The principles of corporate governance are updated


Organization of corporate governance

The board of directors of Nippon Sanso Holdings Corporation consists of 9 members, three of whom are outside directors, and functions to ensure sound business judgment. It meets regularly every month to discuss important issues and hears reports on business activities. The Company has set up an Appointments and Compensation Advisory Committee as a discretionary advisory committee within the Board of Directors. The chairman of the company (CEO), the chairman of the board of directors and independent external directors are members of this committee. The committee is chaired by an independent external director.

The Board of Directors strives to ensure transparency and objectivity in decision-making by consulting the Committee and seeking the opinion of independent external directors during the revision of the bylaws concerning the remuneration of directors, the selection candidates for the posts of director or auditor, the appointment and dismissal of the chairman (CEO), appoint and dismiss members of senior management and choose the successors of the chairman (CEO).

In addition to the Board of Directors, the Management Committee, which in principle meets monthly and consists of the CEO and managers, etc., is set up for rapid decision-making. The term of office of a director is limited to one year to facilitate responsible management during each financial year.

Pursuant to the provisions of section 427, paragraph 1 of the Companies Act, Nippon Sanso Holdings Corporation has entered into contracts with the three independent directors to limit their liability for the damages provided for in section 423, paragraph 1 of the Company Law, to the minimum liability for damages in accordance with Article 425, paragraph 1 of the Company Law. The Audit and Supervisory Board is also made up of four members, including three external members. The members of the Audit and Supervisory Board attend the meetings of the Board of Directors and the Management Committee, independently monitor the business activities of the directors and formulate impartial opinions and give them to the Board and the Committee.

During the performance of the audit, the Audit and Oversight Board hears the reports on the plans and the results of the audits of the accountants and hears the explanations of the results of the internal audit of the Audit Office of business, and work with them. To ensure effective control, the Company sets up a secretariat working exclusively for the Audit and Supervisory Board.

Three external directors and two external members of the Audit and Supervisory Board are independent. The Company appoints Ernst & Young ShinNihon LLC as the Accounting Auditor. In addition to this, the company establishes the Nippon Sanso Holdings group code of conduct and strives to ensure compliance and business ethics of the companies in the group.

Remuneration of directors

The remuneration of the directors and of the members of the Audit and Supervisory Board during the 2021 financial year (from April 1, 2020 to March 31, 2021) is presented below. In this regard, the remuneration of directors consists of base remuneration, remuneration based on medium-term performance and remuneration based on short-term performance.

Medium-term performance-based compensation fluctuates according to the degree to which the objective is achieved in each financial year towards the medium-term management plan objective, and short-term performance-based compensation fluctuates according to the depending on the degree of prudence of performance since the performance of the previous fiscal year.

(in millions of yen)

Compensation paid to directors

287

Compensation of members of the Audit and Supervisory Board

103

(Reference)(million yen)

Compensation paid to the statutory auditors during Fiscal Year 2021

105

Total amount of pecuniary and property compensation paid by the Company and its subsidiaries to the statutory auditors

210

Responsibility

Nippon Sanso Holdings Corporation recognizes that ensuring the timely disclosure of corporate and financial information is a key element of corporate governance and takes steps to fulfill its obligation to also provide adequate explanations to investors, and to ” ensure that investor comments are properly communicated to management.

In order to translate this commitment into action, the corporate officers attend two presentations each year intended for analysts and institutional investors, where they participate in question-and-answer sessions with participants on subjects such as the performance of the Company, forecasts for subsequent periods and the formulation and advancement of medium-term management strategies, and endeavor to respond in a manner that provides both insight and in-depth understanding as representatives of the Company.

Risk management and compliance promotion

Nippon Sanso Holdings Corporation has decided on the basic risk management policies of the Group and has established organizations and rules to ensure their viability. Risk management is implemented by the department in charge of each category.

In addition, we have set up the Global Risk Management Committee, which selects the main risks relating to the entire Group and takes countermeasures to manage these risks. The audit department carries out an internal audit of the state of risk management.

We also decide on the Group’s basic compliance policies and establish organizations and rules to ensure their viability. We have appointed the Director of Compliance (hereinafter referred to as “CCO”) of Nippon Sanso Holdings Corporation and the Regional Directors of Compliance (hereinafter referred to as “RCCO”) in each of the overseas regions.

We provide training tailored to compliance risks in Japan and in each of the overseas regions. In addition, we have clearly defined the rules for dealing with breaches of compliance and have brought them to the attention of all group companies. The GCCO and RCCOs monitor compliance promotion activities and strive to improve and instill compliance promotion activities within the Group.

Additionally, we have whistleblower systems in place in Japan and abroad to ensure that anyone who finds out about a compliance violation, or a possibility thereof, can report it without fear of reprisal. The audit department performs an internal audit of the status of compliance promotion activities.

Audit and risk management systems


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