Corporate Governance Organization

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Basic Views

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 purpose of Japan’s Corporate Governance Code.

System

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.

Nikon's Corporate Governance Organization (As of April 1, 2019)

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. Moreover, in order to further strengthen the supervisory function of the Board of Directors, the Company has appointed five independent external directors (including three Audit and Supervisory Committee members).
Meetings of the Board of Directors are presided at by Chairman of the Board, who does not serve concurrently as an officer.

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 as an independent body. For such a purpose, Audit and Supervisory Committee members regularly attend 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. In addition, to further enhance the independence and neutrality of the audit system, the Audit and Supervisory Committee shall consist of five Audit and Supervisory Committee members, including three independent external directors.

Nominating Committee

The Company has a Nominating Committee as a voluntary advisory body to the Board of Directors. External directors comprise a majority of the members, and an external director chairs the Committee.
The Nominating Committee primarily formulates criteria for the election and removal of the president and directors, nominates candidates, considers the composition of the Board of Directors, and oversees evaluation and assignment of officers so as to ensure that decisions on the election and removal of directors and officers are transparent and objective.

Compensation Committee

The Company has a Compensation Committee as a voluntary advisory body to the Board of Directors. External directors and external experts comprise a majority of its members, and an external director chairs the Committee. 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.

Executive Committee

The Executive Committee, as the highest decision-making body of management, swiftly and decisively makes decisions on individual major management issues delegated by the Board of Directors, in accordance with basic management and other policies, as determined by the Board of Directors.

External Director

In the appointment of its external directors, the Company attaches importance to ensuring their independence. Nikon appoints external director candidates from among those with a wealth of knowledge and experience as executives of other companies or with expertise and experience as specialists such as attorneys and certified public accountants, and who are qualified to take part in the management supervision function from a fair and objective standpoint independent of management.

Reasons for Appointment

Reasons for Appointment of External Director, except Audit and Supervisory Committee Members

Name Reasons for Appointment
Akio Negishi Akio Negishi serves as President, Representative Executive Officer of Meiji Yasuda Life Insurance Company, and possesses many years of management experience and exceptional knowledge, and we believe that he will be able to contribute to our management overall from a big-picture perspective.
Shiro Hiruta Shiro Hiruta served as Representative Director of Asahi Kasei Corporation and other important positions, and possesses long years of management experience and outstanding insight, and we believe that he will be able to contribute to the Company’s overall management from a big-picture perspective. He also meets the independence criteria set by the Company, and we believe that he will be able to serve in a management supervisory function from an independent, fair and objective position as External Director.

Reasons for Appointment of External Directors who are Audit and Supervisory Committee Members

Name Reasons for Appointment
Haruya Uehara Haruya Uehara has a career as Representative Director of Mitsubishi UFJ Trust and Banking Corporation and possesses long years of management experience and outstanding insight, and we believe that he will be able to contribute to securing the soundness and appropriateness of the management, as well as to increasing transparency.
Hiroshi Hataguchi Hiroshi Hataguchi has expertise and experience concerning compliance, etc. as an attorney at law, and we believe that he will be able to contribute to securing the soundness and appropriateness of the management, as well as to increasing transparency.
Kunio Ishihara Kunio Ishihara has a career as Representative Director of Tokio Marine & Nichido Fire Insurance Co., Ltd., etc. and possesses long years of management experience and outstanding insight, and we believe that he will be able to contribute to securing the soundness and appropriateness of the management, as well as to increasing transparency.

Attendance at Meetings of the Board of Directors, and Audit and Supervisory Committee (Fiscal year ended March 31, 2019)

Name Category Board of Directors Audit and Supervisory Committee
Akio Negishi Director 14 of 14 -
Haruya Uehara Director
(Audit and Supervisory Committee member)
13 of 14 10 of 10
Hiroshi Hataguchi Director
(Audit and Supervisory Committee member)
14 of 14 10 of 10
Kunio Ishihara Director
(Audit and Supervisory Committee member)
13 of 14 8 of 10

Evaluation of the Board of Directors’ Effectiveness

Nikon asks a third-party organization to analyze and evaluate the effectiveness of its Board of Directors in order to further improve its functions.
The efforts to address issues identified through the previous evaluation (for the fiscal year ended March 31, 2018) as well as the issues identified in this evaluation (for the fiscal year ended March 31, 2019) and the future responses are outlined below.

Evaluation Method
  • A third-party organization conducted a survey and individual interviews of all directors on general matters related to the Board of Directors, its composition, prior preparations, and details of deliberations, among others, to evaluate Board effectiveness and identify issues.
  • Based on the evaluation results, discussions were held at a meeting of the Board of Directors on how to improve its functions.
Evaluation Results

<Summary>

  • Certain progress has been observed with regard to “comprehensive restructuring and realization of growth strategies,” such as increasing the opportunities for discussion at meetings of the Board of Directors.
  • At the same time, there is room for improvement in efforts to address other issues identified in the fiscal year ended March 31, 2018, while the governance system needs to be further strengthened.

<Efforts to Address Issues Identified in Previous Evaluation>

  • Strengthening of secretariat function of the Board of Directors
    Although improvements in the materials distributed before meetings were observed, necessary to reinforce collaboration between the secretariat and the executive departments for fuller deliberations
  • Comprehensive restructuring and realization of growth strategies
    Progressed toward realization of growth strategies, including carrying out discussions from the early draft stages of the Medium-Term Management Plan released in May 2019
  • Enhancement of the Board of Directors and its complementary functions
    In addition to holding meetings attended by external directors and representative directors and setting up systems for receiving appropriate advice, engaged in repeated considerations aimed at establishing a voluntary nominating committee (Nominating Committee established in May 2019)
Main Issues Identified in This Evaluation and Future Response
  • Initiate governance reforms
    Establishment of Nominating Committee in May 2019 and commencement of activities
  • Strengthen supervisory functions of independent external directors
    Further strengthening of the supervisory function of the Board of Directors, including review of composition of independent external directors
  • Strengthen secretariat function of the Board of Directors
    Provision of support aimed at enhancement of deliberations of the Board of Directors through stronger collaboration between the secretariat and executive departments

Taking into account the issues raised by this evaluation, Nikon plans to continue implementing measures to further enhance Board effectiveness going forward.

Compensation of Directors and Officers

Compensation for Directors (Fiscal year ended March 31, 2019)

Category Fixed compensation Performance-based compensation Stock compensation Total
Fixed monthly compensation Bonuses Subscription rights to shares granted as stock related compensation
Number of persons Amount of compen-
sation
(million yen)
Number of persons Amount of compen-
sation
(million yen)
Number of persons Amount of compen-
sation
(million yen)
Number of persons Amount of compen-
sation
(million yen)
Directors other than those who are Audit and Supervisory Committee members (of whom, external directors) 6
(1)
253
(13)
5
(-)
133
(-)
5
(-)
85
(-)
6
(1)
472
(13)
Directors who are Audit and Supervisory Committee members (of whom, external directors) 6
(3)
93
(40)
- - - - 6
(3)
93
(40)
Total 12 346 5 133 5 85 12 564

Compensation System

Basic Policies on Compensation Executive compensation will be determined to satisfy the following basic criteria.
  • Executive compensation should motivate executives 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.
Compensation System and Performance-based Structure a)The compensation system for executive directors and officers is comprised of the following items. The distribution ratio for compensation is determined by changing the proportion of performance-based compensation and stock compensation to fixed compensation according to position and duties.

<Fixed compensation>

  • Fixed monthly compensation
    This monetary compensation is not based on performance.

<Performance-based compensation>

  • Bonuses
    This monetary compensation is based on the degree of accomplishment and qualitative assessment of the capital efficiency and profitability of the Group as a whole and departments in charge on a single-year basis, and is determined within the range of 0% to 200% of the standard payment.
  • Performance-based stock remuneration
    Stock compensation is determined within the range of 0% to 150% in accordance with achievement of the Company’s overall capital efficiency and other financial performance indicators, in the final fiscal year of the Medium-Term Management Plan to be resolved every three fiscal years, with the aims of sharing value with shareholders and enhancing willingness and morale for improving medium- to long-term performance.

<Stock compensation>

  • Subscription rights to shares granted as stock-related compensation
    Subscription rights to shares are granted with the aims of sharing value with shareholders and enhancing willingness and morale for improving long-term performance, within the range not exceeding 5% of the share dilution ratio.
b)The compensation system for non-executive directors consists only of fixed compensation (“fixed monthly compensation.”)
Method for Determining Compensation Level and Amount The Compensation Committee discusses and advises on related systems in order to determine the level and system appropriate to the duties on account of 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 also considers the formulation and establishment of policy for compensation for directors and officers and deliberates on the specific method of calculation. Based on the results of those deliberations, the compensation for directors other than members of the Audit and Supervisory Committee is determined by resolution of the Board of Directors, and the compensation for directors who are members of the Audit and Supervisory Committee is determined by consultation with the directors who are members of the Audit and Supervisory Committee.

Number of Women and Non-Japanese Appointed as Nikon Group Directors / Officers and Corporate Auditors (As of March 31, 2019)

Category Women Non-Japanese
Nikon Corporation 0 0
Group companies* 3 28