In recognition of the fact that reliable corporate governance is essential to the continuous creation of social value and the maximization of corporate value, NEC is committed to strengthening its corporate governance practices in terms of both oversight and execution through:

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.

Corporate Governance System

An overview of the NEC's corporate governance system is as follows:

NEC has adopted the structure of a “Company with a Nominating Committee, etc.” under the Companies Act of Japan. By clearly separating the oversight and execution functions, the Board of Directors strengthens its oversight function, while delegating substantial authority to Executive Officers to accelerate decision-making and business execution. In line with this, NEC also promotes strengthening governance on the execution side.

Corporate Governance System

Independence Criteria for Outside Directors

Oversight Function

Board of Directors

The Board of Directors is responsible for overseeing the execution of duties by Directors and Executive Officers as well as guiding the direction of management through deliberation of important matters related to NEC's basic management policy.

Nominating Committee

The Nominating Committee deliberates, from the perspective of objectivity, fairness and transparency, on matters concerning nomination of NEC's Officers (including the succession plan for the President), as well as on the contents of proposals to be submitted to the General Meeting of Shareholders concerning the election or dismissal of Directors.

Compensation Committee

The Compensation Committee deliberates, from the perspective of objectivity, fairness and transparency, on matters concerning the remuneration of NEC's Directors and Executive Officers, including the formulation of policies on remuneration, etc. for Directors and Executive Officers and the determination of the details of remuneration, etc. for each individual Director and Executive Officer.

Audit Committee

The Audit Committee audits the execution of duties by Executive Officers and Directors. The Audit Committee periodically reports the audit plan and audit results to the Board of Directors, and makes recommendations based on the audit results to the President.

Execution Function

Execution of Business by Executive Officers

Executive Officers are delegated by the Board of Directors to execute NEC's business execution. NEC promotes accelerated decision-making and business execution by delegating substantial authority to Executive Officers.

NEC has introduced Chief Officers to implement Group-wide strategies. Under the direction of the President, each Chief Officer is working to establish and operate the optimal management infrastructure for the NEC Group in the key Group-wide functional areas for which he or she is responsible.

NEC has established the Executive Committee, which is the highest level deliberative body on the execution side, as well as other committees which work in tandem with the Executive Committee in order to ensure high-quality decision-making in terms of both opportunities and risks. The Executive Committee, consisting of Executive Officers, including Presidents of each business unit and Chief Officers, deliberates on important matters related to the management of the NEC Group, such as management policies and strategies, and examines important business execution matters. Budget Progress Committee, Financial Strategy Committee, Business Strategy Committee, Investment Committee, and Critical Contract Risk Assessment Council, etc. conduct deliberations, etc., on their respective responsibilities in accordance with their roles and authorities and work in tandem with the Executive Committee.

Furthermore, NEC has established the company-wide risk management system centered on the Risk Control and Compliance Committee, in order to accurately recognize and respond to internal and external risks related to the NEC Group's business. The Risk Control and Compliance Committee deliberates fully on such matters of importance from a perspective of risk management, such as the strategy to control significant management risk, and the matters of particular importance are reported to the Executive Committee and the Board of Directors.

Group Internal Audit Department (Internal Auditing Division)

NEC has established the Group Internal Audit Department to conduct internal audits of NEC and its Group companies. The Group Internal Audit Department conducts audits to ensure legal, appropriate, and efficient business execution in the NEC Group, identifies problem areas, and makes recommendations for improvement. In addition, the Group Internal Audit Department cooperates with some subsidiaries that have their own internal auditing divisions by exchanging information to enhance the audits. There are approximately 90 staff members with expertise engaged in internal audits of the NEC Group.

Risk Management and Compliance Department (Compliance Division and Company-wide Risk Management Division)

NEC has established the Risk Management and Compliance Department as the Compliance Division and the Company-wide Risk Management Division. The Risk Management and Compliance Department has approximately 60 staff members, including those responsible for compliance promotion, company-wide risk management, and ensuring the appropriateness of financial reporting, etc.

Directors and Officers

Please refer to (i) NEC's overview of the Directors and Officers, (ii) reasons for nomination and attendance at meeting of outside directors etc. (iii) independence criteria for outside directors, and (iv) remuneration for Directors and Executive Officers.

Internal Control Systems

At its meeting held on June 22, 2023, the Board of Directors resolved to revise the "Basic Policy on Internal Control Systems."

NEC shall endeavor to establish and implement its internal control system more effectively, through continuous evaluation of the status of the establishment implementation of its internal control system under the Policy as well as taking measures necessary for its improvement, and conducting consistent reviews of the Policy responding to changes in the business environment.

Information Disclosure Structure

Basic Policy

NEC recognizes the importance of providing timely, proper and fair disclosure to obtain a fair evaluation of its corporate values from the capital markets and stipulates “Disclosure Policy.” NEC manages and discloses its information, such as information regarding business management and operation, in accordance with applicable laws and regulations, including the listing regulations of Tokyo Stock Exchange and fair disclosure rules under Financial Instruments and Exchange Act. NEC ensures the accuracy of the information to be disclosed and make sure that the disclosures are made in a timely, appropriate and fair manner.

Information Disclosure Structure

In order to ensure timely, appropriate and fair disclosure, NEC has established a communication structure for reporting material information among relevant divisions and subsidiaries.

In addition to establishing NEC's website targeted for individual investors and holding briefings for individual investors regularly, NEC makes efforts to enhance disclosure of corporate information on financial information, such as financial standing and operating results, and non-financial information, such as business strategies and business issues, risk, and governance on NEC's website, posting specific and clear corporate information on NEC's website (such as presentation materials used at briefings both in Japanese and English and video streaming) and strengthening global IR activities (including interviews with major overseas investors).

Adoption of Anti-Takeover Measures

NEC does not adopt anti-takeover measures.

NEC believes that the ultimate decision as to the person who should control the financial and business policy of NEC shall be made by the shareholders of NEC. However, in the event that a person or entity (the "Proposer") proposes to purchase the substantial number of the shares of NEC with an intent to control NEC or proposes the takeover of NEC, NEC believes it is the responsibilities of the Board of Directors (i) to request the Proposer to provide appropriate information on the reasonableness of the consideration and other conditions of the proposal and the influence such action may have on the management policy and business plan of NEC, (ii) to evaluate the information provided and consider whether such proposal has merit in promoting the corporate value of NEC and the common interest of the shareholders, and (iii) to express the opinion of NEC for purposes of assisting the shareholders to make decisions whether or not to accept the proposal. In addition, NEC believes that, in the particular circumstances, it may be required to negotiate with the Proposer or to present alternative proposals to the shareholders.

Currently, NEC has not adopted a policy of defensive measures that will become effective when a proposal is made by a Proposer. It is NEC's intention, however, that if (i) the sufficient information is not provided by the Proposer, (ii) the shareholders are not afforded the time sufficient to consider the proposal or (iii) NEC decides that the proposal would have an adverse effect on the corporate value of NEC or the common interest of the shareholders, NEC will decide and implement reasonable countermeasures that are practicable at the time of the proposal and acceptable to the shareholders.