Overview

NEC has adopted the company with the Audit & Supervisory Board Members (KANSAYAKU) ("A&SBMs"), as illustrated in the chart below.

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NEC has introduced a corporate officer system to separate management supervision from business execution and expedite business execution based on prompt decision-making. This has involved delegating substantial authority for business execution from the Board of Directors to corporate officers. NEC has also been strengthening the supervisory functions of the Board of Directors by ensuring that 5 of the 11 Directors are Outside Directors. Furthermore, NEC has been working to improve transparency of personnel matters of Directors and A&SBMs and remuneration of Directors and corporate officers by making decisions on such matters based on the results of discussions by the Nomination and Compensation Committee. NEC has also put in place personnel and systems to reinforce the functions of the A&SBMs' audit, while encouraging closer cooperation among NEC's A&SBMs, internal auditing division and accounting auditors. NEC has formulated a company-wide strategy for realizing the NEC Group Vision, and in July 2011, NEC introduced chief officers to strengthen a company-wide strategy for realizing the "NEC Group Vision". In April 2017, NEC extended the authority delegated to the chief officers in order to strengthen the corporate functions and accelerate the speed of decision making.

NEC believes that its corporate governance is functioning adequately under the current system described above. However, NEC is focusing its efforts on enhancements and improvements of this system in order to realize more effective corporate governance responding to changes in the business environment.

NEC adopted NEC Corporate Governance Guidelines, which set out the basic framework and policy of the corporate governance system of NEC to help strengthen relationship with its stakeholders, thereby contributing to its sustainable growth and the increase of its corporate value.

NEC's activities regarding Japan's "Corporate Governance Code" that entered into force in June 2015 are described in the Corporate Governance Report and NEC Corporate Governance Guidelines.

NEC stipulates in its Articles of Incorporation that the number of Directors shall be no more than 20, and that the quorum required for a resolution on the election of Directors shall be one-third of all the voting rights of the shareholders entitled to exercise their voting rights. NEC also stipulates in its Articles of Incorporation that it may determine matters provided for in each item of Paragraph 1, Article 459 of the Companies Act by a resolution of the Board of Directors unless otherwise provided by the relevant laws and regulations, in order to conduct the distribution of surplus and acquisition of NEC's shares and other matters expeditiously. Furthermore, NEC stipulates in its Articles of Incorporation that the quorum required for a resolution by the General Meetings of Shareholders, as stipulated in Paragraph 2, Article 309 of the Companies Act, shall be one-third of all the voting rights of the shareholders entitled to exercise their voting rights. This is to ensure the smooth operation of the General Meetings of Shareholders.