Annual Report 2006

NSK defines corporate governance as a system by which its executive organization can better focus on business expansion and profitability improvement under the supervision of the Board of Directors. This system of corporate governance is based on the following concepts. First, to allow for greater management flexibility, the Board of Directors has delegated more authority to the executive organization. Second, the supervisory and executive organizations are working more closely together to strengthen supervisory functions. Third, monitoring of the performance of business operations has been further enhanced. These concepts provide the framework for the Board of Directors and Executive Officers in their management of corporate operations.

NSK has strengthened management soundness and transparency by coordinating its global group activities under a divisional structure based on clearly defined chains of responsibility for each business segment. We have strengthened our group-level governance structure by formulating internal group management rules, and we have established the following organizational units as the basis for the further development of our internal control systems.
*Internal Audit Office
In collaboration with the Audit Committee, the Internal Audit Office conducts internal audits on the legality, adequacy and effectiveness of business operations. It also proposes remedial actions and provides guidance based on the results of these audits.
*Compliance Division-Headquarters
This unit is responsible for planning and education in relation to compliance with laws, regulations and business ethics. It also monitors policy implementation and compliance.
*Risk Management Committee
This committee of executive officers coordinates and manages various risks that could affect business operations, especially hazard risks. It is supported by an administrative group based within the Compliance Division- Headquarters.
*Corporate Strategy Division-Headquarters
This unit manages business risks, plans management policies and monitors implementation and target achievement. It also coordinates the development of internal control systems that extend to all group companies.
*Internal Control Project Team
This team implements measures for ensuring consistency of the business process involved in generating the NSK Group’s financial reports.
*Disclosure Working Team
This team is responsible for gathering and managing corporate information to make certain there is timely disclosure of corporate information to our investors. This team also works closely with the Internal Audit Team to further develop the internal systems supporting timely disclosure.

The NSK Group is a global manufacturing organization with over 150 business sites worldwide. It is possible that a natural disaster, fire, environmental contamination or other unforeseeable contingency could cause losses to local communities and our customers.

Compliance with laws, regulations, rules and business ethics is an important priority for the NSK Group. By observing the NSK Business Ethics Regulations for internal compliance, we are working to prevent accidents and inappropriate behavior throughout the NSK Group.