Investor Relations

Corporate Governance

1. Basic Concept of Corporate Governance

The Nippon Kayaku Group recognizes that disclosing information to our shareholders and investors in a timely and fair manner, and ensuring the transparency of our management by reinforcing our check functions, are issues of great importance to realize the KAYAKU spirit, the corporate vision.
 We believe that our management functions more effectively owing to the implementation of a corporate governance system that consists of consensus-based decision-making by the Board of Directors and an Audit & Supervisory Board Members system. We will also work to expand and reinforce corporate governance as a key management task in the future.

Corporate Governance Report

2. Corporate Governance System

Nippon Kayaku employs an audit & supervisory board members system. We have also introduced an “executive director system” to ensure our ability to quickly address changes in the business environment and carry out flexible operations. With this approach, we clearly separated our management “decision-making and supervisory functions” from our “operational execution functions,” strengthening each of them to ensure correct decision-making and rapid operations.

Board of Directors (convenes monthly)

To rapidly carry out management decision-making, we set the maximum number of Directors at 10, and are working to further strengthen our supervisory functions so that all decisions regarding important issues in our operations are made based on the rules and policies of the Board of Directors, in accordance with laws and the articles of incorporation.

Management Meeting (convenes weekly)

The Management Meeting is comprised of executive directors with official posts. This meeting discusses and receives reports concerning important items related to management and operations. After full discussion by the Management Meeting members, these items are decided by the company president, who is the meeting chairman.

Executive Directors Meeting (convenes quarterly)

This meeting is chaired by the company president, and is composed of the Executive Directors (up to 25) who are in charge of the execution of operations, and who are appointed by the Board of Directors. At the meeting, Executive Directors report on the status of operational execution that are entrusted to them by the Board of Directors and the company president, as well as on other necessary items.

Management Strategy Meeting (convenes biannually)

This meeting is attended by executive directors, general managers of headquarter divisions, plant general managers, research laboratory general managers, Audit & Supervisory Board Members, representatives of consolidated subsidiaries, and others. The Nippon Kayaku Group business policies and business strategies decided by the Board of Directors, as well as other important items related to general management are communicated at this meeting to management personnel to ensure that everyone in the Group is well informed.

Audit & Supervisory Board (convenes monthly)

This board is composed of five Audit & Supervisory Board Members, of which three are from outside the Company. Based on its rules and policies, the Audit & Supervisory Board monitors and supervises the execution of duties of the Directors from an independent perspective.

Committees

Nippon Kayaku has established the following committees as part of the corporate governance system. Meetings are convened regularly and as necessary, and these committees maintain internal controls.

1. CSR Management Committee (convenes biannually)

This committee is comprised of executive directors with official posts, and determines the policy on CSR activities and the midterm CSR Action Plan, based on our CSR principles and on our corporate vision of the KAYAKU spirit of “continuously providing society with the best products through ceaseless progress and the combined forces of our consciences.”

2. Ethics Committee (convenes biannually)

The committee chair is an executive director with an official post who has been appointed by the president. The committee consists of representatives from each corporate headquarters business group and division. The committee determines the policy and specific measures on compliance with the Nippon Kayaku Group Charter of Conduct and Code of Conduct. It consults on incidents, responds to incidents as they occur, and considers and determines what steps to take to prevent recurrence.

3. Crisis Management Committee (convenes biannually)

The committee chair is an executive director with an official post who has been appointed by the president. The committee consists of representatives from each corporate headquarters business group and division. This committee configures and manages the crisis management system to prevent risks that could inflict major damage on the corporate management and business activities of the Nippon Kayaku Group from materializing, and to respond to an emergency when one occurs and work to recover from the damage after the emergency has ended.

4. Disclosure Committee

This committee consists of executive directors with official posts, and the general managers of the Corporate Planning, Public Relations & Investor Relations, Legal & General Affairs, Finance & Accounting, and Internal Control Management divisions. The committee determines the preparation policies and examines the content of business reports, quarterly reports, summary financial statements, internal control system reports, and other reports set forth in the Companies Act, the Financial Instruments & Exchange Act, the rules for listing on stock exchanges, and other laws and regulations.

* In addition, we established rules and policies for managerial authority, and have clarified the Company business organization, business duties, and the authority and responsibilities of management and supervisory positions. We constructed a system of responsibility, and are working to carry out systematic and efficient business operations.

3. Audits

Internal Audit

Nippon Kayaku has established the Audit Division as an organization that reports directly to the president for purposes that include preventing improper acts and errors, improving business practices, and protecting assets. The Audit Division implements business audits of all divisions, including overseas group companies, in accordance with the annual auditing plans approved at the Management Meeting. The Audit Division immediately reports the outcome of its audits to the Representative Directors and Audit & Supervisory Board Members.

Audit & Supervisory Board Members’ Audits

The Audit & Supervisory Board of Nippon Kayaku consists of five Audit & Supervisory Board Members (2 of which are full-time members and 3 of which are outside members). Based on the audit policy, audit plan, and distribution of audit operations decided by the Audit & Supervisory Board, the Audit & Supervisory Board Members exercise oversight by attending meetings of the Board of Directors and other important meetings, reading important documents, conducting audits of the status of operational execution, and taking other steps to monitor and supervise the performance of directors’ duties from an independent standpoint.

Financial Audits

Nippon Kayaku has concluded an audit agreement with Ernst & Young ShinNihon LLC, and submits to financial audits in accordance with corporate law and the Financial Instruments and Exchange Act.

Reciprocal Cooperation on Internal Audits, Audit & Supervisory

Board Members’ Audits, and Financial Audits Audit & Supervisory Board Members receive the audit plans formulated by the financial auditors at the beginning of the period; work to ensure communication of intent with the financial auditors by exchanging opinions during the period, being present for inventory at the end of the period, and other means; and receive reports on and explanations of quarterly reviews and the results of the audit of financial statements at the end of the fiscal year from the financial auditors.
 Audit & Supervisory Board Members receive the audit reports produced for each audit performed by the Audit Division, which is the internal audit division, based on the audit plans for the fiscal year. They also gather information and work to ensure communication of intent through the regular exchange of information with the full-time auditor and the Auditing Division once every three months.

4. Outside Directors and Outside Audit & Supervisory Board Members

Nippon Kayaku has established independence standards for electing Outside Directors and Outside Audit & Supervisory Board Members, and determines the independence of Directors and Audit & Supervisory Board Members.

Outside Directors

Nippon Kayaku elects two Outside Directors to improve management transparency and reinforce the corporate governance system. Both are reported to the Tokyo Stock Exchange as Independent Directors.
 Outside Directors attend Board of Directors Meetings and other important meetings and provide opinions when appropriate. They also supervise our company’s management.

Outside Audit & Supervisory Board Members

Nippon Kayaku elects five Audit & Supervisory Board Members in total, three of which are Outside Audit & Supervisory Board Members. One of the Outside Audit & Supervisory Board Members is reported to the Tokyo Stock Exchange as an Independent Officer.
 Outside Audit & Supervisory Board Members attend Board of Directors Meetings and other important meetings and provide opinions when appropriate. They also attend Management Strategy Meetings (convened biannually) to develop a grasp of and understand the overall state of management, including the management policy of the Company. The full-time Audit and Supervisory Board Members also give summary explanations of the content of the Management Meeting, the results from onsite audits, and other matters to Outside Audit & Supervisory Board Members as needed.
 Each of the Audit & Supervisory Board Members conduct audits from an independent standpoint through the above actions, and we have determined the system to function sufficiently in terms of the management oversight functions.

5. Remuneration to Directors and Audit & Supervisory Board Members

Remuneration to Directors

In addition to a monthly fixed remuneration, remuneration also includes remuneration based on consolidated earnings performance. The amount is determined by the Board of Directors within the scope of the total compensation approved at the Annual Shareholders Meeting. We note that Outside Directors only receive a monthly fixed remuneration.

Remuneration to Audit & Supervisory Board Members

Given that Audit & Supervisory Board Members have the responsibility to monitor the execution of duties by Directors, they are only paid a monthly fixed remuneration. The amount of this remuneration is determined after discussions with Audit & Supervisory Board Members and must be within the scope of the total amount of remuneration approved by at the Annual Shareholders Meeting.

Remuneration to Directors, Audit & Supervisory Board Members, and Financial Auditors

6. Internal Control System

Nippon Kayaku is enacting basic policies in the Board of Directors to establish an “internal control system that will ensure the appropriate operations.” In accordance with these policies, we are putting systems in place, including the establishment of internal rules and necessary organizations.

7. Compliance

The Nippon Kayaku Group has positioned compliance as a top priority issue in our business activities, and has created the Nippon Kayaku Group Charter of Conduct and Code of Conduct. All officers and employees of the Nippon Kayaku Group comply with these.
 Regulations for the Ethics Committee have also been established. The Ethics Committee itself is in charge of creating policy related to observing laws, regulations, and internal rules. The committee also investigates and determines how violations to laws, regulations, and internal rules should be handled, and how to prevent violations from recurring. We established the Compliance Department in the Internal Control Management Division and charged it with the task of managing compliance. This department creates and implements compliance action plans and also operates the Ethics Committee.
 The Compliance Department continuously engages in activities designed to heighten awareness of and respect for compliance. These include conducting a Compliance Survey during Compliance Promotion Month in October of each year, and holding regular compliance training seminar.
 We have also enacted internal rules on whistleblowing for the Nippon Kayaku Group and have established contacts for reporting and consultation both internally and outside of the company. We strive to detect incidents that will lead to compliance violations and correct them quickly.

Compliance(CSR)

Nippon Kayaku Group Compliance Hotline

Nippon Kayaku Group Compliance Hotline

Nippon Kayaku Group Charter of Conduct and Code of Conduct

Nippon Kayaku enacted the “Charter of Conduct and Code of Conduct” in April 2000 and we have striven to be better corporate citizens based on the practical norms of society. The “Nippon Kayaku Group Charter of Conduct and Code of Conduct” were renewed in 2011 as “Roadmap” of the global group-based initiative for realizing the KAYAKU spirit, and we have made everyone in the entire group aware of these.
 All officers and employees in the Nippon Kayaku Group take personal responsibility for respecting the “Nippon Kayaku Group Charter of Conduct and Code of Conduct,” and use these as “Roadmap” on conduct to realize the KAYAKU spirit, foster an even more ethical and open corporate culture and organizational climate than at present, and strive for sound, high quality management.

Nippon Kayaku Group Charter of Conduct and Code of Conduct(Corporate Vision)

8. Risk Management

Nippon Kayaku has established the Crisis Management Committee to establish a crisis management system and respond to crises and formulate plans to prevent recurrence. Crisis Management Committee Rules, a Crisis Management Manual, a BCP Manual, and other documentation have been created, and we engage in comprehensive risk management to avoid the occurrence of risks, and to mitigate loss as much as possible when they arise.
 We established the Risk Management Department in the Internal Control Management Division. It operates the Risk Management Committee, ascertains company-wide risks that require crisis management, establishes departments responsible for each risk, and takes other steps to prevent and avoid individual risks from occurring. The Company also conducts regular education and training on risk management. This includes risk management education for all employees in the Nippon Kayaku Group, and annual BCP simulation drills in which the company president and all officers participate. The Audit Division also performs audits of risk management.

Corporate Governance, Risk Management(CSR)

9. Ensure the Reliability of Financial Reporting

We established the J-Sox Department in the Internal Control Management Division as the department in charge of establishing a system to ensure the reliability of Nippon Kayaku’s financial reporting and evaluate the operation of that system. We also regularly evaluate the management and operation of our system to ensure the reliability of our financial reporting. The results of these evaluations are reported to Representative Directors.

10. Basic Concept of Information Disclosure

Nippon Kayaku discloses information to shareholders, investors, and all other stakeholders in a timely and fair manner to earn the trust of all our stakeholders and to continue to be a company that is needed by society.
 The Company established the Disclosure Committee, which consists of Executive Directors with official posts and the General Managers of the Corporate Planning, Public Relations & Investor Relations, Legal & General Affairs, Finance & Accounting, and Internal Control Management divisions. The Disclosure Committee determines the policies on formulation and examines the content of business reports, quarterly reports, summary financial statements, internal control system reports, and other reports set forth in the Companies Act, the Financial Instruments & Exchange Act, the rules for listing on stock exchanges, and other laws and regulations. It also sets forth the Disclosure Policy and strives for fair and impartial disclosure of information through the Timely Disclosure Network (TDnet), the corporate website, and media organizations.

Communication with Shareholders and Investors

Nippon Kayaku promotes constructive dialog with shareholders and investors while also disclosing information to shareholders and investors in a timely and fair manner. We are aiming to achieve sustainable growth and increase the Company’s corporate value over the medium to long-term by doing so. Based on this thought process, we have appointed an officer in charge of IR as the chief person responsible for all dialog with shareholders and investors. The Public Relations & Investor Relations Division, which is the division in charge, communicates with the relevant internal divisions, and works to engage in dialog with shareholders and investors by holding regular briefings on financial results and other means.
 We also work diligently to manage information so that it is not provided only to some people when engaging in dialog with shareholders and investors, and report the opinions and comments gleaned from such dialog to executive management on a regular basis.

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