Strengthening the Management Foundation(Gavernance) [PDF:780KB]

Strengthening the Management Foundation	Nippon Yusen Kabushiki Kaisha NYK Report 2024

Directors (As as of June 19, 2024)

62 - 63

Eiichi Takahashi

Hiroshi Nakaso

Eiichi Tanabe

Keiko Kosugi

Akira Kono

Hitoshi Nagasawa

Takaya Soga

Yutaka Higurashi

Nobukatsu Kanehara

Tatsumi Yamada

Satoko Shisai

Satoko Kuwabara

Director,

Outside Director,

Chief Outside Director,

Director,

Representative Director,

Chairman, Director

President,

Director,

Outside Director,

Outside Director,

Outside Director,

Outside Director,

Audit & Supervisory

Audit & Supervisory

Independent Director

Audit & Supervisory

Executive Vice-President

Representative Director,

Senior Managing

Independent Director

Audit & Supervisory

Independent Director

Audit & Supervisory

Committee Member

Committee Member,

Committee Member

Executive Officer

President and

Executive Officer

Committee Member,

Committee Member,

Independent Director

Chief Executive Officer

Independent Director

Independent Director

Strengthening the Management Foundation

From left:

Hitoshi Nagasawa

Chairman, Director

Eiichi Tanabe

Chief Outside Director,

Independent Director

Hiroshi Nakaso

Outside Director,

Audit & Supervisory

Committee Member,

Independent Director

Satoko Kuwabara

Outside Director,

Audit & Supervisory

Committee Member,

Independent Director

Discussion with Outside Directors and Institutional Investors

Corporate Value Enhancement through Stronger Governance

The NYK Group is changing its organizational design to enhance the effectiveness of the Board of Directors and

strengthen its monitoring capabilities.

As the Board of Directors transitions from a management model to a monitoring model, we held a discussion,

which included institutional investors, on how best to increase corporate value. (The discussion was held in July 2024.)

From left:

Toru Terasawa

Asset Management One Co., Ltd.

Hiroharu Fukasawa

Nomura Asset Management Co., Ltd.

Akitsugu Era

BlackRock Japan Co., Ltd.

Yuuichi Tezuka

Sumitomo Mitsui Trust

Asset Management

Co., Ltd.

Kazuyuki Mitsuhashi

Mitsubishi UFJ

Trust and Banking

Corporation

Evaluation of the Year Since Transitioning to a Company with Audit and Supervisory Committee Governance System

NagasawaFollowing a resolution by the Ordinary General Meeting of Shareholders held in June 2023, we transitioned from a company with board of company auditors governance system to a company with audit and supervisory committee governance system. We implemented the transition to expedite decision-making by enhancing the effectiveness of the Board of Directors and strengthening its monitoring capabilities. We have also put systems in place to ensure that the Board is able to have fuller discussions within the limited time available. These systems include briefings that explain important matters to outside directors as well as prior briefings that provide them with explanations on matters to be discussed at the Board meetings.

In fiscal 2023, the Board of Directors discussed capital policy, the Company's human resource strategy, and the NYK Group ESG Story and reviewed the medium-term management plan. I believe that in improving the effectiveness of the Board, the type of agendas set is as crucial as the substance of discussions.

KuwabaraThe main goal of the transition to a company with audit and supervisory committee governance system is to move from a management model to a monitoring model. Until now, under the company with board of company auditors governance system, for example, many individual ship investment projects required resolutions of the Board. A considerable amount of effort and time was spent making decisions on such matters. With the introduction of a company with audit and supervisory committee governance system, investment decisions and decision-making for individual ship investment projects have been entrusted to the executive side. Meanwhile, the Board can discuss issues that are more focused on the NYK Group's medium- to long-term growth. These issues include monitoring exposure associated with ship investments and checking that the progress of fleet development is in line with the NYK Group ESG Story. I view the change in organizational design as a very good measure. NYK's financial base has improved significantly, and the Company is implementing more-aggressive growth invest- ments. Against this backdrop, the role of the Board of Directors has been adjusted, allowing it to devote more time to necessary discussions. In addition, until now the Board has tended to deal with agenda items submitted by

Nippon Yusen Kabushiki Kaisha NYK Report 2024

the executive side. However, the change in the governance system has allowed the Board to discuss the setting of agendas themselves. As outside directors, we have begun to express opinions on the topics that we would like to dis- cuss. The emergence of this change in awareness is one of the benefits of the transition.

Institutional investor You mentioned the importance of setting agendas. Since transitioning to a company with audit and supervisory committee governance system, how much time have you been able to spend on discussing agenda items related to the topic of enhancing corporate value? Also, how much time do you intend to spend in the future on discussions of this topic? Would it be possible to set out these quantitative and qualitative changes in this integrated report?

KuwabaraBased on the idea of changing to a monitoring model, we have been revising some business management methods since April 2023, which was the beginning of the previous fiscal year and prior to receiving approval from the Ordinary General Meeting of Shareholders in June 2023. For example, in April a directors' retreat is held to rigorously debate and reach agreement on the topics to be discussed in the coming year. Further, as we had established the roles of and matters to be determined by the Board of Directors, we were able to take time to exchange opinions on various aspects of the NYK Group ESG Story and the medium-term management plan of Ocean Network Express Pte. Ltd. (ONE) quite a long time before they were announced. Similarly, we have spent a lot of time

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Strengthening the Management Foundation

discussing shareholder returns. We have also exchanged opinions outside of formal Board meetings, such as at discussions among directors and Audit & Supervisory Committee members. Although quantification is difficult, I feel that we have considerably increased the amount of time we spend discussing agenda items related to the enhancement of corporate value.

Independence and Diversity of

the Board of Directors

NagasawaThe Board of Directors comprises 12 mem- bers, five of whom also serve as Audit & Supervisory Committee members. Six, or 50%, of the 12 directors are outside directors, while three, or 25%, of the directors are women. Satoko Shisai was appointed as a director at the Ordinary General Meeting of Shareholders held in June 2024. We sought the appointment of Shisai due to her extensive knowledge of digital transformation. As the Board's skills matrix shows, she is an individual that the Company needs.

Institutional investor I think it is wonderful that NYK has invited Shisai to become a director as not only NYK but all companies are in need of personnel with competence in digital transformation. In selecting Shisai, what type of discussions were held at meetings of the Nomination Advisory Committee and the Board of Directors?

TanabeWe have been aware of digital transformation as an issue for some time. We defined the type of personnel needed for the Group's growth and for more than a year discussed personnel selection. We selected Shisai from among multiple candidates based on consideration of three main requirements: diversity, business and management experience, and expertise in digital transformation. Although only having served in her current position for a short time, Shisai has provided incisive comments on the Group's growth strategy.

KuwabaraIn addition to having female directors make up one-quarter of members of the Board of Directors, one of the three female directors is Keiko Kosugi, a full-time Audit

• Supervisory Committee member. I believe this is a bal- anced composition. Looking to the future, however, a ratio of 30% for women managers has been set as a non-finan- cial target for the Group. Therefore, I would like to see more women promoted to senior management positions, including from within the Company. Also, since the Group's businesses are so global, we must seriously consider the appointment of non-Japanese directors in the future.

Executive Compensation Plan and

Succession Planning

TanabeIn 2016, we established the Nomination Advisory Committee and the Compensation Advisory Committee as advisory bodies to the Board of Directors. I currently serve as the chairperson of both committees.

In my opinion, the appointment and dismissal of the president is a particularly important function of the Nomination Advisory Committee. As was the case with the change of president in 2023, the process is by no means one in which the executive side makes decisions on its own. Committee members interview multiple candidates in person, and the Nomination Advisory Committee considers them. In considering the next successor, we will broaden the pool of candidates a little more and evaluate them on an annual basis. Through this process, we would like to develop management leaders rather than simply nominating them.

Regarding executive compensation, in addition to basic compensation, we introduced a performance-based stock compensation plan in 2016 and a performance-based monetary compensation plan in 2022. As for evaluation items, we have established indicators related to return on equity (ROE), total shareholder return (TSR), and

environmental, social, and governance (ESG) elements. Based on feedback pointing out that the evaluation items were difficult to understand, we revised them in 2022. The ESG indicators are related to the Group's three material issues-safety, the environment, and human resources- and also include a compliance element. The results of the evaluations, along with the reasons for each item, are explained to individual executive officers. There is room for improvement in our evaluation methodology. We could examine the lengths of time over which ROE and TSR should be evaluated or whether ESG should be evaluated qualitatively as well as quantitatively. We will continue making revisions as we conduct activities.

Institutional investor In my view, the evaluation of senior management teams is extremely challenging. The maritime shipping industry is greatly affected by market fluctu- ations. However, decarbonization businesses and other new growth businesses that are being pursued for sustainable growth will require medium- to long-term periods in which to develop. If evaluations overemphasize visible indi- cators, companies run the risk of concentrating too much on business management approaches that are short- sighted. When conducting evaluations, what aspects do you keep in mind?

TanabeI believe that a president's true accomplishments do not become apparent during their term in office but after they retire. In particular, presidents are required to set out a strategy for improving corporate value over the medium to long term, plant seeds, and guide the direction

Nippon Yusen Kabushiki Kaisha NYK Report 2024

of their company accordingly. Given that accomplishments are not immediately visible, I closely examine the passion and leadership of presidents in terms of the extent to which they involve and lead employees.

Board Discussions on the Enhancement of Shareholder Value

NagasawaThe medium-term management plan sets out a capital policy of raising the dividend payout ratio target and the minimum dividend level as well as acquiring ¥200.0 billion in treasury stock in fiscal 2023 and fiscal 2024. In fiscal 2023, we acquired ¥200.0 billion in treasury stock. We plan to acquire an additional ¥100.0 billion in treasury stock by the end of April 2025.

NakasoThe favorable performances in fiscal 2021 and fiscal 2022 have significantly improved the Company's financial base. Among the Board of Directors, however, there is a shared understanding that the share price has not risen as much as expected and that this is an issue. To address the issue, the Board of Directors has held multiple discussions on the improvement of capital efficiency with a view to sustaining increases in ROE and ensuring that it exceeds the cost of shareholders' equity on investments that are mindful of a price-to-book ratio (PBR) exceeding 1.0 times, as well as on the best approach to capital policy. As a result of these discussions, the Company is enhancing shareholder returns and utilizing return on invested capital (ROIC) in the management of businesses. The Company intends to lower the cost of shareholders' equity by strengthening the earnings base so that it is less susceptible to market condi- tions. For example, the performance downside risk associated with market fluctuations will continue to be mitigated by expanding the logistics business through M&A. The Board of Directors has repeatedly discussed the balance between shareholder returns and investments. I believe that the Group has ample investment opportunities that exceed the cost of shareholders' equity. The medium-term management plan calls for investments totaling ¥1.3 trillion. Taking into account investments in such growth fields as fuel conversion and offshore wind power-related businesses, how- ever, I believe this figure may well increase. Securing funds for investments in future growth will result in future capital gains and contribute to an increase in shareholder value over the medium to long term. We need to explain to shareholders and investors that the creation of a virtuous cycle of investments that leads to growth is the best way to return

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Strengthening the Management Foundation

profits to them. Looking at the current share price, disclosure must be further increased and enhanced so that shareholders develop high expectations of the Group's growth.

TanabeThe Board of Directors is discussing capital efficiency and shareholder value more actively than ever before. The discussions include such topics as ROE, PBR, and TSR. Discussions on the business portfolio are also progressing in light of the newly introduced ROIC metric. The decision to sell the air cargo transportation business was the product of this trend in discussions. I believe that we must continue tirelessly pursuing business portfolio reform without making any exceptions.

and the Group should instead see this as an opportunity to demonstrate leadership in decarbonization and invest actively in this area.

ESG Management, Human Resources, and Organizational Reform

NagasawaWe are making steady progress with digital transformation and the strengthening of management foundations, both of which support the business strategies set forth in our medium-term management plan. To strengthen our management foundations, we have formu-

Nippon Yusen Kabushiki Kaisha NYK Report 2024

68 - 69

Institutional investor I believe that the maritime shipping industry is seeing an increase in security risks and geopolitical risks, such as cyberattacks and conflicts. What types of discussions is the Board of Directors having about the risks that have been steadily emerging in recent years? I realize that detailed disclosure in this regard may be prob- lematic, but, from an investor's point of view, executing an investment is difficult if such risks become significant.

NakasoWe should continue discussing geopolitical risks as they affect crude oil, which powers ships. We must monitor the situations in the Middle East and Taiwan particularly closely. The outcome of the U.S. presidential election is another geopolitical risk. Global climate change measures may also be affected by who becomes the next president. However, even if a different trend emerges in relation to climate change measures, I believe that Japan

lated the NYK Group CX (corporate transformation) Story, and we are working on measures to further empower the NYK Group's 35,000 employees.

KuwabaraThe Board of Directors has discussed and determined the content of the medium-term management plan, the NYK Group ESG Story, and the NYK Group CX Story. To some extent, the decarbonization goals of the NYK Group Decarbonization Story gained greater overall coherence once we, as outside directors, provided support to the executive side, who were struggling with various dilemmas. We encouraged them to change from thinking about the achievement of goals through the accumulation of efforts and to instead work backward from their goals to determine what should be done. This change in thinking resulted in an order for the building of new LNG-fueled ves- sels. While still based on rigorous discussions of viability and profitability, these are good investment decisions that are ahead of their time. Of course, the goals we have set are very ambitious and will not be easy to achieve. I hope that NYK works with the conviction that the realization of each story will lead to the enhancement of corporate value.

NakasoThe NYK Group CX Story calls on the Group to change from "A Japanese Company Operating Globally" to "A Global Company Headquartered in Japan." This phrase effectively expresses a commitment to becoming a truly global company as it emphasizes that, while the Group originates from Japan, the country is only one part of the world. I am very much in agreement with this commitment and worldview. The direction of human resource development and organizational reform is not mistaken. As for tasks going forward, I would like to see the NYK Group pursue resolute efforts to strengthen its frontline capabili- ties, establish a global human resource system, and develop globally competent management personnel.

Expectations for the NYK Group's Future

TanabeThe NYK Group has solidly accumulated assets that are important for building the future: human resources, intellectual assets, and data. First of all, the Group has fostered personnel with a strong sense of mission who love the sea and have supported social infrastructure in challenging situations. In addition, I believe that both the technical expertise acquired by the Group during years of maritime shipping as well as the data accumulated on ship operations are among the best in the world. As sea lanes have recently been a focus of attention in terms of geopolitical risks, the value of the Group's expertise in supporting the optimal supply chains of companies is increasing. I feel that an exciting future for the Group will naturally unfold if it leverages these strengths to develop new capabilities in the maritime shipping industry and the logistics industry as well as in areas beyond the scope of comprehensive logistics, as stated in the medium-term management plan.

NakasoLooking at the world today, geopolitical risks remain, and the global economy faces the risk of fragmen- tation. In mitigating such risks, the maintenance or reconstruction of a diversified free trade system is important. As an important part of international maritime shipping, the NYK Group should play a role in such efforts and aim even higher by raising its awareness of itself as a company that contributes to the sustainable growth of the global econ- omy. Further, I would like the Group to go beyond the confines of an individual entity and become the international maritime shipping industry's standard-bearer. More

specifically, I hope that the Group enlarges the extent of its activities so that it can provide the expertise needed to facilitate energy transition and solve other common global issues and produce personnel who are able to demonstrate leadership that mobilizes global maritime shipping. Since its founding, the Group has contributed to daily life while maintaining a broad social perspective and an understanding of a larger purpose. I look forward to seeing even greater realization of the DNA that has been developed and passed down during this history of ambitious initiatives.

KuwabaraAlthough geopolitical risks constitute an issue in an economy that is becoming increasingly globalized, cargo transportation volume is trending upward. The Group plays a role in facilitating globally important social infrastructure. On the other hand, given the trend toward decarbonization, the Group and its industry must work hard to meet the goals of the Paris Agreement. I would like the Group to seek a good balance between its obligations. I hope that it dependably plays a role in the provision of important social infrastructure while focusing on ESG- related initiatives. In this way, the Group will meet the expectations of its shareholders and other stakeholders. "Sail Green, Drive Transformations 2026-A Passion for Planetary Wellbeing," which is the title of the medium-term management plan, is a phrase that I like very much. It expresses exactly what I want the Group to realize.

Strengthening the Management Foundation

Corporate Governance

The NYK Group is working to increase its corporate value by further improving its management foundation. This section explains the Group's initiatives to enhance its governance and management.

Enhancing Corporate Governance

Nippon Yusen Kabushiki Kaisha NYK Report 2024

70 - 71

NYK's Corporate Governance Organizational Structure (As of June 19, 2024)

General Meeting of Shareholders

Appointment /

Appointment /

Appointment /

Dismissal

Dismissal

Dismissal

Audit & Supervisory Committee

Audit,

Board of Directors

Reporting

etc.

6 Internal Directors and 6 Independent Outside Directors

Independent Auditors (Accounting Auditors)

5 Audit & Supervisory Committee Members

(including 3 Outside Members)

Note: Including Directors Who Are Audit & Supervisory

Committee Members

Coordination

Reporting /

The NYK Group's Governance Characteristics

Organizational Design	Company with Audit & Supervisory
Committee (Since June 2023)
Advisory Committees	Nomination Advisory Committee and
Compensation Advisory Committee
	One year (directors who are not Audit &
Term of Office of	Supervisory Committee members)
Directors	Two years (directors who are Audit &
	Supervisory Committee members)
	Basic compensation, performance-
Compensation Plan	based monetary compensation, and per-
	formance-based stock compensation

History of Initiatives to Enhance Governance

Initiatives over the past 10 years

2015 Established Corporate Governance Guidelines

2016 Established Nomination Advisory Committee and Compensation Advisory Committee

Introduced performance-based stock compensation plan

2018 Appointed an outside advisor in charge of evaluation and analysis, etc., related to Board of Directors effectiveness

2020 Revised decision-making process Established the Management Meeting

2022 Introduced the performance-based monetary compensation plan

2023 Transitioned to a Company with Audit & Supervisory Committee

Advisory

Accounting

Audit

Instruction/

Reporting

Appointment /

Proposal /

Nomination Advisory Committee

諮問

Dismissal / Monitoring

Reporting

/

Operational Execution System

Coordination

Coordination

Compensation Advisory Committee

Reporting

President (Representative

Director, President and

Principal Committees related to Internal Control

Chief Executive Officer)

Management

Meeting

Internal Control Committee

Instruction /

Reporting

Risk Management Committee

Supervision

Reporting

Compliance Committee

Executive Officers

Safety and Environmental

Reporting

Management Committee

Departments at Headquarters /

Internal Audit Chamber

Branch Offices /

Internal Auditing

Group Companies

Ratio of Outside Directors

Outside

37.5%

Directors	Directors
6 of 12
3 of 8
(fiscal 2022)	(current)
	Outside
	50.0%

Ratio of Outside Members on the Nomination Advisory Committee and Compensation Advisory Committee

Outside

60.0%

Members	Members
4 of 6
3 of 5
(fiscal 2022)	(current)
	Outside
	66.7%

About the Company with Audit & Supervisory Committee

Characteristics

Voting rights within the Board of Directors

• Audit & Supervisory Committee members have voting rights as directors.

Right to express opinions in the General Meeting of Shareholders

• The Audit & Supervisory Committee has the right to express

Role of Audit & Supervisory Committee members

• Auditing of directors' execution of duties.
• Exercise of authority pertaining to the appointment and dis- missal of Audit & Supervisory Committee members and the independent auditors and compensation for the independent auditors.

Role of Audit & Supervisory Committee members

Ratio of Outside Members		Ratio of Female Directors
on the Audit & Supervisory Committee	Female	Female
	12.5%	25.0%
Members		Directors	Directors
3 of 5		1 of 8	3 of 12
	(fiscal 2022)
(current)			(current)
Outside
60.0%

opinions on the appointment, dismissal, resignation, compen-

sation, etc., of directors who are not Audit & Supervisory

Committee members.

Composition of the Audit & Supervisory Committee

• The Audit & Supervisory Committee shall have three or more members, with the majority being outside directors.
• Audit & Supervisory Committee members shall not be required to be full-time members.

Term of office of Audit & Supervisory Committee members

• Two years

• Attendance at Management Meeting and Meetings of Executive Officers, etc., and proactive collection of information.
• Sharing of information with other Audit & Supervisory Committee members and independent outside directors (excluding directors who are Audit & Supervisory Committee members).

Corporate Governance

https://www.nyk.com/english/profile/gvn/

Strengthening the Management Foundation

Directors and Executive Officers

As of June 19, 2024; number of shares held as of March 31, 2024

Hitoshi Nagasawa

Takaya Soga

Akira Kono

1

2

3

Chairman, Director

President, Representative Director,

Representative Director,

1980 Joined NYK

President and Chief Executive Officer

Executive Vice-President, Executive Officer

2023 Chairman, Director

1984 Joined NYK

1984 Joined NYK

Number of shares held:

2023 President, Representative Director,

2023 Representative Director, Executive

President and Chief Executive

Vice-President Executive Officer

290,793

Officer

Number of shares held:

Number of shares held:

58,636

50,422

Yutaka Higurashi

Eiichi Tanabe

Nobukatsu Kanehara

Directors

4

5

6

Director,

Chief Outside Director,

Outside Director, Independent Director

Senior Managing Executive Officer

Independent Director

2023 Independent Outside Director

1985 Joined NYK

Chair, Nomination Advisory Committee

Chair, Compensation Advisory Committee

2022 Director, Senior Managing Executive

Number of shares held:

Officer

2019 Independent Outside Director

130

Number of shares held:

Number of shares held:

93,154

9,836

Satoko Shisai

7

New Appointment

Outside Director, Independent Director

2024 Independent Outside Director

Number of shares held:

0

Eiichi Takahashi

Keiko Kosugi

Hiroshi Nakaso

8

9

10

Director, Audit &

Director, Audit &

Outside Director, Audit &

Supervisory Committee Member

Supervisory Committee Member

Supervisory Committee Member,

1982 Joined NYK

1989 Joined NYK

Independent Director

2021 Audit and Supervisory Board

2023 Director, Audit & Supervisory

2020 Independent Outside Audit and

Member

Committee Member

Supervisory Board Member

2023 Director, Audit & Supervisory

Number of shares held:

2023 Independent Outside Director, Audit

Committee Member

& Supervisory Committee Member

Number of shares held:

14,572

Number of shares held:

121,803

1,313

Satoko Kuwabara

Tatsumi Yamada

11

12

Outside Director, Audit &

Outside Director, Audit &

Supervisory Committee Member,

Supervisory Committee Member,

Independent Director

Independent Director

2020 Independent Outside Audit and

2023 Independent Outside Director, Audit

&DirectorsWhoAreAuditSupervisory CommitteeMembers

Supervisory Board Member

& Supervisory Committee Member

2023 Independent Outside Director, Audit

Nippon Yusen Kabushiki Kaisha NYK Report 2024

72 - 73

Attendance at Board of Directors' Meetings, Etc.

				Number of	Attendance at Board of	Attendance at Audit &	Nomination Advisory	Compensation Advisory
Name	Position in the Company	Years as	Directors' Meetings in	Supervisory Committee	Committee	Committee	Outside
				Director	Fiscal 2023	in Fiscal 2023	(Attended / Convened)	(Attended / Convened)
Hitoshi Nagasawa		Chairman, Director	13	100%	-
	(16 / 16)	(6 / 6)	(5 / 5)
Takaya Soga	President, Representative		100%
Director, President and Chief	2	-
(16 / 16)	(6 / 6)	(5 / 5)
		Executive Officer
Akira Kono	Representative Director,		100%
Executive Vice-President	1	-	-	-
(12 / 12)
		Executive Officer
Yutaka Higurashi	Director, Senior Managing	4	100%	-	-	-
	Executive Officer	(16 / 16)
Eiichi Tanabe	Chief Outside Director,	5	100%	-	Committee Chair	Committee Chair
Independent Director	(16 / 16)	(6 / 6)	(5 / 5)
Nobukatsu Kanehara		Outside Director,	1	100%	-
Independent Director	(12 / 12)	(5 / 5)	(3 / 3)
		Outside Director,
Satoko Shisai	Independent Director	0	-	-	(-)	(-)
		New Appointment
Eiichi Takahashi	Director, Audit & Supervisory	1	100%	100%	-	-
	Committee Member	(12 / 12)	(11 / 11)
Keiko Kosugi	Director, Audit & Supervisory	1	100%	100%	-	-
	Committee Member	(12 / 12)	(11 / 11)
	Outside Director, Audit &
Hiroshi Nakaso	Supervisory Committee	1	92%	91%	-	-
Member, Independent	(11 / 12)	(10 / 11)
		Director
	Outside Director, Audit &
Satoko Kuwabara	Supervisory Committee	1	100%	100%	-	-
Member, Independent	(12 / 12)	(11 / 11)
		Director
	Outside Director, Audit &
Tatsumi Yamada	Supervisory Committee	1	100%	100%
Member, Independent	(12 / 12)	(11 / 11)	(5 / 5)	(3 / 3)

Director

* The target period for attendance is from April 1, 2023 to March 31, 2024. For directors and committee members appointed on June 21, 2023, the attendance from that date onward is presented. Male  Female

		& Supervisory Committee Member	Number of shares held:
	Number of shares held:	643
	3,744
	Senior Managing Executive Officer
	Nobuhiro Kashima
Executive	Managing Executive Officers
Yutaka Ikeda	Hiroaki Nishiyama	Hisaya Higuchi
Hironobu Watanabe	Takuji Banno	Yasunobu Suzuki
Officers	Executive Officers
Yuko Tsutsui	Patrick Brennan Jr.	Kenichiro Sutoh	Toshi Nakamura	Hiroaki Ohashi
Shinichi Yanagisawa	Shogo Terajima	Mie Sugano	Yasuyuki Takahashi	Takashi Yamamoto
	Katsuhiko Haruna	Tsutomu Yokoyama	Tomotaka Aso	Takeshi Kondo	Nobuaki Sumida
	Atsuhiko Kurosawa	Ryutaro Okuzawa	Hiroyuki Noma	Yasushi Yamamoto	Carl-Johan Hagman

Discussion at Board of Directors Meetings

Main items discussed in fiscal 2023

• Impact on the Company's business from the situation between Russia and Ukraine, and response
• Evaluation of the effectiveness of the Board of Directors
• Further development of materiality
• Setting of new GHG reduction targets
• New medium-term management plan for Ocean Network Express Pte. Ltd.
• Implementation of cybersecurity measures
• NYK Group CX Story stipulating human resource and organizational strategies

• Report to Board of Directors on important matters in business execution
• Examination of the purpose and significance of holding strategic shareholdings

Main items to be discussed in fiscal 2024

• Geopolitical risks
• Capital policy
• Optimization of business portfolio
• Status of risk management and internal control in business
• Revision of executive compensation plan

Strengthening the Management Foundation

Evaluation of Effectiveness of the Board of Directors

Nippon Yusen Kabushiki Kaisha NYK Report 2024

74 - 75

Compensation Plan

Evaluation of Effectiveness of the Board of Directors and Issues for Fiscal 2024

Since fiscal 2015, the Company has continued to conduct a self-evaluation survey on all directors with the aim of further improving the effectiveness of the Board of Directors. In addition, in fiscal 2023, interviews by third-party advisors were conducted based on the results of the survey.

1) Summary of the Fiscal 2023 Evaluation

In fiscal 2023, we conducted a survey consisting of 17 questions

intended to improve the effectiveness of the Board of Directors by allocating more time for deliberation by the Board of Directors of matters that lead to the growth in corporate value, such as medium- to long-term management strategies, allocation of management resources, business portfolio, sustainability, and handling significant business risks. Regarding the evaluation of the transition, the Company has noted some views that not enough information has been accumulated with only one year since the transition. However, the Company has found no negative views and recognized that the Board of Directors is on its way to further improvement of the effec-

Executive Compensation (Performance-Based Stock Compensation Plan)

The Company introduced a performance-based stock compensation plan in fiscal 2016 to provide a highly transparent and objective executive compensation plan.

In fiscal 2022, the Company partially revised the details of said plan with a view to further accelerating ESG management and establishing shared interests between executives and shareholders over the medium to long term.

Executive Compensation (Performance-Based Monetary Compensation Plan)

In fiscal 2022, the Company introduced a performance-based monetary compensation plan with a separate budget for basic compensa- tion. The purpose of the plan is to increase the short-term incentives for directors and executive officers to contribute to earnings and provide a mechanism for helping increase corporate value.

Overview of the Performance-Based Monetary Compensation Plan

under five topics, which were selected taking into account third-party advisers' opinions. The five topics were (1) composition and operations of the Board of Directors, (2) management strategies and busi-

tiveness. Furthermore, the Company has recognized that there is room for improvement in setting an agenda to further take advantage

Overview of the Performance-Based Stock Compensation Plan

Persons eligible for the performance -based monetary compensation plan

Directors concurrently serving as executive officers and executive officers excluding certain concurrent executive officers

ness strategies, (3) corporate ethics and risk management, (4) performance monitoring and evaluation and compensation of the management, and (5) dialogues with shareholders. In addition, the survey covered the necessity of a forum for discussions only by outside directors as well as operations of the Board of Directors and other meetings after the transition to a company with Audit & Supervisory Committee. Furthermore, interviews by third-party advisors were conducted with the aim of bringing clarity to and obtaining an in-depth understanding of the recognized issues and comments gained from the survey, as well as clarifying measures to further improve the effectiveness of the Board of Directors by obtaining opinions on improvement measures and any other matters.

2) Results of Evaluation of Effectiveness

i. Overview

As a result of disucssions based on the survey results and interviews,

it was determined that the Board of Directors was functioning appro-

of a company with Audit & Supervisory Committee, while noting that the Board of Directors had deeper discussions by giving priority in deliberations to matters related to medium- to long-term management strategies and sustainability, such as new strategic targets for decarbonization and human resource strategies.

• Issues of Diversity and Human Resource Strategies, etc. Recognized in Fiscal 2022

Based on CX strategies aimed at further enhancement of human cap- ital, transformation of Group management, and enhancement of gov- ernance, which was presented in the medium-term management plan announced in March 2023, the Company formulated the NYK Group CX Story, which showed the history of the NYK Group and its target state as well as the CX 2030 vision and an overview of the strategy. Its action plan was also formulated. The Board of Directors held deeper discussions based on the above strategy and other materials and gave the executive side a direction to work to further evolve them, integrating opinions presented at the discussions.

Persons eligible under the performance -based stock compensation plan

Applicable period for the performance- based stock compensation plan

Upper limit to the amount of trust money contributed by the Company

Upper limit to the number of Company shares, etc., to be acquired by directors and method for acquiring the

Directors who concurrently serve as executive offi- cers, the Board of Directors' chairman not serving concurrently as chairman and executive officer, and executive officers excluding certain concurrent executive officers who reside in Japan

Three fiscal years from April 1, 2022 to March 31, 2025

In the event that the trust term is extended, each three fiscal-year period afterward

A total of ¥1.6 billion over three fiscal years (includ- ing trust expenses, etc.)

The upper limit for the total number of shares shall be three million shares per three-year period (however, this shall be based on the number of shares after the stock split conducted on October 1, 2022, the number before the stock split being 1 mil- lion.), and the ratio of the number of shares issued (as of March 31, 2022, after excluding treasury stock) shall be approximately 0.6%

Upper limit to the amount of compensation under the performance-based monetary compensation plan

Details of business result achievement conditions

Timing of monetary payments to directors

¥300.0 million per fiscal year

Performance-based indices shall be consolidated recurring profit and consolidated return on equity

In principle, the base values for measuring the degree of achievement of performance- based indices shall be the targets defined in the Company's medium-term management plan

The performance-based coefficient shall vary between 0.0 and 2.0 depending on the degree of achievement of each index

After the conclusion of each fiscal year

priately and its effectiveness was ensured. In fiscal 2023, in regard to

(1) composition and operations of the Board of Directors in particular,

improvement was observed by the arrangement of opportunities to

explain the details of discussions at the Management Meeting to out-

side directors and the administration of the Board of Directors by the

chairperson with the understanding of perspectives of outside direc-

tors through participating in a briefing to them on matters to be sub-

mitted to the Board of Directors, and the effectiveness of the Board of

Directors was enhanced. On the other hand, the Company has recog-

nized that, in relation to (3) corporate ethics and risk management,

amid a sense of ethics in society significantly changing, comments by

outside directors from an external perspective are important and the

Company needs to implement further improvement of corporate cul-

ture with the Board of Directors proactively engaging in this theme.

ii. Initiatives in Fiscal 2023

• Transition to a Company with Audit & Supervisory Committee

Pursuant to a resolution passed at the Ordinary General Meeting of

Shareholders on June 21, 2023, the Company transitioned from a

company with Audit & Supervisory Board to a company with Audit &

Supervisory Committee with the aim of working to strengthen moni-

toring functions, in addition to speeding up decision-making by dele-

gating the decision-making authority for important business

execution to the executive directors. Through this transition, we

3) Initiatives in Fiscal 2024

By utilizing the characteristics of a company with Audit & Supervisory Committee, the Company will continue to speed up decision-making and further strengthen monitoring functions. Regarding setting an agenda, for which the Company recognized that there is room for improvement, by clarifying the annual plan through carefully selecting an agenda and timing of its discussion and securing sufficient time for discussions in advance, the Company will effectively work on matters with a high priority. In particular, the Company plans to take up matters such as the financial condition and investment plans of the NYK Group; capital policies based on factors such as market trends; a structure for responding to geopolitical risks that became apparent due to factors such as tense situations in Russia, Ukraine, and the Middle East; and corporate ethics and risk management, which were recognized as issues by the evaluation of the effectiveness of the Board of Directors. In addition, as the target period of the performance -based stock compensation plan for current directors, etc., (excluding directors who are Audit & Supervisory Committee mem- bers) will end at the end of fiscal 2024, we plan to discuss a new compensation plan to improve a compensation plan for directors, etc., taking this opportunity.

Company's shares

Method for calculating the number of Company shares, etc., to be acquired by directors

Timing of the deliv- ery, etc., of Company shares, etc., to directors

The Company's shares shall be acquired from the stock market to avoid dilution

The calculation shall be divided into a role-fixed portion and a performance-based portion

Indices for calculating the number of shares in the performance-based portion: the Company's total shareholder return (TSR), including dividends, and the Company's own ESG indices based on its ESG policy

The performance-based coefficient shall vary between 0.0 and 2.0 depending on the degree of achievement of the following indices

1. Stock price indices: Relative TSR (compared with TOPIX growth rate and competitors' TSR)
2. Non-financialindices: Status of progress on mate- riality initiatives for safety, the environment, and human resources, based on the NYK Group ESG Story, and status of compliance discussed qualitatively and quantitatively, with degree of achievement comprehensively evaluated by the Compensation Advisory Committee and deter- mined by the Board of Directors

	After the conclusion of each fiscal
Role-fixed portion	year but with a three-year transfer
	restriction after delivery
Performance-	After the conclusion of three
based portion	fiscal years

Compensation Plan for Directors (Excluding Directors Who Are Audit & Supervisory Committee Members), etc.

	Performance-Based	Performance-Based
Basic compensation	Monetary
Stock Compensation
	Compensation
¥510 million/year	¥300.0 million/year ¥1.6 billion/3 years

Note 1: Of the total amount of basic compensation of up to ¥510 million per year, the total amount for outside directors shall not exceed ¥150 million per year.

Note 2: The amount of performance-based stock compensation is the maximum amount of trust money to be contributed by the Company.

Note 3: Executive officers who meet certain requirements are eligible under the performance-based monetary compensation plan and the performance-based stock compensation plan. The maximum amount shown above is the maximum amount for all eligible persons under the plans, including said executive officers.

Note 4: This does not include those who are ineligible under the performance-based stock compensation plan due to non-residence in Japan.

Information regarding executive compensation

https://www.nyk.com/english/profile/gvn/action/

Strengthening the Management Foundation

Risk Management

Nippon Yusen Kabushiki Kaisha NYK Report 2024

76 - 77

Information Security

In accordance with its risk management policy and rules, the Group convenes twice yearly meetings of the Risk Management Committee, which assesses and receives reports regarding progress in managing critical risks that could have a significant impact on the Group's business management, and reports findings to the Board of Directors. Chaired by the president and comprising chief executives and the deputy chief executive of the ESG Strategy Headquarters, the Risk Management Committee identifies critical risks based on qualitative and quantitative evaluations of the business divisions, which have the best understanding of the essential nature of the business, and reports from each headquarters, determines the headquarters responsible for advancing countermeasures for each critical risk, and promotes risk reduction activities for the entire Group.

Most Critical Risks and Critical Risks

Each year, the Risk Management Committee identifies the most critical risks among the critical risks as risks that could have a significant impact on the continuity of the Group's businesses. These include compliance risks, major accidents and other operational risks, cyber risks, and risks related to damages caused by natural disasters and measures to mitigate climate change. In addition, critical risks that could significantly affect the Group's business management include strategic risks, market fluctuation risks, operational risks, financial and accounting risks, and human rights risks, as well as risks from infectious diseases such as COVID-19.

The NYK Group continuously reinforces multilayered defenses in readiness for cyberattacks, which are becoming more sophisticated and diverse. However, given that the perfect defense is infeasible, the Group is also developing countermeasures focused on cyber resil- ience, thereby enabling rapid recovery from damages. Moreover, the Group is putting in place "zero trust" countermeasures, which are not reliant upon the boundary defenses of the networks used when introducing cloud computing or telecommuting.

Specifically, the Group will introduce security functions such as a multi-factor authentication (MFA) system and an endpoint detection and response (EDR) system to the entire Group, while introducing cloud systems to reduce risks caused by malfunctions or disasters as well as a global security operation center (GSOC) to monitor IT equipment on land and at sea worldwide around the clock 365 days of the

(CSIRTs) that coordinate with each other globally. By promptly sharing and managing information not only with IT departments but also with other departments when an incident occurs, the teams underpin a system that enables the members of senior management to make decisions appropriately.

On the governance front, the Group regularly updates its information security regulations to respond to new technologies such as AI and works to ensure security by sharing said regulations throughout the Group.

All of these initiatives rest upon the foundation of Group employ- ees' security literacy. To increase this literacy generally for the Group, we are regularly conducting (1) e-learning using an education plat- form, (2) cyberattack countermeasure drills, and (3) global security assessments.

Risk Management System

Risk Map

year. These systems are designed to minimize damages by rapidly

	Risk
Risk	Management

Manage and evaluate

risks for current

fiscal year

Provide overview of

Major legal violations

Dysfunction of headquarters or major business sites

Cyber risks

Violations or infringements of economic sanctions

Fluctuations in supply and demand

detecting and countering hacks. Further, in regions worldwide the Group has established computer security incident response teams

Risk Management

https://www.nyk.com/english/profile/gvn/risk/

management at
respective
headquarters	Committee
			Submit
			critical risk
				candidates

critical risk candidates for coming fiscal year

Prepare risk map for

coming fiscal year

Major accidents	Fluctuations in
	currency
	exchange rates

Measures to mitigate climate change

Human rights violation risks

Changes in fuel prices

Group Management Structure

With the overarching objective of enhancing its corporate value, the NYK Group is promoting further improvements in Groupwide governance.

1 Group Companies in Japan

Frequency

Response to Human Rights Risks

The Company aims to maintain a system for overseeing directors' business execution and ensuring consistency in the judgment criteria during audits, such as dispatching auditors to each Group com-

maintain its effectiveness. Based on the Groupwide governance built through these initiatives, the Group will make maximum use of its capabilities and promote unified, efficient management.

The Company started a human rights project in 2022. In accordance wiht the United Nations Guiding Principles on Business and Human Rights, we are promoting various initiatives to respect the basic human rights of all people and realize a society that acknowledges and respects diverse values and different cultures. These include formulating a human rights policy, building internal frameworks, and carrying out human rights due diligence.

At a workshop held prior to carrying out human rights due diligence, we promoted understanding of human rights risks that could cause

We have conducted impact assessments of businesses identified in this workshop through interviews with rights holders since 2022 and disclosed information about the content of these assessments and our initiatives for improvement on the Company's website.

In addition to these initiatives, we have proactively conducted education and awareness-raising regarding human rights through e-learning and training.

pany. Furthermore, the Company conducts specialized training and provides expert business support to Group companies and so forth to promote Groupwide strengthening of corporate governance func- tions, and aims to increase the level of operations throughout the Group. In addition, to maintain a transparent management structure, the Group will centrally manage the appointment and compensation determination process for management at Group companies and

2 Group Companies Overseas

Support Measures for Group Companies (Example)

1.	Provision of training	3.	Acceptance of corporate
	opportunities		consultations
2.	Consultation on handling of	4.	IT security measures
	various laws and regulations

or contribute to human rights violations in value chains involving the Company.

Board of Directors

Chairperson: Hitoshi Nagasawa, Chairman, Director

Human Rights Initiatives

https://www.nyk.com/english/esg/social/activities/

Introduction to

"Discover Our ESG Stories"

In April 2024, the Company established NYK Group region heads in		region heads to gather information and strengthen and deepen
five regions: Europe (London), the Americas (Secaucus), China		regional strategies. In addition, the region heads will work closely
(Shanghai), South Asia (Singapore), and the Middle East (Dubai). In		with Group companies and business units to promote flexible
April 2022, we had established region heads in South Asia and the		regional business development.
Middle East, and the NYK Group will now have five NYK Group

Management Meeting

Chairperson: Takaya Soga, President, Representative Director, President and Chief Executive Officer

ESG Strategy Headquarters

Person-in-charge: Akira Kono, Executive Vice-President, Executive Officer, Chief Executive of the ESG Strategy Headquarters

ESG Management Group

Person-in-charge: General Manager of the ESG Management Group

UN Global Compact Promotion Committee

Chairperson: General Manager of the ESG Management Group

Department in charge: ESG Management Group

Jointly controlled with: Human Resources Group and Legal & Fair Trade Promotion Group

ESG Strategy Committee

Chairperson: Yuko Tsutsui, Executive Officer,

Deputy Chief Executive of the

ESG Strategy Headquarters

https://www.nyk.com/english/esg/ does/stories/detail_11.html

Top Management

Liner & Logistics Headquarters

Automotive Business Division

Dry Bulk Division

Energy Division

Region heads (Cross-Group function)

Region heads
Planning to build a system to enable
proactive provision and sharing of information	Leading to stronger regional
between top management, region heads,	business strategy proposal
and business divisions	function in the future
Five regions
Europe/Americas/China/South Asia/Middle East

Strengthening the Management Foundation

Nippon Yusen Kabushiki Kaisha NYK Report 2024

78 - 79

Message from the Officer in Charge of Compliance

We will create a corporate culture in which everyone is highly aware of and responsible for compliance.

Kenichiro Sutoh

Executive Officer

Deputy Chief Compliance Officer

plan-do-check-act (PDCA) cycle for the advancement of the Group's compliance. In addition, with respect to the Board of Directors, the chief compliance officer reports all compliance incidents that occur in the Group, submits regular reports on compliance activities, and receives timely and appropriate supervision from the Board of Directors.

Like most companies, the focuses of the Group's compliance activities range from violations of social norms, such as harassment, through to laws and statutory regulations. However, the Group has established strict reporting standards for three types of laws with respect to which it views compliance as being of particular impor- tance, namely, competition laws, sanction laws, and anti-corruption laws. Meanwhile, one of the Group's whistleblowing systems is the Yusen Chat Room, which serves as a primary help desk for receiving reports. The

institutional memory. To this end, in 2022 we launched a training program that gives participants a vivid sense of the decisions and dilemmas of those involved at the time and asks participants to think about what they would have done in the same situa- tion. We are conducting the training in stages for different employee ranks. Ultimately, all employees will participate in the program. The response from participants has been incredibly significant. We have found that they really want an opportunity to accurately grasp the information and think it through for themselves. This training has led us to conduct training based on cases other than those related to antitrust laws. We have also begun training that focuses on past business investment choices. The significant response to all of these training programs gives a sense of the strong awareness of compliance in our culture.

a high level of harassment awareness in the organization as a whole and a generational gap regarding communication methods and common sense. In response to this result, we will strengthen cooperation not only with human resource divisions but also with on-site organizations to take measures in relation to employees' day-today activities more directly. Through training programs, we will give priority to establishing a common knowledge of harassment, aligning the perspectives of employees, and developing and internalizing appropriate measures. In addition, based on the assumption that a gap in understanding and awareness of compliance still exists not just in relation to harassment but in other areas, we will strongly encourage the sharing and updating of awareness and knowledge to ensure that management is aware of and complies with the rules and behavioral norms

Strong Focus on Compliance

In fiscal 2023, a compliance awareness survey targeting our officers and employees was conducted by a specialized outside organization. Compared with a sample of companies that have similar business scale, NYK returned above-average results for all survey items. In particular, the survey found that awareness of compliance has been effectively instilled among officers

and employees, including understanding of the Group's Mission and awareness of compliance systems. We attribute this awareness to our unique culture of objectively viewing one's own actions in light of our Mission, Vision, and Value.

On the other hand, compliance cannot be achieved solely through the efforts of individuals. Organizational efforts to create conditions that make the occurrence of compliance violations unlikely are

indispensable. The NYK Group promotes compliance through two organizations: the Compliance Committee and the Executive Committee Overseeing Thorough Law Compliance. The former formulates the Group's compliance promotion policies and plans for initiatives and evaluates these ini- tiatives. Meanwhile, the latter is responsible for analyzing the progress of the Group's compliance activities. These two organizations work together to implement a

contact point is staffed by NYK personnel and has been in operation for more than 20 years. A feature of the Yusen Chat Room is that widespread awareness of it in the Group helps lower the barrier to whistleblowing.

Initiatives to Strengthen

Compliance

Since alleged violations of antitrust laws came to light in 2012, the Group has been rigorously identifying potential risks, conducting practical compliance training, and

In addition, we are moving forward with initiatives focused on respect for human rights, which also aligns with the promotion of ESG management. Since fiscal 2022, members of in-house organizations involved in compliance promotion have been participating in a human rights proj- ect, which the ESG Strategy Headquarters is advancing. The project members directly visit sites that could be negatively impacting the human rights of workers, such as ship scrapping sites and logistics bases in emerging countries. Through dialogue and proposals, the members attempt to resolve the issues encountered. I believe that this initiative is important from the perspective

that frontline personnel comply with as a matter of course, and vice versa. We are also revising our approaches to penalties and information sharing in-house.

Establishing a common awareness of compliance globally is also an issue to be addressed. Each region has its own autonomous management. To raise the level of compliance and, ultimately, governance throughout the Group in this context, Yusen Logistics Co., Ltd., which is the largest Group company, and the Group's four region heads have launched a collaborative initiative. This initiative involves the establishment of a center of excellence.* As circumstances differ from region to region,

The NYK Group's Compliance System

Compliance Committee (Chairperson: President)

implementing cycles that improve risk sensitivity and on-site action not only in the Automotive Business Headquarters

of increasing sensitivity to human rights risks within the Group.

raising awareness of compliance globally is not easy. Nonetheless, I believe that consensus building-based on acknowledg-

Yusen Chat Room*2

Outside Help Desk for Whistleblowing

Chief Compliance Officer

Audit & Supervisory Committee Members

*1

Deputy Chief Compliance Officer

Legal & Fair Trade Promotion Group

General Managers of Departments, Offices, or Branches

Regional Governance Officers (Overseas)

(Compliance Leaders)

Head Office Officers and Staff, etc.

Group Company Officers and

Group Company Officers and Staff, etc.

Staff, etc. (Japan)

(Overseas)

involved but in all divisions. The risk-related cases reported in the process of implementing these cycles have included erroneous words and actions on the part of supervisors, which were pointed out by junior personnel. We feel that the various measures we have taken are leading to real actions. Further, we aim to pass on and update the lessons learned from past failures related to violations of antitrust laws

Tasks Going Forward

Addressing harassment is one of our tasks going forward. Although there are currently few incidents of harassment, the aforementioned compliance awareness survey revealed that many employees feel that they have seen or heard harassment

ment of these differences and discussions aimed at setting target standards-will certainly encourage each region to take responsibility for ensuring the penetration of compliance throughout the Group.

• The establishment of a body that consolidates resources and knowledge in a single location to enable the promotion of cross- organizational efforts

*1 Reports to a full-time Audit & Supervisory Committee member periodically and as required

*2 This is a consultation contact point for NYK Group employees to discuss concerns about compliance. Such reports are received by five employees (three men and two women) and one outside lawyer.

so that they do not fade from our

around them. I view this both as indicating

Strengthening of Compliance https://www.nyk.com/english/profile/gvn/cmp/