CORPORATE
GOVERNANCE
POLICY

Part 1: General Provisions
1. Objectives of the Basic Policy on Corporate Governance
The Noritsu Koki Group (the Group) has formulated this Basic Policy on Corporate Governance, recognizing that it needs to take a proactive approach to developing its business in a disciplined manner to support the Group’s sustained growth and increase corporate value.
2. Basic Approach to Corporate Governance
The Group uses corporate governance to fulfill its corporate social responsibility, support rapid and appropriate decision-making and strengthen competitiveness in order to increase corporate value and retain the trust of shareholders and customers.
Part 2: Management Policy
1. Corporate Philosophy and Vision
The Group conducts its activities in accordance with the Corporate Philosophy set out below in order to provide value to society as a whole, support the Group’s sustained growth and increase corporate value.
<Corporate Philosophy> Provide products and services that are trusted and supported by customers
The Group has formulated a Vision to clearly communicate its stance to internal and external stakeholders with respect to business activities based on the Corporate Philosophy.
2. Management Plan
The Group formulates management plans with specific targets to realize its Corporate Philosophy and Vision. Progress toward the targets is regularly assessed to drive improvements and respond to changes in the business environment.
3. Capital Policy
[ 1 ] Basic Policy
To increase corporate value, the Group procures capital funding in response to changes in the business environment or in line with the Group’s growth stage. When procuring funds, the Group carefully considers avoiding dilution and other actions that undermine shareholder value.
[ 2 ] Shareholder Returns
  • ①Dividends
    The Group’s basic policy is to pay stable, continuous dividends while taking into account a range of factors when determining dividend payments, including business performance for the fiscal year and future funding needs.
  • ②Share Buybacks
    The Group takes into account a range of factors when repurchasing shares, including future funding needs to support sustained growth or investment deals, the share price and other market valuations.
[ 3 ] Reinvestment
Retained earnings are appropriated for R&D investment, capital investment, investment in M&A and other activities to drive sustained growth in order to further increase earnings. The Group takes into account capital cost when selecting investment deals funded by retained earnings.
Part 3: Relationships with Stakeholders
1. Stakeholder Engagement
The Group believes that information provided by customers, business partners, local communities, government bodies, shareholders, employees and other stakeholders can contribute to the Group’s development. As such, the Group works to reflect that information in business decisions to support sustained growth and increase corporate value.
2. Shareholder Engagement
[ 1 ] The General Meeting of Shareholders
The Group takes the following steps to ensure shareholders can appropriately exercise voting rights.
・Where possible, the General Meeting of Shareholders is not held on popular dates for shareholder meetings.
・Convocation notices are mailed out as early as possible.
・Convocation notices are uploaded to the Noritsu Koki website and other channels as soon as details are confirmed.
[ 2 ] Protecting shareholder rights
The Group respects the rights of all shareholders, including minority shareholders, and works to substantively protect their rights.
[ 3 ] Analyzing dissenting votes
The Board of Directors analyzes results from the exercise of voting rights to identify reasons for dissenting votes. Based on that analysis, the board implements responses, including dialogue with shareholders, as needed.
[ 4 ] Constructive Dialogue with Shareholders
  • ①Department Responsible for Dialogue
    The IR Department is responsible for dialogue with shareholders and related measures, with activities overseen by the Director in charge of the IR Department.
  • ②Fair Disclosure
    Important information that can determine the corporate value of the Group is disclosed appropriately and in a timely manner, regardless of whether the information is positive or negative.
  • ③Dialogue Methods
    The Group works to disclose information in a fair manner and conducts results briefings and other IR activities that take into account shareholder and investor characteristics (individual/institutional, domestic/overseas, etc.) to ensure information is communicated appropriately.
  • ④Internal Coordination
    The IR Department coordinates with other departments to conduct appropriate dialogue with shareholders and to ensure shareholder views and requests raised through dialogue are reflected in management. In addition, information from shareholder dialogue is regularly fed back to the management team.
[ 5 ] Policy on Cross-shareholdings
  • The Group’s cross-shareholdings are limited to companies that align with Group management policy and contribute to increased corporate value for both Noritsu Koki and the investee. Cross-shareholdings are reviewed by the Board of Directors annually. The Group also carefully considers its position when exercising voting rights cross-shareholding resolutions that are deemed damaging to shareholder value.
[ 6 ] Takeover Defense Measures
The Group will not implement takeover defense measures in principle. However, the Group will carefully consider implementing measures when deemed necessary, such as in cases where shareholder interests may be impaired.
[ 7 ] Conflicts of Interest in Transactions and Related Party Transactions
In the event of conflicts of interest in transactions or related party transactions, the Group will manage the transactions fairly and appropriately based on legal regulations and other rules to prevent damage to the interests of the Group and its shareholders.
3. Engagement with Employees
[ 1 ] Communicating Management Policy to Employees
The Group will disseminate its management policy to employees to foster understanding and provide support to policy execution. In addition, the Group will raise awareness of its Code of Conduct and Basic Compliance Policy to ensure appropriate relations with stakeholders.
[ 2 ] Fostering a Corporate Culture that Enables Employees to Fulfill their Potential
The Group believes that fostering a corporate culture that enables every employee to fulfill their potential is key to driving sustained growth and increasing corporate value. The Group will run all organizations based on this principle, backed by the understanding of all management team executives and employees.
[ 3 ] Internal Whistleblower System
The Group will raise employee awareness of the internal whistleblower system as a means of minimizing the impact of misconduct and other risks to the Group. In accordance with rules governing the use of the internal whistleblower system, the system will be used as an internal reporting system to ensure the appropriate reporting of facts related to legal violations, compliance and other events to the Internal Audit Office.
[ 4 ] Training Related to Insider Information
To prevent insider trading, which undermines fairness or creates the impression of undermining fairness for shareholders, the Group conducts insider information training for employees based on the legal regulatory framework and internal regulations governing insider training.
Part 4: Corporate Governance Structure
1. Organizational Design
[ 1 ] Organizational Design Based on the Companies Act
Noritsu Koki has adopted the Company with Audit and Supervisory Committee organizational design, as described in the Companies Act of Japan, to reinforce the audit functions of the Board of Directors and to balance management transparency and flexibility.
2. Board of Directors
[ 1 ] Roles and Responsibilities
The Board of Directors is tasked with increasing corporate value on a sustained basis by appropriately exercising its powers in accordance with its fiduciary responsibilities.
[ 2 ] Authority
Members of the board can be entrusted with making all or some of the decisions on important business execution matters using resolutions of the Board of Directors, as set out in the Company’s Articles of Incorporation. In addition, matters discussed and decided by the board are determined by the Regulations of the Board of Directors.
The Board of Directors also delegates certain powers to the management team as defined in law, the Articles of Incorporation, internal regulations and other rules, to improve decision-making flexibility.
[ 3 ] Composition
Noritsu Koki has set the following target for the composition of the Board of Directors to ensure objective oversight of the board and management transparency.
・Independent outside directors should account for at least one third of the total number of board members.
[ 4 ] Size
The size of the Board of Directors should be appropriate for the Company’s business and its operating environment.
The number of board members is determined by the Articles of Incorporation, as set out below.
・No more than five Directors (excluding members of the Audit and Supervisory Committee)
・No more than five Directors who are members of the Audit and Supervisory Committee
[ 5 ] Appointment and Dismissal
  • ①Policy on Appointments and Dismissals
    (Appointments)
    In appointing directors, the Company will consider individuals who satisfy the following criteria and are capable of fulfilling their duties appropriately, taking into account concurrent duties.
    ・Individuals who satisfy all legal requirements, with excellent character and business acumen, and capable of performing all delegated duties.
    ・Individuals attuned to the Group’s Corporate Philosophy and capable of driving sustained growth in the Group’s corporate value by adjusting appropriately to the external environment.
    (Dismissals)
    The Company will consider submitting a resolution for the resignation of a Director to the General Meeting of Shareholders if any of the following criteria are met.
    ・Confirmation of socially reprehensible links with antisocial forces
    ・Violations of legal regulations, the Articles of Incorporation or other Group rules that cause significant loss to the Group or that interfere with the execution of business activities.
    ・Significant issues preventing the execution of duties
    ・Discovery of issues that fall short of appointment criteria
  • ②Procedures Related to Appointments and Dismissals
    To create a balanced Board of Directors in accordance with the Regulations of the Board of Directors and other internal rules, the board will consult with the Nomination and Remuneration Committee on the following matters and respect its judgements in appointment and dismissal decision-making, in order to realize the Group’s management policy.
    ・Preparation of draft resolutions related to the appointment and dismissal of Directors for submission to the General Meeting of Shareholders
    ・Preparation of draft resolutions for the selection or dismissal of Representative Directors and Executive Directors
    ・Other matters deemed necessary by the Board of Directors related to the above items
[ 6 ] Analysis and Evaluation
The Board of Directors will analyze and evaluate the overall effectiveness of the Board of Directors each year and disclose a summary of the results.
[ 7 ] Remuneration
  • ①Procedures Related to Determining Remuneration
    The Board of Directors will consult with the Nomination and Remuneration Committee on the following matters and respect its judgements in remuneration decision-making.
    ・Preparation of draft policies related to decision-making on remuneration and other benefits for individual Directors
    ・Preparation of draft resolutions regarding the details of remuneration and other benefits for each Director
  • ②Directors who are not Members of the Audit and Supervisory Committee
    In accordance with the Regulations of the Board of Directors, the Company will provide earnings performance-linked compensation and stock-based compensation, including stock options, in addition to fixed remuneration, in order to align Directors’ interests with those of shareholders and to motivate them to execute their duties in a way that continuously increases corporate value.
  • ③Directors who are Members of the Audit and Supervisory Committee
    The Company will provide fixed remuneration to ensure members of the Audit and Supervisory Committee independently and objectively fulfill their supervisory functions.
[ 8 ] Succession Planning
The Group strategically fosters successors for the management team to support sustained growth and increase corporate value.
[ 9 ] Internal Controls
The Board of Directors is responsible for establishing internal control systems as required by law, and the Representative Director & CEO oversees and manages internal control systems.
In addition, the Group works to improve the effectiveness of internal control systems by raising awareness of the need to strengthen internal controls to prevent undesirable events for the Group, and to support active growth in corporate value.
[ 10 ] Training Policy
Based on analysis and evaluation of management policy, the operating environment and the overall effectiveness of the Board of Directors, the Group provides Directors with opportunities to take part in training as needed.
Particular attention is given to providing training opportunities for Outside Directors when they are appointed and through regular training thereafter to deepen their understanding of the Group.
[ 11 ] Operation of the Board of Directors
To enable a sufficient level of discussion by the Directors, the Company has established an Administrative Office of the Board of Directors to ensure the smooth operation of the Board of Directors.
3. Audit and Supervisory Committee
[ 1 ] Roles and Responsibilities
The Audit and Supervisory Committee actively uses the internal control system to conduct audits to verify that the execution of duties by Directors complies with legal regulations, the Articles of Incorporation and other rules.
[ 2 ] Composition
A majority of the members of the Audit and Supervisory Committee are outside appointments, as prescribed by the Companies Act of Japan. The Company may also appoint full-time Audit and Supervisory Committee members.
[ 3 ] Appointment
The Company endeavors to appoint at least one individual to the committee with appropriate expertise in financial and accounting matters.
[ 4 ] Connection Between Audit and Supervisory Committee and Internal Audit Department
The Audit and Supervisory Committee coordinates with the Accounting Auditor and the Internal Audit Department to improve the quality and effectiveness of audits.
[ 5 ] Employees to Assist Committee Duties
  • ①Appointment
    When the Audit and Supervisory Committee requests the appointment of employees to assist with performing its duties, the Company will respect the views of the committee and select employees to provide assistance. When deciding whether the employees will be full-time assistants or part-time assistants with concurrent duties, the Company will respect the views of the Audit and Supervisory Committee.
  • ②Independence
    Employees assisting the Audit and Supervisory Committee will follow the instructions and orders of committee members. Any decisions on other personnel-related matters (transfers, performance evaluation, etc.) will respect the views of the Audit and Supervisory Committee. When the employees are assigned as part-time assistants with concurrent duties, the instructions and orders of the Audit and Supervisory Committee will take precedence and the Company will make considerations for their workload.
4. Nomination and Remuneration Committee
[ 1 ] Roles and Responsibilities
The Nomination and Remuneration Committee is tasked with providing advice to the Board of Directors on the key matters of Director nominations and remuneration in order to strengthen the independence, objectivity and accountability of related board functions.
[ 2 ] Composition
The Nomination and Remuneration Committee is composed of at least three members, of which the majority are independent Outside Directors. In addition, the Chair of the committee is selected from the independent Outside Directors by resolution of the Nomination and Remuneration Committee.
5. Outside Directors
[ 1 ] Roles and Responsibilities
Outside Directors or Independent Directors are tasked with ensuring Directors make appropriate management decisions, while also using their expertise and experience to advance the Group’s development.
[ 2 ] ]Independence Criteria
Individuals who meet the standards for independence prescribed in legal regulations and rules published by financial instruments exchanges and who have no conflicts of interest with ordinary shareholders are appointed as Independent Directors.
6. Accounting Auditor
[ 1 ] ]Roles and Responsibilities
The Board of Directors and the Audit and Supervisory Committee establish systems to enable the Accounting Auditor to perform its duties, recognizing that the Accounting Auditor’s role and responsibility is to ensure the reliability of the Group’s financial reporting. In addition, the Company verifies the independence and expertise of the Accounting Auditor.
[ 2 ] Appointment and Evaluation
The Audit and Supervisory Committee has established a system to appropriately evaluate the Accounting Auditor to support decisions on appointment and other matters related to the Accounting Auditor, in accordance with the Regulations of the Audit and Supervisory Committee.
Additional Provisions
1. Enactment, Revisions and Annulments
The enactment of this Basic Policy on Corporate Governance and revisions and annulments are by resolution of the Board of Directors, with minor revisions made by the Representative Director & CEO.
2. Record of Changes
Formulated November 27, 2015
Revised December 7, 2018