About Directors, Independent Directors, and the Board of Directors
The Company has established a corporate governance system suited to the businesses of the NIPPON STEEL Group in order to achieve the sound and sustainable growth of the NIPPON STEEL Group and increase its corporate value over the medium- to long-term, in response to the delegation of responsibilities by and trust of all stakeholders, including its shareholders and business partners.
- Basic Structure of Corporate Governance
- Corporate Governance Relationship Diagram
- Policy on Strategic Shareholdings
- About Directors, Independent Directors, and the Board of Directors
Corporate Governance Report
Board Policies and Procedures in Determining the Compensation of Directors
1.Content of policies
The policies regarding the decisions on the amount of compensation, etc. for Directors of NIPPON STEEL are as detailed in the following (a) and (b) below.
NIPPON STEEL abolished its retirement benefits for Directors in 2006. Furthermore, the policies relating to their bonuses were removed from the "Policies regarding the Decisions on the Amount of Compensation" for Directors, etc. in 2013.
(a) Directors (excluding Directors who are Audit & Supervisory Committee Members)
a) Basic policy
The amount of compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members) consists solely of monthly compensation, set based on an appropriate composition of fixed compensation and performance-linked compensation. NIPPON STEEL sets the base amount of fixed and performance-linked compensation (i.e., the amount of compensation when the Company's consolidated performance reaches a certain level) for each position in consideration of compensation level commensurate with the skills and responsibilities required. The amount of performance-linked compensation is changed within a certain range based on the Company's consolidated performance. The Company then determines the amount of monthly compensation for each Director is determined within the limited amount approved by the General Meeting of Shareholders.
b) Policy on performance-linked compensation
In accordance with "a) Basic policy" above, as indicators for performance-linked compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members and Outside Directors), the Company uses consolidated underwriting profit/loss based on actual performance (which is consolidated profit/loss excluding inventory valuation impact and other items, and recognized as representing the Group's actual profitability) in order to set an appropriate compensation commensurate with performance for the corresponding term, while taking into account other factors including the revenue targets in the medium- to long-term management plan. The ratio of fixed compensation to performance-linked compensation at the base amount (when consolidated underlying profit/loss reaches 600.0 billion yen) is set at 50% to 50% for Representative Directors. and approximately 70% to 30% for Directors in other positions (excluding Directors who are Audit & Supervisory Committee Members and Outside Directors), to provide appropriate incentives according to their position and performance.
Compensation for Outside Directors (excluding Directors who are Audit & Supervisory Committee Members) consists solely of fixed compensation.
c) Method to determine compensation for each individual
The specific amount of monthly compensation for each Director (excluding Directors who are Audit & Supervisory Committee Members) is determined by the Board of Directors after deliberation by the Nomination and Compensation Advisory Committee consisting of the Chairman, the President, and three (3) or more Outside Directors appointed by the President who serves as the chairman of the committee.
(b) Directors who are Audit & Supervisory Committee Members
Compensation for Directors who are Audit & Supervisory Committee Members consists solely of fixed monthly compensation. The Company determines the amount of monthly compensation for each Director within the limited amount approved by the General Meeting of Shareholders by considering the duties of the Director's position and whether the Director is full-time or part-time.
2.Methods of determining the policies
The policies described in 1 above for Directors (excluding Directors who are Audit & Supervisory Committee Members) are determined by resolution of the Board of Directors, after the deliberation of the Nomination and Compensation Advisory Committee, while for Directors who are Audit & Supervisory Committee Members, the policies described in 1. Above are determined through discussion by Directors who are Audit & Supervisory Committee Members.
The Nomination and Compensation Advisory Committee conducts discussions on a wide range of topics including the system of Directors' compensation and the appropriateness of the compensation levels by position, taking into account the survey results of directors' compensation levels of other companies obtained from third-party research organizations.
Independence Standards of Independent Directors
NIPPON STEEL decides the independence of Outside Directors in accordance with the independence standards set by the financial instruments exchanges in Japan (e.g. Tokyo Stock Exchange), considering each individual's personal relationship, capital relationship, business relationship, and other interests with NIPPON STEEL.
Outside Director's Relationship with NIPPON STEEL
| Name | Reasons of Appointment |
|---|---|
| Tetsuro Tomita | 【Reasons for Appointment as an Outside Director】 NIPPON STEEL believes that Mr. Tomita is well-qualified for the position by his deep insight and ample experience in corporate management. 【Reasons for Designation as an Independent Director】 Until March 2018, Mr. Tomita engaged in the execution of business of East Japan Railway Company, which has a business relationship with NIPPON STEEL for transactions of steel and other products/services. However, he currently does not engage in the execution of its business. The amount of transactions with the said company accounts for less than 1% of the consolidated revenue of NIPPON STEEL, so that the said company is not a specified associated service provider of NIPPON STEEL. He does not conflict with the independence standards as set by each financial instruments exchange on which NIPPON STEEL is listed (e.g. Tokyo Stock Exchange), and does not have any special interests with NIPPON STEEL. Because NIPPON STEEL believes that there is no possibility of a conflict of interest between him and the general shareholders as stated above, NIPPON STEEL has designated him as an Independent Director. |
| Kuniko Urano | 【Reasons for Appointment as an Outside Director】 NIPPON STEEL believes that Ms. Urano is well-qualified for the position by her deep insight and ample experience in corporate management. 【Reasons for Designation as an Independent Director】 Until March 2021, Ms. Urano engaged in execution of business of Komatsu Ltd., which has a business relationship with NIPPON STEEL for transactions of steel and other products/services. However, she currently does not engage in the execution of its business. The amount of transactions with the said company accounts for less than 1% of the consolidated revenue of NIPPON STEEL, so that the said company is not a specified associated service provider of NIPPON STEEL. She does not conflict with the independence standards as set by each financial instruments exchange on which NIPPON STEEL is listed (e.g. Tokyo Stock Exchange), and does not have any special interests with NIPPON STEEL. Because NIPPON STEEL believes that there is no possibility of a conflict of interest between her and the general shareholders as stated above, NIPPON STEEL has designated her as an Independent Director. |
| Kenji Hiramatsu | 【Reasons for Appointment as an Outside Director】 NIPPON STEEL believes that Mr. Hiramatsu is well-qualified for the position by his deep insight regarding international affairs, economy, culture, etc., that he accumulated at the Ministry of Foreign Affairs as well as ample experience as Ambassador Extraordinary and Plenipotentiary and other important positions. 【Reasons for Designation as an Independent Director】 He does not conflict with either the independence standards or attribute information as set by each financial instruments exchange on which NIPPON STEEL is listed (e.g. the Tokyo Stock Exchange), and does not have any special interests in NIPPON STEEL. Because NIPPON STEEL believes that there is no possibility of a conflict of interest between him and the general shareholders as stated above, NIPPON STEEL has designated him as an Independent Director. |
| Aiko Sekine | 【Reasons for Appointment as an Outside Director】 NIPPON STEEL believes that Ms. Sekine is well-qualified for the position by reason of her deep insight as a certified public accountant possessing deep familiarity with corporate accounting, and her ample experience as a Partner of an audit corporation and Chairman and President of Japanese Institute of Certified Public Accountants and other important positions. 【Reasons for Designation as an Independent Director】 Ms. Sekine is a professor at Waseda University, Faculty of Commerce, and is engaged in the execution of business of the university. The Company conducts joint research with Waseda University, Faculty of Science and Engineering, and pays it, among others, contract research expenses, which account for less than 1% of the consolidated selling, general and administrative expenses of the Company. Therefore, the university is not a specified associated service provider of the Company. She does not conflict with the independence standards as set by each financial instruments exchange on which NIPPON STEEL is listed (e.g. the Tokyo Stock Exchange), and does not have any special interests in NIPPON STEEL. Because NIPPON STEEL believes that there is no possibility of a conflict of interest between her and the general shareholders as stated above, NIPPON STEEL has designated her as an Independent Director. |
| Sumiko Takeuchi | 【Reasons for Appointment as an Outside Director】 NIPPON STEEL believes that Ms. Takeuchi is well-qualified for the position by reason of the deep insight she has cultivated as a researcher in the fields of environment and energy at an NPO and universities, as well as her ample experience in corporate management. 【Reasons for Designation as an Independent Director】 She does not conflict with either the independence standards or attribute information as set by each financial instruments exchange on which NIPPON STEEL is listed (e.g. the Tokyo Stock Exchange), and does not have any special interests in NIPPON STEEL. Because NIPPON STEEL believes that there is no possibility of a conflict of interest between her and the general shareholders as stated above, NIPPON STEEL has designated her as an Independent Director. |
The Evaluation of the Effectiveness of the Board of Directors
At NIPPON STEEL, the office of the Board of Directors (General Administration Division) conducts quantitative analysis through comparison of the number of the agenda items submitted for deliberation or reported to the Board of Directors and the number of hours of deliberation, as well as the attendance rate and the number of opinions expressed by each of Directors at the meetings of the Board of Directors with these of prior years; and the Board of Directors, taking into account self-assessments and opinions of each member of the Board of Directors on the operation of the Board of Directors obtained through individual interviews with them, annually analyzes and evaluates the effectiveness of the entire Board of Directors and utilizes such analysis and evaluation to improve the future operation and administration of the Board of Directors. NIPPON STEEL decided to take the opportunity of the transition to a Company with an Audit & Supervisory Committee in fiscal year 2020 to establish the Rules of the Board of Directors, enhance discussions by the Board of Directors on matters such as the formulation of management policies and strategies, strengthen the supervisory function of the Board of Directors over management, and devise and improve operation of meetings so as to contribute to these efforts.
The Board of Directors, at its meeting held in June 2024, analyzed and evaluated the effectiveness of the Board of Directors for fiscal year 2023, confirming that the Board of Directors functions effectively because all of the matters submitted for deliberation or reported to the Board of Directors pursuant to the Companies Act or NIPPON STEEL's rules were resolved or confirmed, after discussion among Inside and Outside Directors, from the point of view of improvement of NIPPON STEEL's corporate value in the mid- to long-term or other various perspectives, with relevant information being provided in advance. In addition, from the standpoint of further enhancing the effectiveness of the Board of Directors, based on the opinions voiced by each Director in the effectiveness evaluation in fiscal year 2023, NIPPON STEEL will continue to improve the format and contents of materials for Board of Directors meetings, as well as the means of providing them, and enrich and revitalize deliberations by focusing on the subjects to be deliberated and reviewing the operation of the Board of Directors. In addition, NIPPON STEEL will continue to share a wide range of information such as on various environmental changes surrounding management, important long-term themes such as securing talents and supporting their participation and career advancement, matters related to risk management, and exchange opinions by actively using forums other than Board of Directors meetings.