Nissui Pharmaceutical Co., Ltd.

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Corporate Governance

Basic Ideas on Corporate Governance

Nissui Pharmaceutical has established systems and enhanced internal controls to achieve greater soundness and transparency in its management and increase its corporate value. As a publicly traded company, we aim to maintain strong corporate governance by protecting shareholder rights, ensuring even-handed treatment of shareholders, and taking other steps to build good relationships with stakeholders; disclosing information in a manner that is fair, timely, and appropriate; and ensuring that our Board of Directors and Audit & Supervisory Board are able to fulfill their respective roles.

Corporate Governance Overview

At Nissui Pharmaceutical, external directors and the Audit & Supervisory Board play key roles in corporate governance. The six-member Board of Directors, for example, includes three external directors: an attorney, an individual with previous experience as a company director, and a university professor in the field of medicine. The three-member Audit & Supervisory Board includes two external members: an individual who is both a certified public accountant and certified tax accountant and a person with previous experience as a company director. In addition, to promote the functionality of the Board of Directors, speed decision-making, and enhance business efficiency, we have adopted an executive officer system.

The Board of Directors, chaired by the representative director, comes together, in principle, for meetings that are held on a monthly basis and attended also by the members of the Audit & Supervisory Board. Important business matters and all matters stipulated by Japan’s Companies Act are deliberated by the Board of Directors, which engages in timely decision-making and effective oversight of business execution.

The Executive Committee, with a membership consisting of directors, members of the Audit & Supervisory Board, and executive officers, discusses individual business matters from a practical standpoint.

The Audit & Supervisory Board, consisting of one standing member and two external members, works to ensure the reliability of the Company’s audit function. It also meets on a regular basis with the independent auditor to discuss matters such as auditing of each fiscal year’s financial statements, and the Company’s audit environment and accounting system.

For more details, please refer to the following report.
Corporate Governance Report(Stock code:4550)

Rationale Behind the Design of the Corporate Governance System

Limiting the Board of Directors to six members enables it to engage in detailed deliberations of individual matters and quickly render decisions. Furthermore, among the members of the Board of Directors and the Audit & Supervisory Board are an attorney, individuals with experience managing companies in other industries, a medical school professor, and an individual who is both a certified public accountant and certified tax accountant.
These two corporate governance organs, therefore, are effective in exercising proper oversight, preventing conflicts of interest between the Company and its executives, ensuring ethical corporate behavior and compliance with the law, and fulfilling all the other demands placed upon the current corporate governance system. The Company is confident that it has established effective corporate governance.

Board of Directors Meeting Attendance

Name Year ended March 31, 2018
Tokuya Ono 15 meetings / 15 meetings
Seiichi Yatsu 15 meetings / 15 meetings
Yoichi Sekiguchi 15 meetings / 15 meetings
Eiichi Shibasaki (External Director) 15 meetings / 15 meetings
Takatomo Ajima (External Director) 14 meetings / 15 meetings
Kazunori Kato (External Director) 15 meetings / 15 meetings

External Directors and External Members of the Audit & Supervisory Board

The Board of Directors includes three external members: an attorney, an individual with previous experience as a company director, and a medical school professor. The Audit & Supervisory Board includes two external members: an individual who is both a certified public accountant and a certified tax accountant, and an individual with previous experience as a company director.

Independence Standards for External Directors

The Company nominates independent director candidates based on the independence standards set forth by the Tokyo Stock Exchange and Japan’s Companies Act. Information regarding the nominations and independence of officers is disclosed in proxy statements, annual securities reports, reports concerning corporate governance, and other communications issued by the Company.

Concurrent Positions of External Directors and External Members of the Audit & Supervisory Board

The external directors, external members of the Audit & Supervisory Board, and all other members of the Board of Directors and the Audit & Supervisory Board are devoting the time and effort necessary for them to fulfill their roles and responsibilities as members of these organs. All members of the Board of Directors and Audit & Supervisory Board have attended at least 90% of the meetings of their respective organs. Time and attention devoted to other positions are being kept to reasonable levels, and conditions with regard to concurrent positions are disclosed in officer nomination proposals included in proxy statements.

Rationale for Nomination as an External Member of the Board Of Directors

Name Nomination Rationale
Eiichi Shibasaki Eiichi Shibasaki was nominated to be an external member of the Board of Directors based on his legal knowledge and experience as an attorney, his wealth of corporate management insight as a specialist in the law, and the judgment that he would be able to exercise objective oversight of the Company’s management.
Other than compensation for his work as a Company officer, Mr. Shibasaki receives no money from the Company, and, given that there are no concerns of conflicts of interest with the general shareholders, he has been designated an independent director.
Takatomo Ajima Takatomo Ajima was nominated to be an external member of the Board of Directors based on his insight and experience in corporate management.
Other than compensation for his work as a Company officer, Mr. Ajima receives no money from the Company, and, given that there are no concerns of conflicts of interest with the general shareholders, he has been designated an independent director.
Kazunori Kato Kazunori Kato has many years of experience in conducting research in the fields of fundamental and clinical medicine at universities and research institutions. Dr. Kato was nominated to be an external member of the Board of Directors based on the expectation that this experience would enable him to provide valuable advice and oversight regarding research and development work undertaken in collaboration with universities, research institutions, and venture companies in the “open innovation” approach championed by the Company.
Other than compensation for his work as a Company officer, Dr. Kato receives no money from the Company, and, given that there are no concerns of conflicts of interest with the general shareholders, he has been designated an independent director.

Rationale for Nomination as an External Member of the Audit & Supervisory Board

Name Nomination Rationale
Takeshi Tayama Takeshi Tayama is both a certified public accountant and certified tax accountant and is experienced in auditing publicly listed companies. Mr. Tayama was nominated to be an external Audit & Supervisory Board member based on the expectation that his professional insight would allow him to make valuable contributions to auditing of the Company’s management activities.
Other than compensation for his work as a Company officer, Mr. Tayama receives no money from the Company, and, given that there are no concerns of conflicts of interest with the general shareholders, he has been designated an independent Audit & Supervisory Board member.
Hitoshi Saito Hisashi Saito was nominated to be an external member of the Audit & Supervisory Board based on his wealth of experience in corporate management.
Other than compensation for his work as a Company officer, Mr. Saito receives no money from the Company, and, given that there are no concerns of conflicts of interest with the general shareholders, he has been designated an independent Audit & Supervisory Board member.

System for Promoting Constructive Dialogue with Shareholders

Nissui Pharmaceutical appoints a director to oversee IR and has assigned the Corporate Planning Department to handle IR activities. The representative director conducts semiannual results briefings for shareholders and other investors. For those who cannot attend these briefings, measures, such as the provision of reference materials online, are taken to promote constructive dialogue. We believe that listening to investors, examining our management from the perspective of investors, and reflecting investor opinions in our management activities will further understanding of our management direction and contribute to ongoing growth and increases in our corporate value over the medium-to-long term.

Policy on Strategic Shareholdings

Nissui Pharmaceutical considers factors such as the desire to build stable, long-term business relationships; the needs of business alliances; and advancement of business strategies. When it is judged that doing so will benefit its own corporate value, the Company may purchase the shares of business partners. In exercising voting rights associated with these shareholdings, we carefully examine the resolutions at hand, and make decisions based on considerations such as expected effects on shareholder value and our own corporate value.

Takeover Defenses

Nissui Pharmaceutical has implemented no measures designed specifically to defend against a takeover.

Basic Policy on Rejecting All Relationships with Antisocial Forces

On rejecting all relationships with antisocial forces, the Board of Directors has resolved as follows.
Basic Policy and Policy Implementation Measures for Rejecting All Relationships with Antisocial Forces

1) Basic Policy on Rejecting All Relationships with Antisocial Forces
Nissui Pharmaceutical rejects all relationships with antisocial forces, which are regarded as threats to public order and safety.

2) Nissui Pharmaceutical has included the Basic Policy on Rejecting All Relationships with Antisocial Forces in its ethics charter. The Company clearly and consistently states in its Code of Ethical Conduct that it rejects all requests made by antisocial forces that would result in financial or other economic benefits in forms such as publication subscriptions, contributions, and advertising purchases, all of which it deems inappropriate. ・In accordance with its risk management manual, Nissui Pharmaceutical has established a management system and internal contact network and specified steps, such as working with law enforcement and corporate counsel, for responding when antisocial forces have attempted to intervene in the Company’s business dealings. ・Nissui Pharmaceutical is a member of Tokubouren (an association for preventing particular forms of violent crime) and a local council for the prevention of special forms of violent crime. The Company uses its participation in these organizations to remain up-to-date on concerns regarding antisocial forces. ・In work environments, Nissui Pharmaceutical uses education and training to promote understanding of both the Basic Policy on Rejecting All Relationships with Antisocial Forces and the risk management manual. In addition, through education and training, the Company tests the effectiveness of these measures to reject relationships with antisocial forces.