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, ESG Management Committee, Risk Management 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 an 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 Corporate Business Principles and 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.
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.
|April 1999||Established the NGK Corporate Business Principles|
|April 2003||Revised guidelines into the NGK Group Corporate Business Principles|
|June 2005||Introduced an executive officer system|
|Introduced a stock option|
|Introduced an outside officer system|
|July 2005||Established the CSR Committee|
|April 2007||Established the CSR Office|
|June 2010||Appointed independent directors|
|July 2011||Revised the NGK Group Corporate Business Principles|
|April 2015||Signed on to the UN Global Compact|
|June 2015||Established the Global Compliance Office|
|December 2015||Established the Nomination and Compensation Advisory Committee, Corporate Council, Conference of Outside Directors and Outside Audit & Supervisory Board Members, and Business Ethics Committee|
|June 2017||Appointed one additional outside director|
|October 2018||Appointed a chief compliance officer|
|January 2019||Revised the NGK Group Corporate Business Principles|
|April 2019||Established the ESG Committee|
|February 2020||Endorsement of recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)|
|April 2020||Established the Compliance Committee|
|Established the HR Committee|
|April 2021||Formulated the NGK Group Vision|
|Formulated the NGK Group Human Rights Policy|
|Established the NGK Group Basic Guidelines for Compliance Activities|
|Established the ESG Management Department|
|June 2021||Outside directors increased to 1/3rd of Board of Directors|
|An outside director made the chair of the Nomination and Compensation Advisory Committee|
|April 2022||Established the ESG Management Committee|
|June 2022||Introduced a Restricted Share Compensation Plan|
|April 2023||Established the Risk Management Committee|
|May 2023||Formulated the NGK Group Basic Sustainability Policy|
|July 2023||Revised the NGK Group Corporate Business Principles and established the NGK Group Code of Conduct|
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 14 times in FY2022
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.
The main agenda items for FY2022 were as follows.
- Budget and financial results
- Investment in production facilities, R&D, etc.
- Formulation of the NGK Group Digital Vision
- Initiatives for creation of new business (Progress report on New Value 1000)
- Formulation of statement regarding the UK Modern Slavery Act
- Progress report on the 5th Five-Year Environmental Action Plan
- Initiatives for business portfolio
- Progress report on Manufacturing ∞ (Chain) Innovation
- Revision of succession plan for NGK Group Chief Executive Officer
- Dissolution and liquidation of Group companies and investment in joint ventures
- Establishment of the Risk Management Committee
- Report on major committee activities, intellectual property activities, IR activities, etc.
BAudit & Supervisory Board
No. of members: 4; Convened 14 times in FY2022
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.
The major resolutions and reports for FY2022 were as follows.
- Audit & Supervisory Board members’ audit policy and audit plan and audit reports of the Audit & Supervisory Board
- Consent to the proposal for the appointment of Audit & Supervisory Board members
- Consent to the compensation of the Accounting Auditor
- Confirmation of proposals and documents to be submitted to the General Meeting of Shareholders
- Consent to a pre-agreement process for non-assurance services provided by the auditing firm to which the Accounting Auditor belongs and its network firms
- Report on audit activities by full-time Audit & Supervisory Board members
- Audit plan by the Accounting Auditor
- Financial audit report by the Accounting Auditor
- Report on the results of internal audits by the Auditing Department
CNomination and Compensation Advisory Committee
No. of members: 5; Convened 2 times in FY2022
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 as an advisory body to the Board of Directors. The committee receives inquiries from the Board of Directors and then deliberates on personnel matters for directors and the Audit & Supervisory Board members, matters relating to compensation for directors and executive officers, upper limit on the total compensation amount for directors and Audit & Supervisory Board members, and a succession plan for the Chief Executive Officer, etc. The committee 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.
The major matters discussed by the committee in FY2022 were as follows.
- Personnel matters for directors and Audit & Supervisory Board members
- Response in the event of an emergency with the Chief Executive Officer
- Upper limit on the total amount of compensation for directors and the Audit & Supervisory Board members as a whole
- Compensation (cash and stock-related compensation) commensurate with the position of each individual director and executive officer
- Amount of performance-linked bonuses to be paid to each individual director in FY2022
- Matters relating to the Chief Executive Officer succession plan
DBusiness Ethics Committee
No. of members: 6; Convened 5 times in FY2022
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.
No. of members: 11; Convened 2 times in FY2022
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 FY2022
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 FY2022
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.
No. of members: 16; Convened 21 times in FY2022
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, directors in charge of each department, 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 2022 to March 2023.
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.
|Risk Management Committee (Newly established in April 2023)||
This is a body established to report important matters relating to risk management to the Board of Directors and Executive Committee, to assist the Board of Directors in supervising the Group’s risk management, and to contribute to increasing the sophistication of risk management.
|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.
|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.|
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.
|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.|
Times held: 3
This body assists the president and Compliance Committee chair with decision-making by deliberating essential matters pertaining to the following.
|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.
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.
|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 department. 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.
We revised the NGK Group Corporate Business Principles which 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 while pursuing economic efficiency. In addition, we established the NGK Group Code of Conduct in July 2023 as specific matters which our officers and employees should put into practice. The departments and committees which handle the related matters are responsible for ensuring that the code and principles are thoroughly applied in the Group. The ESG Management Committee coordinates the overall process. 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 July 2023 board meeting.