Corporate Governance Initiative

NYK’s Corporate Governance Organisation Chart

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Initiatives to Strengthen Corporate Governance

2002
  • Introduced Committee of Corporate Officers to strengthen operational execution system
2005
  • Reduced number of directors from 25 or fewer to 18 or fewer to increase business management efficiency
2006
  • Established advisory board to heighten transparency of business management
  • Reduced number of directors from 18 or fewer to 16 or fewer
2008
  • Abolished advisory board, appointed outside directors
  • Shortened term of service of directors from two years to one year to clarify management responsibility of directors and build system that expedites responses to changes in business conditions
2010
  • Filed notification of independent directors / audit and supervisory board members as stipulated by stock exchanges in Japan for all four outside directors / outside audit and supervisory board members
2016
  • Increased number of independent outside directors / outside audit and supervisory board members from four to five

Corporate Governance Guidelines
http://www.nyk.com/english/ir/manage/gvn/gvn_report_01.pdf

Structure of the Board of Directors and the Audit and Supervisory Board

We are a company with a board of directors and an audit and supervisory board. The Board of Directors comprises 12 directors, including three highly independent outside directors, while the Audit and Supervisory Board comprises four audit and supervisory board members, including two highly independent outside audit and supervisory board members.
Members of the Committee of Corporate Officers execute authorised duties under the supervision of representative directors or executive directors.

Through the abovementioned system, we endeavour to clarify authority and responsibility for operational implementation; ensure prompt, appropriate decision making; and increase business management transparency and efficiency.

Board of Directors

The Board of Directors decides on legal matters, establishes important management policies and strategies, and oversees the execution of operations. The Company has introduced a corporate officers system. The Committee of Corporate Officers comprises 31 members, who include directors but not outside directors or non-executive directors. These members execute operations based on the resolutions and supervision of the Board of Directors.

Responsibilities of the Board of Directors

The board bears the responsibility for the implementation of effective and efficient corporate governance and achievement of the Company’s sustainable growth and medium-to-longterm enhancement of corporate value.

The board makes decisions on the execution of important duties prescribed in the laws and regulations, the Articles of Incorporation and the Rules of the Board of Directors, and oversees or supervises the execution of duties by directors and corporate officers.

The board acknowledges that one of its commitments to shareholders is the medium-term management plan. If the Company fails to meet its performance targets, the board will adequately analyse the cause and the measures taken by the Company and explain the results of analysis to shareholders and reflect them in the management plan for the next fiscal period and beyond.

The board formulates the basic policy for the development of the internal control system compliant with the Companies Act, and develops the internal control and risk management systems. The board establishes the Internal Control Committee chaired by the president as an organisation that deliberates on the status of operation of the internal control system, and supervises the status of operation of the internal control system through the Internal Control Committee.

The board appropriately supervises the preparation and implementation of a successor plan for the president or the equivalent thereof.

Our Views on Size, Balance and Diversity of the Board of Directors

In order to facilitate prompt decision-making at all times at the Board of Directors while ensuring the quality of such decision making through active and substantive discussion, the Company believes that the efficient size of the Board of Directors for the time being is around 12 members, of which around three should be outside directors who meet the Independence Criteria. The Board of Directors shall be comprised of a sufficient number of internal directors who are well versed with the Group’s globally operated businesses with shipping and logistics businesses at its core, as well as a certain number of independent outside directors with high expertise that can contribute to corporate management, and further enhance the supervisory function of the Board of Directors. Composition of the Board of Directors shall be decided with a view to ensuring diversity and expertise, as well as the balance of knowledge, experience and ability of its members. As for internal directors, attention shall also be paid to the balance between the members with strength in operating each business segment, and those who are suited for company-wide corporate management. The Board of Directors shall decide by its resolutions the assignment of duties and operations under their charge and others to respective directors at the Board of Directors’ meetings, and clarify their roles and responsibilities.

Operation of the Board of Directors

The Board of Directors strives to cultivate a corporate culture which encourages uninhibited and constructive discussion and exchange of opinions, including raising issues by outside directors. The method of operation, etc., of the Board of Directors is stipulated in the Rules of the Board of Directors. The chairman, president, and other representative directors determine the schedule dates of the monthly Board of Directors’ meetings and foreseeable agenda items for the meetings in advance to stimulate deliberation. These representative directors provide reference materials and information to each director and audit and supervisory board member well in advance of the dates of the Board of Directors’ meetings. The Board of Directors ensures adequate time necessary for deliberation of agenda items.

Policies for the Appointment and Nomination of Directors, Audit and Supervisory Board Members and Corporate Officers

In nominating director candidates, the Company shall recommend qualified persons capable of fulfilling their duties and responsibilities as directors responding to shareholders’ entrustment of management, in full consideration of their individual character, insight and others. As for internal director candidates, they are required to have broad knowledge, experience and a track record necessary for the deliberation of proposals at the Board of Directors’ meetings, along with the ability to accurately identify issues in departments under their charge and solve them in cooperation with fellow officers and employees, have respected personalities, and have sound judgement in thorough compliance with laws and regulations as well as corporate ethics. The Company shall apply the nomination policy for internal directors also to the appointment of corporate officers and senior members among them.

In nominating audit and supervisory board member candidates, the Company shall recommend qualified persons capable of fulfilling their duties and responsibilities as audit and supervisory board members, in full consideration of their individual character, insight and others in light of the importance of audits and the function of audit and supervisory board members in corporate management.

The Company shall separately set out the Independence Criteria of outside directors and audit and supervisory board members, and recommend candidates for outside directors and outside audit and supervisory board members who meet such criteria.

Independent Outside Directors and Audit and Supervisory Board Members

The Company appoints outside directors and outside audit and supervisory board members that are not from, or do not execute duties for, the companies of the major shareholders of the Company; that meet the Company’s Independence Criteria for Recommendation of Candidates for outside directors and outside audit and supervisory board members and the criteria for independence of the Tokyo Stock Exchange Inc. and other bodies; and that have no conflicts of interest with the Company. By electing highly independent outside directors and outside audit and supervisory board members in this way, the Company endeavours to increase the transparency of business management further and strengthen oversight.

Audit and Supervisory Board

The Audit and Supervisory Board comprises 50% or more of independent outside audit and supervisory board members, who are selected from among persons who have a high level of expertise conducive to audits. The Company endeavours to appoint one or more audit and supervisory board members who have appropriate knowledge on finance and accounting.

The Audit and Supervisory Board strives to enhance the effectiveness of audits by combining the information-gathering ability of full-time audit and supervisory board members and the independence of outside audit and supervisory board members.

Also, the Audit and Supervisory Board establishes an effective audit system through such means as ensuring adequate time to perform audits necessary to ensure the high quality of audits and the sharing of necessary information with the outside accounting auditor, Internal Audit Department and outside directors.

Further, the Audit and Supervisory Board develops criteria for appropriately appointing and evaluating candidates for outside accounting auditor, and identifies their independence and level of expertise.

Audit and supervisory board members fulfil their responsibilities by performing audits on the execution of duties of directors and exercising their authority over appointment and dismissal of the accounting auditor and auditor remuneration from an independent and objective standpoint. Full-time audit and supervisory board members actively create an environment and gather information for audits, and endeavour to share information with other audit and supervisory board members and independent outside directors.

Development of Managerial Human Resources

Upon the assumption of office by directors and audit and supervisory board members, including independent outside directors and independent outside audit and supervisory board members, the Company shall provide them with an opportunity for acquiring the necessary knowledge about the business, finance, organisation and other matters of the Company and to properly understand the roles and responsibilities required for directors and audit and supervisory board members, including legal obligations. The Company shall provide them with subsequent training to update such knowledge as deemed necessary. The Board of Directors shall review the progress of the implementation of such training and the aforementioned policy on a regular basis.

Policies for Determining Remuneration for Directors, Audit and Supervisory Board Members and Corporate Officers

Remuneration for internal directors and corporate officers is comprised of basic remuneration based on individual responsibilities, and performance-based remuneration linked to corporate performance, and a certain proportion of the remuneration shall be paid in the form of stock-based remuneration. Bonus shall be proposed at the General Meeting of Shareholders as an annual incentive, in consideration of the management condition such as performance of the Company.
Remuneration for non-executive directors, independent outside directors and audit and supervisory board members shall be paid solely in the form of basic remuneration. The Company does not provide retirement benefits for termination to any director, audit and supervisory board member or corporate officer.

Procedures for Determining Remuneration for Directors, Audit and Supervisory Board Members and Corporate Officers

The amount of remuneration and bonus for directors shall be decided by the Board of Directors, based on the proposal by the president within the limit of the total amount decided by the resolution of the General Meeting of Shareholders, with the involvement of independent outside directors, e.g. the exchange of opinions thereof. The amount of remuneration for audit and supervisory board members shall be decided by the discussions among audit and supervisory board members including independent outside members within the limit of the total amount decided by the resolution of the General Meeting of Shareholders. The amount of remuneration and bonus for corporate officers shall be decided by the Board of Directors, based on the proposal by the president with the involvement of independent outside directors, e.g. the exchange of opinions thereof.

Remuneration Paid to Directors and Audit and Supervisory Board Members

Category Number of Persons remunerated Yearly remuneration
Directors (outside directors) 14 (2) ¥630 million
(¥38 million)
Audit and Supervisory Board Members
(outside audit and supervisory board members)
6 (3) ¥105 million
(¥27 million)
Total (outside directors and outside audit and supervisory board members) 20 (5) ¥736 million
(¥66million)

Notes:
*1. The amount of remuneration paid to directors includes the amount paid to one director who retired during fiscal 2015.
*2. The amount of remuneration paid to audit and supervisory board members includes the amount paid to two audit and supervisory board members who retired during fiscal 2015.
*3. For the five consecutive terms since the 125th up to the current term, there have been no payments of bonus for directors.
*4. Monthly remuneration for directors shall be paid according to each director’s grade within the aggregate monthly remuneration limit as determined by the resolution of the General Meeting of Shareholders.
Bonus for directors shall be paid according to each director’s grade within the aggregate bonus limit as determined by the resolution of the General Meeting of Shareholders. However, as the proposal of the bonus for directors shall be made at the General Meeting of Shareholders based on the business result and other factors, there may be no payment depending on a fiscal year. Executive directors shall be obliged to acquire shares of the Company and have contributed to the executive shareholding association out of their monthly remuneration an amount not less than the threshold set out according to each executive director’s grade.
*5. At the 118th Ordinary General Meeting of Shareholders held on June 28,2005, NYK approved the payment of retirement benefits for termination resulting from the abolition of the retirement benefits system for directors and audit and supervisory board members. As a result of this resolution,¥113 million in retirement benefits for termination was paid to one director who retired during fiscal 2015. This amount of retirement benefits for termination was not included in the amount of remuneration paid above.

Introduction of Performance-Based Stock Remuneration Plan

The Company has introduced a performance-based stock remuneration plan for its directors and corporate officers (excluding outside directors and corporate officers who are not residents of Japan; hereinafter ‘directors, etc.’) that will deliver Company shares to the directors, etc., in accordance with the degree of the achievement of business performance goals in the new medium-term management plan, the achievement of the consolidated financial forecasts, and the previous fiscal year’s business performance.

This highly transparent and objective directors’ remuneration plan is intended to encourage directors, etc., to contribute to the Company’s sustainable growth and to have directors, etc., share benefits and losses with shareholders.

Policy for Holding Strategic Shareholdings

In case the Company holds strategic shareholdings, it assigns a department in charge of managing each relevant share, and regularly examines and determines the appropriateness of acquisition and holding of such shares from the viewpoints of the purpose, significance and profitability of the strategic shareholdings. The Company has been working on the reduction of strategic shareholdings. In line with the policy, the Company will continue to examine the medium-to-long-term economic rationality of holding strategic shareholdings in light of elements such as advantages and disadvantages, and explains the purpose and rationality of holding strategic shareholdings at the Board of Directors’ meetings each year.

When exercising voting rights of strategic shareholdings, the Company shall decide to vote for or against agenda items by implementing assessment that each agenda item will not lead to the impairment of corporate value of an investee company and whether each agenda item will contribute to the enhancement of the Company’s corporate value and the degree of such contribution.

Auditing System

The NYK Group’s Internal Audit Chamber conducts internal audits of the Company and domestic Group companies and also audits the system for controlling cash flow into and out of the Company, all in accordance with internal auditing rules approved by the Board of Directors. Internal audits of overseas Group companies are performed by internal auditors assigned to Group regional headquarters in four regions—the Americas, Europe, East Asia, and South Asia—who act under the direction and guidance of the Internal Audit Chamber. Reports are delivered to the Internal Audit Chamber and the presidents of regional headquarters (the heads of Group regional headquarters).

All four audit and supervisory board members, including the two outside audit and supervisory board members, undertake auditing activities in accordance with audit plans determined by the Audit and Supervisory Board. These activities include attending Audit and Supervisory Board and other important sessions; ascertaining the status of duties executed by directors, the Internal Audit Chamber, and other personnel and corporate sections; and examining paperwork, such as important approval documents. Audit and supervisory board members ensure the independency, capabilities, and quality of the outside accounting auditor while keeping lines of communication open, complementing audit-related activities through mutual information exchange, and working to raise audit quality and efficiency.

Audit and supervisory board members also hold monthly meetings where the results of audits and other information are shared. They also meet with the Internal Audit Chamber on a regular basis and convene meetings with the outside accounting auditor, thereby strengthening communication between all three audit-related groups. The Audit and Supervisory Board Office, consisting of three full-time staff and one holding a concurrent position, supports audit and supervisory board members in the execution of their auditing duties.

The certified public accountants who audit the Company’s consolidated and non-consolidated financial statements are Toshiyuki Ono, Yuji Takei, and Tomoya Noda, all of whom are with the accounting firm Deloitte Touche Tohmatsu LLC and have been auditing the Company’s accounts for less than seven consecutive years. These three accountants are assisted by 16 certified public accountants and 19 others. Audits are undertaken in accordance with standards generally accepted as fair and appropriate.

Auditor Remuneration

Remuneration Paid to the Certified Public Accountants Engaged in Audits of the Company

Classification Fiscal 2014 Fiscal 2015
Remuneration
paid for audit
certification
activities
(Millions of yen)
Remuneration
paid for non-audit
activities
(Millions of yen)
Remuneration
paid for audit
certification
activities
(Millions of yen)
Remuneration
paid for non-audit
activities
(Millions of yen)
The Company 145 3 145 4
Consolidated subsidiaries 142 0 144 0
Total 288 3 289 4

Other Important Remuneration

Most principal overseas consolidated subsidiaries that are subject to audits, for the previous fiscal year and the fiscal year under review, of financial statements and of internal control have concluded audit agreements with Deloitte Touche Tohmatsu Limited, which is affiliated with the same professional network as the certified public accountants and others engaged in audits of the Company.

Details of Remuneration for Non-Audit Activities of Certified Public Accountants Engaged in Audits of the Company

In the previous fiscal year and the fiscal year under review, remuneration for non-audit activities of certified public accountants engaged in audits of the Company consisted of fees related to duties for agreed-upon procedures and other activities.

Policy for Determining Auditor Remuneration

The Company strives to determine auditor remuneration based on ample discussions with the certified public accountants and others on matters necessary to ensure proper and efficient audits, such as the number of audit days and staff members involved in audits.

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