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Corporate Governance
Our Policy and Approach
We believe that strengthening the system of corporate governance in accordance with the purposes of each principle of the "Corporate Governance Code" of the Tokyo Stock Exchange is an important management issue for maximizing corporate value while meeting the expectations of various stakeholders, including shareholders and other investors, as well as customers, business partners, and employees. Therefore, we are working to strengthen corporate governance based on our fundamental policies of ensuring sound management, executing appropriate decision-making and business activities, clarifying accountability, and maintaining thorough compliance.
NTT is implementing all the principles of the Corporate Governance Code it revised in June 2021.
A History of Strengthening Corporate Governance
Governance Reinforcement Policy
- Deployment of 10 directors (five independent directors, with a policy of 50% or more independent directors).
- Enhancing the auditor system by deploying five Audit & Supervisory Board Members, of which three are outside members, making up a majority.
- Implementing a policy to increase the ratio of female directors, corporate auditors, and executive officers to at least 30%.
- A Nomination Committee and a Compensation Committee, each consisting of five members (three members, being a majority, are outside independent Members of the Board) have been voluntarily established as preliminary deliberation organizations for the Board of Directors.
We are anticipating outside directors to provide a wide range of management perspectives and expert opinions, and internal and external directors are appointed by actively considering the promotion of diversity (gender, race, or ethnicity).
As a result, more than 30% of executives are women, and we are actively promoting diversity.
In order to enhance governance, executives including outside members of the board undergo regular training conducted by outside experts on various themes such as risk management.
At NTT, in accordance with the provisions of Article 10, paragraphs 1 and 2 of the Act on Nippon Telegraph and Telephone Corporation, etc., a foreign national cannot serve as a Representative Member of the Board, nor can foreign nationals constitute one-third or more of the Members of the Board or Audit & Supervisory Board Members. However, at the NTT DATA Group, which is in charge of global business, we have deployed foreign national directors: one at NTT DATA Group Corporation, and seven at NTT DATA, Inc.
Corporate Governance Structure
NTT believes that an auditing system based on Audit & Supervisory Board Members, including outside independent Audit & Supervisory Board Members, is an effective means of supervising management. Accordingly, we have adopted the model of being a company with a Board of Company Auditors (Audit & Supervisory Board).
In addition, through the election of outside independent Members of the Board, NTT has strengthened the function of appropriately supervising business execution.
Furthermore, through its adoption of an executive officer system, NTT intends to clearly separate management-related decision- making and supervisory functions from business execution functions and improve its management flexibility.
Additionally, NTT has voluntarily established a "Nomination Committee" and a "Compensation Committee," each of which consists of five Members of the Board, including three outside independent Members of the Board, to further increase the objectivity and transparency of decisions relating to appointment and compensation.
NTT has determined that governance functions based on a Board of Corporate Auditors (Audit & Supervisory Board) are sufficiently effective to achieve this purpose.
Governance Chart
| Committee name | Function |
|---|---|
| Board of Directors |
The Board of Directors has ten Members of the Board including five outside independent Members of the Board, which brings the total percentage of outside Members of the Board to 50%. In addition, the introduction of an executive officer system that clearly separates the management decision-making and oversight functions from the business execution function ensures closer supervision of execution and enhanced management flexibility. In principle, the ordinary meetings of the Board of Directors are held once per month, and extraordinary meetings are held as needed. The Board of Directors discusses the group management strategies and makes decisions on matters stipulated by laws and regulations and on important matters related to company management and group management. Moreover, through such means as periodic reports from Members of the Board and Executive Officers on the status of business execution, the Board of Directors supervises the business execution of Members of the Board and Executive Officers. With the objective of further strengthening the independence, objectivity, and accountability in decisions with respect to appointments and compensation of officers and related matters made by the Board of Directors, the Company has voluntarily established a Nomination Committee and Compensation Committee, each consisting of five Members of the Board, of which a majority (three) are outside independent Members of the Board, as preliminary review institutions of the Board of Directors, thereby increasing the effectiveness of governance. Moreover, in recognition of the fact that response to sustainability issues is an important management challenge, the Company has voluntarily established a Sustainability Committee that reports directly to the Board of Directors. The committee will work to further promote initiatives after important issues and indicators have been decided by resolution of the Board of Directors. |
| Audit & Supervisory Board | The Audit & Supervisory Board comprises four outside independent Audit & Supervisory Board Members (including one female member), who have experience and knowledge in a range of fields-as a lawyer, university professor, and Certified Public Accountant --and two internal Audit & Supervisory Board Members (including one female member). NTT conducts effective audits by combining the independence of outside Audit & Supervisory Board Members with the superior information collection capabilities of internal Audit & Supervisory Board Members. |
| Nomination Committee / Compensation Committee | With the objective of further strengthening independence, objectivity, and accountability in decisions made by the Board of Directors with respect to appointments and compensation of the Members of the Board and officers, the Company has voluntarily established a Nomination Committee and a Compensation Committee, each consisting of five Members of the Board, of which a majority (three) are Independent Outside Members of the Board, as preliminary review institutions of the Board of Directors, thereby increasing the effectiveness of governance. |
| Executive Officers Meeting | Important corporate matters to be decided are, in principle and in advance, discussed at the Executive Officers Meeting, which is made up of senior vice presidents and others. The Executive Officers Meeting is held about once a week. To improve the transparency of management decision-making, one Audit & Supervisory Board member participates in the Executive Officers Meeting. |
| Various Committees |
A number of committees have been established below the Executive Officers Meeting to discuss specific important business execution-related matters. Major committees include the Technology Strategy Committee, which deliberates on the Group's R&D vision and technology development strategy; the Investment Strategy Committee, which examines investment projects that are larger than a certain scale; and the Finance Strategy Committee, which discusses basic financial strategies and issues. These committees, which are held as necessary throughout the year, are in principle chaired by the president or a senior executive vice president and are attended by relevant senior vice presidents and other designated members. |
Evaluating the Effectiveness of the Board of Directors
The Board of Directors of the Company, which is a pure holding company, plays the role of monitoring the specific business operations of the Group companies based on the medium- to long-term business strategy of the entire Group.
The Board of Directors of the Company decides important items related to the Group's management that have passed the Executive Officers Meeting, which is made up of the Executive Officers and others, as well as the review of the various committees chaired by the President or a Senior Executive Vice President and attended by the relevant Executive Officers, while also monitoring the status of the execution of the duties of the individual Members of the Board and Executive Officers.
At meetings of the Board of Directors, based on the authority of the individual Members of the Board, current issues in group management and the initiatives being taken to resolve them are reported and reviewed, as well as initiatives for growing the business, such as investments and partnerships.
During the financial year, lively discussions were had, focusing on directions in which the NTT Group's business should head and future important initiatives such as the new medium-term management strategy "New Value Creation & Sustainability 2027 Powered by IOWN."
In addition to the advance explanations to independent Members of the Board of matters discussed at meetings of the Board of Directors, explanations of matters such as issues of immediate concern and the status of considerations were also given by the Chief Executive Officer. By striving to clarify the focus of execution of duties and the purpose of such initiatives, we are working to strengthen the supervisory function of the Board of Directors.
Furthermore, to allow the outside independent Members of the Board to more deeply understand the Company's business, meetings were held between the outside independent Members of the Board and representative Members of the Board to exchange ideas and opinions on the Company's management strategies, and they received explanations on topics such as the results of cutting-edge research by attending exhibitions and were introduced to talks using the latest ICT technology.
Additionally, ideas and opinions on issues in NTT Group management were exchanged between the outside independent Members of the Board and the Audit & Supervisory Board Members of the Company.
In these meetings, we received opinions on NTT's Board of Directors from the outside independent Members of the Board and the Audit & Supervisory Board Members that adequate information is provided and Members of the Board engage in active discussions, thereby ensuring the Board's effectiveness in their evaluation.
In addition, NTT implements an evaluation of the effectiveness of the Board of Directors annually for the purpose of strengthening the governance of the top management through continuous improvement of effectiveness of the Board of Directors.
During the fiscal year under review also, NTT implemented an evaluation of its effectiveness as the Board of Directors, with the support of a third-party organization, getting all Members of the Board and Audit & Supervisory Board Members to complete a questionnaire survey concerning the Board of Directors.
Questions were asked with regard to the role and responsibilities of the Board of Directors, its composition, its operation, and its satisfaction level. The results, which were compiled at the third-party organization, confirmed that the Board was sufficiently fulfilling its important role and responsibilities, with a majority of positive opinions for all the questions.
In addition, as a result of a dialogues held in order to reinvigorate strategic changes and the furtherance of discussions on the future business direction that should be taken by the NTT Group and material issues such as future important initiatives, positive opinions were received from all Directors, and the company has assessed this to mean that the efficacy of the Board of Directors has been ensured.
Breakdown of Board of Directors Resolutions and Reports
Succession Plan
With respect to successor candidates for the CEO position, we view it as important to secure successor candidates who can respond to technological innovation, market trends, and the speed of changes in the business environment. By securing the diversity of candidates through offering experience of a broad range of jobs and appointments to important posts, we are cultivating personnel for promotion who, in addition to possessing integrity and insight, are exceptionally well-suited to the times.
The decision regarding the appointment is made by the Board of Directors after it has been presented for deliberation to the Nomination Committee, a preliminary review institution of the Board of Directors, which consists of five Members of the Board including three outside independent Members of the Board.
For future management candidates, we select various people of any age, gender, or field of expertise. Through education at the NTT University, which was started as a program for developing management candidates, we target diverse people who are full of desire to lead our transformation.
Determination Policy and Process for Officer Compensation
Regarding the composition and level of compensation for Members of the Board of NTT under the Determination Policy, in order to secure objectivity and transparency, NTT established the Compensation Committee, comprising five Members of the Board, including three Independent Outside Members of the Board. Moreover, decisions on the ratios and calculation methods for compensation for Members of the Board, and amounts of compensation for individual Members, are delegated from the Board of Directors to the Compensation Committee. The reason for delegating these authorities to the Compensation Committee is that such committee is composed of two Representative Members of the Board and three Outside Members of the Board, and we believe that it is able to make the appropriate judgements from an outside perspective while also taking a bird's-eye view of the Company's overall performance.
Compensation of individual Members of the Board (excluding outside Members of the Board) consists of a monthly salary (base salary) and a bonus (compensation related to performance over the short term), NTT stock purchase through Board Members Shareholding Association and stock compensation (compensation related to performance over the medium to long term). The composition ratio of compensation in a case where standard business results are achieved is roughly as follows: Fixed compensation: Short-term performance-linked compensation: Medium- to long-term performance-linked compensation = 50%: 30%: 20%.
From fiscal 2023, managerial bonuses will be calculated based on performance indicators, as also applies to officers.
Bonus Performance Indicators (FY2024)
Clawbacks System
A performance-linked stock compensation system was adopted in fiscal 2021 for members of the board and officers of NTT and its major subsidiaries. A system has been established such that, in the event that an Eligible Member of the Board or Officer engages in significant illegal or inappropriate activity, or takes employment at another company in the same industry without the permission of the company, the system enables the revocation of rights to receive Company Shares under the Compensation System with respect to such person (malus clause) and the request for the return of funds corresponding to previously delivered Company Shares (clawback).
Governance
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