Committees on Corporate Governance
NGK has further strengthened and enhanced its corporate governance system by establishing committees to bolster the supervision and monitoring functions of the Board of Directors.
Board of Directors
The Board of Directors is comprised of 13 directors who deliberate matters prescribed in the Companies Act, which primarily include company-wide unified budgeting; strategic planning such as dissolution, mergers, and alliances of the company; appointing and removing representative directors; approval of financial statements, business reports, etc.; the disposal and acceptance of transfer of important assets; and the appointment and dismissal of an important employee. The Board also monitors the job performance of all company directors. The Board of Directors includes three outside directors to create a system enabling management monitoring based on professional knowledge and decision-making from a wider perspective. In addition, both the full-time and outside members of the Audit & Supervisory Board attend meetings of the Board of Directors and provide their input and opinions when necessary. As of June 29, 2020 the current Board of Directors comprises 13 members (12 men and one woman).
Times held: 14
Audit & Supervisory Board
The Audit & Supervisory Board is comprised of two full-time members and two outside members, each of whom attends meetings of the Board of Directors and other important meetings. At those meetings they monitor the decision-making process and job execution of directors by receiving reports from directors, employees and others, as well as receiving explanations from them as needed. They also check how the company’s internal control systems are being maintained and operated and confirm the appropriateness of the auditing methods and results of the accounting auditors.
Times held: 14
The Executive Committee is a body that deliberates necessary matters to assist the President in decision making, and consists of the President, directors, Audit & Supervisory Board members, senior fellows, as well as corporate officers, chairpersons, general managers, and division heads designated by the President. As of June 29, 2020 the current Executive Committee comprises 18 members (17 men and one woman).
Times held: 21
Nomination and Compensation Advisory Committee
This committee was established in order to ensure fairness and enhance transparency in officers’ personnel matters, the determination of remuneration, and other matters. Comprising five outside directors and three representative directors, it deliberates on matters related to the appointment of directors and Audit & Supervisory Board members, remuneration of directors, executive officers, and Audit & Supervisory Board members, and Chief Executive Officer succession planning. The results of these deliberations are reported to the Board of Directors.
Times held: 2
Business Ethics Committee
Comprised of outside directors and one inside director in charge of compliance, the committee conducts investigations as necessary into fraudulent acts or violations of laws and regulations in which the officers and others of NGK were involved, and it makes recommendations, such as measures to prevent reoccurrence, to the Board of Directors. In addition, the committee considers the creation of compliance systems and compliance activities aimed at compliance with competition laws and the Foreign Corrupt Practices Act, and reports the results thereof to the Board of Directors. 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.
Times held: 5
This council is comprised of five outside directors and three representative directors. It exists as a place for outside directors, representative directors, and other participants to exchange opinions and to provide management with an opportunity to seek advice from the outside directors concerning various management-related issues.
Times held: 3
Conference of Outside Directors and Outside Audit & Supervisory Board Members
This conference is comprised of five outside directors who exchange opinions concerning managerial issues and other matters, aiming to actively contribute to discussions at the Board of Directors’ meetings.
Times held: 2
Hearing Convened by Audit & Supervisory Board Members and Outside Directors
This hearing is comprised of four Audit & Supervisory Board members and three outside directors. Information is collected from the personnel in charge within each division regarding the business environment and issues of NGK.
Times held: 7
Note: Times held is the number of meetings between April 2019 and March 31, 2020.
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.
|Environmental Protection Committee
Times held: 2
|This body formulates and deliberates the planning of matters necessary to help the president and the Environmental Protection Committee chair with decision-making regarding the realization of our Core Policy on the Environment to promote business activities in harmony with the environment.|
|Safety and Health Committee
Times held: 2
|This body deliberates important issues on safety and health to assist the decision-making of the president and Safety and Health Committee chair regarding the establishment of basic policies and priority targets pertaining to safety and health and the confirmation of labor accidents and priority activities.|
Times held: 3
(CSR Committee until fiscal 2019)
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: 3
|This body deliberates items necessary to assist the decision-making of the president and Development Committee chair regarding policies, evaluations, budgets, major individual planning, and commercialization projects related to development.|
Times held: 2
|This body deliberates items necessary to assist the decision-making of the president and Facilities Committee chair regarding the examination and evaluation of policies, budgets, performance, and major individual planning related to capital expenditure and information systems.|
(established in April 2020)
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.
Times held: 5
|This body facilitates information sharing, opinion exchange, and policy deliberation between the president and other relevant directors and personnel about important environmental, social, and governance-related issues.|
Times held: 1
|Aimed at ensuring business continuity in times of emergency, 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.|
|Central 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.|
Audit & Supervisory Board Auditing Status
Each Audit & Supervisory Board member is responsible for providing an independent perspective on the job performance of directors and accounting auditors, as well as for sharing information with the other Audit & Supervisory Board members in order to help ensure auditing is both efficient and highly effective. In addition to meeting before and after the Board of Directors meeting each month, the Audit & Supervisory Board convenes meetings on an as-needed basis. In fiscal 2019, the Audit & Supervisory Board met 14 times for an average of 1.5 hours each time.
The following three items were addressed as auditing priorities in fiscal 2019.
- The status of compliance-related initiative adoption
- The launch/progress status of new business, products, etc.
- Business-specific risk awareness and reasonableness of the management decision-making process
Audit & Supervisory Board members attend Board of Director meetings where they observe meeting management, resolution content, and other aspects, and provide opinions and input as necessary. In addition, hearings convened by Audit & Supervisory Board members and outside directors are held with each general manager and Head Office division director to learn and exchange opinions about various matters, including budgetary content, the status of business, the status of risk management, and legal and regulatory compliance systems. Also, on-site auditing visits and other methods are used when necessary to hold hearings with directors and other managers, as well as directors and personnel at subsidiaries, to learn and exchange opinions about such matters as the status of business, risk management, and legal and regulatory compliance systems. For corporate group auditing, the targets of on-site auditing and inspection were chosen from among NGK subsidiaries in and outside of Japan and based upon importance and risk approach.
In addition to the above, full-time Audit & Supervisory Board members also attend meetings of the Executive Committee, CSR Committee*, Internal Controls Committee, and other important meetings and committees within NGK in order to assess the business execution decision-making process. They also meet every half-term with the representative directors to report on the results of their audits and to exchange opinions. In fiscal 2019, as part of the corporate group audit process, the full-time Audit & Supervisory Board members also met twice with auditors at major NGK Group subsidiaries in Japan, and they held two audit report meetings with auditors, inspectors, and other auditing-related personnel from NGK Group subsidiaries in Japan, China, and South Korea.
Other activities undertaken by the board members included reviewing important approval documents and the results of internal reviews conducted by the Auditing Department; soliciting comments and critiques about financial report-related internal reporting audits conducted by accounting auditors; and reviewing the Group’s asset status by accompanying accounting auditors on in-person, physical inventory inspections of inventory assets. The details of the auditing activities undertaken by the full-time Audit & Supervisory Board members are shared in a timely manner with the board’s outside members via board meetings and other means.
The CSR Committee was reorganized on April 1, 2020 into the Compliance Committee.
The Auditing Department (17 members) has been established as NGK’s internal auditing division and is responsible for checking the status of business execution in each division and then providing management with information, which contributes to their decision-making. The general manager of the Auditing Department is a member of the Internal Controls Committee.
As the NGK’s internal auditing division, the Auditing Department performs approval application and expense settlement monitoring and auditing, as well as compliance auditing related to competition laws, the Subcontract Act, security export control, and other regulations. It also does internal control auditing and business process auditing related to the financial reporting of NGK and NGK Group companies. Every half-term, all of the above audits are used by the Auditing Department to compile business audit results for NGK overall, as well as individual audit results when appropriate. These results are then reported to the president, the directors responsible for these departments, the members of the Audit & Supervisory Board, and others.
Audits by Audit & Supervisory Board members, accounting audits, and internal audits are conducted independently. However, to increase the effectiveness and efficiency of audits, Audit & Supervisory Board members (the Audit & Supervisory Board), accounting auditors, and the Auditing Department regularly exchange information regarding the policy, plan, and results of audits.
Additionally, with regard to quality, environmental, and safety and health audits, these require specialized expertise to conduct and are thus performed on an as-needed basis within the Group by the specialist departments, which serve as the committee secretariats for their respective areas. The results are then reported to the committee responsible for the area audited, and a summary is provided by the committee to the Board of Directors.
Accounting Audit Status
Accounting audits are performed by an auditing firm and includes financial statement and internal control auditing carried out in line with the Financial Instruments and Exchange Act and auditing carried out in line with the Companies Act.
Selection of the auditing firm to perform accounting audits was carried out by the Audit & Supervisory Board according to a variety of criteria. Among the key criteria were whether the firm maintained systems and structures in line with the Regulation on Corporate Accounting (“Matters Related to the Performance of Duties of Financial Auditor(s)”); whether it possessed professional expertise and could carry out appropriate auditing while maintaining a position of independence; and whether there was any grounds for dismissal of financial auditors, as per the Companies Act. Based on a determination of suitability made in light of these criteria, Deloitte Touche Tohmatsu LLC (“Deloitte”) has been selected as the accounting auditor for NGK.
The decision of the Audit & Supervisory Board and its members to utilize Deloitte as the accounting auditor for NGK was made based not only on the company’s suitability in terms of the mentioned selection criteria but also in light of such criteria as its communication with management, Audit & Supervisory Board members, finance and accounting divisions, internal auditing divisions, and others during the course of daily auditing and other activities, and its suitability for handling Group-wide auditing and improper and illegal risks.
Election of Board Members, Executive Officers, and Audit & Supervisory Board Members
With respect to the nomination of candidates for the Board of Directors and Audit & Supervisory Board, all representative directors discuss matters related to each candidate. The Nomination and Compensation Advisory Committee, of which external directors make up a majority, then deliberates matters related to each candidate, and reports the results to the Board of Directors. As for candidates for the Audit & Supervisory Board, approval is obtained from the Audit & Supervisory Board in order to secure the independence of Audit & Supervisory Board members. With consideration given to the report made by the Nomination and Compensation Advisory Committee, candidates for the Board of Directors and Audit & Supervisory Board are determined by resolution of the Board of Directors and their confirmation is set as an agenda item for the General Meeting of Shareholders. Members of the Board of Directors and Audit & Supervisory Board are then appointed by resolution of the General Meeting of Shareholders. Also, to further clarify the directors’ mission and responsibilities, the term of office for directors is one year.
Training Policies for Executives
Taking into account that directors and Audit & Supervisory Board members assume the duty of care of a good manager as a fiduciary of NGK, NGK has established training policies to provide the following opportunities to improve their skills and knowledge so that they can adequately fulfill their respective responsibilities as experts in management or as supervisors of business execution.
- Training for internal officers relating to the Companies Act, Financial Instruments and Exchange Act, competition laws, and corporate governance and compliance.
- The provision of individual explanations from the relevant divisions to outside directors/Audit & Supervisory Board members, mainly relating to the items brought up at the Board of Directors’ meetings as well as the periodic provision of information to, and opportunities to exchange opinions with, outside directors/Audit & Supervisory Board members on the business environment and other issues.
Comments from Outside Directors
Our role is to check managerial balance
Given that companies exist as part of society, they cannot survive if they ignore the environmental and social impacts of their actions. Thus, I believe that the social value that a company provides, such as through hiring and contributing to the environment, is just as foundational to its existence as its economic value, such as profitability and growth potential.
Also, in the post-COVID-19 era and beyond, the importance of the relationship between companies and the environment looks to only grow stronger. An important issue facing society is humanity’s coexistence with the environment, and this is an area where society is increasingly recognizing the lasting value of positively contributing companies.
In that sense, we can say that the NGK Group is extremely well-positioned. This is because the very business in which the NGK Group engages, such as developing environmentally beneficial products for automotive-related business, helps to reduce humanity’s environmental footprint. If the NGK Group can capitalize on its expertise in ceramic technology to facilitate progress towards achieving the SDGs, it would be abundantly possible to turn the COVID-19 recession into a growth opportunity.
Company management cannot remain static in the face of tremendous societal upheaval. In order to achieve corporate growth, it must embrace significant innovation reflective of society’s needs. Management tends to act conservatively out of a sense of obligation to responsibly handle the important assets of shareholders. However, the act of management entails a certain adventurousness that must be continually acted upon in order to grow.
The key, then, is balance: keeping management oriented in the direction of innovation while also keeping it within an acceptable range of risk. Management should not be being overly adventurous. Risk should be adequately calculated. A balance should be struck between risk and reward. Keeping check of all this is, I believe, the role that we must play as outside directors.
We will continue to provide the Board of Directors with recommendations so that the NGK Group can anticipate future values and head in the direction of change and innovation. Our wish is for young employees to look forward to realizing their dreams and that the NGK Group will continue to exist well into the future.
Transformation and growth for the post-COVID-19 era
Improving corporate value all depends on how well a company is meeting the essential expectations of society. This will require companies to be providing society with new value. This is exactly expressed in the mission of the NGK Group, as stated in its Group Philosophy: “Enriching Human Life by Adding New Value to Society.”
And, given its history of product development derived from the application of cumulative expertise in the difficult area of ceramic technology, this is a strong suit of the NGK Group. However, the NGK Group must avoid simply continuing to create better versions of its already outstanding products and services; rather, it is important that it focus on delivering products and services tailored to the changing times.
Ceramic materials offer superior durability and versatility, which suits them to an extremely broad range of applications. I think this durability and versatility can also be capitalized upon to great effect as part of the infectious disease measures within the medical and healthcare fields. With its expertise in ceramic technology, the NGK Group is capable of providing the new technologies and products demanded by our times.
In a post-COVID-19 era, things that we thought were still a way off in the future are suddenly becoming reality, and it is the companies delivering new ideas to meet this reality who will be building the era to come. I would like to see the NGK Group being a pioneer in the coming era through its technological innovation in new areas. That, I believe, is the transformation and growth for which the NGK Group must aim.
And in order to achieve sustainable growth as a company, it is important to recognize the value, as well as draw out the full potential, of each and every employee. Specifically, this means listening to the input of Group employees throughout the world and engaging in discussion, which incorporates a multitude of viewpoints. In other words, it means embracing diversity. The NGK Group already has a foundation of diversity in place; so, the next stage is to find ways of capitalizing on all of the diverse input that this foundation provides.
Improving corporate value by working as a group to speed up all operations
It has been a year since I was appointed as an outside director for the NGK Group. In that time, my impression of the NGK Group overall is that it is a well-functioning manufacturer, which is thorough in its operation of key committees and bodies, such as meetings of the Board of Directors, in its distribution of authority between Group companies, in its execution of global governance, and in much else. However, in order to further improve corporate value, it is important that the NGK Group be more proactive as a global company, working together as a group to speed up all operations.
Given the extremely rapid rate at which the market is changing, along with the ongoing spread of COVID-19, it is difficult to make any predictions in the current era. Moreover, with new technologies like AI, IoT, and quantum computers appearing one after another, the world is in the midst of significant and ongoing change. It is within this context that the NGK Group needs to capitalize on its expertise in ceramic technology by finding ways to combine it with cutting-edge technology to create unprecedentedly innovative products. NGK’s 100th anniversary slogan, “Surprising Ceramics.,” is finding concrete expression through the ongoing creation of next-generation products, such as the EnerCera® battery and zinc rechargeable batteries. I would like to not only see this trend accelerated by an increase in the speed of product development, I would also like to see the mass production system undergo a rapid reorganization from a global perspective. By enabling the NGK Group to plan, develop, and manufacture on a global basis, I think it will be possible to launch products and services simultaneously worldwide.
In addition, if all core ideas and expression adopt a global perspective, this will likewise affect not only products but also the way in which a business continuity plan (BCP) is performed. In the face of the COVID-19 pandemic, the smoothness with which measures such as transitioning to remote work arrangements has been handled is laudable. However, we are now in an era that requires readjusting supply chains and production bases, reforming the operations of indirect departments, and improving job satisfaction on a global basis and then quickly implementing ideas, quickly obtaining results, and providing feedback to each plant and office. It is my hope that the next 100 years will see the NGK Group achieve even greater growth as a global company.