Corporate Governance
Basic approach
We consider achieving swift management decision-making in response to the fluctuating economic environment and increasing shareholder value through sound business management are the important issues for us. To achieve this, we are working to build strong relationships with our stakeholders, comprising first and foremost our shareholders, as well as our business partners, local society and our employees, and to enhance corporate governance as we strengthen and improve each of our functional bodies, including the Board of Directors and the Board of Executive Officers.
Changes to initiatives to strengthen corporate governance
Corporate governance system
Board of Directors
The Board of Directors consists of six Directors (excluding Directors Serving as Audit & Supervisory Committee Member) and four Directors Serving as Audit & Supervisory Committee Member (three of which are Outside Directors).At its meetings, which are held once monthly in principle, important matters are determined in accordance with laws and regulations, the Articles of Incorporation and internal company rules, and the status of business execution is supervised by the Directors Serving as Audit & Supervisory Committee Member.
| Fiscal year | Meetings convened: Meetings with all Directors present |
|---|---|
| 2023 | 16 meetings in total: 16 meetings |
| 2022 | 16 meetings in total: 16 meetings |
Audit & Supervisory Committee
The Audit & Supervisory Committee consists of the four Directors Serving as Audit & Supervisory Committee Member (three of which are Outside Directors) and holds meetings once monthly in principle.The committee rigorously audits the execution of duties of the Directors (excluding Directors Serving as Audit & Supervisory Committee Member) and the Executive Officers, and diligently exchanges information with administrative departments such as the Internal Auditing Division and the Accounting Auditor.
| Fiscal year | Meetings convened: Meetings with all Committee Members present |
|---|---|
| 2023 | 14 meetings in total: 14 meetings |
| 2022 | 14 meetings in total: 14 meetings |
Nomination and Remuneration Advisory Committee
The Nomination and Remuneration Advisory Committee has been established as an optional advisory committee to the Board of Directors. It consists of four Directors (three of which are Outside Directors).The aim of the committee is to obtain the appropriate involvement and advice of Outside Directors to strengthen independence, objectivity and accountability, and to further enhance our corporate governance system when nominating Directors, determining important matters relating to remuneration, and so forth.
| Fiscal year | Number of meetings held | Main matters resolved |
|---|---|---|
| 2023 | 3 | Matters regarding the appointment/dismissal of Directors, matters regarding the appointment/dismissal of Executive Officers, and details of Director remuneration, etc. |
| 2022 | 3 |
Officer remuneration system
Remuneration for Nichimo’s Directors consists of basic remuneration, bonuses as performance-linked remuneration and share-based remuneration through the Board Benefit Trust (non-monetary), based on a basic policy to determine a consideration for the level of contribution to improvement of corporate value and increase in share price, and guided by the corporate philosophy that we have followed since our founding: “In the spirit that a company is a public organ of society, we widely contribute to societal development with technologies and services that lead the industry.”
| Basic remuneration | Basic remuneration is monthly fixed remuneration, and it is determined based on consideration of the level of contribution to business performance according to position, business performance, social circumstances, remuneration levels of other companies, and other factors.The remuneration amount for Directors Serving as Audit & Supervisory Committee Member only consists of basic remuneration and the individual amounts shall be determined by discussion among the Directors Serving as Audit & Supervisory Committee Member within the scope of the maximum remuneration amount proposed and resolved in a general meeting of shareholders. |
|---|---|
| Bonuses as performance-linked remuneration | Determined based on business performance indicators, giving consideration to the degree of contribution to business performance according to position, social trends, and levels of remuneration in other companies globally.In addition, the business performance indicators are calculated based on the medium-term management plan and the degree of achievement for the fiscal year, using ordinary profit—a particularly important indicator for the Company—as the denominator. |
| Share-based remuneration through the Board Benefit Trust (non-monetary) | By further clarifying the link between remuneration and the Company’s share price so that Directors share with shareholders the benefits and risks of share price fluctuations, the Company works to increase Directors’ awareness of making the greatest possible contribution to increasing business performance over the medium- to long-term and expanding the Company’s value. With this aim, the Company grants points to Directors in each position based on their contribution to business results, up to a maximum of 15,000 points per fiscal year (1 point = 1 share).In principle, the Company will deliver shares* in accordance with the number of accumulated points granted to a Director upon their retirement.
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Composition ratio of remuneration
The ratios of basic remuneration (monetary), bonuses (performance-linked remuneration), and share-based remuneration through the Board Benefit Trust (non-monetary) for each individual is based on the standard shown on the right, giving consideration to the degree of contribution to business performance of each position, the status of management, social trends, and remuneration levels at companies of a similar scale to the Company belonging to related industries or having related business models.
Evaluation of effectiveness of the Board of Directors
With the aim of improving the functioning of the Board of Directors and ultimately increasing corporate value, the Company has a third-party organization conduct an annual survey of Directors to evaluate the effectiveness of the Board of Directors, and reports the results to the Board of Directors.
Survey items
General matters regarding the Board of Directors, including its composition and operation method, the status of discussion, and cooperation with outside officers
Implementation methods
To protect the anonymity of respondents, an independent organization was commissioned to collect, tabulate, and analyze the survey results.
Results of evaluation of effectiveness
FY2022
The results gave a generally positive evaluation, and the effectiveness of the Board of Directors is thus judged to be ensured.
Some ongoing issues were identified in the results of the previous survey concerning the composition of the Board of Directors (ratio of Inside Directors to Outside Directors, ensuring of diversity in gender and internationality) and officer training for the further improvement of functions of the Board of Directors. We also identified new issues regarding support systems for Directors, such as coordination with the Internal Auditing Division.
FY2023
The evaluation was higher than the previous year’s results, and the continued effectiveness of the Board of Directors is thus judged to be ensured.
It was confirmed that the examination of the composition of the Board of Directors (the ratio of internal Directors to Outside Directors, and ensuring diversity in terms of gender and internationality) and training for officers, which were recognized as issues in the results of past surveys, have been improved through the measures taken this year. It was also confirmed that there is a need to further strengthen the supervision and monitoring of the establishment and operation of the internal control system for the entire Group, including subsidiaries.
Going forward
Going forward, the Company will fully discuss the issues identified in this evaluation and strive to respond swiftly, while continuing to make progress on initiatives to enhance the function of the Board of Directors, with the aim of further enhancing corporate governance. Moreover, we will aim to achieve a sustainable increase in corporate value by promoting sustainable management.
Outside Directors × President Round-table Discussion
Future Developments in the Marine Business
As the business environment surrounding the marine products industry undergoes major changes, Nichimo’s Marine Business is also required to undergo major transformation.
President Shinya Aoki spoke with Outside Directors Tatsuya Kikuchi, Sunao Hirata, and Ninjo Akashi about the future developments in the Marine Business.
Tatsuya Kikuchi
Outside Director, Audit & Supervisory Committee Member
Sunao Hirata
Outside Director, Audit & Supervisory Committee Member
Ninjo Akashi
Outside Director, Audit & Supervisory Committee Member
Shinya Aoki
President,
Representative Director
Taking on the paradigm shift occurring in the marine products industry
■ Aoki
First, regarding the current state of Nichimo’s Marine Business, environmental issues such as climate change and environmental pollution are becoming more serious on a global scale.The Marine Business is being affected the most by this.Although the Food, Machinery and Materials Businesses have also been affected, our Marine Business, which is deeply involved in the marine products industry, is keenly aware of the seriousness of environmental issues and the impact they have on the business.In recent years, the marine products industry has been undergoing a paradigm shift towards sustainable business, and the conventional industry is undergoing major changes.Sustainable management is also a major theme in the Fiscal 2023 Medium-Term Management Plan, which is currently in progress.In the Marine Business, the promotion of aquaculture is becoming increasingly important as fishing from fishing boats has reached a plateau, and the use of environmentally friendly materials in fishing gear such as fishing nets is also becoming an important issue in light of the movement toward a decarbonized society and efforts to curb marine pollution.These two issues are likely to become increasingly important in the long term, but we are currently still in a state of trial and error.
What makes steering the Marine Business difficult is that it needs to respond to these new trends in the marine products industry while also focusing on operations that are already established as businesses.It is not easy to tackle two issues at the same time, and it places a heavy burden on those in charge, but looking at the business over a long span of five or ten years, we see this as a hurdle that we must find a way to overcome.
■ Kikuchi
As we discussed in last year’s Sustainability Report, Japan is a world-renowned maritime nation that is surrounded by sea.The effective utilization of marine resources has been and will continue to be the key for Japan to survive in the world.Nichimo is a company that creates corporate value by supporting the people who utilize marine resources.
This overlaps with what Mr. Aoki said, but I believe there are three challenges facing marine resources.They are global warming, the depletion of fishery resources, and marine pollution.Regarding our efforts to combat global warming, Nichimo supports the TCFD initiative and is working on the disclosure of information.Additionally, we contribute to addressing the depletion of fishery resources by providing fish fry and feed for aquaculture, and in response to marine pollution, we are working to collect and recycle fishing nets and develop marine materials using biodegradable plastics.
Expand the land-based aquaculture business with a sense of speed
■ Hirata
The aquaculture that you both mentioned is an important business for Nichimo.As a measure to support the aquaculture industry, the Ministry of Agriculture, Forestry and Fisheries launched the Comprehensive Strategy for the Growth of Aquaculture as an Industry in 2021, which is being promoted as national policy.In land-based aquaculture, too, companies from a variety of industries are continuing to enter the market, intensifying competition.As a company with experience and knowledge gained from developing the Marine Business over many years, I believe that Nichimo should continue to be a front-runner in the field of land-based aquaculture.I would like to ask Mr. Aoki, what kind of business do you plan to develop, given that the business environment surrounding land-based aquaculture is undergoing intensifying competition and other major changes?
■ Aoki
As Mr. Hirata pointed out, many companies are beginning to enter the land-based aquaculture business.The important thing is to act with a sense of speed and to steadily scale up the scale of the business.In 2021, Nichimo partnered with three other companies including Kyushu Electric Power to establish Fish Farm Mirai LLC.The company is currently operating Kyushu’s largest land-based salmon aquaculture business, and is expanding its land-based aquaculture business through so-called open innovation.As the market is expected to expand, it is relatively easy to raise capital, but the companies with knowledge and know-how about the practical aspects of aquaculture, such as how to grow fish and to whom and how to sell the farmed fish are limited.Nichimo’s aquaculture business has a 40-year history and we have learned a lot through trial and error.Nichimo’s knowledge and know-how are also of great use in Fish Farm Mirai’s open innovation efforts, including the distribution and processing of farmed fish.As this success story has spread, we are receiving inquiries about collaboration from various companies across the country.As social expectations and demands grow, the role that Nichimo must fulfill is becoming more important every day.
The Marine Business’ sustainable initiatives should be promoted more
■ Akashi
I often travel all over Japan as the representative of a measuring equipment trading company, and I feel that Nichimo’s name recognition is growing rapidly.However, I feel that some more effort is required in that, although familiarity with the company’s name is growing, people are not yet aware of what the company does.If a company’s business is unknown, people will not be interested in picking up and trying the new products the company develops, no matter how useful they are to society.
Nichimo’s Marine Business, in consideration of curbing marine pollution and global warming, is accelerating its efforts to replace marine materials such as fishing nets that are made from petroleum-based plastics with materials made from biomass and biodegradable materials.Fishing nets and ropes made from biomass and biodegradable materials are also used as materials in the foundations of wind turbines used in offshore wind power generation.In fact, Nichimo’s products are contributing to the realization of a sustainable society in many ways.It is important that more people know that Nichimo is blessed with marine-based business opportunities and that it can take advantage of these opportunities.
■ Kikuchi
That’s correct.I believe that the biomass and biodegradable materials developed by Nichimo are extremely suitable for the future society, where sustainability will be a fundamental prerequisite.However, at present, there are cases that, while the development of such materials is progressing, sales teams to publicize their value and expand sales are not yet in place.Biodegradable polystyrene foam is one example.I hope the Company proactively pursues business opportunities using such excellent material.If so, Nichimo will be able to become an even more lively and well-known company.
■ Aoki
I am grateful for your valuable comments.In recent years, there has been increasing calls from offshore wind power generation operators to use Nichimo’s products.One of the reasons behind this is that Nichimo supports local economies not only through marine materials, but also through the distribution and processing of marine products.The reason for this is that the perspective of regional development is one of the evaluation criteria when bidding for offshore wind power generation facilities.Biodegradable polystyrene foam is certainly an excellent material, but the difficulty in reducing costs is an issue, which makes the sales department hesitant to use it.We recognize that this is an important issue that must be resolved in order to contribute to the environment and society.
In addition, there is the issue that, as workers in the fishing industry are aging and catches are shrinking, the amount of unused marine products that do not go through the fishing industry’s distribution or processing lines is increasing.Unused marine products often end up being discarded, and I believe that solving this social issue is also part of Nichimo’s job.We are working with staff in the Food Business to find a solution.Currently, Nichimo Foods operates small izakaya restaurants. My dream is to open sustainable antenna shops that are unique to Nichimo, where we could serve customers seafood caught using sustainable marine materials, or unused fish that are not distributed or processed.
■ Hirata
I think the idea of antenna shops is very interesting.A university that has successfully cultivated bluefin tuna has also set up a restaurant to serve the tuna as food.I hear that they have put a lot of effort into running their restaurant, and have outsourced its operation to a major beverage manufacturer.I think it is worth Nichimo putting in the effort and taking on the challenge.
I want young employees to proactively embrace change
■ Aoki
It is not only myself and the employees of my generation who are concerned about the aging of those involved in the fishing industry and the decline of local marine product industries.There are many young employees who want to find a way to overcome this situation.Many of these young employees have also provided various ideas to solve these issues.Some of these ideas appear difficult to realize, but rather than simply rejecting them, we are trying to persevere with them and find a way to make them a reality.As I mentioned at the beginning, a paradigm shift is occurring in the fishing industry.I believe that continuing to listen to the voices and needs from the field, even if they are minor, will lead to results.I think we can begin to see the path we should take by listening to the voices of employees in their 20s and 30s, learning what they want to do now and what kind of company they want Nichimo to be.I hope that our generation will take the lead in drawing a vision for the future of Nichimo that these young employees will carry, and then, once that vision is realized, we can pass the baton on to the next generation.
■ Akashi
That is a wonderful idea.Nichimo has many young employees who are very capable and full of potential.The Company needs to also invest more proactively in human capital in order to further increase the value of such human resources.Even some of those who are highly capable and have potential may lack sufficient motivation or a strong attitude toward their work.If the Company can inspire these employees, their abilities and passions will multiply and Nichimo will be able to become a company that can perform even better than it is now.
■ Aoki
I am always impressed with the vigorous energy that our young employees have.They are also good at maintaining relationships and building trust with people in local fishing industries.However, on the other hand, I feel that many employees are hesitant to adapt to change.As the market environment changes rapidly, I would like to see efforts made to change, even if only gradually, how they use their abundant horsepower.Of course, we managers will also work to encourage such efforts.
Strengthen horizontal collaboration between businesses to deliver valuable products to our many customers
■ Aoki
There are many issues that need to be resolved before handing over the reins to younger employees.Nichimo currently has four businesses, including the Marine Business.Each business has its own history and strengths, but it must be said that horizontal collaboration between the businesses is still weak.There are some projects where the Marine Business and the Food Business are working well together, such as the coho salmon aquaculture business that I have been involved in for a long time, but looking at the overall picture, there is still a long way to go.There are issues at the level of those in charge in the field, but I think another future issue is to set out clear policies at the management level.
■ Kikuchi
I can agree with what Mr. Aoki has identified.If the mentality of vertical divisions is strong, it is easy to miss out on cross-business opportunities or turn a blind eye to them.This would be a huge loss for the company.I believe that if Nichimo always seizes on marine-related business opportunities and each employee has the determination to contribute to the prosperity of the maritime nation of Japan, then both the organization and its people will become even stronger.I hope that Nichimo will become that kind of company in the future.
■ Hirata
Speaking from the perspective of an Outside Director, I would like more institutional investors to become aware of Nichimo’s appeal.For example, as part of our IR activities for overseas institutional investors, why not create an opportunity for them to pick up Nichimo’s products and try our marine products?Plant tours would also be a good idea.I’m sure overseas investors will also be interested in Japanese marine products and fish cuisine.
■ Aoki
I would like to express my deep gratitude to each of you Outside Directors for your kind advice.I once again feel that as the paradigm shift in the marine products industry progresses, Nichimo’s Marine Business also needs to change.Our customers are no longer just fishermen.From now on, we need to let more people know about the greatness of our company and our products.To achieve this, it is essential that we first contribute to our customers and society by providing valuable products that meet their needs.Doing so will increase Nichimo’s name recognition and brand value, and more people will turn their attention to our products.I will continue to work hard to create this kind of virtuous cycle.Thank you all for your time today.
Compliance
Basic views
The Group shall thoroughly comply with business ethics and social norms, such as legal compliance and matters prescribed in the “Nichimo Group’s Charter of Corporate Behavior,” and promote its “Compliance Program” in order to undertake its social mission as a company.
Compliance system
The Company has prescribed the “Nichimo Group’s Charter of Corporate Behavior” and the “Compliance Regulations,” which are based on the Company’s corporate philosophy, as the basis of the compliance system, distributes and raises awareness about them to the employees of all Group companies, and thoroughly carries them out throughout the Group, with the Board of Directors taking the initiative.Furthermore, the Company established the Compliance Committee chaired by the President, Representative Director, and operates it as an organization that maintains and promotes the “Compliance Program.”
Whistleblowing system
After establishing the “Whistleblowing System Regulations” in order to protect whistleblowers, the Company operates the whistleblowing system, with the officer in charge of compliance as the responsible person, as a system to promptly recognize organizational or individual fraud, illegal activities or unethical actions, and minimize and solve at an early stage the company crisis from illegal activities, etc.
Internal control
The Company’s internal controls are intended, through their initiatives, to result in increased operational efficiency and quality. In this way, we aim to ensure the legality and efficiency of business execution by the Board of Directors and to enhance the legal compliance of our financial reporting, and to conduct appropriate disclosure.Furthermore, to achieve the objectives of our internal controls, we have arranged our business processes to incorporate responses to six basic elements: “control environment,” “risk evaluation and response,” “control activities,” “information and communication,” “monitoring,” and “IT”; and we have established structures for ensuring that these business processes are reliably executed.
Risk Management
Basic views
The Group stipulates the “Regulations for Risk Countermeasures,” establishes basic countermeasures for crises and risks related to corporate management, and minimizes and solves at an early stage the risks that arise.Having established the Crisis Management Guidelines for the response in the event that problems occur, the Company will swiftly respond and establish a system that prevents the increase of losses in the event that unforeseen circumstances occur.
Business continuity plan (BCP)
The Company distributes and raises awareness about the BCP manual to all employees in the event of a disaster, and has established a system that allows confirmation and response at any time.
Furthermore, in the event of the spread of various infectious diseases or disasters, such as earthquakes, the Company establishes the Countermeasure Division, and ensures the safety of employees and carries out the response for business continuity in line with the manual.
Initiatives for food safety
With regard to food production, in addition to taking a leading role in ensuring that the Company responsibly provides products, the Food Quality Management Department establishes and thoroughly maintains and manages the quality control system, and carries out inspections at all the Group and partner plants in Japan and overseas.If the manufacturing lines of plants, management of employees, various bookkeeping, etc. do not satisfy the standards required by the Company, the Company will not be able to produce its products.As problems, such as contamination by foreign materials, will cause significant damage to business, the Company will identify the cause, apply an immediate remedy, and continue to thoroughly control quality and train employees.
Managing supply chain risks
The Group is presently exposed to various supply chain risks in its business domains.Geopolitical risks such as the impact of the protracted situation in Ukraine and heightened tensions in the Middle East, as well as drastic fluctuations in foreign exchange rates, are causing procurement difficulties and high prices for raw materials and energy. The Company has taken response measures, such as using a variety of purchasing channels, diversifying its procurement regions and implementing appropriate inventory management in response to risk.The Company also audits and revises the Group’s risk management system as needed.
Management of information security and system operations
The Group has established the Information Security Management Regulations and has prepared the information security systems necessary for safe and rational operation of information systems and protection of information assets such as personal information and company secrets.
We define information security as protecting information assets from threats and keeping them in a state where they can be managed appropriately and used with confidence, working to guarantee their “confidentiality,” “completeness,” and “availability.”
Furthermore, to ensure appropriate operation of the Group’s information systems, we have established the Information System Operation Committee, which is chaired by the Director in charge of the administrative section, and we have adopted a structure for appropriately revising, maintaining, and promoting regulations, organizations, and management structure, and so forth, related to information systems.
Initiatives for the climate change risks
As one of the specific initiatives for promoting sustainable management outlined in the Company’s Fiscal 2023 Medium-Term Management Plan, the Company recognized the issue of climate change as a key management issue, and declared its agreement with the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD) in April 2023.In addition, following the framework proposed by the TCFD, at the Internal Control Committee under the supervision of the Board of Directors, the Company is assessing the level of impact of the risks and opportunities that will be brought to the Group’s businesses by climate change in the future using the scenario analysis method.Going forward, we will expand these initiatives to include disclosure of the impact on the Company’s financial position. Please see here for details of the Company’s response to climate change (information disclosure based on the TCFD recommendations).