Corporate Governance Guideline

Japanese

The Nikon Group's basic policies and views on corporate governance are defined in the Corporate Governance Guideline.

Nikon Group Corporate Governance Guideline

(Revised on October 7, 2022)

Nikon's Philosophy

The Nikon Group aims to contribute to sustainable development of society founded on its corporate philosophy "Trustworthiness & Creativity," an everlasting theme of the Group.

Basic views on corporate governance

• Based on its corporate philosophy, the Nikon Group will carry out highly transparent management by fulfilling its fiduciary responsibilities toward shareholders as well as its responsibilities toward all stakeholders, including customers, employees, business partners and society, with a sincere and diligent attitude.
• The Nikon Group will strive to achieve sustainable growth and enhancement of its corporate value over the medium-to-long term, by improving management efficiency and transparency and further strengthening the supervisory function over management in light of the purposes of Japan’s Corporate Governance Code.

• 1.Ensuring the interest and equal treatment of shareholders
  • (1)Respect for the rights of shareholders
    While respecting legitimate exercise of shareholder’s rights, the Company ensures effective equality among shareholders. In addition, the Company recognizes the exercise of voting rights at the General Shareholders’ Meetings as important rights of shareholders, and will develop an appropriate environment for the exercise of rights at the General Shareholders’ Meetings.
  • (2)Basic capital policy
    The Company’s fundamental policy on shareholder returns is to distribute a steady dividend that reflects the perspective of shareholders, and simultaneously realizing appropriate capital allocation flexibly from the medium-to-long term perspective, while strengthening investments (including strategic investments, R&D, and capital expenditures) to ensure sustainable growth.
  • (3)Policy on cross-shareholdings

    If the Company holds shares in other listed companies for strategic purposes, the Board of Directors regularly examines and verifies the rationale for holding such shares for each of the listed companies in terms of strategic significance and rationality, benefits and risks that accompany the cross-shareholding, including total shareholder return and related earnings on transactions, and capital costs that the Company bears. If the Board of Directors finds the necessity or rationality for holding such shares insignificant, the Company gives due consideration to options, including the possibility of selling them.

    When exercising voting rights associated with cross-shareholdings, the Company makes decisions based on perspectives such as whether each proposal will improve the corporate value of the Company and the issuing company over the medium-to-long term. In particular, if there is a high chance that the proposal will damage the issuing company’s corporate value, or if the issuing company is facing a major corporate scandal, the Company makes a decision with extra caution to exercise its voting rights.

• 2.Appropriate cooperation with stakeholders other than shareholders

  Under the corporate philosophy, the Nikon Group will strive to appropriately cooperate with stakeholders including employees and other corporate personnel, customers, business partners, creditors and local communities.

  In order to permeate and establish awareness of corporate ethics and engage in sound and fair corporate activities to gain the trust of stakeholders, we have established the “Nikon Code of Conduct”, which shows the Nikon Group’s basic stance on corporate social responsibility and the standards of behavior to ensure sensible conduct by directors, officers and employees of the Nikon Group based on a high level of morality, pursuant to relevant laws and regulations as well as internal regulations.

  The Compliance Committee regularly performs its function in order to ensure legitimate, fair, and sound corporate behavior. In addition, the Sustainability Committee conducts activities for improving, fostering and educating on issues surrounding sustainability, including social responsibility.

  Furthermore, the Nikon Long-term Environmental Vision is set up and the Sustainability Committee and the Environmental Subcommittee thereunder will promote environmental protection activities in order to pass down a sound environment to the next generation and to enable sustainable development of society.

  Reporting/consulting hotlines such as the "Code of Conduct Hotline" will be established and operated to ensure compliance across the Nikon Group, through preventing and rectifying acts which violate social norms and/or corporate ethics. Persons who provided information via the reporting/consulting hotlines will not be subject to any disadvantageous treatment because of such reporting.

  Upon the implementation of a defined-benefit corporate pension plan, the Company establishes the Pension Committee headed by the CFO and composed of the general managers of the finance and human resources divisions, and determines the policy for asset management.

  Actual asset management is entrusted to an asset management agency. The Company receives reports on the status of asset management every quarter, and monitors the management status. Furthermore, the Company appropriately manages and administrates its pension assets, such as by conducting regular reviews of the strategic asset mix at the Pension Committee.

• 3.Full disclosure

  The Company, under its corporate philosophy "Trustworthiness & Creativity," makes it a basic stance to carry out active and fair disclosure of its corporate information. The Company will promote activities to further enhance understanding about the Nikon Group among shareholders and investors, by widely providing information on its management stance and business activities, as well as products and technologies, while complying with the timely disclosure regulations of the Tokyo Stock Exchange.

• 4.Corporate governance structure

  Aiming to further enhance corporate governance, Nikon adopted a company with an Audit and Supervisory Committee. This position further strengthens the supervisory function of the Board of Directors as it strives to streamline decision-making and clarify management responsibility arising through delegation of authority.

  • (1)Board of Directors
    • i)Roles of the Board of Directors

      The Board of Directors supervises management by directors and assumes the decision-making functions regarding matters prescribed under laws and regulations, the Articles of Incorporation of the Company, as well as the important matters concerning the Nikon Group.

      For the purpose of clarifying the scope of delegation to executive directors and officers while ensuring prompt decision-making and management by executive directors and officers, the Company specifically sets out the matters subject to deliberation at Board of Directors’ meetings in the criteria for matters subject to deliberation and reporting at Board of Directors’ meetings. For example, the Board of Directors makes decisions on matters concerning important management issues, including the basic management policies, the Medium-Term Management Plan, the annual plan, the Basic Policy on Internal Control System, and investments and loans exceeding a certain amount.

    • ii)Composition and the size of the Board of Directors
      To accomplish its management strategy, the Company selects the specific skills expected from its directors, and authorizes them following the deliberation by the Nominating Committee. The skills include knowledge on and experience in corporate management, management strategy, internal control, and governance as well as the Company’s business characteristics and issues. The composition of the Board of Directors is designed to ensure that each director possesses these skills in a well-balanced manner and the Board as a whole can demonstrate its effectiveness, taking into account the need to maintain diversity and an appropriate number of directors.
      In addition, two or more independent external directors are appointed in order to further strengthen the supervisory function of the Board of Directors.
    • iii)System for operating, gathering information, and supporting the Board of Directors
      The Company strives to provide appropriate and necessary information to directors for effectively fulfilling their roles and responsibilities. Meanwhile, at the meetings of the Board of Directors, the Company carries out prior distribution of relevant materials to the attendees of the meetings of the Board of Directors, and advance briefing to external directors as necessary, to ensure constructive discussion and exchange of opinions.
    • iv)Evaluating the effectiveness of the Board of Directors
      The Board of Directors will analyze and evaluate its effectiveness each year and disclose a summary of the results thereof. Based on the results, the Board of Directors will work on measures for further improving its functions.
  • (2)Audit and Supervisory Committee
    • i)Roles of the Audit and Supervisory Committee
      The Audit and Supervisory Committee audits and supervises the status of management by directors other than those who are Audit and Supervisory Committee members, and officers (including executive fellows and other positions equivalent to officer; hereinafter collectively referred to as “officers, etc.”) as an independent body. For such a purpose, Audit and Supervisory Committee members regularly attend the important meetings of the Board of Directors as well as important meetings such as the Executive Committee, and conducts audits and supervision over management and directors.
    • ii)Composition and the size of the Audit and Supervisory Committee
      The Audit and Supervisory Committee shall maintain an adequate number of members, within five members as prescribed in the Articles of Incorporation, to ensure highly effective audits and supervision. Furthermore, members with the appropriate experience and capabilities as well as knowledge in the areas of finance, accounting and legal affairs shall be appointed. In particular, at least one member with ample knowledge in the areas of finance and accounting shall be appointed. In addition, for the purpose of further enhancing independence and neutrality of the audit system, the majority of the Audit and Supervisory Committee shall be comprised of independent external directors.
  • (3)Nominating Committee
    • i)Roles of the Nominating Committee
      As a voluntary advisory body to the Board of Directors, the Nominating Committee primarily formulates criteria for the election and removal of the chief executive officer, president and directors, nominates candidates, considers the composition of the Board of Directors, and oversees evaluation and assignment of officers, etc. so as to ensure that decisions on the election and removal of directors and officers, etc. are transparent and objective.
    • ii)Composition of the Nominating Committee
      From the perspective of conducting appropriate supervision, the majority of members of the Nominating Committee shall be external directors, and the Committee chairperson shall also be an external director.
  • (4)Compensation Committee
    • i)Roles of the Compensation Committee
      As a voluntary advisory body to the Board of Directors, the Compensation Committee deliberates and makes proposals for policy regarding executive compensation as well as various related systems so as to ensure objectivity, transparency and linkage with performance in the process of determining executive compensation.
    • ii)Composition of the Compensation Committee
      From the perspective of conducting appropriate supervision, the half or more of members of the Compensation Committee shall be external directors, and the Committee chairperson shall also be an external director.
  • (5)Independent External Directors’ Meeting
    

    The Company has an Independent External Directors’ Meeting whose members are all external directors. The meeting serves as an opportunity for the members to freely exchange opinions and have discussions from an independent and objective standpoint about issues and matters to be deliberated by the Board of Directors. Based on the results of this meeting, the Independent External Directors’ Meeting makes proposals to the Board of Directors and helps stimulate discussions at Board of Directors’ meetings.

  • (6)Policies and procedures for appointing and dismissing officers
    • i)Policies for appointment
      

      The Company nominates director candidates from among those who understand the management environment of the Company and who can contribute to the sustainable growth of the Nikon Group and the enhancement of corporate value over the medium to long term from a sophisticated and global viewpoint, while also being qualified to earn the trust of society as members of the Board of Directors. The specific race, gender, nationality, or country of origin of candidates shall not be determining factors in the nomination of candidates. Furthermore, the Company nominates external director candidates from among those with a wealth of knowledge and experience, etc., as executives of other companies, or expertise and experience, etc., as specialists such as attorneys and certified public accountants, and who are qualified to take part in management supervision function from a fair and objective standpoint independent of management.

      The Company appoints officer candidates from among those with a broad perspective, a wealth of experience, leadership skills, and capabilities to promote reforms in their respective areas of responsibility, while possessing the ability to strategically fulfill their capabilities to contribute to the improvement of business performance. Meanwhile, the Company appoints executive fellow candidates from among those who possess the outstanding expertise, abundant experience and distinguished achievements in specific field, and who contribute to the management of the Company with accomplishments.

    • ii)Criteria for determining independence of external directors
      In addition to the criteria for external directors under the Companies Act, the Company judges an external director candidate to be independent if he/she does not fall under any of the following criteria.
      • a)The candidate serves or served the Group in the past.
      • b)The candidate is a "major client or supplier*" of the Company or an executive thereof.
      • c)The candidate is a major shareholder of the Company or an executive of said major shareholder.
      • d)The candidate served in the past at a company whose directors are concurrently serving as external directors of the Company and vice versa.
      • e)The candidate is a person who belongs to a company or organization that receives a donation from the Company, or a person who served in the past at such a company or organization.
      • f)The candidate’s relative within the second degree of kinship serves as an important executive of a "major client or supplier" of the Group or the Company.
      • • *"Major client or supplier" refers to a client or supplier that falls into either of the following.
          • (1)A client or supplier with whom the Company has a transaction that falls into the following, in any of the past three years
            • a party that receives payment from the Company equivalent to 2% of the party’s consolidated net sales or 100.0 million yen, whichever is greater
            • a party that makes payments to the Company equivalent to 2% of the Company’s consolidated net sales or 100.0 million yen, whichever is greater
          • (2)A consultant, an accounting professional, or a legal professional who receives compensation from the Company in excess of 10.0 million yen per year (average over the past three fiscal years)
    • iii)Procedures for appointment
      The Nominating Committee deliberates on the nomination of candidates for director, and the nomination of candidates is determined by resolution of the Board of Directors based on the results of these deliberations.
      The appointment of officers, etc. is determined by resolution of the Board of Directors after prior examination by the Nominating Committee of the appropriateness of the candidates.
      The nomination of candidates for director who is an Audit and Supervisory Committee member is subject to the prior consent of the Audit and Supervisory Committee.
    • iv)Policies and procedures for dismissal
      If a director or an officer, etc. of the Company falls under the dismissal criteria formulated by the Nominating Committee, the Nominating Committee and the Board of Directors shall consider whether he or she should be dismissed.
    • v)Appointment, dismissal, and successor scheme of chief executive officer
      The Company recognizes the appointment, dismissal, and systematic training for the successors of its chief executive officer, as a task with utmost importance in achieving its sustainable growth, and the Nominating Committee formulates appointment and dismissal criteria, narrows down successor candidates, monitors their training, and nominates successors.
  • (7)Compensation system
    Compensation system is based on the following policies and procedures.
    • i)Basic policies
      Executive compensation will be determined to satisfy the following basic criteria.
      • Executive compensation should motivate directors and officers, etc. to sustainably improve corporate and shareholder value, as well as enhance their willingness and morale.
      • Executive compensation should help keep, cultivate and reward excellent personnel.
      • The decision-making process for the compensation system should be objective and transparent.
    • ii)Decisions on compensation amount and calculation method based on deliberations by the Compensation Committee
    • • The Compensation Committee establishes executive compensation policies and discusses and advises on related systems in order to determine the level and system appropriate to the duties, given compensation levels of major Japanese companies that globally develop their businesses, so as to determine the compensation amount consistent with the performance of the Group and its business scale.
      • The Compensation Committee deliberates on compensation for individual directors other than those who are Audit and Supervisory Committee members and officers, etc. Based on the results of such deliberations, the Board of Directors decides on the compensation.
      • Compensation for individual directors who are Audit and Supervisory Committee members is determined by consultation among directors who are Audit and Supervisory Committee members.
    • iii)Compensation system and performance-based structure
      • 　a)As a general rule, the compensation system for executive directors and officers, etc. comprises monetary compensation (fixed monthly compensation and bonuses) and stock compensation (performance-based stock remuneration and restricted stock remuneration). The standard payment of bonuses or each stock compensation to be paid to individual executive directors and officers, etc. is calculated by multiplying the amount of their respective fixed monthly compensation by a ratio, which is determined according to their respective title and duties. The higher and more important their title and duties are, the higher the ratio is. When the ratio of fixed monthly compensation is assumed to be 1, the range of the ratio of each compensation is as shown below. Also, stock compensation is paid to executive directors and officers, etc. every fiscal year within the range not exceeding 1% of the share dilution ratio.

        Bonuses	Performance-based stock remuneration	Restricted stock remuneration
        0.6 - 0.7	0.1 - 0.225	0.3 - 0.45

      • ＜Monetary compensation＞
      • • Fixed monthly compensation
          This monetary compensation is not based on performance and is paid every month.
        • Bonuses
          This monetary compensation is determined by the Board of Directors based on an evaluation by the Compensation Committee based on the following factors on a single-year basis within the range of 0% to 200% of the standard payment, which is calculated according to title and duties. As a general rule, a bonus is paid in June every year.
          • the degree of achievement of the consolidated ROE and operating profit;
          • the degree of achievement of capital efficiency, profitability and other targets, as well as qualitative assessment, of each division; and
          • the qualitative assessment of responses to issues assigned to individual executive directors and officers, etc.
      • ＜Stock compensation＞
      • • Performance-based stock remuneration
          With the aims of sharing value with shareholders and enhancing willingness and morale for improving medium-to-long-term performance, this stock compensation is determined by the Board of Directors based on an evaluation by the Compensation Committee based on the following factors within the range of 0% to 150% of the standard payment, which is calculated according to title and duties.
          • the degree of achievement of the consolidated ROE target set for the final fiscal year of the medium-term management plan (the “Plan”) to be resolved every multiple fiscal years determined separately by the Board of Directors;
          • the degree of achievement of consolidated revenue and operating margin targets for each fiscal year during the Plan period; and
          • the degree of achievement of targets for strategic issues
          As a general rule, this remuneration is paid by delivering restricted shares or the amount of cash equivalent to the market value of the restricted shares in the first June after the end of each fiscal year included in the Plan period. The restricted shares are, as a rule, prohibited from being disposed of during the period up to the date on which an eligible person retires from any of the positions as director and officer, etc.
        • Restricted stock remuneration
          As a general rule, this stock compensation is paid by delivering restricted shares in April every year, with the aims of sharing value with shareholders and enhancing willingness and morale for improving long-term performance. The restricted shares are, as a rule, prohibited from being disposed of during the period up to the date on which an eligible person retires from any of the positions as director and officer, etc. As a general rule, the number of restricted shares to be delivered is determined by dividing an amount calculated according to title and duties by resolution of the Board of Directors by the market value of the Company’s shares.
      • 　b)The compensation system for non-executive directors consists only of fixed monthly compensation to be paid every month.
    • iv)Claim for return
    • If a director (other than a director who is an Audit and Supervisory Committee member) or officer, etc. of the Company is found to have committed serious breach of his or her duties or serious violation of internal rules, or to be in the employment of a competitor, etc., of the Company without permission from the Company (including appointment as a director, officer, or any other positions equivalent thereto of the competitor or an employee of the competitor), the Company shall be able to claim return in all or part of shares of the Company delivered and cash paid to the director or officer, etc.
  • (8)Policies on the training of directors

    When new directors take office, the Company offers training opportunities for them to fully understand the roles and responsibilities they are expected to fulfill. In addition, even after taking office, the Company offers opportunities for these directors to attend training sessions, including study sessions with external experts, such as attorneys, as lecturers and seminars hosted by external organizations, in order to promote further understanding about the roles and responsibilities of directors.

  • (9)Related party transactions
    Upon conducting transactions with related parties, the Company will follow appropriate procedures in advance as listed below, to avoid harming the common interest of the Company and its shareholders.
    • Make resolutions at the meetings of the Board of Directors as appropriate, in consideration of the importance, etc., of a transaction.
    • Exclude officers, etc., with special interest from resolution.
    • Verify whether a transaction is carried out under common terms and conditions.
    • Seek opinions from external directors, etc., as appropriate.
• 5.Dialogue with shareholders
  • (1)Constructive dialogue with shareholders

    The Company aims to hold constructive dialogue with shareholders, and appoints an officer in charge of this initiative, while collecting and sharing information through cooperation among relative departments within the Company as appropriate. For the purpose of dialogue with shareholders, senior management or responsible officers of the Company will attend meetings with shareholders, as far as reasonably practicable, and opinions, etc., obtained from such occasion will be shared among the senior management. Any insider information will not be expressed in said meetings, in accordance with the internal rules of the Company.

    The Company will also enhance information sharing through such means other than meetings, including briefing sessions for institutional investors and individual investors, and provision of information through the Company’s website, etc.

  • (2)Formulation and announcement of management strategies and management plans
    The Company formulates the Medium-Term Management Plan, clarifying the earnings projection, basic capital policy and priority measures, etc., with the aim of increasing its corporate value over the medium-to-long term, which is explained in detail at the briefing sessions for investors as well as on the Company’s website, etc.
• 6.Revision and abolition of the Guidelines

  Revision and abolition of the Guidelines will be made subject to the resolution of the Board of Directors.