The NSK Mission Statement is as follows: “NSK contributes to a safer, smoother society and helps protect the global environment through its innovative technology integrating Motion & Control™.” As a truly international enterprise, we are working across national boundaries to improve relationships between people throughout the world. NSK Ltd. aims to fulfill this responsibility to society while maintaining an appropriate level of profitability that meets the expectations of our shareholders, thereby achieves sustainable growth and increases our mid- to long-term corporate value.
NSK believes that the establishment and maintenance of systems that ensure transparent, fair and timely decision-making is essential in order to achieve sustainable growth and increases our mid- to long-term corporate value. To realize this objective, we are working to construct our corporate governance systems based on the following four guiding principles.
(1) To increase the efficiency and agility of management by proactively delegating decision-making authority regarding the execution of operations from the Board of Directors to the Company’s executive organizations.
(2) To ensure that supervisory organizations have oversight of executive organizations by clearly separating the two.
(3) To strengthen supervisory organizations’ oversight of the executive organizations by ensuring cooperation between the two.
(4) To improve the fairness of management by strengthening compliance systems.
NSK has adopted a Company with Three Committees (Nomination, Audit and Compensation) as its form of corporate organization to better achieve the aforementioned basic approach. We have articulated this basic approach to corporate governance and its structure in our Corporate Governance Rules, which guide directors and executive officers in the performance of their duties.
Corporate Governance Structure
NSK's Board of Directors passes resolutions related to basic management policies etc. The Board also delegates decision-making authority regarding business execution to executive organizations, while monitoring the status of implementation in an appropriate manner. A list of the items which must be resolved by Board of Directors is as follows.
<Major matters requiring board resolution>
Basic management policy
Matters regarding the interrelationship between the Executive Officers, including the division of duties between the Executive Officers and hierarchy of command of the Executive Officers
Basic policy on the development of internal control systems
Acquisition of company treasury stock stipulated in the Articles of Incorporation
Calling of the General Meeting of Shareholders
Approval of related party transactions
Appointment and removal of members of the Nomination, Audit and Compensation
Appointment and removal of the Executive Officers
Appointment and removal of Representative Executive Officers
Approval of financial statements, business reports and the annexed detailed statements thereof as well as provisional financial statements and consolidated financial statements
Decision on matters regarding dividends of surplus stipulated in the Articles of Incorporation
Approval of execution of material operations
Establishment, amendment and repeal of material by-laws
Other items required to be resolved by the Board of Directors in accordance with
laws or the Company's Articles of Incorporation except matters which may be
delegated to the Executive Officers as well as items delegated to the Executive Officers but for which resolution of the Board are deemed necessary
The Nomination Committee, Audit Committee and the Compensation Committee, each of which are comprised of a majority of independent outside directors, work to strengthen the monitoring function by fulfilling the duties of each.
The primary function of the Nomination Committee is to determine the content of proposals regarding the election and dismissal of directors to be submitted at the general meeting of shareholders, ensuring with due care that the nominating process for director candidates is transparent and effective.
The primary function of the Audit Committee is to audit the execution of duties by the Directors and the Executive Officers and prepare audit reports, as well as to determine the content of proposals regarding the election and dismissal of financial auditors. The Committee also audits in accordance with the Companies Act, and the NSK Group's governance systems and its management of business risk in cooperation with the internal audit department.
The primary function of the Compensation Committee is to determine the remuneration policy for the Directors and the Executive Officers as well as the remuneration of the individual Directors and Executive Officers.
The Executive Officers appointed by the Board of Directors are responsible for executing their respective duties in accordance with the division of duties under the directions of the Chief Executive Officer (CEO) . NSK established the Operating Committee and the Executive Officers Meeting, and secures the efficiency and agility of execution of operations properly.
The Operating Committee is established as an organization for supporting decision-making by the CEO. It deliberates on policies and key matters relates to the execution of the NSK Group's business operations.
Executive Officers Meeting
The Executive Officers Meeting is a forum for sharing information related to the operation of the business in order to unify understanding and direction of business expansion.
Internal Control System
The Executive Officers are required to create and operate internal control systems, according to the basic policy determined by resolution of the Board of Directors. The main functions of the internal control system and the roles of the organization responsible are outlined as follows:
The Compliance Committee creates policies designed to strengthen the compliance of the overall NSK Group, sets and promotes compliance enhancement measures to realize these policies, supervises their implementation, and periodically reports to the Board on the progress of these measures.
The Compliance Enhancement Office is located under CSR Division Headquarters and, as the operational arm of the Compliance Committee, is responsible for implementing measures to strengthen compliance based on the policies set by the Committee. It also monitors the operations of initiatives and reports their progress to the Compliance Committee on a regular basis.
The Corporate Planning Division Headquarters and the Finance Division Headquarters coordinate with each business and functional division headquaters, and regional headquarters to support the CEO and oversee and manage general risks related to management of the NSK Group. It is also responsible for maintaining and enhancing the internal control systems necessary for the operation of the NSK Group's global business.
The Internal Audit Department conducts regular stock takes of risks and performs risk monitoring to ascertain their management status. It also studies the appropriateness of internal systems and performs business audits to facilitate corrective measures and improvement initiatives.
The Crisis Management Committee is responsible for preparing and strengthening management systems in order to prevent or minimize the damage from major risks to the NSK Group, such as natural disasters, pandemics, or major accidents. It is also responsible for leading a swift and appropriate response in the event of a disaster.
Approval and Reporting
Each NSK Group Company duly applies for approval to CFO for matters related to corporate management, systems, governance structure and interest of shareholders, or to the controlling business or functional division headquarters in the case of important decisions related to business operation. NSK Group Companies also report on the progress of their operations to the Company on a regular basis.
The Company believes that the Company’s Board of Directors should be well versed in the Company’s businesses and be capable of supervising important managerial judgments related to business execution, with the aim of enhancing the sustainable growth and mid- to long-term corporate value of the NSK Group. Career diversity in field of expertise and business experience are considered to ensure that the Board maintains a well-balanced composition, in light of the Company’s mid- to long-term business strategy or managerial issues and the size of the Board is also considered to enhance the effectiveness of deliberations. In appointing individual directors, in addition to selecting based on experience in business and management in general or experience in their area of expertise, high ethical standards in management and their insight into corporate governance is also in the selection criteria.
<Skill Matrix for Board of Directors>
Experience and expertise expected
Hajime Bada, Akemi Mochizuki, Yoshitaka Fujita, Mitsuhiro Nagahama, and Koichi Obara are outside directors.
Structure and Roles of Supervisory Organizations
Years as Director at NSK, Attendance at the Board of Directors and Committee meetings
(As of August, 2021)
Attendance at the Board of Directors and committee meetings(FY2020)
Current position of the Board
Significant Concurrent Positions
outside the Company
Board of Directors
Board of Directors
Board of Directors
Board of Directors
Honorary Advisor of JFE Holdings, Inc.
Outside Director of Mitsui Chemicals, Inc.
Independent Corporate Auditor of Asagami Corporation
Board of Directors
Partner of Akahoshi Audit Corporation
Outside Director of Tsumura & Co.
Outside Corporate Auditor of Asahi Kasei Corporation
Board of Directors
Corporate Advisor of Murata Manufacturing Co., Ltd.
Board of Directors
Outside Audit & Supervisory Board Member of Kuraray, Co., Ltd.
Outside Director of Azbil Corporation
Standing Advisor of Maeda Corporation
* Kenichi Yamana and Koichi Obara were newly appointed as directors on June 25, 2021, and therefore have not attended any meetings in fiscal 2020.
* Each of the outside directors has been registered with the Tokyo Stock Exchange as an independent director.
NSK expects outside directors to possess outstanding character and a broad range of knowledge. These individuals provide expert knowledge beneficial to the Group and contribute to achieving sustainable growth and increasing its mid- to long-term corporate value.
When electing outside director candidates, we verify requirement as follows in addition to “Selection Standards of Directors”:
Persons who have neither a special interest with the Company
nor conflict of interest with regular shareholders
Persons who meet NSK’s criteria for independence
Persons who have considerable experience and deep insight as
a corporate executive or as experts
Persons who can devote sufficient time to perform duties as an
outside director of NSK
The Nomination Committee determines outside director candidates who meet the above criteria.
The following persons are ineligible to become independent director candidates of NSK Ltd.
1) Persons holding positions at a company which constituted 2% or more of the previous year's consolidated sales of NSK, or persons who held such a position until recently.
2) Persons holding positions at a company which made 2% or more of its previous year's consolidated sales to NSK or a subsidiary of NSK, or persons who held such a position until recently.
3) Persons holding positions at a financial institution which NSK relies on for funding, or persons who held such a position until recently.
4) Consultants, accounting or legal professionals receiving significant financial compensation in addition to compensation for the NSK independent director position, or persons who held such a position until recently.
5) Persons belonging to a company or organization which held 10% or more of NSK's total number of shares issued at the end of the most recent financial reporting period, or persons belonging to such a company or organization until recently.
6) Persons belonging to a company or organization which NSK holds 10% or more of the company's total number of shares issued at the end of the most recent financial reporting period, or persons belonging to such a company or organization until recently.
7) Relatives within the second degree, or family members living in the same household as persons specified in items 1) to 6) (excluding non-key posts).("Key posts" are generally assumed to refer to executive or senior managers of relevant companies or trading partners, chartered public accountants belonging to relevant audit firms, and legal professionals belonging to relevant legal firms.)
8) Persons who hold executive positions at NSK or a subsidiary of NSK, or relatives within the second degree or family members living in the same household of persons who held such positions until recently.
The wording “recently” in the items above shall be assumed to be a period of three years or less from the date NSK elects directors.
These criteria satisfy those of the Tokyo Stock Exchange, Inc.
Reasons of Outside Directors Appointoment
Reasons of Appointment
Hajime Bada has actively expressed his opinions at meetings of the Board of Directors from a fair and independent standpoint, and we expect him to supervise the Company’s management and provide advice on business execution in general based on his considerable experience and deep insight as a corporate executive. As the Chair of the Nomination Committee, he has played a leading role in the Committee through discussions and deliberations on proposals for the election of directors and succession planning. The Company has designated him as an outside director nominee with the expectation that he will continue to contribute to enhancement and reinforcement of the Company’s corporate governance and the enhancement of corporate value.
Akemi Mochizuki has actively expressed her opinions at meetings of the Board of Directors from a fair and independent standpoint, and we expect her to supervise the Company’s management and provide on business execution in general based on her considerable experience and insight as a Certified Public Accountant. As chair of the Audit Committee, she has played a leading role in the Committee discussions and deliberations, and provided appropriate guidance on the operation and enhancement of internal audit systems. The Company has designated her as an outside director nominee with the expectation that she will continue to contribute to the enhancement and reinforcement of the Company’s corporate governance and the enhancement of corporate value.
Yoshitaka Fujita has actively expressed his opinions at meetings of the Board of Directors from a fair and independent standpoint, and we expect him to supervise the Company’s management and provide advice on business execution in general based on considerable experience and insight as a corporate executive. As a member of the Nomination Committee, he has played a role in the Committee discussions and deliberations and provided appropriate guidance on proposals for the election of Directors and in successor planning. As a member of the Audit Committee, he has played a role in Committee discussions and deliberations, and provided appropriate guidance on the operation and enhancement of internal auditing systems. The Company has designated him as an outside director nominee with the expectation that he will continue to contribute to the enhancement and reinforcement of the Company’s corporate governance and the enhancement of corporate value.
Mitsuhiro Nagahama has actively expressed his opinions at meetings of the Board of Directors from a fair and independent standpoint, and we expect him to supervise the Company’s management and provide advice on business execution in general based on his considerable experience and insight as a corporate executive. As the Chair of the Compensation Committee, he has played a leading role in the Committee through discussions and deliberations on proposals for executive compensation policy and decisions. As a member of the Audit Committee, he has played a role in Committee discussions and deliberations, and provided appropriate guidance on the operation and enhancement of internal auditing systems. The Company has designated him as an outside director nominee with the expectation that he will contribute to the enhancement and reinforcement of the Company’s corporate governance, as well as ensure its sustainable growth and increase its corporate value.
Koichi Obara has considerable experience and deep insight as a corporate executive. Such experience and knowledge, as well as his independence from the Company, make him sufficiently qualified to supervise the Company’s management. The Company has designated him as an outside director nominee with the expectation that he will supervise the Company’s management and provide advice on business execution in general based on his experience as an outside director, and that he will contribute to the enhancement and reinforcement of the Company’s corporate governance, as well as ensure its sustainable growth and
increase its corporate value.
NSK provides information in an appropriate manner, including distributing materials to all directors in advance, and prior explanation by officers and the Board secretariat. Furthermore, in previous years, we have provided opportunities for outside directors to visit business facilities in Japan and overseas, which enables them to deepen their understanding of NSK’s business and matters specific to NSK, although such site visits were not carried out in 2020, due to the spread of COVID-19 pandemic.
In addition, NSK holds meetings comprised of outside directors to facilitate information exchange and foster shared understanding among outside directors and executive officers. While valuing these meetings as an opportunity to freely share opinions, the Board secretariat follows up on requests and suggestions as appropriate to improve the effectiveness of the Board of Directors.
Compensation for Directors and Executive Officers, Policy on Determining Compensation Amounts and Calculation Methods
As a Company with Three Committees (Nomination, Audit, and Compensation), NSK Ltd. makes decisions on executive compensation structure, compensation levels, and individual compensation, etc., at a Compensation Committee chaired by an outside director, and based on advice from external consultants as well as objective information on compensation levels and trends at other companies.
The Company will determine compensation for director and executive officer positions separately. When a director also serves as an executive officer, the total of each respective compensation amount shall be paid. For directors who also serve as executive officers, stock-based compensation for the director position will not be provided.
Executive Officers’ Compensation
The compensation package for executive officers consists of a fixed basic compensation and a performance-based compensation that fluctuates with performance. The Company generally sets a compensation ratio of 4:6 of fixed compensation to performance-based compensation.
(1) Basic compensation
The amount of basic compensation is determined according to
the title of the executive officer. Moreover, an additional amount
will be paid to executive officers with representation rights.
(2) Performance-based compensation
The performance-based compensation consists of a short-term
performance-based compensation and a mid- to long-term
performance-based stock compensation.
a) Short-term performance-based compensation
The short-term performance-based compensation are determined based on metrics consistent with management goals to increase profitability, raise efficiency of shareholders’ equity, and improve corporate value: metrics related to the operating income margin, ROE and cash flow,
as well as an achievement target for ESG goals for CO2 emission reductions and safety and quality improvement. The individual’s level of achievement in their designated job duties are also evaluated when determining the amount of compensation paid to each executive officer.
b) Mid- to long-term performance-based stock compensation
In order to further incentivize contributions to a sustainable improvement of corporate value, to ensure they share the interests with shareholders and to further reinforce the link between executive officer compensation and the mid- to long-term stock value, the Company has introduced a performance-based stock compensation program using a Board Benefit Trust system. Through the system, points are fixed every three years based on a relative evaluation of the total shareholder return (TSR) of the Company’s shares through a comparison with the TOPIX growth rate, the equivalent for which Company shares are then distributed upon retirement. However, for a certain portion of the above shall be provided in the from of cash obtained by converting shares into cash.
The compensation package for directors consists of a fixed basic
compensation and stock compensation which is variable compensation.
(1) Basic compensation
Basic compensation is determined based on whether the
director is an outside director or an internal director in addition
to the director’s role on committees and the Board of Directors to which the director
(2) Stock compensation
In order to further incentivize contributions to a sustainable
improvement of corporate value and to ensure they share the
interests of shareholders, the Company has introduced a stock
compensation program using a Board Benefit Trust system.
The system distributes company shares upon retirement based
on points allocated each fiscal year, of which separate amounts
are given for outside and internal directors. However, for a
certain portion of the above shall be provided in the from of cash obtained by
converting shares into cash. For directors who also serve
as executive officers, stock-based compensation will not be
provided for the director position.
In addition, in the event a member of a management team
of another company such as a subsidiary or an affiliate, etc.,
assumes an executive officer position, compensation will be
In order to achieve sustainable growth and increase our mid- to long-term corporate value, NSK conducts annual assessments of the effectiveness of its Board function and works to further enhance performance. To maintain the objectiveness of these assessments, we commission external experts to conduct assessment based on questionnaires and interviews and the results are discussed by the Board.
Conduct questionnaires for each director.
Conduct one hour interview for each director. *Interview was done in person or on remote in fiscal 2020.
Main contents of questionnaire
The main contents of the questionnaire conducted in fiscal 2020 are outlined below.
Management strategies and risk control
Composition, role and process of the Board of Directors
CEO succession planning
Operation of each committee (Nomination/Audit/Compensation Committees)
Assessment Results and Future Initiatives
An assessment conducted in 2020 by external experts concluded that the Board of Directors maintained a high level of effectiveness with the purpose of sustainable growth and mid- to long-term corporate value.
The main results are as follows.
All the directors including outside directors who have extensive knowledge keep contributing to active discussions, backed by a close relationship of mutual trust.
The structure of Board of Directors was changed to consist of majority of outside directors.
Furthermore, the Board delegated more authority to the executive organization, which enabled the Board to focus on monitoring, and discussing mid- to long-term strategies.
We will continue to improve the effectiveness of our Board of Directors, consisting of a majority of outside directors, to contribute further enhancement of corporate value by strengthening our corporate governance system, focusing on improved monitoring function and placing more emphasis on discussions regarding the direction of long-term management.
NSK continues to have its response measures to large-scale purchases of the Company’s shares (“Takeover Defenses”) based on the resolution of the Ordinary General Meeting of Shareholders held in June 2020.
NSK is a listed company whose shares are freely tradable by shareholders and investors on capital markets, and therefore, NSK believes that, in the case of a large-scale purchase of its shares, the decision whether or not to accept such a purchase should ultimately be left to the shareholders.
In light of recent social and economic conditions, as well as the state of the capital markets, however, there is a possibility that a sudden and unsolicited large-scale purchase of the Company’s shares could occur without necessary and sufficient information being disclosed, and without an opportunity to consider the proposal being given to the shareholders of the Company, or without NSK’s Board of Directors being provided with the information and time to express its opinion and make an alternative proposal. Such large-scale purchases of shares could damage the Company’s corporate value and the common interests of its shareholders, such as the case in which a purchaser does not intend to manage the Company reasonably or in good faith.
For this reason, NSK decided to introduce and keep to have Takeover Defenses for the purpose of securing and enhancing corporate value and the common interests of its shareholders, believing that shareholders, who will make the final decision, should have an adequate understanding of any proposals for the large-scale purchase of shares by the Large-Scale Share Purchaser, so they can make an appropriate decision.