Corporate Governance

We believe that to increase corporate value and achieve sustained growth, it is essential to continue to ensure managerial transparency and strengthen supervisory functions regarding the execution of business affairs. This is our basic policy on corporate governance and we will strive to improve our organization and business systems in accordance with this policy.

NEG is a company with a board of corporate auditors. The Board of Directors, which includes outside directors, carries out decision-making regarding the execution of duties and supervision of the execution of duties by directors and others. The supervision of the directors is carried out independently of the Board of Directors and the executive structure by the Board of Corporate Auditors, which includes outside corporate auditors. This system is intended to ensure the transparency and fairness of the Board of Directors.

Also, a Nomination and Remuneration Advisory Committee, which exists as a voluntary committee, has been established as an advisory body to the Board of Directors. The committee deliberates on the appropriateness of matters related to the appointment and dismissal of representative directors, remuneration policies and systems for directors, and the amount of remuneration determined for directors. It then reports its conclusions to the Board of Directors.

In recent years, the number of issues, such as climate change, human capital, and human rights, that companies must address in order to achieve sustainable growth has been growing. Society increasingly expects companies to help solve the challenges facing it and to provide greater information disclosure. Therefore, we have established the CSR Committee as a cross-organizational entity that engages in a comprehensive discussion of the direction and content of our CSR activities. The committee makes recommendations to management, flexibly develops activities, and contributes to more appropriate information disclosure.

As of March 28, 2024, there are four outside directors and two outside corporate auditors within the company. Outside directors make up over one-third of all directors, and there are two female outside directors.
In order to strengthen the management supervisory capabilities of the Board of Directors and other corporate administrative bodies by ensuring that they receive informed and objective advice, our outside director appointments include; a corporate management expert with many years of first-hand knowledge and experience in the world of corporate management; an economist with expertise and a robust background in corporate governance and organizational management; a science expert who is specialized and highly experienced in the field of agricultural sciences; and a technical expert with extensive experience and expertise in technology development and a proven track record in the technology development department of a global company and involvement in human resource development.

Outside corporate auditors consist of one certified accountant and tax accountant and one attorney at law, who are both independent from the company and are highly knowledgeable and experienced in their respective fields. They proactively perform their auditing duties and reinforce supervisory functions.

We base our determination of the independence of outside officers on the criteria established by the Tokyo Stock Exchange as well as on our own “Independence Standards for Outside Directors and Outside Corporate Auditors” described below. No personal, capital, or business relationship, nor any other interest to which any of above-mentioned criteria apply, exists between NEG’s outside officers and NEG, and, in light of the fact that they fulfill all of the requisite criteria, we have registered all our outside officers as independent directors/auditors with the Tokyo Stock Exchange.

The Board of Directors makes decisions on important management affairs of the NEG Group and supervises the execution of business affairs. As of March 28, 2024, the Board of Directors consists of nine members (including two representative directors, three inside directors, and four outside directors). The Board of Directors is presided over by the Chairman of the Board. To achieve clarity of management responsibility and develop a flexible management system capable of responding to changes in the business environment, the term of directors is set at one year. Regular Board of Directors meetings are held monthly, and extraordinary Board of Directors meetings are held when necessary. In addition, at the budget meeting held once a year, the Board of Directors monitors management by hearing explanations directly from the respective executive officers about the business outcomes of the current fiscal year and the budget of the next fiscal year.
The reasons for appointment for all directors are included in the Notice of the 105th Ordinary General Meeting of Shareholders (held on March 28, 2024) and can be found on the NEG website.

We adopt a corporate auditor system. As of March 28, 2024, the Board of Corporate Auditors consists of four corporate auditors, two of whom are outside corporate auditors. Corporate auditors conduct audits of the directors’ execution of their duties through assessing business affairs and corporate assets and setting important audit issues according to auditing policies, plans, and assignment of duties established by the Board of Corporate Auditors. They also participate in Board of Directors meetings.

Meetings of the Board of Corporate Auditors are held monthly in principle, and corporate auditors share information and exchange opinions at these meetings. Corporate auditors endeavor to improve the effectiveness of their audits by deepening their understanding about the company’s business operations. For this purpose, the corporate auditors take various measures, such as attending the annual budget meeting and periodically questioning directors and executive officers about their duties and handling of business affairs.

As part of our efforts to strengthen our corporate governance, the company established the Nomination and Remuneration Advisory Committee to ensure transparency and objectivity in the appointment and dismissal of representative directors and in the process of determining director remuneration. The Committee deliberates on the appropriateness of matters related to the appointment and dismissal of representative directors, remuneration policies and systems for directors, and the amount of remuneration determined for directors. It then reports its conclusions to the Board of Directors.

The Nomination and Remuneration Advisory Committee met four times during fiscal 2023 and reported to the Board of Directors regarding the total amount of directors’ bonuses. Evaluation and allocation of the monthly remuneration (fixed) and bonus for each director (excluding outside directors) does not need to be reported to the Board of Directors, and decisions of the Committee are deemed to have the approval of the Board of Directors.
As of March 28, 2024, the Committee comprises two representative directors and four outside directors. Its membership is shown below.

The Management Committee deliberates on the company’s important managerial affairs and draws up detailed action plans regarding the decisions made at the Board of Directors meetings. Management Committee meetings are held twice a month and when deemed necessary.
As of March 28, 2024, the Management Committee comprises five inside directors (two of whom are representative directors) and five senior vice presidents.

We adopt an executive officer system to promote faster decision making, ensure managerial transparency, and enhance the execution of business affairs. As of March 28, 2024, in addition to the president, there are 15 executive officers (three of whom are directors, one of whom is French). The president is responsible for execution of duties and the other executive officers execute the duties assigned to them by the president. Each executive officer serves for a term of one year.

For the corporation to be able to respond flexibly to a changing climate and business conditions, and to improve corporate value over the medium and long term, we consider it necessary for directors to have specialized skills in a range of areas related to management.

During Compliance Awareness Month, which is held in October of every year, we invite outside instructors to come and give lectures on compliance to our inside directors, full-time corporate auditors, and other executives. We also hold director training seminars every year, which provide our directors with a deeper understanding of current business conditions, including those surrounding corporate governance.
Our corporate auditors participate in seminars and information exchanges with outside organizations, through which they deepen their auditing-related expertise. For our outside directors and outside corporate auditors, prior to assuming office, we provide them with explanations about our current corporate situation and systems. After they have assumed office, we provide them with opportunities to conduct interviews with directors and executive officers.

All of our directors respond to an annual questionnaire to investigate the effectiveness of the Board of Directors. The questionnaire focuses on (1) the Board of Directors in general, (2) the running of Board of Directors meetings, and (3) outside directors.

From the fiscal 2023 questionnaire, some were of the opinion that, due in part to the effects of the COVID-19 pandemic, outside directors did not really have enough opportunities to tour factories in Japan and overseas and to exchange opinions with local executives. Also, there was feedback that sometimes board meeting materials are distributed at the last minute. Based on the results of the questionnaire, we have determined that the Board of Directors is viable and that its effective functioning has been ensured. However, we will strive to enhance deliberations at Board of Directors meetings by making improvements based on evaluation results and will continue to evaluate its effectiveness.

Our executive compensation for directors (excluding outside directors) comprises a monthly retainer, bonuses, and grants of restricted shares. For outside directors and corporate auditors, remuneration is limited to a monthly retainer.

The total monthly remuneration for directors is within the scope determined by the General Meeting of Shareholders, and the total amount of the bonus payment is determined at the General Meeting of Shareholders after deliberation by the Nomination and Remuneration Advisory Committee subject to the approval of the Board of Directors. The amounts of the monthly retainer and bonus for each individual director are commensurate with those of other companies and are aligned with our business performance (in the case of inside directors only), the economic environment, and objective market research data on remuneration provided by outside specialized agencies. The duties, responsibilities, and achievements of individual directors are also taken into account. The decision is made after comprehensive consideration of the above. The specifics are deliberated on and decided by the Nomination and Remuneration Advisory Committee, which is chaired by an outside director and the majority of whose members are outside directors. Unless an equal number of Committee members differ in opinion, the decisions of the Committee are deemed to have been adopted by the Board of Directors.

Grants of restricted shares are determined by the Board of Directors after consideration of individual duties and responsibilities as well as the share price after deliberation by the Nomination and Remuneration Advisory Committee and are within the scope of the total amount determined by the General Meeting of Shareholders. The ratio of the monthly retainer, which is a fixed amount of remuneration, to the bonus and grants of restricted shares, which are variable amounts of remuneration, is generally 6:4 (fixed: variable) on a periodic payment basis.

Remuneration for corporate auditors is determined after consultation with the auditors within the scope of the total amount determined by the General Meeting of Shareholders after reference to what is offered by other companies as determined by surveys conducted by external specialized agencies.