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 the risk management.
Corporate Governance System of NST
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 Member, 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.
Board of Directors
The Board of Directors is composed of all Directors. A meeting of the Board of Directors is held once every month. The Board decides important matters and supervise the business execution of each director.
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 the deliberation by the Personnel and Remuneration Committee, which is composed of the President and Outside Directors. Each Director's remuneration is also decided by a resolution of the Board of Directors following the deliberation by the Personnel and Remuneration Committee.
The Governance Committee is composed of the President, Director in charge of the Corporate Planning & Administration Division, Outside Directors and Outside Audit & Supervisory Board Member. The Committee discusses basic policy and measures to advance corporate governance from broad perspectives based on the principles of the Corporate Governance Code, and the results of discussions are submitted to the Board of Directors.
Audit & Supervisory Board Member
Audit & Supervisory Board Member attend important meetings such as those meetings of the Board of Directors or the Management Meetings to supervise the status of business execution by Directors. Audit & Supervisory Board Member have the right to inspect all proposals including resolution proposals and reports on the database, request reporting by Directors when necessary, and to express opinions at the meetings.
Deloitte Touche Tohmatsu LLC is appointed to execute financial audits in accordance with the Companies Act, and financial statement audits and internal control audits in accordance with the Financial Instruments and Exchange Act. The Accounting Auditor, Audit & Supervisory Board Member, and the Internal Control & Audit Department exchange information regularly and cooperate with each other.
The Management Meeting is composed of Directors who serve as Executive Officers or Senior Advisors concurrently. In principle it is held twice per month. The Meeting deliberates on policies on important business execution and other important matters related to management and responds to inquiries of the President. Audit & Supervisory Board Member have the right to attend the Meeting and give their opinion.
The Internal Control & Audit Department audits on a regular basis the validity and efficiency of business execution by NST and Group companies in Japan and foreign countries.
Committees in the Execution System
Various committees have been established as advisory bodies of the Management Meeting, to further promote sustainability including corporate governance.
Investment and Loan Committee
The Committee investigates and examines investment and loan matters before the holding of a Management Meeting.
The ESG Committee considers basic policies and measures concerning issues related to promotion of ESG management of the NST Group comprehensively and across the entire Group.
The Environment Meeting, Social Meeting, and Governance Meeting have been established as subordinate bodies of the ESG Committee.
Risk Management Committee
For the purpose of managing risk comprehensively and across the entire Group, and of building a company structure that is strong against risk, the Risk Management Committee checks the status of each risk management operation, identifies the Group's risks including new risks, develops measures to deal with these risks, and strives to ensure that the measures are implemented throughout the entire Group.
Enhancement of the Auditing System
- 1.Auditing by Audit & Supervisory Board Member
Two of the four Audit & Supervisory Board Member are Outside Audit & Supervisory Board Member. These Outside Audit & Supervisory Board Member have a wealth experience and a broad perspective in various fields such as that of a CPA or in the management of companies. By appointing such Audit & Supervisory Board Member, NST strengthens the monitoring and supervisory function of the Board of Directors, which has decision-making and business supervisory authority. Audit & Supervisory Board Member cooperate with one another to execute the daily audit engagements according to the schedule and determines about the legitimacy of the Directors' business execution and the validity and rationality of operational judgement from independent perspectives, and do so at the meeting of the Board of Directors or other important meetings.
- 2.Cooperation among Audit & Supervisory Board Member, Accounting Auditors and the Internal Audit Department
The Audit & Supervisory Board Member receives audit reports from the Accounting Auditor, and full-time Audit & Supervisory Board Member have meetings to exchange information with the Accounting Auditors and the Internal Audit Department once every three months, so as to enhance cooperation.
Audit & Supervisory Board Member attend Auditing Meetings and Audit Liaison Meetings, which are composed of Directors, etc., and exchange opinions regarding the annual auditing plan, auditing results or measures for improvement, so as to strengthen internal control functions for sound management.
Board Policies and Procedures for the Nomination of Candidates for Directors and Audit & Supervisory Board Member and the Appointment/Dismissal of Senior Managers
- 1.Policies for the Appointment/Dismissal and the Nomination of Candidates for Directors and Audit & Supervisory Board Member
For the appointment of senior management and the nomination of candidates for Directors and Audit & Supervisory Board Member, 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 Member
Concerning the appointment/dismissal of senior managers and the nomination of candidates for Directors and Audit & Supervisory Board Member, such decisions are made by the Board of Directors taking into account recommendations by the Personnel and Remuneration Committee, a majority of which are Independent Outside Directors. Regarding Audit & Supervisory Board Member candidates, prior approval by the Audit & Supervisory Board must be obtained.
Board Policies and Procedures in Determining the Remuneration of Directors
NST has established the Policy and Procedures Determination of the Amount of Remuneration for Directors, Etc. regarding the policies in determining the details of remuneration of each Director, etc. 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. 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 (consolidated ordinary profit or loss, and profit or loss attributable to owners of parent) and each division's consolidated profit or loss, in view of the connection with the annual management plan and the medium-term management plan, and the amount and other details of each Director's remuneration are determined by the Board of Directors within the limits approved by the General Meeting of Shareholders after the deliberations by the Personnel and Remuneration Committee. In addition, remuneration for Outside Directors consists only of monthly remuneration in cash in view of their roles and independence from business execution. Remuneration for Audit & Supervisory Board Member consists of monthly fixed remuneration in cash in consideration of the details of duties independent from business execution. The amount is determined through consultation with the Audit & Supervisory Board within the limits approved by the General Meeting of Shareholders.
Analysis and Evaluation of the Effectiveness of Board of Directors
NST's Board of Directors analyzes and evaluates the effectiveness of the Board of Directors as a whole once a year based on the results of quantitative analysis comparing performance with prior years as to the number of proposals submitted and reported to the Board of Directors and discussion time, etc.. The analysis is conducted by the Office of the Board of Directors, at which time reference is made to the results of self-evaluation and opinions regarding the operation, etc. of the Board of Directors, as obtained through a questionnaire and an interview of each Director and Audit & Supervisory Board Member. The Board of Directors makes use of the results of the analysis and evaluation to improve the future operation, etc. of the Board of Directors. Based on the evaluation results of the effectiveness of the Board in FY2020 (at the meeting of the Board of Directors held in June 2021), the Board of Directors was evaluated to be effective from the comprehensive viewpoint then held. This was mainly because respective proposals submitted and reported to the Board of Directors were resolved through questions and deliberations from diverse perspectives by inside and outside officers in accordance with the Companies Act and internal rules. Going forward, from the viewpoint of improving effectiveness, NST shall strive to strengthen the function of the Board of Directors by making the work more sharply focused, richer in content, and more prompt, based on the opinions from Directors and Audit & Supervisory Board Member as to the evaluation of effectiveness in FY2020. NST will also reinforce the function of supervision and ensure the transparency of management primarily by deepening discussions on overall management issues under the governance system in which at least onethird of the Directors are Independent Outside Directors.
Training of Directors and Audit & Supervisory Board Member
NST explains its Corporate Philosophy, the details of NST Group businesses, etc., to each Outside Director and Outside Audit & Supervisory Board Member when they are appointed to their position. NST also explains to Internal Directors and Audit & Supervisory Board Member, when they are appointed, their responsibilities based on the Companies Act and other important laws and regulations as well as systems related to the operations.
For all Directors and Audit & Supervisory Board Member, NST conducts necessary training as appropriate.
Independence of Outside Directors
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.
Supporting System for Outside Directors and Audit & Supervisory Board Member
To support the duties of Outside Directors, 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 Member, NST has established Audit & Supervisory Board Member's office and has assigned two employees to it. The General Affairs & Corporate Communication Department also supplies Outside Directors and Audit & Supervisory Board Member with necessary support such as provision of the notice of the Board meetings or of its change, advance provision of the materials for the Board meetings, and advance explanation of the resolution matters.
- 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, and other action.
- 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 judgement 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.
Policy for Dialogue with Shareholders
NST responds to requests for dialogue from shareholders as follows and within reasonable limits, in order to contribute to its sustainable growth and improvement of medium- to long-term corporate value.
The Director in charge of the Accounting & Finance Department responds to the overall dialogue with shareholders, with the help of relevant executive officers, the Corporate Planning Department, the General Affairs & Corporate Communications Department, and other departments. In addition to actively providing information to shareholders and making careful questions and answers at the General Meeting of Shareholders, NST regularly holds IR briefing sessions for institutional investors, and responds to requests from institutional investors for individual meetings. Opinions received from shareholders and investors through these efforts are reported to the Board of Directors and other relevant parties. In dialogues with shareholders, the purpose of the Fair Disclosure Rules is respected and the insider information (important facts not disclosed) is properly managed in accordance with the Compliance with Insider Trading Regulations.
Basic Views on Eliminating Anti-Social Forces
NST aims to continue to be a company group relied upon by society, and has the policy never to have a relationship with Anti-Social Forces which threaten public order and social safety, and to never meet unreasonable demands.
NST has already established an internal corporate structure such as the Compliance Manual and the assignment of a responsible person for unreasonable demands.
NST belongs to the particular association managed by the Metropolitan Police Department and receives instructions and information, and cooperates with outside special organs such as the police or lawyers, etc., in normal times.