Fundamental Reform of Internal Controls, Governance and Corporate Culture

「The appointment and dismissal of directors and executive officers at the company are handled by the statutory Nominating Committee, whose chair is an independent outside director and a majority of whose members are outside directors, in order to ensure independence from major shareholders. The committee determines proposals for the appointment and dismissal of directors and approves proposals for the appointment and dismissal of executive officers, among other matters.」

「As of the date of submission of this Annual Securities Report, the Board of Directors comprised 12 directors (Chairman of the Board and Outside Director Hiraku Tomofumi (平工 奉文), chair; Director Kato Takao (加藤 隆雄); Director Inada Hitoshi (稲田 仁士); Outside Director Miyanaga Shunichi (宮永 俊一); Outside Director Koda Mao (幸田 真音); Outside Director Sasae Kenichiro (佐々江 賢一郎); Outside Director Sakamoto Hideyuki (坂本 秀行); Outside Director Nakamura Yoshihiko (中村 嘉彦); Outside Director Tagawa Joji (田川 丈二); Outside Director Kakiuchi Takehiko (垣内 威彦); Outside Director Mike Kanetsugu (三毛 兼承); and Outside Director Ogushi Junko (大串 淳子)). Of the 12 directors, 10 were outside directors with extensive experience and high levels of expertise, and 5 of the outside directors (Hiraku Tomofumi (平工 奉文), Koda Mao (幸田 真音), Sasae Kenichiro (佐々江 賢一郎), Nakamura Yoshihiko (中村 嘉彦), and Ogushi Junko (大串 淳子)) were independent outside directors.」

「Based on revisions to ministerial ordinances, including the Ordinance for Enforcement of the Regulation for Vehicle Type Designation, which took effect in April 2026, we have begun establishing and implementing a system of operational responsibility and evaluation for strengthening and thoroughly enforcing internal controls over certification operations. This includes “stating compliance with laws and regulations in management policy,” “clarifying the responsibilities of the head of certification operations and others,” and “evaluating and reporting on the status of internal control implementation.”」

「During the fiscal year, we conducted interviews to gain a deeper understanding of the series of business processes related to the Road Transport Vehicle Act, one of the most important laws in the automotive business.」

「As of 21 June 2024, the Board of Directors comprised 13 directors (Chairman of the Board and Outside Director Hiraku Tomofumi (平工 奉文), chair; Director Kato Takao (加藤 隆雄); Director Inada Hitoshi (稲田 仁士); Outside Director Miyanaga Shunichi (宮永 俊一); Outside Director Koda Mao (幸田 真音); Outside Director Sasae Kenichiro (佐々江 賢一郎); Outside Director Sakamoto Hideyuki (坂本 秀行); Outside Director Nakamura Yoshihiko (中村 嘉彦); Outside Director Tagawa Joji (田川 丈二); Outside Director Ikushima Takehiko (幾島 剛彦); Outside Director Kakiuchi Takehiko (垣内 威彦); Outside Director Mike Kanetsugu (三毛 兼承); and Outside Director Ogushi Junko (大串 淳子)). Of the 13 directors, 11 were outside directors with extensive experience and high levels of expertise, and 5 of the outside directors (Hiraku Tomofumi (平工 奉文), Koda Mao (幸田 真音), Sasae Kenichiro (佐々江 賢一郎), Nakamura Yoshihiko (中村 嘉彦), and Ogushi Junko (大串 淳子)) were independent outside directors.」

「Through 3 risk management activities, namely priority risk management, divisional risk management, and affiliated-company risk management, we are establishing and improving the Group-wide risk management system.」

「Effective 21 June 2019, as part of further strengthening corporate governance, we transitioned to a company with a nominating committee, etc., to clearly separate oversight from execution, further strengthen oversight and thoroughly implement crisis management to ensure sound and transparent management, and achieve agile business execution that responds quickly to changes in the environment.」

「Effective 1 April 2018, we reformed the organisation by abolishing the 4 executive officers under the COO and placing an officer in charge at the head of each function, with each officer reporting directly to the CEO or COO, in order to further flatten the organisation, simplify its hierarchy, accelerate decision-making and facilitate communication.」

「Going forward, we will continue to make compliance our top priority and work to fundamentally reform and strengthen our internal control and governance systems, including through the use of IT, while making unremitting efforts to regain the trust of our customers and society as soon as possible.」

「First, to facilitate communication and accelerate decision-making, we placed 4 functional executive officers (CPLO, CCO, CPO and CFO) under the COO, reorganised the former pyramid-shaped organisation along functional lines, and flattened the organisation and simplified its hierarchy. To improve the efficiency of decision-making and clarify responsibilities, we changed the recipient of authority delegated by the Board of Directors from the Management Committee to the CEO, positioned the Management Committee as an advisory body to the CEO, and established detailed rules governing the delegation of authority at each level. In addition, we appointed an executive officer responsible for global risk control to manage compliance and operational risks and regularly report measures to improve governance to the Board of Directors.」

「Following the election at the extraordinary general meeting of shareholders held on 14 December 2016, we will transition to a new management structure. As part of management reform, we will also substantially reorganise the company's organisation effective 1 January 2017, fundamentally review business processes by clarifying responsibilities and authority and accelerating decision-making, strengthen employee training, and pursue internal reforms with an unwavering resolve.」

「The Company is treating this matter as its highest priority. It disclosed 23 measures to prevent recurrence on 17 June and announced 8 additional measures on 30 September. The Company intends to implement these measures as appropriate by April 2017.」

「As misconduct, including the misconduct in fuel-economy testing, occurred mainly in the development division, we will receive personnel and technical support from Nissan Motor, including the dispatch of the head of the development division, and pursue reform of that division. At the same time, we will fundamentally review our organisational structure and business processes, strengthen employee training, and pursue internal reforms with an unwavering resolve.」

「We will fundamentally review our organisational structure and business processes, strengthen employee training, and pursue internal reforms with an unwavering resolve.」