Directors and the Board of Directors

The Company clarifies that responsibility and authority regarding the management supervisory function lies with directors and responsibility and authority regarding the business execution function lies with executive officers. We have set the number of directors to at least three but no more than 12 to ensure prompt and proper decision making and minimize the scope of liability of that body. We also appoint more than one outside director to ensure transparency. Currently, the Board comprises eight directors (seven men and one woman), which includes three outside directors. A director’s term is one year for the purpose of facilitating annual accountability.

The Board of Directors is held once each month wherein the Chairperson and Director serves as the Chairperson, and makes decisions on the matters set forth in the laws, regulations, and the Articles of Incorporation, as well as other important matters.

The Board of Directors convened 18 times during the fiscal year ended March 31, 2023

Board Leadership

Audit & Supervisory Board Members and the Audit & Supervisory Board

The Audit & Supervisory Board carries out part of the supervisory function of the Company in cooperation with the Board of Directors. As an independent body entrusted by shareholders, it audits the execution of duties by directors.

We have set the number of Audit & Supervisory Board members to at least three but no more than five to enable it to fully perform its supervisory function toward the Board of Directors. Also, in principle, over half of the members are outside Audit & Supervisory Board members. Currently, the Board comprises five members (all men), which includes three outside members.

The Audit & Supervisory Board should comprise individuals who have expertise in finance, accounting, and legal affairs, and there should be at least one member who has appropriate knowledge of finance and accounting in particular. The Audit & Supervisory Board meets at least once a month and discusses important matters concerning auditing.

Optional Committees(FY2022)

To enhance the objectivity and transparency of management, the Company has established the following optional committees as advisory bodies to the Board of Directors.

Outside Directors

Yasuko Kono

Since Ms. Yasuko Kono has considerable experience and knowledge in consumer issues, the Company expects her to make useful recommendations not only with regards to management in general, but also in relation to propulsion and execution of NH Foods Group “The Five Materialities” which are set as social issues to be addressed in order to realize NH Foods Group “Vision 2030” which was developed as a milestone towards the realization of corporate philosophy. Based on the above, the Company determined that Ms. Kono is an appropriate individual as an Independent Outside Director supervising business execution and continues to appoint her as an Outside Director candidate.

Hideo Arase

Since Mr. Arase served as a director responsible for overseas business at a major medical equipment manufacturer and has considerable experience and in-depth knowledge in global business management dealing with changes, the Company expects him to make useful recommendations not only with regards to management in general, but also in relation to “Establish a growth model for Overseas Business” which is a business policy in the “Medium-Term Management Plan 2023” which was developed from a backcasting perspective, in order to realize NH Foods Group “Vision 2030” which was developed as a milestone towards the realization of corporate philosophy. Based on the above, the Company determined that Mr. Arase is an appropriate individual to be an Independent Outside Director supervising business execution and continues to appoint him as an Outside Director candidate.

Tokushi Yamasaki

Since Mr. Yamasaki has expert viewpoint and considerable experience as a corporate analyst, the Company expects him to make useful recommendations not only with regards to management in general, but also in relation to “Shifting to a sustainable business model with profitability” which is a business policy in the “Medium-Term Management Plan 2023” developed from a backcasting perspective, in order to realize NH Foods Group “Vision 2030” which was developed as a milestone towards the realization of corporate philosophy. For these reasons, the Company determined that Mr. Yamasaki is an appropriate individual as an Independent Outside Director supervising business execution and continues to appoint him as an Outside Director.

Board Leadership

Audit & Supervisory Board Member (Outside)

Masayuki Kitaguchi

Masayuki Kitaguchi provides advice in a timely manner to ensure the legality and appropriateness of Group management from an objective and fair perspective based on his expert standpoint and abundant experience as an attorney-at-law and certified public accountant. He has also served as an observer at meetings of the Compliance Committee.

Shigeru Nishiyama

Shigeru Nishiyama provides advice in a timely manner to ensure the legality and appropriateness of Group management from an objective and fair perspective based on his expert standpoint and abundant experience as a certified public accountant and a graduate school professor. He has also served as a member of the Sustainability Committee.

Katsumi Nakamura

Mr. Katsumi Nakamura provides advice in a timely manner to ensure the legality and appropriateness of Group management from an objective and fair perspective based on his professional knowledge and abundant experience as an attorney at law. He has also served as a member of the Sustainability Committee.

Evaluation Process

Each year, we carry out a questionnaire survey of all directors and Audit & Supervisory Board members. Also, in order to ensure that officers can be honest with their opinions and to realize objective analysis, responses are delivered directly to a third-party evaluation organization without passing through an internal secretariat. We also conduct interviews with a number of directors.

At a meeting of the Board of Directors on April 28, 2023, there was an exchange of opinions based on a report containing the objective analysis and assessment of the third-party evaluation organization. Analysis and assessment of the Board of Directors was conducted at the Board meetings held on June 9, and June 27 using the results of the exchange of opinions as a reference.

Evaluation of effectiveness in FY2022 [3.2MB / 20 pages]

Basic Policy

The officers compensation system provides compensation to individual executive directors and executive officers who have been selected from among the finest management talent and nurtured and promoted by the Company. Its purpose is to further clarify the linkage between officers, compensation and the Company’s business performance/shareholder value and to provide an incentive for enhancing corporate value over the medium-to long-term with the aim of realizing the corporate philosophy.
System development, compensation levels, system operation, etc., are to be deliberated on by the Compensation Committee, with an independent outside director acting as chairperson, and with the final decision to be made by the Board of Directors.
Regarding compensation levels for each individual officer, the reasonableness of these levels is verified every year with reference to the investigation results, etc., of third-party organizations.

Summary of Director Compensation

Compensation for directors (excluding outside directors) comprises monetary compensation (basic compensation and performance-based compensation) and performance-based stock compensation.

Performance-based compensation is not only determined by the fiscal year’s business results. Evaluations of efforts and progress toward achieving the materiarities linked to sustainability are also considered. Non-financial items linked to the environment, society, and the enhancement of governance are also included in the scope of evaluation. Out of the management issues that are factored into annual incentives based on the previous year's results (about 40%), non-financial evaluation items count for about 50%.

Performance-based stock compensation includes malus (reduction of an amount of rights granted but yet to be exercised) and clawback (return of an amount of rights that have been exercised) provisions. These provisions can be exercised in the event of one of the predetermined triggers that include certain wrongdoings, such as a serious breach of duties or material violation of the internal rules. The stock-based compensation subject to return under these provisions shall be the whole or a part of compensation for the fiscal year in which such wrongdoing takes place.

When introducing the plan, we adopted a board benefit trust system for officers in which a set amount of shares in the Company are acquired by a trust using monetary contributions from the Company, and these shares are delivered to recipients, such as directors who are in office during the eligibility period, through the trust.

Human-Resources Characters Required for Executives

The Group is working to continuously enhance corporate value by establishing the Plan for the Development of the Next-Generation Executives and defining five “Human Resources Characteristics Required for Executives” (integrity, devotion, deliberation, endeavor, and empathy). The assessment of corporate officers involves executive officers creating a commitment sheet that incorporates these five requirements, followed by an interview with the President during which the setting and achievement of targets is confirmed. NH Foods Ltd. is also working to cultivate the next-generation of human resources who possess the five requirements by introducing programs such as a selection, training, and transfer program and an executive behavioral characteristic analysis program on a company-wide basis.
Additionally, we will expand pathways for diverse talent to become potential next-generation leaders as early as possible through “selection, education, and transfer programs” that provide employees at each level with opportunities to be selected.

Developing Next-Generation Executives

The Group implements next-generation executive planning initiatives in accordance with the process in the Guidelines for Strategic Development of Managerial Human Resources to Improve Corporate Value released by the Ministry of Economy, Trade and Industry. Our plan started in fiscal 2018 and we are currently engaged in Phase 4—“Evaluation of the results of development, and reassessment and reevaluation of related measures.” Since fiscal 2021, our new executive officers participate in young managers forums with a view to cultivating next generation executive experience and creating useful contacts outside of the Group.
In order to educate newly appointed officers, we provide learning opportunities at meetings of the Board of Directors and Corporate Executive Committee (such as talks on the latest trends in corporate governance and by experienced managers). We are also introducing a voluntary program for officers run by an external educational institution so that officers can continue to improve their abilities after being appointed and can maintain and further develop the five requirements of our executives.
Additionally, we conduct 360-degree evaluations for members of Group management (at NH Foods Ltd. this includes heads of major departments and divisions or above), which incorporate feedback from superiors, peers, and people working under them. These are useful for self-development.
We are carrying out succession planning for CEO and management positions through measures such as disclosing our requirements of executives, applying various external assessment systems, and carrying out education and training. Each year we make improvements, and the details of these improvements are discussed by the Executive Nomination Committee and confirmed by the Board of Directors.

Internal Audits and Audits by Audit & Supervisory Board Members

The implementation of internal audits has been assigned to 20 employees of the Audit Department and is carried out in coordination with Audit & Supervisory Board members and accounting auditors. These audits include site visits to plants, business offices, and other facilities, as well as at both domestic and overseas subsidiaries, to evaluate their accounting and business operations. The results of internal audits are reported to the Board of Directors. Accounting auditors evaluate the effectiveness of internal controls by holding discussions with the Audit Department to gauge the status of internal audits. They also exchange information concerning audit results.

With regard to audits by Audit & Supervisory Board members, members attend meetings of the Board of Directors, Management Strategy Committee, and other boards and committees in order to confirm business execution by directors. Each quarter, Audit & Supervisory Board members also exchange opinions and proposals with the President and Representative Director, and exchange opinions with outside directors.

Also, in order to monitor the status of business execution, in principle, at least one full-time Audit & Supervisory Board member and one outside Audit & Supervisory Board member participate in interviews with directors twice per year, and executive officers and the heads of major departments and divisions once per year, in order to confirm the situation regarding matters such as business execution, governance and compliance initiatives, workstyle reform, and human resources development. Audits of domestic and overseas Group companies are conducted annually at key business sites mainly selected based on an audit plan formulated at the beginning of each fiscal year, and biannually at other sites. During these audits, interviews are held regarding matters such as the progress of business execution, response to material risks, compliance initiatives, progress on workstyle reform, and requests for the Group. Audit & Supervisory Board members receive a report from internal audit departments once per month with the accounting auditor and the internal audit departments, and observe audits by the internal audit departments and audits by the accounting auditor (including the year-end inventory audit).

The Group Audit & Supervisory Board Members’ Office was established in April 2021 to strengthen the Group’s auditing and internal control functions by facilitating audits of Boards of Directors at subsidiaries by said subsidiary’s Audit & Supervisory Boards and strengthening coordination with relevant departments. It aims to establish an appropriate overall audit framework at each subsidiary and cultivate human resources for building the organizational bodies needed to implement audits. The office coordinates with the Audit Department and Audit & Supervisory Board members to conduct preparatory training for newly appointed Audit & Supervisory Board members at Group companies and support the development of new auditing tools, as well as to facilitate information sharing aimed at improving the quality and effectiveness of audits.

Main Roles and Duties of the Audit & Supervisory Board and Its Members