Build a Fair, Transparent and Highly Effective Governance System

Build a Fair, Transparent and Highly Effective Governance System

Basic stance

The purpose of corporate governance of the Nidec Group is to become a conscientious and principled company that earns society’s trust, and to increase corporate value sus-tainably based on the motto, “High growth, high profit, and high share price.” To this end, we maintain and enhance our internal control, run our business healthily and efficiently, and disclose information appropriately to increase the transparency of the company’s business operations.
　Nidec became a company with an Audit and Supervisory Committee in 2020, and has been working to enhance the supervisory function of the Board of Directors by setting up a Remuneration Committee. To further improve the effectiveness of the Board of Directors, we will consider introducing effectiveness evaluation of the Board of Directors by a third-party organization and setting up a Nominating Committee.
　Nidec is also committed to ensuring the independence and diversity of the Board of Directors. The Board of Directors of Nidec comprises nine members, including five outside members. All nine members are individually selected with a good balance, based on their knowledge, experience and qualifications in a diversity of areas, as well as on Nidec’s businesses, business environment, and the like. The members include those with broad experience of working overseas, as well as women, in order to secure diversity in terms of internationality, gender, etc. Going forward, when selecting candidates for the Board of Directors, Nidec will continue to take into account, among others, the balance of the knowledge, experience and qualifications of the Board of Directors as a whole, and the number of its members based on its diversity in gender, career history, age, etc. and on Nidec’s business scale.
　Based on the understanding that corporate governance is one of the highest-priority issues for the sustainable growth and improved corporate value of the company, we will make persistent efforts to enhance and improve the relevant systems.

History of Nidec’s corporate governance

Corporate governance structure

① Board of Directors

Status of operation

The Board of Directors makes material management decisions and oversees the Group’s business operations as a whole. The Board of Directors includes highly independent Outside Members, to enhance the supervisory function of the com-pany’s business operation and improve management transparency and objectivity.

Themes of deliberations at the Board of Directors meetings

Effectiveness evaluation of the Board of Directors

Annually, Nidec sends out questionnaires to all members of the Board of Directors, including Outside Members, on the effec-tiveness of the Board of Directors’ meetings, and the Board of Directors discusses, analyzes and assesses the results of the questionnaires. Based on the results of the questionnaires, Nidec formulates measures for constant improvement.

Questionnaire survey on the effectiveness of the Board of Directors (efforts and evaluation)

Efforts made in FY2020

• Executive directors provided a business overview for mem-bers of existing informal meetings (for Outside Members of the Board of Directors who are not members of the Audit and Supervisory Committee, and Members of the Board of Directors who are members of the Audit and Supervisory Committee).
• Promoted understanding of our business at informal meetings (explanation of the business and online plant tour)

Summary of FY2020 evaluation results

• Evaluated appropriate in that the Board of Directors’ meetings on the whole functioned sufficiently and that discussions and operation of the Board of Directors’ meetings have been improved, in addition to the compo-sition, frequency and length of the Board of Directors’ meetings and the quality of information and explanation provided thereat
• Problems found include inappropriate timing of provision of materials for meetings, and insufficiency of efforts to realize the medium- to long-term plan and analysis of the cause of failure to achieve targets.

Skills matrix

② Audit and Supervisory Committee

The Audit and Supervisory Committee audits the execution of duties by the Board of Directors’ members, and receives audit reports from the Accounting Auditor.

Composition of members and the chairperson

Cooperation between the Audit and Supervisory Committee and accounting auditors

In addition to quarterly meetings, the Audit and Supervisory Committee and the accounting auditors meet whenever necessary. In these meetings, they exchange information and opinions on audit results, audit systems, audit plans, audit implementation status and the like. In FY2020, the accounting auditors were invited to six meetings of the Audit and Supervisory Committee to closely exchange information.

Cooperation between the Audit and Supervisory Committee and the internal audit department

The Corporate Administration & Internal Audit Department, Nidec’s internal audit department, regularly reports to the Audit and Supervisory Committee on the results of the Nidec Group’s internal audits. The department also exchanges opinions and shares information with the Audit and Supervisory Committee as necessary, and conducts on-site audits at the request of the Audit and Supervisory Committee.

③ Remuneration Committee

The Remuneration Committee consists of two internal members and three outside members of the Board of Directors, headed by Jun Seki, Representative Director and President (Chief Executive Officer) as the chairperson. The Committee members discuss basic policies and systems for remunerations of directors in response to consultation from the Board of Directors, and reports the results back to the Board of Directors.

④ Various committees

⑤ Executive Management Meeting

The Executive Management Meeting convenes once a month to assess the present state of business and determine the next course of action, based on the monthly performance data and outcome of discussions at respective meetings where important group-wide concerns are shared among administrative departments, subsidiaries and business units.

⑥ Management Committee

The Management Committee, the consultative body to the Representative Director and Chairman, is held and chaired by the President and Chief Executive Officer twice a month in principle to discuss overall operational directions, plans and other important considerations in the execution of business.

Reasons for appointment and major activities of Outside Members of the Board of Directors

*1 During the fiscal year under review, the Board of Directors held 22 meetings, the Audit and Supervisory Committee held 10 meetings, the Audit & Supervisory Board before transition to the Audit and Supervisory Committee held five meetings, and the Remuneration Committee met once.
*2 The number of meetings of the Audit and Supervisory Committee attended by Takeshi Nakane includes five meetings of the Audit & Supervisory Board.
*3 Aya Yamada and Takako Sakai were newly appointed at the 47th Annual General Meeting of Shareholders held on June 17, 2020. After this, 17 meetings of the Board of Directors and 10 meetings of the Audit and Supervisory Committee were held during the fiscal year under review.

Support systems for Outside Members of the Board of Directors

The General Affairs Department, which acts as the secretariat for the Board of Directors, supports the Outside Members of the Board of Directors. The General Affairs Department provides the outside directors with the company’s information in a timely manner, and corresponds to their inquiries through day-to-day communication. With regard to the meetings of the Board of Directors, the General Affairs Department provides all members of the Board of Directors with materials related to the proposals for the meetings and accounting information, at the latest one day before the day of the meeting. In addition, assistance is provided by the Corporate Administration & Internal Audit Department, Nidec’s internal audit department, to Outside Members of the Board of Directors who are Audit and Supervisory Committee Members. When a meeting of the Audit and Supervisory Committee is held, meeting notices are sent out to all the Audit and Supervisory Committee Members by three days prior to the day of the meeting, while documents related to the proposals to be deliberated in the meeting of the Audit and Supervisory Committee are sent to the members, at the latest one day before the meeting. After a meeting of the Audit and Supervisory Committee, meeting minutes are sent to all Audit and Supervisory Committee Members. Furthermore, for Outside Members of the Board of Directors who are Audit and Supervisory Committee Members, various information is reported and provided as necessary by full-time Audit and Supervisory Committee Members and Nidec’s executive officers.
　Outside Members of the Board of Directors who are not members of the Audit and Supervisory Committee have informal meetings with the Audit and Supervisory Committee members, where various information is provided by Nidec’s executive officers. They also visit the field sites of subsidiaries.

Executive remuneration

1. Policies on remuneration for Members of the Board of Directors

① Basic policy

The remuneration for Nidec’s directors is determined based on the following policy, to enhance the company’s global competitiveness and secure the sustainable growth of its businesses.

• Increase motivation toward improving corporate value;
• Contribute to securing talented managerial human resources; and
• Ensure that the level of the remuneration is appropriate for the scale and area of Nidec’s businesses.

② Composition of the remuneration

• Outside Members of the Board of Directors (excluding those who are members of the Audit and Supervisory Committee)
  Fixed remuneration
• Members of the Board of Directors (excluding those who are Outside Members of the Board of Directors and members of the Audit and Supervisory Committee)
  Fixed remuneration : Variable remuneration (bonuses) : Performance-linked share-based remuneration
  = 3 : 1.5 : 1

③ Procedure to decide the remuneration amounts

The amounts of fixed and variable remunerations for individual directors (excluding members of the Board of Directors who are members of the Audit and Supervisory Committee) are determined by the Board of Directors based on reports submitted by the Remuneration Committee, which is a voluntary advisory body, in accordance with the criteria specified by this policy. Similarly, the details of the performance-linked share-based remuneration are determined by the Board of Directors based on reports submitted by the Remuneration Committee.

④ Forfeiture, etc. of remuneration (clawback/malus)

The amounts of fixed and variable remunerations may be reduced if the recipient has caused serious damage to the company by obtaining the consent of the recipient.
　Based on the performance-linked share-based compen-sation plan, if any individual to be issued shares should, on or after the day when his/her right to receive compensation is finalized, commit an illegal action such as a material violation of his/her duties or internal rules/regulations, the company may request that the individual pay restitution.

2. Total amount of remuneration by category of directors and by type of remuneration, and the number of eligible directors

*1 The figures above include five members of the Board of Directors and two outside members of the Audit & Supervisory Board who resigned during the fiscal year under review.
*2 The introduction of the performance-linked share-based remuneration system was resolved at the 45th Annual General Meeting of Shareholders held on June 20, 2018. The amounts of expenses recorded for the fiscal year under review according to the Japanese standard are provided above. Outside members of the Board of Directors are not covered by the system.
*3 The target period of the performance-linked share-based remuneration system is three years from the fiscal year ended March 31, 2019 to the fiscal year ended March 31, 2021, which was the remaining period of the Vision 2020 medium-term strategic goal. The fiscal year under review is the final year of the period. Since the amount of the performance-linked share-based remuneration including the portion linked to the medium-term performance is finalized in the final fiscal year, the amount of the performance-linked share-based remuneration finalized during the fiscal year under review is less than the total accumulated amount calculated as of the end of the previous fiscal year. Therefore, the amount of difference is provided in the table above.
*4 Based on the resolution at the 47th Annual General Meeting of Shareholders held on June 17, 2020, the company became a company with an Audit and Supervisory Committee on the same day.
*5 The amounts and numbers of recipients of the remuneration received as members of the Audit & Supervisory Board and the remuneration received as members of the Board of Directors who are members of the Audit and Supervisory Committee during the fiscal year under review are provided separately.

3. Total amount of consolidated remuneration, etc. of each director

Not provided as there are no individuals whose total amount of consolidated remuneration, etc. is 100 million yen or more.

Internal control

The Nidec Group commits itself to enhancing its management soundness and transparency by establishing a compliance system generally required of a listed company in Japan, and clarifying its risk management responsibilities. Specifically, the Group has compiled its basic policies related to internal control as the “Nidec Policy Manual.” Through the auditing activities of the Corporate Administration & Internal Audit Department, the Group aims to maintain and improve the effectiveness of its internal control over financial reporting required by Article 24-4-4, Paragraph 1 of the Financial Instruments and Exchange Act. In addition, the Legal & Compliance Department, the Risk Management Committee, the Information Security Committee and the CSR Committee are organized under the Board of Directors, under which the Legal & Compliance Office, the Risk Management Office, the Information Security Management Office, and the IR & CSR Promotion Department are placed as the secretariat respectively, working to create a corporate culture and enhance management systems for internal control.

Corporate governance of Group companies

The Nidec Group companies operate under Nidec’s mission statement and policies, and therefore they are incorporated in Nidec’s internal control system. The Group companies, to which Nidec sends some directors and employees, have sufficient discussions before making decisions on business execution that correspond to the circumstances of each company, based on specialists’ opinions as necessary, thereby endeavoring to assure their independence.

Cross-shareholding

Policy for cross-shareholding

Nidec holds shares in the companies that Nidec has relation-ships with in terms of trading and cooperation in its business and other areas, when it judges that such shareholding contributes to the company’s corporate value expansion through stabilization of its business from a medium-to-long-term perspective by maintaining and strengthening its relationship with those companies. Nidec assesses its cross-held shares individually at the Board of Directors meeting every year, on not only qualitative aspects such as the purpose of the shareholding, but also on quantitative aspects such as the benefits that can accrue through the shareholding from the perspective of economic rationality. According to the results of the assessment, Nidec intends to reduce the number of shares it holds if the cross-held shares are not expected to bring significant benefits.

Criteria for exercising voting rights for cross-shareholding

With regard to the exercise of voting rights in relation to cross-shareholdings, Nidec makes comprehensive decisions to vote for or against individual proposals to serve the investees’ sustainable growth from the perspective of whether appropriate governance and compliance structures are in place at investee companies.
(Basic views on exercising voting rights)
With regard to the individual proposals submitted to the shareholders’ meetings of the companies Nidec invests in, Nidec decides to vote for or against after confirming the following points: whether the proposals suit the purposes of the shareholding which are to maintain and strengthen the trade and cooperation relationships through medium-to-long-term investment; and particularly, whether there are any circumstances that might lead to undermining of the shareholders’ value due to the restructuring of organizations, including asset transfer and mergers. Nidec opposes all proposals that are considered to violate the law or constitute antisocial behavior, in all circumstances.