Last update: March 13, 2024

Basic Initiative Policy

In order to carry out appropriate corporate management that meets the expectations of all stakeholders, the recognizes the enhancement of corporate governance as an important issue and is committed to improving management transparency and promoting prompt management decision-making and management efficiency in response to changes in the business environment.

Reasons for non-compliance with the principles of the Corporate Governance Code

[Supplementary Principle 1.2.4]
The ratio of institutional investors and overseas investors to the shareholders of Nagoya Electric Works Co., Ltd. (hereinafter, the Company) is relatively low at present. However, the Company will continue to consider the use of electronic voting platforms and the translation of convocation notices into English based on the opinions and requests of shareholders and investors as well as various procedures to take and costs.

[Principle 1.3 Basic Strategy for Capital Policy]
The Company will continue to consider explaing the basic capital policy.

[Principle 1.4 Cross-Shareholdings]
The Company will continue to hold its cross-shareholding when the strategy of which it holds the shares is consistent with the Company’s strategy (capital alliance, etc.). However, the Company will dispose of or reduce the number of shares it holds if they are considered to be of little significance to hold, based on its basic policy to dispose or reduce the number of shares it holds as much as possible after comprehensively considering the impact on the market and deciding on the method of sale in detail.

The Company will continue to consider disclosing the details of verification of individual shareholdings at Board of Directors meetings, as well as to set and disclose voting criteria.

[Supplementary Principle 2.4.1]
The Company believes that in order for the Company to respond to changes in the market environment and needs and to grow over the mid- to long- term, it is important to respect the individuality of each employee and to utilize the experience and expertise of each to come up with new ideas. To achieve this goal, the Company has set a target of increasing the ratio of female managers to 3.5% or more by FY2030 (1.2% in FY2022), and is promoting the systematic development of female employees into management positions and conducting in-house training programs. Although the Company has not set measurable targets for the promotion of foreign nationals and mid-career hires to management positions, the Company has a system in place that allows them to receive fair evaluation and career advancement regardless of their attributes.

In human resource development, the Company believes it is important to foster a corporate culture that prevents organizational inertia and to create an environment in which young employees can demonstrate their abilities. The Company will continue to provide a wide range of external training opportunities for young employees and managers alike, and continue to create an environment that facilitates access to external knowledge and human networks, thereby creating an environment conducive to innovation creation.

[Principle 3.1 Full Disclosure]
(iv) The Company will consider for disclosure its policies and procedures for the Board of Directors' selection and dismissal of senior management and nomination of candidates for director positions.

[Supplementary Principle 3.1.2]
The Company has its website in English. The Company will continue to consider the introduction of the notice of convocation and other related materials in English based on the composition of the Company's shareholders.

[Supplementary Principle 4.1.3]
The company has not established selection criteria for nominating a successor to the position of the President. However, all directors including outside directors and directors who are Audit and Supervisory Committee members are to be consulted while the current President is recommended as the basis for the nomination.

In addition, in order to develop human resources to become successors to senior management who will contribute to the enhancement of the Company’s value over the mid- to long-term, the Company has them attend external training programs as appropriate to improve their abilities by accumulating knowledge and experience, educating and guiding subordinates, and is working to develop human resources to become successors.

The Company will continue to consider the Board of Directors' proactive involvement in the development and operation of the President's succession plan and appropriate oversight.

[Supplementary Principle 4.2.2]
The Board of Directors of the Company has concluded that the most effective way to contribute to solving social issues is to transform the Company itself into a comprehensive equipment company and lead the industry, and that the source to strengthen and ensure this is to provide new products and services in a wide range of fields. Based on this, the Company has identified social issues to be solved and a policy for solving them.

Sustainability activities are overseen through regular reports from the Sustainability Committee, which is chaired by the director in charge of SDGs promotion.

[Supplementary Principle 4.3.2]
The Company does not set criteria for the selection of the President. However, the Board of Directors, including outside directors and directors who are Audit and Supervisory Committee member, shall discuss the matter thoroughly and nominate a person with outstanding character, insight and ability based on his/her business background. The Company will continue to consider appointment of the President in accordance with more objective, timely and transparent procedures.

[Supplementary Principle 4.3.3]
The Company does not set criteria for the dismissal of the President. However, the Board of Directors, including outside directors and directors who are Audit and Supervisory Committee members, shall resolve such dismissal after thorough discussions if it is deemed appropriate due to significant damage to the corporate value of the Company, such as violation of laws and regulations or the articles of incorporation. The Company will continue to consider dismissal of the President in accordance with more objective, timely and transparent procedures.

[Supplementary Principle 4.10.1]
The Company has not established a nomination and remuneration committee at this time. However, the Company makes decisions on the nomination and remuneration of directors by seeking opinions and advice of the outside director. The company recognizes that this contributes to the independence and objectivity of the functioning of the Board of Directors. The Company will continue to consider this issue in light of the purpose of the Corporate Governance Code.

[Supplementary Principle 4.11.1]
The Company's Board of Directors consists of no more than eight directors (excluding directors who are Audit and Supervisory Committee members) and no more than four Audit and Supervisory Committee members.

The directors include executive directors who are well versed in their respective business fields, and outside directors with extensive experience in corporate management and a high level of expertise, such as certified public accountants and lawyers. In the process of selection, the balance of the entire Board of Directors is taken into consideration, while giving due consideration to the knowledge and experience of outside directors who are in a supervisory position, so that the Company can achieve sound and sustainable growth while improving the competitiveness of its business.

A skills matrix is included in the notice of convocation to disclose the combination of skills and other attributes possessed by directors.
The Company will continue to consider the disclosure of policies and procedures for the appointment of directors.

[Principle 5.2 Establishing and Disclosing Business Strategies and Business Plans]
The Company has established a mid-term management plan, but has not set specific numerical targets for capital efficiency, etc. at this time. The Company will continue to consider setting the target figures. The Company will also continue to consider the easy-to-understand explanations for shareholders regarding its business portfolio and allocation of management resources.

[Supplementary Principle 5.2.1]
The Company does not currently determine a basic policy regarding its business portfolio, but will continue to consider to open its policy and status of business portfolio review in an easy-to-understand manner.

Disclosures based on the principles of the Corporate Governance Code

[Principle 1.7 Related Party Transactions]
The Company requires the Board of Directors meetings to deliberate and resolve transactions with directors, etc. that conflict with the interests of the Company. Based on such procedures, the Company has put in place a system to monitor such transactions to ensure that they do not raise concerns that may harm the common interests of the Company and shareholders.

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]
The Company has adopted a defined contribution pension plan and a defined benefit corporate pension plan. The employees manage the defined contribution pension plan by themselves. For defined benefit corporate pension plans, the Company has assigned appropriate personnel for its management, and continues to develop human resources with appropriate qualifications for operations by attending training sessions to acquire knowledge and to enhance expertise.

[Principle 3.1 Full Disclosure]
(i) The Company discloses its management philosophy and management strategies on the website and in its annual securities reports.
(ii) The Company discloses its basic stance and basic policy on corporate governance in the Corporate Governance Report and in its annual securities reports, etc.
(iii) The policies and procedures of the Board of Directors meetings in determining the remuneration of senior management and directors are disclosed in the annual securities report.
(v) The Company discloses explanations of the individual selection and dismissal of senior management and nomination of directors by the Board of Directors in accordance with (iv) above in the Reference Document for the General Meeting of Shareholders.

[Principle 3.1.3]
The products and services the Company provides have a high affinity for solving social issues, and the Company recognizes that addressing climate change is a high-priority issue. The Company has set targets for greenhouse gas (GHG) emissions in FY2030 and FY2050 as long-term indicators.

Regarding human capital, the Company has positioned the advancement of women and the inclusion of diverse work styles as one of its important themes, and is working to improve career development and the working environment by setting targets for the following indicators by FY2030.

 Percentage of female managers ... 3.5% or more
 Percentage of male employees taking childcare leave ... 100%
 Percentage of employees leaving within one year after taking leave ... 0%

Regarding intellectual property, the Company is actively engaged in research and development to establish new technologies and methods that lead to solutions to social issues, and the Company discloses the results of these efforts through research papers and conference presentations.
The details of these activities are disclosed in the Company's annual securities report and on its website.

[Supplementary Principle 4.1.1]
Any matters stipulated by laws and regulations, described in the articles of incorporation and the regulations of the Board of Directors are resolved by The Board of Directors meetings, while other key issues are decided by the Management Meetings to ensure the systematic and efficient management of business operations.

[Principle 4.9 Independence Standards and Qualification for Independent Directors]
The Company has adopted the independence standards set forth by the Stock Exchange in selecting independent outside directors. In making the selection, the Company has made a judgment based on the premise that sufficient independence can be secured to enable the outside directors to perform their duties as outside directors independent of the Company's management, based on their career and relationship with the Company.

[Supplementary Principle 4.11.2]
The status of concurrent positions held by the outside directors at other companies is disclosed annually through the notice of convocation of the General Meeting of Shareholders, the annual securities report, and the Corporate Governance Report.

Managing directors do not hold concurrent posts as executives at other listed companies and are able to concentrate on their duties as directors.

The full-time Director who is Audit and Supervisory Committee member does not hold concurrent post as executive at other companies and is able to concentrate on his duty as a corporate auditor at all times.

[Supplementary Principle 4.11.3]
The Company conducted questionnaires on the evaluation of the effectiveness of the Board of Directors for all directors, and the results were analyzed and evaluated to be generally appropriate. In pursuing the improvement of the effectiveness of the Board of Directors as a whole, the Company has realized the early distribution of Board of Directors meetings materials. The Company will continue to conduct periodic evaluations of the effectiveness of the Board of Directors in order to further enhance its effectiveness and to make continuous improvements.

[Supplementary Principle 4.14.2]
The Company provides trainings for directors, with particular emphasis on compliance as opportunities to acquire necessary knowledge and to understand their roles and responsibilities.

For the purpose of deepening the understanding of outside directors regarding the Company Group's management philosophy, management policies, business activities, organization, etc., the Company provides them with information on these matters at the time of inauguration and continuously thereafter. In addition, the Company provides opportunities, mediates, and supports expenses necessary for directors and corporate auditors, including outside directors, to acquire knowledge of business, finance, organization, and other matters necessary to fulfill their roles and responsibilities.

[Principle 5.1 Policy on Constructive Dialogue with Shareholders]
The Company has designated the Management Administration Division and the Corporate Development Office as the divisions in charge of investor relations. The executives, Corporate Administration Division and the Corporate Development Office respond to requests for dialogue from shareholders and investors as necessary.

In order to promote dialogue with shareholders and other stakeholders, the executives in charge of the IR department supervises dialogue with shareholders and other stakeholders, and collaborates with other departments, including related departments that assist in dialogue, to share information as appropriate.

In order to promote constructive dialogue with shareholders, IR activities such as briefings by directors and financial results briefings shall be conducted as appropriate, and opinions and concerns from shareholders shall be shared and fed back to directors, management and related departments through reports at meetings or distribution of reports, as necessary.

In addition, when engaging in dialogue with shareholders, etc., the Company will work to prevent the leakage of insider information and to manage information.