Introduction

Strategies for Value Creation

Foundation for Value Creation

Material issues (V)Pursuit of corporate governance that
supports improved corporate value

Financial/Corporate Data

Our initiatives▶Improved effectiveness of corporate

governance▶Respect for human rights▶Thorough compliance▶Enhancement of risk management

Improved effectiveness of corporate governance

To practice CSV management, we have engaged in numerous dialogues from the perspectives of our stakeholders, including
shareholders, members of the local community, customers and employees. At the same time, we have been monitoring andsupervising management from a medium- to long-term perspective in an effort to reform the management structure.

Corporate governance system

In addition to general shareholder meetings, we haveinstituted a Board of Directors, a Board of Corporate
Auditors and an Accounting Auditor under the Companies
Act. We have also introduced an executive officer system toaccelerate decision-making, and the Board of Directors
supervises and monitors them.
History of corporate governance improvements
Jun. 2004 Implemented executive officer system
Mar. 2010 Elected one independent director

Jul. 2011 Added one independent director for a total of two
Apr. 2012 Established voluntary Compensation Committee
Nov. 2018

Established voluntary Election andCompensation Committee

Jun. 2021 Added one independent director for a total of three

Board of Directors

Five out of NEC Capital Solutions’ nine directors areoutside directors. Meetings of the Board of Directors are
regularly held once a month, with extraordinary meetings
held when necessary. In addition to making decisions onimportant matters concerning issues prescribed by laws
and regulations, the Articles of Incorporation, and otherrules, the Board of Directors monitors the state of businessexecution by directors by receiving various reports, suchas the amount of risk faced by the Group and the results ofinternal audits. In the fiscal year ended March 31, 2023, theBoard of Directors held 14 meetings to discuss and passresolutions to determine the issues, including the policyof investment and loan projects considered importantto our business strategies, establish the Human Rights
Policy, and set a new Group vision and Medium-term Plan.
Furthermore, three of the outside directors are independent
with no interests in the Group or major shareholders, andno risk of conflicts of interest with general shareholders.
Their names are submitted as independent directors inaccordance with the Tokyo Stock Exchange’s stipulations.
We expect our outside directors to play roles of providing
advice concerning all aspects of corporate management
based on their deep insights and extensive experienceand of being involved in decision-making at the Board of
Directors to ensure its appropriateness and fairness.

Corporate auditing system

Four Corporate Auditors (three of which are outside
Corporate Auditors) hold regular meetings of the Board of
Corporate Auditors to discuss auditing activities based on
the auditing plan and management information.
Along with attending important internal meetings
that include meetings of the Board of Directors andManagement Conference, Corporate Auditors holdconferences once a month with the President of NEC
Capital Solutions to discuss important auditing issues,
problems the Company needs to address, and progress
made in developing an environment for auditing, inaddition to gathering direct feedback from directors andemployees regarding the execution of business.
The Auditing Department provides specific advice andrecommendations regarding the improvement of business
operations through internal audits, offers guidance on thedevelopment and operation of the internal control system,and evaluates its operation.

Assessment of the effectiveness of the Boardof Directors

Analysis and assessment of the effectiveness of the Board of
Directors are conducted once a year at the Board of Directors
meeting to improve its function. NEC Capital Solutions
conducted a survey through an outside agency for all
directors and Corporate Auditors in January 2023. According
to the survey findings, the Board of Directors’ Office
separately conducted interviews with independent outside
directors to obtain their opinions. Opinions were gathered
at a Management Roundtable comprising all directors andCorporate Auditors in light of the findings mentioned above
and from the perspectives specified below, and analyses,
discussion, and assessment were conducted.
1

Supervision of the management by the Board of Directors

3

Strategic orientation of the management by the Board of
Directors

2

4

Appropriate Board composition

Ensured discussion opportunities for the Board of
Directors

NEC Capital Solutions Limited Integrated Report 2023 32

Pursuit of corporate governance that supports improved corporate value

We assessed that the Board of Directors was sufficiently

boosting corporate value and shareholder value.

of Directors” and “2. Appropriate Board composition” theBoard of Directors assessed that it consists of a diverse
range of officers with the necessary skill sets, sharesnecessary information in an appropriate manner, andfunctionally supervise the management. As for “3. Strategicorientation of the management by the Board of Directors”
and “4. Ensured discussion opportunities for the Board of
Directors” the Company held a Management Roundtable
to freely exchange opinions on important management
issues, and enhanced the advance briefings on proposals
given to outside directors. In addition, the Board of
Directors set agendas with an eye on strategies of the newGroup vision and the Medium-term Plan, thereby ensuring
discussions for strategic orientation of the management.
Going forward, the Company will continue to work to
improve the effectiveness of the Board of Directors andincrease its corporate value over the medium- to long-termby steadily following up on the Medium-term Plan with theaim of realizing our Group vision, which is to “Be a solution
company leading the next-generation circular economy.”of business execution comprises the supervisorycompensation for their supervisory function and theexecutive compensation for their executive function,and the executive compensation consists of the basecompensation, the performance compensation (bonus)
and the share compensation. The ratio between the fixedcompensation and the performance-linked compensationin the case of standard performance is roughly set at 60:40.
The performance-linked compensation was determinedaccording to the consolidated profit and the level ofachievement against the personal key performanceindicator (KPI) targets for resolving medium- and longterm issues in their areas of charge. This was meant tospur directors to commit to our short-, medium-, andlong-term management objectives. Starting from thefiscal year ending March 31, 2024, ROA and ESG-related
indicators have been newly added to evaluation factors,
such as responses to environmental and social issues
including initiatives for carbon neutrality and employee
engagement scores. Performance-linked compensation
will also be based on the extent to which these targets
have been achieved. The compensation for outside
directors and Corporate Auditors is composed solelyof fixed compensation, and is not linked to company
performance in consideration of their roles. The amountof compensation for Corporate Auditors is determinedthrough deliberations among the Corporate Auditors.

Director compensation

At the Company, the Election and Compensation
Committee, a majority of which comprises independent
outside directors, discusses a policy on the determinationof details about compensation for individual directors andrefers it to the Board of Directors for a decision.
We design a system for directors’ compensation to suit theobjectives of securing and retaining competent personnel
who practice our corporate philosophy and of motivating

The compensation for any director playing a role

Directors

Election/
Dismissal/
Supervision＝Outside directors

General Shareholders’ Meeting

Election/Dismissal

Board of Directors Outside directors
5＝Internal directors

9

Audit

Corporate Board ofAuditors Corporate
Auditors

Election and Compensation Committee

Executive Officers

Sales and staff departments

3

4

Cooperation

President

Management Conference

Outsidedirectors

Auditing Department
Internal audit

Foundation for Value Creation

Financial/Corporate Data

Directors● Directors (as of the end of June 2023)

Masaaki Suganuma

Masamitsu Kisaki

Representative Director

Director

Director

Director

Director

Representative Director and President

Takashi Nawa*
OutsideIndependent

Professor of Hitotsubashi University
Business School, School ofInternational Corporate Strategy

Takako Hagiwara*
OutsideIndependent

Representative Director of DDD
Corporation

For more information, please visit:https://www.necap.co.jp/csv/governance/index.html(available in Japanese only)● Corporate governance system schematic diagram(as of the end of June 2023)
Election/Dismissal

Strategies for Value Creation

directors to play the roles expected of them in continuously

effective during the fiscal year ended March 31, 2023.

As for “1. Supervision of the management by the Board

33

Introduction

Director

Satoshi Okubo
OutsideManager of Group Business
Management and Transformation
Department, Strategy Division, NEC
Corporation

Director

Shigeki Fujita
OutsideTakashi Arai

Director

Yuichi Tsukada

Asako Yamagami*
OutsideIndependent

Partner, ITN Partners Attorney at
law admitted in JapanFor their biography, please visit:
Notice of the Convocation of the 53rd Ordinary General
Meeting of Shareholders (Japanese only)
https://www.necap.co.jp/ir/shareinfo/pdf/20230530e.pdf

General Manager of Public
Solutions Planning Department,
NEC Corporation*Mr. Takashi Nawa, Ms. Takako Hagiwara, and Ms. Asako Yamagami
are independent directors in accordance with the Tokyo Stock
Exchange’s stipulations.

Corporate Auditor (Full-time)

Corporate Auditor● Corporate Auditors (as of the end of June 2023)

Cooperation
Accounting
Audit

Election/
Dismissal

Accounting Auditor

Cooperation

Corporate Auditor (Full-time)

Yoshiyuki Koizumi

Hiroshi Komazaki
OutsideTatsuya Oyama
OutsideGeneral Manager, Head of Corporate
Accounting & Global Finance, Corporate
Accounting & Global Finance Department,
Finance Division, NEC Corporation

Corporate Auditor

Shigetoshi Yokomizo
OutsideSenior Manager, IT Service Solution
FP and A Group, IT Services FP and A
Department, Finance Division, NEC
Corporation

NEC Capital Solutions Limited Integrated Report 2023 34

Pursuit of corporate governance that supports improved corporate value

Introduction

Skills matrix

Name

Masaaki Suganuma

Corporate
Legal affairs Human
Finance,Financialmanage- CSV, ESG
and risk
resources
accounting
industry
Gender ment
management strategy

GlobalMale○○

Masamitsu Kisaki

Male

○

○

○

Takashi Arai

Male

○

○

Yuichi Tsukada

Male

○

○

Takashi Nawa

Male

○

○

○

○

Takako Hagiwara

Female○○○○Asako Yamagami

FemaleSatoshi Okubo

Male

○

○

Shigeki Fujita

Male

○

○

= Outside= Independent director○

Message from outside director

Partner, ITN Partners Attorney at law
admitted in Japan

Asako Yamagami

Looking back on the past year from the perspective ofcorporate governance, the highlight was the formulation of
the Group Vision 2030 and Medium-term Plan 2025. Basedon the fact that CSV management, which the Company
established ahead of the rest of the industry in theprevious Group Vision formulated in 2013, has taken holdover the past decade, the Board of Directors repeatedly
deliberated on the form of approaching “next-generation
circular economy” and the strategic direction that should
be taken to provide unique solutions that will lead to a
virtuous circle for the environment and growth.
The Medium-term Plan 2025, which represents the firststep toward realizing this, aims to improve profitability
and accelerate the pursuit of sustainability management
through the realization of a next-generation circular

35

ICT

○

○
○

○
○

○

○

Financial/Corporate Data

Under our corporate philosophy of “Helping Societies Advance through ‘Capital Solutions,’” the NEC Capital Solutions
Group recognizes that respect for human rights is an important issue for management. We will therefore fulfill oursocial responsibility by implementing initiatives to respect human rights throughout the Group.

Businessdevelopment

○

○

○

○

○

○

Foundation for Value Creation

Respect for human rights

We identify skills that the Board of Directors should have in light of our management philosophy and ensure that thecomposition of directors is well-balanced as a whole in terms of knowledge, experience and skills.
Knowledge, experience and skills

Strategies for Value Creation○○○

economy. The Company has also set non-financial
indicators, such as the promotion of DE&I and measuresto achieve carbon neutrality. At the same time, regarding
the policy for determining compensation for directors,
the Company has clarified the standards for calculating
performance compensation and added progress made on
environmental and social issues as well as engagementscores to the calculation standards, thereby increasing thetransparency of the process for determining compensationand making it possible to objectively evaluate the statusof progress on sustainability goals. Moreover, the risk
management system has been refined, and progress has
been made toward the creation of an environment that
supports appropriate risk-taking by the management
team. With the progress in the effectiveness of the Board of
Directors and timely reports by the Board of Corporate
Auditors being made on the status of initiatives and issues
related to the Medium-term Plan, I am committed toengage in discussions that incorporate theperspectives of a wide range of stakeholders in order toappropriately monitor the process of realization of theGroup Vision.

Human Rights Policy

In December 2022, we established the NEC Capital
Solutions Group’s Human Rights Policy through approvalof the Board of Directors. This policy is based on the United
Nations’ “Guiding Principles on Business and Human
Rights*.”This policy applies to all directors and employees of the
NEC Capital Solutions Group. We will also work with ourcustomers, business partners, and suppliers to ensure theirunderstanding of this policy and to encourage their efforts
to respect human rights. We will also continuously review
this policy and our measures to respect human rights
based on this policy, and update and revise it as necessary.
* Guiding Principles on Business and Human Rights: A global standard
approved by the UN Human Rights Council in 2011. A set of principles
that embody the UN framework on business and human rights.

Human rights education

In order to ensure that all directors and employees of
the Group understand the necessity and importance ofrespect for human rights and execute operations properly
according to the provisions of the NEC Capital Solutions
Human Rights Policy, we perform human rights education
and all directors and employees, including temporary
workers, of the Group receive the education.

Hotline to consult and report on human rights(complaint mechanism)

The Company has put a complaint mechanism in place toaddress and remedy any adverse impact on human rights.
We have established and operate a whistle-blowing system(hotline) for all Group employees.
For more information, please visit:https://www.necap.co.jp/csv/humanrights.html(available in Japanese only)

Thorough compliance

The Company strives to ensure thorough compliance as a business operator engaged in the money lending businessand type II financial instruments business. In addition to establishing a Code of Conduct, we have also prepared thenecessary training and frameworks/systems as part of efforts to constantly improve the awareness of business ethics
and compliance among officers and employees in our Group.

Code of Conduct

The Group established the NEC Capital Solutions Group
Code of Conduct which stipulates that all directors andemployees are required to comply with relevant laws andregulations in their daily business activities and to takeaction consistent with social ethics. The Code of Conduct● Basic Position

1
2

consists of seven chapters: General Provisions; Respectfor Human Rights; Our Relationship with Society; Our
Relationship with Customers and Business Partners;
Our Relationship with Shareholders and Investors;
Management of Company Assets and Information; andOperating Systems.

WE will comply with all applicable laws, rules, regulations, and in-house regulations, etc., including this Code, in every
aspect of our corporate activities at all times. WE will strive to ensure that all corporate activities are in compliance withnormal business practices and social ethics.
WE will maintain impartial, fair, and open relationships with all the stakeholders of our company and will conductbusiness in a fair manner with them.

3

WE will not take any action pursuing our personal or a third party’s interests against our company’s legitimate interests.

5

WE will establish an effective internal control system and implement it.

46
7

WE will not carry out any actions whatsoever that may damage the NEC Capital Solutions Group’s social trust or honor.
WE will accurately and fairly maintain all accounting and other records in accordance with applicable laws, rules,
regulations, and in-house regulations, and properly execute our duties. WE will not carry out any unlawful accounting
transactions or actions that may cause losses to the NEC Capital Solutions Group.

With an awareness of our position as a member of society, WE will always act in accordance with a good social consciencebased on high moral and ethical standards.

NEC Capital Solutions Limited Integrated Report 2023 36

Pursuit of corporate governance that supports improved corporate value

Compliance promotion system

At the quarterly Internal Control Committee, the initiativesof each group company are controlled in a cross-sectionalmanner.
Our regular compliance auditing consists of internal
audits by the Auditing Department on the status of theCompany’s compliance to laws and regulations, theArticles of Incorporation and various rules.

Compliance education

In order to ensure that all directors and employees of
the Group understand the necessity and importance ofcompliance as the basis of all our business activities andexecute operations properly according to the provisions of
the NEC Capital Solutions Code of Conduct, we conduct
compliance training annually, and all directors andemployees, including temporary workers, of the Group
receive the training.
See ▶P.43-44 for change in the compliance training
participation rate

Whistle-blowing system

The Company has an external whistle-blowing hotline
where any employee having discovered improper activities
can report anonymously. Measures are in place to ensurethat whistle blowers are not treated disadvantageously.
The whistle-blowing system may be used by all directors
and employees of the Group, including those of overseas
group companies.

Basic policy on exclusion of antisocial forces

We believe that excluding antisocial forces that threaten
the order and security of civil society is an important
issue for society overall. As a corporate group with social
responsibilities, we established a basic policy on antisocial
forces, and set up a system to realize this policy.
For more information, please visit:https://www.necap.co.jp/csv/governance/compliance.html(available in Japanese only)

Information security

We provide the appropriate security countermeasuresfor our information systems, for information we obtained
individually, and for information provided to us by ourcustomers and clients. We thereby aim to maintain soundcorporate activities and organizational management to betrusted by our customers and clients.

Fundamental Information Security Policy

Strategies for Value Creationof various points of operations.

3. Our group shall continue to provide education necessary
to ensure information security.

Approach to risk management

2. Our group shall establish and implement internal rules
for information security.

4. Our group makes every effort to take appropriate human,organizational, and technical measures to ensure that
there will be no illegal intrusions, information leaks,
falsification, loss, robbery, destruction, and interference ofuse, etc. in information systems and information assets.

5. In the event of an information security problem, ourgroup makes every effort to immediately investigate
the causes of the problem, minimize the damage andprevent the recurrence of such an incident.

6. Our group shall comply with laws and other social norms
relating to information security.
7. Our group stipulates the following as basic policy forcontrolling information assets.

(I) We only obtain and retain the information necessary
for our business operation.
(II) Information is disclosed only to those who need it.
(III) Authorization of access to information is limited tothe minimum need for our business operation.

8. Our group makes every effort to continuously review andimprove the above-mentioned items.

Initiatives for improving information security

In 2006, we acquired ISO/IEC 27001 certification and we
strive to maintain and improve the level of information
security accordingly. The Company offers information
security education to all officers andemployees, including temporary
workers, of our Group each year. For
mid-career recruits and temporary
workers, we offer information security
education as soon as they join us toraise their awareness.
JQA-IM0333
See ▶P.43-44 for change in the information security
training participation rate

Efforts to protect personal information

To appropriately protect the personal information ofcustomers, we established the “Personal Information
Protection Policy” and handle information in accordancewith this policy. In 2020, we acquired the PrivacyMarkby establishing a personal information protection
management system, conforming with JISQ 15001:
Personal information protection management systems requirements.

Foundation for Value Creation

Financial/Corporate Data

Enhancement of risk management

1. Our group makes every effort to establish an information
security system and control information assets
appropriately.

For more information, please visit:https://www.necap.co.jp/csv/governance/security.html(available in Japanese only)

37

Introduction

We appropriately manage the diverse risks involved in business development by identifying the risks and opportunities

The objective of risk management, as we define it, is toensure the Company’s survival and improve corporate
value for stakeholders.
Taking on some degree of risk is necessary in ourbusiness, but the materialization of the risks could resultin losses on our financial statements and could requirecompensation and reparations. It invites a loss of publictrust in the Company, which could have a major impact
on our survival. We practice risk management by clarifying
and controlling our risk tolerance, thus enhancing our
relationship of trust with stakeholders.

Risk management system

We make every effort to recognize the risks that emerge
in the course of business execution, assessing themaccording to uniform criteria. We then carry out integrativerisk management and operation while maintaining
management stability and striving to maximize
shareholder value.
We strive to prevent and avoid risks that may
significantly impact our business activities through various
meeting bodies. We also have a system in place to reportsuch risks to the Board of Directors or the Management
Conference based on the degree of importance. We haveestablished a governance system that, in the event thatrisks are expected to arise, enables prompt consultation
with the Management Conference or Board of Directors on
the policies set by the respective meeting body, enabling
an immediate response. The main meeting bodies fordeliberating risk management are as follows.
Main meeting bodies
for deliberating risk
management

Risks to manage

Risk Management
Committee

Risks related to credit, and ERM(credit, market, and operation)

Internal Control
Committee

Risks related to internal control
and compliance

ALM Committee

Risks related to interest
rates, funding, income andexpenditure management,
foreign currency, and liquidity

Business Continuity Plan (BCP)The Company has formulated BCP as one of its mostimportant management issues and has reinforced systems
for operating and improving BCP.
Our BCP Action guidelines are as follows.
BCP Action guidelines(I) Surely protecting the lives and safety of
employees and visitors(II) Fulfilling social responsibilities as afinancial company(III) Minimizing management damage

Systems for operation and improvement● Formulation of the “Disaster Control and BusinessContinuity Concept”▶Clarified guidelines to enable employees to act
according to their own judgement in the event of adisaster, set specific actions to be handled by the
emergency headquarters and the business continuity
headquarters, etc.

● Training to foster awarenessThe emergency headquarters, established in February2020 as part of efforts to tackle the COVID-19 pandemic,has ended its activities as COVID-19 was reclassified as aClass 5 infectious disease in May 2023.
In the event of a major earthquake or a similar disaster,
the above mentioned Action guidelines are followed inoperations for the fast restoration of operations and thecontinuity of the business.
For more information, please visit:https://www.necap.co.jp/csv/governance/riskmanagement.html(available in Japanese only)

Sustainability Committee Climate-related risks

NEC Capital Solutions Limited Integrated Report 2023 38