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Corporate Governance

Basic Approach to Corporate Governance

Nabtesco established the Nabtesco Corporate Governance Basic Policy on October 30, 2015. The Policy can be found on our website. We will be committed to achieving sustainable growth, increasing its corporate value on a medium- to long-term basis, and earning greater trust from stakeholders based on the principles and spirit of Japan’s Corporate Governance Code, which was established by Tokyo Stock Exchange. To fulfill this commitment, we will work on improvement of our corporate governance.

Corporate Governance System
Corporate Governance System
Corporate Communications Department, General administration department, 1, 2

Measures to Enhance Corporate Governance

Given the content and characteristics of business operations covered by our Group, we have adopted an executive officer system and an in-house company system as a means of expediting decision-making and clarifying the responsibility for executing certain business operations. As a means of controlling these systems, we have established corporate governance under which the Board of Directors, Audit & Supervisory Board (members), Accounting Auditors, and the Management Committee—an organization tasked with carrying out the deliberation of important issues relating to executing business operations— have been set up to clearly divide the functions of decision-making, execution of business, and the supervision of management.

Explanation of Company Organizations
Organization Name Roles and Responsibilities No. of People Frequency of meetings
Board of Directors Formulates the Group’s basic policies and strategies, makes decisions about the execution of important business matters and supervises the way business is carried out. 10 (incl. 3 outside directors) 18 times (At least once a month, in principle)
Nomination Committee Deliberates on candidates for Directors, Audit & Supervisory Board members and the CEO as well as succession plans for the CEO etc, and reports the results to the Board of Directors. The Committee consists of five members including two outside directors and one Audit & Supervisory Board member (independent).  5 (incl. 3 outside members) 3 times
Remuneration Committee Deliberates on policies and management of remuneration for directors and corporate officers and reports the results to the Board of Directors. The Committee consists of three members including one outside director and one Audit & Supervisory Board member (independent). 3 (incl. 2 outside members) 2 times
Compliance Committee The Committee is responsible for promoting compliance in the Nabtesco Group by providing advice on basic policies and priority issues related to the Group-wide compliance system to the Board of Directors. 7 (incl. 2 outside members) 2 times
Audit & Supervisory Board (Members) The Audit & Supervisory Board is briefed on auditing plans in advance and receives reports on audit results from Accounting Auditors, as well as exchanging opinions as necessary. To reinforce coordination with the internal audit division, the accounting division in charge of promoting internal control and the compliance risk management division, the Audit & Supervisory Board holds information-sharing conferences twice a year. 5 (incl. 3 outside auditors) 13 times
Corporate Officers Committee The Corporate Officers Committee is the body devoted to the execution of business pursuant to the policies and strategies of the Board of Directors under the supervision of the Board. It is composed of 20 members including the corporate officers of the Group’s four subsidiaries. 23 13 times
Management Committee In line with the policies decided by the Board of Directors, the Management Committee serves as the body that discusses important matters relating to execution of the Group’s business and reports on results and the execution of business. It comprises the CEO, officers in charge of corporate departments, general managers, internal company presidents, full-time Audit & Supervisory Board members and persons appointed by the CEO. - 20 times (At least once a month in principle
Business Auditing Department With the aim of contributing to sound management control and in an attempt to improve the effective operation and quality of Group management activities, the Business Auditing Department was established to strengthen internal business auditing. It conducts internal business audits of headquarter divisions, in-house companies and consolidated subsidiaries. 7 -
  • * No. of people and frequency of meetings show the aggregated figures of FY2017.
Corporate Communications Department, General administration department, 1, 2

Corporate Governance Effort

Corporate Governance Effort
  • *1. Kazuaki Kotani, the current Chairman of the Board, is an independent chairman without the right to execute business.
  • *2. In FY2011 and FY2015, the number of Audit & Supervisory Board Members was temporarily four (including three Outside members) due to the resignation of a members for personal reasons.
  • *3. Outside Directors are only paid on a monthly basis.
  • *4. Remuneration is linked to medium-term and long-term business results.
  • *5. The pre-warning anti-takeover measures were introduced with the resolution of the 4th Ordinary General Meeting of Shareholders held on June 26, 2007. However, they were abolished at the conclusion of the 7th Ordinary General Meeting of Shareholders held on June 24, 2010.
Corporate Communications Department, General administration department, 1, 2

Composition of Directors and Audit & Supervisory Board Members

Nomination Committee

With the aim of ensuring independence and objectivity in the process of selecting the directors and the Audit & Supervisory Board members, we established the Nomination Committee, which is composed of two directors and three independent outside directors/Audit & Supervisory Board members. The committee deliberates on candidates for directors, Audit & Supervisory Board members and the CEO, succession plans for the next CEO and development of the next generation of senior executives. It reports the results to the Board of Directors.

When nominating candidates to serve as executives, directors and Audit & Supervisory Board members, The Board of Directors selects individuals who, based on their career record and abilities, can contribute to the growth and advancement of the entire Group. Nabtesco nominates candidates for Audit & Supervisory Board members with the approval from the Audit & Supervisory Board.

Composition of Board of Directors

The Board of Directors of Nabtesco shall comprise up to 10 members, of whom at least two are independent outside members. The present Board of Directors comprises ten directors, of whom three are independent outside members.

For the Board of Directors to fulfill its roles and responsibilities to the fullest, members are selected from inside and outside the company and among those who have outstanding personal qualities, expertise and abilities, exhibit advanced professionalism and strong ethics, and can demonstrate abundant experience in a non-discriminatory manner in terms of race, sex and nationality. This helps ensure the well-balanced Board of Directors having diverse expertise, talent, experience and other qualifications.

Independent Outside Directors

Nabtesco has at least two independent outside directors who can give advice and supervise management to help increase the corporate value in a sustainable manner and on a medium- to long-term basis.

All independent outside directors are well experienced, have versatile knowledge, can take a broader view for various stakeholders of the company, and meet Nabtesco’s Criteria for the Impartiality of Outside Directors and Outside Audit & Supervisory Board Members.

Outside directors meet by themselves as necessary in order to freely discuss and exchange information and views objectively and independently, apart from the execution of business.

Composition of Audit & Supervisory Board Members

The Audit & Supervisory Board Members is composed of up to five members, of whom at least half (three) are independent outside members. The present Audit & Supervisory Board comprises five members, of whom the majority (three) are independent outside members.

Members are selected from among those who have outstanding personal qualities, expertise and abilities, advanced professionalism and strong ethics, and abundant experience to function fully in playing a part in and fulfilling the duties of the Audit & Supervisory Board. The Audit & Supervisory Board Members shall include at least one person who is appropriately well versed in financial and accounting issues.

The Audit & Supervisory Board Members organically combines the robust independence of outside members and the advanced information collection ability of internal members so that it may fulfill its roles and responsibilities effectively.

Independent outside Audit & Supervisory Board members

All independent outside Audit & Supervisory Board members shall meet Nabtesco’s Criteria for the Impartiality of Outside Directors and Outside Audit & Supervisory Board Members.

Corporate Communications Department, General administration department, 1, 2

Remuneration for Directors and Audit & Supervisory Board Members

Remuneration Committee

With the aim of ensuring independence and objectivity in the process of deciding the remuneration of the directors and fulfilling the company’s accountability obligations, the company established the Remuneration Committee as an advisory body for the Board of Directors, which is composed of one director and two independent outside directors/Audit & Supervisory Board members.

The Remuneration Committee shall deliberate the outline and operation of the treatment of directors and executive officers and report back to the Committee.

Compensation System for Directors

Compensation to directors are established in such a way that it functions as a healthy incentive for the company’s sustainable growth. Compensation to directors comprises “monthly compensation,” which is made up of fixed compensation and short-term performance-linked compensation, and “stock compensation-type stock options,” which are offered in consideration of medium- to long-term performance. ROE, net sales, operating income, net income, R&D indicators and environmental indicators are used as the major performance indicators.Compensation of independent outside directors is only paid on a fixed basis in light of their roles and independence.

With the resolution of the 14th Annual General Meeting of Shareholders held on March 28, 2017, the amount of remuneration of directors was revised from a maximum of 350 million yen per annum (of which a maximum of 30 million yen per annum for outside directors) to a maximum of 400 million yen per annum (of which 50 million yen for outside directors). In addition, a new stock compensation plan, a Board Benefit Trust (BBT), was introduced. This revision aims to establish a level of remuneration that will further increase the motivation of each director to contribute to improving business performance and boosting corporate value as well as further increase their shareholder-centric management awareness.

BBT is a plan in which the Company shares are acquired through a trust (hereinafter called the “Trust”, a trust established based on the Plan) the company makes a monetary contribution to for funds to acquire the shares. Under the Plan, points shall be granted to directors and executive officers (excluding outside directors, hereinafter collectively called “Directors, etc.” in accordance with positions, business performance, etc. (hereinafter called “share issuance points”) based on the regulations of stock benefits for directors established by the company every year. Then, the Company shares and money equivalent to the realization value (hereinafter called the “Company shares, etc.”) shall be issued or delivered to Directors, etc. as compensations through the Trust (hereinafter called “issuance, etc.”) in accordance with the number of share issuance points at the prescribed timing. There are two types of issuance, etc. given to Directors, etc. through the Trust; (1) “Issuance, etc. in office” in which share issuance points are granted linked to the degree of achievement of the medium-term management plan and issuance, etc. of the Company shares is made at a certain timing in office, (2) “Issuance, etc. at retirement” in which share issuance points are granted in accordance with the position of Directors, etc. and issuance, etc. of the company shares is made at retirement.

BBT, compared with existing stock compensation-type stock options, the Plan, as a remuneration system, has the potential to further increase the motivation of Directors, etc. to contribute to improving the medium- to long-term business performance of the Group as a whole and boosting corporate value, as well as to further increase shareholder-centric management awareness by additionally clarifying the link between compensation of Directors, the business performance and share value of the company, and by having Directors share with shareholders not only the benefits of rising share prices, but also the drawbacks of falling share prices.

The company abolished both the long-term performance-linked stock compensation-type stock option and the medium-term performance-linked stock compensation-type stock option upon the introduction of the BBT Plan. However, any subscription rights to shares already awarded to Directors, etc. as stock compensation-type stock options that have not been exercised will continue to be retained.

Claw-back clause

The bylaws for compensation provide for a claw-back clause in which, in the event of a significant retrospective change in the business results of a past year, on which the calculation of performance-linked compensation was based, as a result of the revision of operating results due to inappropriate accounting or for other reasons, or if the company incurs a serious loss due to wrongful or illegal acts by a director or Audit & Supervisory Board member, the company is entitled to demand the return of performance-linked compensation paid to directors or Audit & Supervisory Board members, in whole or in part.

Compensation Structure for Audit & Supervisory Board Members

Compensation given to Audit & Supervisory Board members is decided through consultation with the auditors. Due to the nature of auditing, the compensation structure for Audit & Supervisory Board members comprises only the base salary and no performance-based incentives.

Total Amount of Compensation Paid to Directors and Audit & Supervisory Board Members (for FY2017)
(Unit: Million yen)
  Total
Amount of Compensation
Types of Compensation Number of Directors and Audit & Supervisory Board Members
Monthly Compensation Board Benefit Trust (BBT) Stock Compensation-Type Stock Options
Directors (excl. Outside Directors) 377 235 134 8 8
Audit & Supervisory Board Members (excl. Outside Members) 53 53 - - 2
Outside Directors 51 51 - - 6
  • *1 The number of directors shown above includes one director who resigned during the FY2016/12.
  • *2 The limit for compensation for directors is as mentioned below (the resolution was passed at the 14th Annual General Meeting of Shareholders held on March 28, 2017.  
    • Monthly compensation:400 million yen for a year (50 million yen for Outside Directors)
    • Board Benefit Trust (BBT) :No. of points for a year 107,000 points
      (of which 56,000 points are share issuance points granted linked to the degree of achievement of the medium-term management plan, 51,000 points are share issuance points granted in accordance with the positions)
  • *3 Monthly remuneration consists of basic monthly salary and performance-based compensation, paid out in total on a monthly basis.
  • *4 The amount of the board benefit trust (BBT) shows the amount recorded under expenses based on the number of points for issue of shares granted or to be granted during the current term.
  • *5 The stock compensation type stock option plan was abolished with the approval of the 14th Annual General Meeting of Shareholders held on March 28, 2017. The amount of stock compensation type stock options shown in Table above shows the data issued during the current term before the said abolition.
  • *6 Since none of the directors /audit & supervisory board members receives a compensation exceeding JPY90 million, disclosure of compensation on an individual level is omitted (according to Japanese legislation, a compensation exceeding JPY90 million should be publicly disclosed)
Corporate Communications Department, General administration department, 1, 2

Measures to Ensure Effectiveness of Board of Directors and Its Evaluation

Nabtesco conducts a yearly analysis and evaluation of the effectiveness of the Board of Directors based on the self-evaluations of the Directors to improve its functions. In FY2017, the company conducted an anonymous self-evaluation questionnaire survey (with the design of questions and aggregation of responses performed by an independent third party) of the Directors and Audit & Supervisory Board members, and the Board analyzed and evaluated the results. According to the results, the Directors believe that the number of the Directors and the structure of the Board of Directors are appropriate and that open, natural and constructive discussion is being held, among others. Considering the judgment that the understanding of and insight into the company's business has deepened especially among outside directors through the meeting of the Board of Directors held at factories, which started from FY2017, the effectiveness of the Board is considered to be well secured.

On the other hand, with respect to how to hold a discussion at the meeting of the Board of Directors, the following issues were found: securing enough time to deliberate important issues in management, including growth strategies; delegating authority further to lower branches in order to secure such time; and increasing efficiency in the administration of the Board of Directors, among others. Nabtesco will further enhance its corporate governance system to increase its corporate value through better corporate management. Based on the aforementioned evaluation results concerning effectiveness, we will improve the functions of the Board on a continual basis.

Attendance Rates of Members at Board of Directors and Audit & Supervisory Board Members Meetings in FY2017
Board of Directors and Audit & Supervisory Board Members Meetings
Average Attendance Rate 96.7%
Average Attendance Rate of Outside Directors 94.4%
Kazuakai Kotani Director, Chairman of the Board of Nabtesco Corporation 100.0%
Katsuhiro Teramoto Representative Director, President & CEO 100.0%
Nobutaka Osada Representative Director 100.0%
Toshio Yoshikawa Director 83.3%
Shinji Juman Director 100.0%
Daisuke Hakoda Director 100.0%
Goro Hashimoto Director 100.0%
Yutaka Fujiwara Outside Director 94.4%
Norio Uchida Outside Director 94.4%
Naoko Yamazaki Outside Director 94.4%
Takayuki Onishi Audit & Supervisory Board Member 100.0%
Kensuke Ioku Audit & Supervisory Board Member 100.0%
Hisao Katayama Audit & Supervisory Board Member (Independent) 100.0%
Zenzo Sasaki Audit & Supervisory Board Member (Independent) 100.0%
Takemi Nagasaka Audit & Supervisory Board Member (Independent) 100.0%
Audit & Supervisory Board Members
Average Attendance Rate 100.0%
Average Attendance Rate of Outside Audit & Supervisory Board Members 100.0%
Takayuki Onishi Audit & Supervisory Board Member 100.0%
Kensuke Ioku Audit & Supervisory Board Member 100.0%
Hisao Katayama Audit & Supervisory Board Member (Independent) 100.0%
Zenzo Sasaki Audit & Supervisory Board Member (Independent) 100.0%
Takemi Nagasaka Audit & Supervisory Board Member (Independent) 100.0%
Corporate Communications Department, General administration department, 1, 2

Current Status of Internal Control System

Based on its Basic Polices for the Construction of an Internal Control System, the Nabtesco Group is working to enhance all the areas associated with internal control—such as increased efficiency of management, compliance, information management, risk management and collaboration with the Audit & Supervisory Board Members under consistent principles, and integrate them to construct an internal control system.

Internal control for the Nabtesco Group shall be based on making The Nabtesco Way and the Nabtesco Group Code of Ethics cornerstones of proper and fair business activities, and requiring the Group’s directors, audit & supervisory board members and all employees to comply with these norms and rules.

The Chief Executive Officer (CEO) shall be the top executive responsible for the promotion of internal control. The Board of Directors shall examine the maintenance of internal control systems on a continual basis in line with changes in the business environment and social needs, revisions to laws and regulations, risk diversification and other factors, and shall conduct a review yearly and whenever else necessary.

Corporate Communications Department, General administration department, Compliance Promotion Department, 1, 2
Corporate Governance
Corporate Governance

Basic Approach to Corporate Governance

Nabtesco established the Nabtesco Corporate Governance Basic Policy on Octo...

Corporate Governance
Corporate Governance

Measures to Enhance Corporate Governance

Given the content and characteristics of business operations covered by our...

Corporate Governance
Corporate Governance

Corporate Governance Effort

zoom *1. Kazuaki Kotani, the current Chairman of the Board, is an...

Corporate Governance
Corporate Governance

Composition of Directors and Audit & Supervisory Board Members

Nomination Committee With the aim of ensuring independence and objectivi...

Corporate Governance
Corporate Governance

Remuneration for Directors and Audit & Supervisory Board Members

Remuneration Committee With the aim of ensuring independence and objecti...

Corporate Governance
Corporate Governance

Measures to Ensure Effectiveness of Board of Directors and Its Evaluation

Nabtesco conducts a yearly analysis and evaluation of the effectiveness of ...

Corporate Governance
Corporate Governance

Current Status of Internal Control System

Based on its Basic Polices for the Construction of an Internal Control Syst...

Corporate Governance
Management Team

Board of Directors (as of March 26, 2019)

Katsuhiro Teramoto(Dec. 13, 1955) Representative Director, ...

Corporate Governance
Management Team

Audit & Supervisory Board Members (as of March 26, 2019)

Kensuke Ioku Audit & Supervisory Board Member (Jan 30, 195...

Corporate Governance
Management Team

Executive Officers (as of January 1, 2019)

President Katsuhiro Teramoto Chief Executive Officer ...