providing the following types of opportunities to sharpen skills and knowledge so that they can fully execute their duties as experts in various kinds of management or as supervisors of business execution.

• For internal officers: Training on the Companies Act, the Financial Instruments and Exchange Act, competition laws, and other aspects of corporate governance and compliance
• For outside officers: Mainly providing separate explanations from the division in charge concerning items on the agenda of the Board of Directors and regularly providing information on the business environment and issues as well as opportunities for exchanging opinions

Evaluation on the effectiveness of the Board of Directors

NGK’s Board of Directors conducts a survey of directors and Audit & Supervisory Board members at the close of each fiscal year to evaluate the effectiveness of Board of Directors meetings. The Board entrusts analysis and evaluation of the responses to an external organization, which reports the results to the Board of Directors. The Company continually strives to improve effectiveness through such means as considering the importance and necessity of each issue identified and reinforcing efforts in Board of Directors meetings during the next fiscal year.

Summary of the evaluation of effectiveness in FY2021

We conducted a survey in April 2022 to evaluate the Board of Directors meetings in FY2021 (ended March 31, 2022). The survey was comprised of 50 questions and free-response entry and the results were reported at the Board of Directors meeting held on June 9, 2022.

NGK made progress on the following initiatives and improvements concerning items identified as issues in the evaluation for the previous fiscal year:

• Discussed important medium to long-term and strategic themes in expanded strategy committee attended by outside officers in addition to the main business executives in charge, and freely debated and reported on such themes in Board of Directors meetings.
• Reported the status of allocation, treatment, and development of top management candidates and shared information in Corporate Council meetings attended by outside officers. Also partially revised the succession plans for the chief executive and approved the plans in a Board of Directors meeting.

Regarding the overall evaluation, we received the following comments from the external organization, and recognize the need for ongoing discussion to further improve effectiveness and realize the Group vision:

• The NGK Board of Directors has maintained the elements that form the foundation necessary as a Board of Directors since the previous evaluation, including the commitment and leadership of each member and a healthy culture. Evaluation of corporate strategy and policy decisions, risk management, and the composition of the Board of Directors has also improved. We can see the positive impacts of the structural change to one-third outside directors and discussion on formulating the vision. As can be seen from the increase in the overall score, we think the Board of Directors continues to be effective due to the specification of problems and concrete steps the Board of Directors has taken to achieve improvement.
• Opinions in the free-comment section were divided on whether or not the recent reforms increased the effectiveness of the Board of Directors. A certain number of comments demanded concrete efforts to further improve actual effectiveness, rather than in form only. In particular, some think the Board needs to devise ways to separate execution from supervision, clearly distinguish between reporting items and discussion items according to this separation of functions, and reduce the number of items elevated to the Board of Directors, among other improvements.
• Although the overall evaluation of discussion on formulating the vision was high, some desired continued discussion on strengthening the PDCA cycle, better follow-up, supervision of the business portfolio, effective use of assets, and other topics.
• Some think there is a need to share and perform the checks to the level expected in regard to the Nomination and Compensation Advisory Committee, succession plans, and evaluations of executive management.

We will endeavor to ensure and enhance effectiveness of the Board of Directors through ongoing efforts based on the evaluation results.

Initiatives Targeting Further Improvements in Effectiveness

Management Succession Planning

The revised NGK Group Chief Executive Officer Succession Plan was approved by resolution of the Board of Directors in April 2022. This succession plan establishes the required qualities, development policies, selection procedures, and other actions for developing chief executive officer successors. Based on this, the president provides the Nomination and Compensation Advisory Committee with a progress report on the plan each year, and the committee reviews the appropriateness of the plan.

Policy on Cross-Shareholdings

NGK holds shares in listed companies that contribute the long-term business development of the NGK Group as cross-shareholdings, primarily to maintain and strengthen transactional relationships. We also hold shares in each company in the Morimura Group, which shares a common founder. We hold these shares to mutually enhance management quality because the Morimura Group brand is part of NGK’s corporate value through its philosophy and history.
As part of our asset portfolio, all cross-shareholdings are positioned as assets to supplement the liquidity considered necessary for our business plans. We always keep shrinking the size of cross-shareholdings in mind from the perspective of asset efficiency, and the size of cross-shareholdings may change due to changes in overall business trends and risks, financial conditions, the transactional relationship with each company whose shares we hold, and other such factors.
The Board of Directors regularly reviews NGK’s capital policy and whether it is appropriate to continue holding these shares based on certain indicators in addition to significance of holding shares from the perspective of the transactional relationship. Such indicators include the credit rating and other indicators of the safety in holding shares, and the dividend yield and other indicators of efficiency. With respect to the cost of capital, shareholdings are not evaluated in isolation. We also evaluate cross-shareholdings as part of the balance sheets for each business, which have different risks and anticipated rates of return, in managing the return on invested capital (NGK version ROIC) for each business.
When exercising voting rights on cross-shareholdings, we focus on whether the business is being managed with an emphasis on enhancement of corporate value, shareholder return, in addition to evaluation from the perspective of the content of resolutions and whether they will adversely affect shareholder return.

Number of Stocks and Balance Sheet Amount

Stocks for Which Number of Shares Increased in FY2021

Stocks for Which Number of Shares Decreased in FY2021

Donations and Other Spending

We forbid contributions to individual politicians which are forbidden by law, and donations to specific political groups or parties which exceed the amounts allowed by law. We did not make any political contributions in FY2021.