Governance System

Basic Approach

NGK’s basic policy on corporate governance is to ensure legality in business activities and transparency in management. The Company has established a structure that can respond swiftly to changes in the business environment and built and maintains shareholder-focused system to ensure fair management.
To put this policy into practice, NGK has chosen the governance structure of a company with an Audit & Supervisory Board. We have established a corporate governance system that increases the effectiveness of corporate governance through debate and deliberation on important matters. This was accomplished by establishing the Executive Committee and various other committees to support the president in making decisions, in addition to the General Meeting of Shareholders, Board of Directors, and Audit & Supervisory Board.
NGK recognizes the need for swift, optimal decision-making and execution to respond to changes in the business environment. We have therefore introduced a executive officer system to segregate the management decision-making and supervisory function from the business execution function to clearly define the roles of and strengthen each function.
To strengthen the supervisory and oversight function of the Board of Directors, we have mandated reporting to Board of Directors from the key committees among committees that handle various risks surrounding NGK. To ensure that the objectives of the Corporate Governance Code are thoroughly implemented, we established the Nomination and Compensation Advisory Committee, Corporate Council, Conference of Outside Directors and Outside Audit & Supervisory Board Members, the Business Ethics Committee, and other committees.
In addition, we have established the NGK Group Code of Conduct to stipulate how everyone working for the NGK Group should execute their jobs so that they abide by society’s laws and the company’s Articles of Incorporation and comply with corporate ethics. All executives and employees are well versed in the code and are obligated to abide by it. In January 2019, the NGK Group Code of Conduct was revised with an emphasis on the realization of a sustainable society through business activities, respect for human rights, and thorough compliance to reflect changes in society since the previous revision.

Corporate Governance Report

Steps taken to strengthen corporate governance

We continue to strengthen the corporate governance system. Enhancements include introducing an executive officer system to improve the management supervision and monitoring functions and other functions, and to provide suggestions on all aspects of management.

Corporate governance system

We have established the following system to ensure legality in business activities and transparency in management. This system makes it possible to respond swiftly to changes in the business environment and maintains a shareholder-focused system to ensure fair management.

Committees on Corporate Governance

ABoard of Directors

No. of members: 9; Convened 13 times in FY2021

The Board of Directors is composed of nine directors (eight male, one female; one third of directors are outside directors). It discusses and votes on matters designated under the Companies Act, NGK’s Articles of Incorporation and Rules for the Board of Directors. (These matters include company-wide unified budgeting, strategic planning such as dissolution, mergers, and alliances of the company, appointing and removing representative directors, and authorizing business reports and financial statements etc., the disposal and acceptance of transfer of important assets, the appointment and dismissal of important employees, etc.) The Board also monitors the job performance of all company directors. The chair of the Board of Directors is a non-executive director. In addition, both the full-time and outside members of the Audit & Supervisory Board attend meetings of the Board of Directors and provide their opinions when necessary.

BAudit & Supervisory Board

No. of members: 4; Convened 14 times in FY2021

The Audit & Supervisory Board is composed of four Audit & Supervisory Board members (all male). Audit & Supervisory Board members supervise directors’ decision-making process and job performance, by attending meetings of the Board of Directors and other important meetings, receiving reports from directors, employees, etc. and requesting explanations where necessary. In addition, they review the establishment and operation of so-called internal control systems, and confirm the appropriateness of accounting auditors’ auditing methods and results.

CNomination and Compensation Advisory Committee

No. of members: 5; Convened 4 times in FY2021

The Nomination and Compensation Advisory Committee was established in order to ensure fairness and enhance transparency in officers’ personnel matters, the determination of compensation, and other matters. The Nomination and Compensation Advisory Committee deliberates on personnel matters for directors and the Audit & Supervisory Board members, matters relating to compensation for directors and corporate officers, total compensation amount proposal for the Audit & Supervisory Board members, and a succession plan for the chief executive. It reports its results to the Board of Directors. The committee consists of a majority of independent outside directors and a committee chairperson who is selected from among the independent outside directors. It is composed of four male members and one female member. One outside Audit & Supervisory Board member attends committee meetings as an observer to confirm the appropriateness of the deliberation process.

DBusiness Ethics Committee

No. of members: 6; Convened 5 times in FY2021

The Business Ethics Committee is comprised of outside officers and one internal director who is in charge of compliance. The committee conducts necessary investigations into fraudulent acts and violations of laws and regulations involving corporate officers and employees and advises the Board of Directors on how to prevent recurrence. To ensure compliance with competition laws and the Foreign Corrupt Practices Act, the committee makes recommendations to the Board of Directors on building a compliance system and considering compliance activities. The Committee strives to strengthen the compliance system by establishing, in addition to the current Helpline System, a whistle-blowing system (hotline), which is directly linked to the Business Ethics Committee, as a mechanism to prevent any such fraudulent act or violation of laws and regulations. The committee is composed of five male members and one female member.

ECorporate Council

No. of members: 11; Convened 2 times in FY2021

The Corporate Council is a council where outside officers (outside directors and outside Audit & Supervisory Board members), representative directors, and others can exchange opinions. It provides an opportunity for management to actively seek advice from outside officers on various issues concerning management. The council is composed of ten male members and one female member.

FConference of Outside Directors and Outside Audit & Supervisory Board Members

No. of members: 5; Convened 2 times in FY2021

This conference consists only of outside officers, and is a conference where outside officers can exchange opinions concerning corporate management issues and other matters to actively contribute to discussions in Board of Directors meetings. The committee is composed of four male members and one female member.

GHearing Convened by Audit & Supervisory Board Members and Outside Directors

No. of members: 7; Convened 14 times in FY2021

Hearings consist of Audit & Supervisory Board members and outside directors. The purpose of these hearings is to collect information from relevant internal personnel concerning the corporate business environment and company issues. The hearing is composed of six male members and one female member.

HExecutive Committee

No. of members: 16; Convened 18 times in FY2021

The Executive Committee is the body that deliberates necessary matters to assist the president in making decisions. It consists of the president, executive vice presidents, group executives of each business group, the group executive of Corporate NV Creation, the group executive of Corporate R&D, the group executive of Corporate Manufacturing Engineering, corporate officers in charge of each department, senior fellows, and full-time Audit & Supervisory Board members, as well as corporate officers, committee chairs, general managers and division heads designated by the president. Fifteen committee members are male and one is female.

Other BodiesNote: The number of times held refers to the cumulative total from April 2021 to March 2022.

Strategy Committee Times held: 18	This committee conducts a broad range of discussions aimed at discovering problems and considering solutions concerning issues important to business management, strategy and policy planning, and reporting on the execution status and progress of various businesses and projects.
ESG Management Committee Times held: 9	This body assists the president, who is the ESG Management Committee chairperson, in decision-making about strategy, action plans, and important issues related to NGK Group sustainability (medium-to-long-term), as well as Environmental, Social, and Governance, and Sustainable Development Goals. It also performs deliberation for the presentation of agenda items deemed important to the Board of Directors or the Executive Committee. Note: In April 2022, we renamed the former “ESG Committee” to the “ESG Management Committee.” The Committee will more proactively addresses the NGK Group’s sustainability issues and the activities will be appropriately supervised by the Board of Directors.
Development and Commercialization Committee Times held: 2	This body deliberates items necessary to assist the decision-making of the president and Development and Commercialization Committee chair regarding policies, evaluations, budgets, major individual planning, and commercialization projects related to development and commercialization. Note: In April 2022, the Development Committee was abolished and the Development and Commercialization Committee was established as a higher body in charge of policy development and to oversee the entire processes of the company internal research and development and commercialization.
Capital Investments Committee Times held: 14	This body deliberates items necessary to assist the decision-making of the president and Capital Investments Committee chair regarding the examination and evaluation of policies, budgets, performance, and major individual planning related to capital expenditure and information systems.
Quality Committee Times held: 5	Aiming to increase customer satisfaction and trust by realizing even higher-quality products and services, this body deliberates the matters necessary to help the president and the Quality Committee chair with decision-making regarding the following items. Determination, revision, or abolition of Quality Policy and Objectives Items pertaining to the prevention of serious quality defects in the market and technological responses after occurrence Items pertaining to the quality assurance framework and avoidance of quality risks in commercialization of developed products Other quality-related matters determined to be important
Environment, Safety & Health Committee Times held: 3	This body performs overall management of the environment, safety and health for the NGK Group by regularly ascertaining overall conditions, and carrying out the necessary deliberations for making decisions on important policies, formulating action plans, and handling important matters.
Compliance Committee Times held: 3	This body assists the president and Compliance Committee chair with decision-making by deliberating essential matters pertaining to the following. Observance of laws, regulations, and corporate ethics 1.1.Determination, revision, or abolition of basic policies related to the observance of laws, regulations, and corporate ethics, including the Code of Conduct Note: Deliberation items for Board of Directors meetings 1.2.Determination of systems, structures, and strict observance of important activities pertaining to laws, regulations, and corporate ethics 1.3.Handling of Helpline matters 1.4.Determination, revision, or abolition of risk management structures pertaining to laws, regulations, and corporate ethics Response to the matters, incidents, or accidents related to laws, regulations, or corporate ethics that are special crisis management matters Other compliance-related issues deemed important by the committee chair
Internal Controls Committee Times held: 3	This body deliberates matters necessary to help the president and Internal Controls Committee chair with decision-making regarding internal controls system assessment and reporting related to financial reporting based on the Financial Instruments and Exchange Act. Determines the scope of reporting for each fiscal year, assessment and reporting schedules, standards to assess internal controls, and other basic matters Summarizes internal controls assessment and drafts internal controls report
HR Committee Times held: 7	This body assists the president with decision-making by examining issue presentation, research reporting, solution development, and other essential matters related to corporate obligations in respecting human rights (issue handling) and the important personnel policies within the NGK Group. Matters related to the determination, revision, or abolition of basic policy on human rights Matters related to raising human rights awareness among Group companies and implementing human rights due diligence Matters related to important personnel policies whose impact may potentially extend to Group companies Other human rights and personnel policy-related matters deemed serious by the committee chair
BCP Countermeasures Headquarters Times held: 1	Aimed at ensuring business continuity in critical situations such as disasters, terrorism, or systems failure, this body executes the operation and maintenance of business continuity plans (BCP) in normal times as well as gives instructions on and support to restoration systems, and prioritizes restoration orders when BCP is in effect.
Disaster Prevention and Control Headquarters Times held: 1	This body executes requisite duties under commands from the Head and deliberates items necessary to assist the decision-making of the president and Head of this body regarding items related to earthquakes, storm and flood damage, fires, and explosions that threaten or significantly impact the company.
Security Export Control / Specified Export and Customs Clearance Control Committee Times held: 1	This body deliberates and determines items necessary for guidance for subsidiaries and affiliates, legal compliance and the improvement of other internal systems with respect to security export controls, specified export declaration systems, and the management of customs clearance operations.

Internal Control Systems

The Board of Directors and the executive bodies overseen by the president are responsible for establishing and operating NGK’s internal control system. The Auditing Department, a specialized internal audit body, is responsible for assessing the status of business execution in each operating division. NGK has also established the Internal Controls Committee to manage its reporting system for internal controls pursuant to Japan’s Financial Instruments and Exchange Act.
The NGK Group Code of Conduct (revised in January 2019) was formulated as a policy embodying the Group’s corporate philosophy. These guidelines specify the Group’s fundamental stance on sincerely engaging in business activities and fulfilling its responsibilities to society.
The task of ensuring Group-wide compliance with the NGK Group Code of Conduct, along with laws, regulations, and corporate ethics, is the responsibility of the Compliance Activity Promotion Subcommittee, which was established by the Compliance Committee and consists of managers from NGK divisions. The Business Ethics Committee handles matters concerning improper acts and legal violations involving NGK executives, and ensuring compliance with competition laws and Foreign Corrupt Practice Act.
The Board of Directors adopted an amendment to the “Resolution for the Development of Systems to Ensure the Appropriateness of Operations” at the March 2022 board meeting.