Management Based on Trust and Reliability
(Basic Views on Corporate Governance)
Based on its Corporate Philosophy, Management Principles and Employee Code of Conduct, the Nippon Steel Trading Group (NST Group) strives to build a fair and favorable relationship with stakeholders and to achieve sustainable growth and increase corporate value over the medium to long term. The Group has established a business execution system that ensures soundness, transparency, and efficiency in management as well as an effective corporate governance system that appropriately incorporates monitoring and supervision functions and risk management.
Sustainability (corporate governance, etc.) promotion system
Basic Views on Corporate Governance
- 1.Nippon Steel Trading (NST) has established its Corporate Philosophy, Management Principles and Employee Code of Conduct, and its Directors, Audit & Supervisory Board Members and employees strive to put them into practice in the daily management and business of NST.
- 2.NST works on enhancing its corporate governance based on the principles of the Corporate Governance Code in order to continue to implement the Corporate Philosophy, etc.
- 3.NST endeavors to achieve sustainable growth and the increase of its corporate value over the mid- to long-term through the continuous improvement of corporate governance under consolidated management.
- 4.NST has resolved a Basic Policy about Internal Control System at the meeting of the Board of Directors. By appropriately operating this policy, NST further enforces its corporate governance, ensures “compliance with laws and ordinances,” “reliability of financial reporting,” and “effectiveness and efficiency of operations,” and aims to improve it continuously.
- 5.NST’s Board of Directors is composed of Executive Directors with thorough knowledge about the business and management of NST and two or more Outside Directors with a wealth of experience and deep insight in the area of corporate management. The Board makes decisions about the basic policy of management and important business executions, and also supervises the execution of duties by Directors. Furthermore, Audit & Supervisory Board Members, who have strong authority, attend the meetings of the Board of Directors and audit the business executions of Directors, etc., from an independent standpoint. NST judges that such structure is effective to ensure the efficiency and soundness of management, and adopts the governance system of a “Company with an Audit and Supervisory Board.”
- 6.NST has adopted the Executive Officer System and aims at the efficient operation of the Board of Directors by separating the function of decision-making and supervision and the function of business execution, and has adopted a system to promptly cope with changes in the management environment.
History of improving corporate governance
Ratio of Outside Directors
Ratio of female directors
Outside Director qualities and standards for judging their independence
NST judges the independence of Outside Directors in accordance with the independence standards set by the Tokyo Stock Exchange, considering each individual’s personal relationship, capital relationship, transactional relationship and other interests with NST.
Analysis and Evaluation of the Effectiveness of Board of Directors
NST’s Office of the Board of Director performs quantitative analysis comparing performance with prior years in terms such as the number of proposals submitted and reported to the Board of Directors and the discussion times. This office also collects opinions from each Director and Audit & Supervisory Board Member by means of questionnaires and individual interviews concerning operation of the Board of Directors. Based on these results, the Board of Directors analyzes and evaluates the effectiveness of the overall Board of Directors once each year, and utilizes the results to improve the future operation of the Board of Directors. Based on the evaluation results of the effectiveness of the Board in fiscal 2021 (at the meeting of the Board of Directors held in June 2022), the Board of Directors was evaluated to be effective from a comprehensive perspective. This was mainly because respective proposals submitted and reported to the Board of Directors were explained appropriately in advance, and were examined and discussed prior to adoption from various viewpoints including those of Outside Directors based on an approach aimed at sustained company growth and improving the Medium- to Long-Term corporate value in accordance with the Companies Act and internal rules.
Implementing improvements based on the analysis and evaluation of Board of Directors effectiveness
Board Policies and Procedures for the Nomination of Candidates for Directors and Audit & Supervisory Board Members and the Appointment/Dismissal of Senior Managers
- 1.Policies for the appointment/dismissal and the nomination of candidates for Directors and Audit & Supervisory Board Members
For the appointment of senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members, NST’s policy is to consider not only each candidate’s experience, insight and expertise, but also the overall size of the Board of Directors and the Audit & Supervisory Board, and a good mix of members including the candidates for each board so that there is an optimum board composition in which each member is able to appropriately fulfill his or her role and responsibilities and properly respond to management issues of the NST Group’s business. It is NST’s policy to dismiss an individual senior manager if, for example, the person no longer is considered to have the required qualifications outlined above.
- 2.Procedures for the appointment/dismissal and the nomination of candidates for Directors and Audit & Supervisory Board Members
Concerning the appointment/dismissal of senior managers and the nomination of candidates for Directors and Audit & Supervisory Board Members, such decisions are made by the Board of Directors taking into account recommendations by the Personnel and Remuneration Committee. Regarding Audit & Supervisory Board Member candidates, prior approval by the Audit & Supervisory Board must be obtained.
Composition and Functions of the Personnel and Remuneration Committee
The appointment of senior management and the nomination of Director and Audit & Supervisory Board Member candidates are resolved by the Board of Directors following deliberation by the Personnel and Remuneration Committee, which is composed of the President and three Outside Directors who have extensive experience and advanced knowledge related to corporate management. Each Director’s remuneration is also decided by a resolution of the Board of Directors following deliberation by this committee. During the previous fiscal year, this committee met twice and received appropriate participation and advice from Outside Directors.
Board Policies and Procedures for Determining the Remuneration of Directors
In regards to the policies for determining remuneration and other matters for each director, the NST Board of Directors has established the Policy and Procedures for Determination of the Amount of Remuneration for Directors.
- 1.Policies for determining the amounts of remuneration and other matters for Directors
Each Director’s remuneration (excluding that of Outside Directors) consists only of monthly remuneration in cash, and is based entirely upon the operating performance of NST, in order to provide incentives for the NST Group’s sustainable growth and the improvement of its corporate value. Remuneration for Outside Directors consists only of fixed monthly remuneration in cash in view of their roles and independence from business execution.
Specifically, NST sets the base amount of remuneration for each Director’s rank, taking into consideration each Director’s required skills and responsibilities, and this base amount varies within a specific range depending on NST’s consolidated profit or loss for that fiscal year (consolidated ordinary profit or loss, and profit or loss attributable to owners of parent for that fiscal year) and each division’s results for consolidated profit or loss from the previous fiscal year. The amount of each Director’s remuneration is determined within the limits approved by the General Meeting of Shareholders.
- 2.Procedures for determining the amounts of remuneration and other matters for Directors
Remuneration for each Director is discussed by the Personnel and Remuneration Committee and then decided by a resolution of the Board of Directors based on the policies for determining the amounts of remuneration and other matters for Directors described at left and within the limits approved by the General Meeting of Shareholders. Remuneration for Audit & Supervisory Board Member consists of fixed monthly remuneration in cash in consideration for the details of duties independent from business execution. The amount is determined through consultation with the members of the Audit & Supervisory Board within the limits approved by the General Meeting of Shareholders.
Communication among the Audit & Supervisory Board System, Audit & Supervisory Board Members, Accounting Auditors, and the Internal Control & Audit Department
Two of the four Audit & Supervisory Board Members are Outside Audit & Supervisory Board Members who are a certified public accountant or corporate director with a wealth of experience and a wide range of knowledge in various fields. By appointing such Audit & Supervisory Board Members, NST strengthens the functions for monitoring and supervision of the Board of Directors, which has decision-making and business supervisory authority. Audit & Supervisory Board Members cooperate with one another to execute the daily audit engagements according to the schedule and determines the legitimacy of the Directors’ business execution and the validity and rationality of operational judgment from independent perspectives, and do so at meetings of the Board of Directors and other important meetings. This constitutes the basic policy for appointment of Audit & Supervisory Board Members, and it is believed that the system for monitoring and supervision of NST management is functioning effectively.
Supporting System for Outside Directors and Audit & Supervisory Board Members
So that Outside Directors are able to correctly carry out their duties, the General Affairs & Corporate Communication Department serves as a point of contact and supplies necessary information appropriately. To support the duties of Outside Audit & Supervisory Board Members, NST has established the Audit & Supervisory Board Members’ Office and has assigned office staff to it. The General Affairs & Corporate Communication Department also supplies Outside Directors and Audit & Supervisory Board Members with necessary support including advance explanation of proposed Board of Directors resolutions, and observation visits to NST sites, subsidiaries, and other entities.
- 1.Policy on cross-shareholdings
Regarding basic policy on cross-shareholdings (all holding shares except shares of NST Group companies), the Group conducts regular evaluations of the holdings’ significance, economic rationale, etc. Shares for which the validity of holding is not recognized are to be reduced through adequate dialogue with the counterparty company.
- 2.Examination of holdings’ significance and economic rationale
In addition, the Board of Directors regularly verifies and examines whether these cross-shareholdings serve the purpose of holding from the medium- to long-term perspective and whether the benefit and risk of holding them are appropriate for the cost of capital, on an individual company basis, to confirm the appropriateness of continuation of those shares.
- 3.Policy on the exercise of voting rights
Regarding voting rights concerning cross-shareholdings, the assumption is that said shares contribute to NST’s financial performance. The votes are approved internally in accordance with the prescribed procedure following the responsible division’s appropriate deliberation and judgment based on the investee company’s financial performance and other factors and in order to contribute to its sustainable growth and higher mid- to long-term corporate value.