Corporate Governance：The Norinchukin Bank

The Norinchukin Bank’s Management System

The Bank is both the national-level organization for Japan’s AFF(agriculture, fishery and forestry) cooperatives and an institutional investor that plays a major role in the financial and capital markets through investment of large amounts of funds in Japan and overseas. Accordingly, while adhering to decisions made by the Council of Delegates, the Bank’s decision-making duties are shared and coordinated by the Supervisory Committee and the Board of Directors, as stipulated by the Norinchukin Bank Act, while taking into consideration the internal and external situations of the cooperatives.

Risk Appetite Framework (RAF)

The business environment surrounding financial institutions is changing radically. For the Bank to maintain its high soundness and continue to meet stakeholders’ expectations and perform its basic roles, the forward-looking recognition of risks and the appropriate risk controls, as well as risk-taking in a disciplined manner, are increasingly important.

To implement such measures, the Bank has introduced the Risk Appetite Framework (RAF) for business administration. Under the RAF, the Bank aims to achieve the goals of the priority strategies and initiatives and works to foster and disseminate a sound risk culture that supports its business administration framework.

The Bank’s RAF is a “framework for business administration leading to disciplined risk taking and optimizing the balance between risk and return” by clarifying the Bank’s management strategies, business strategies, expected return (types and amounts of return that are set as goals), and risk appetite (types and amounts of risks that the Bank is willing to take or are acceptable to the Bank, and optimal management resources) and managing them in an integrated manner. Under the RAF, with the aim of an optimal balance between risk and return, the Bank further improves its soundness while adjusting to changes in the surrounding environment.

Initiatives for Strengthening Internal Control

For the Bank to fulfill its fundamental mission as the central organization for Japan’s AFF cooperatives as well as its social responsibility, the Bank views the construction of management control systems as its highest priority. It has established basic policies for internal control to secure compliance with corporate ethics rules and relevant laws and regulations, and proper risk management and business activities.

Risk Management

To implement appropriate company-wide risk management, the Bank has formulated the Basic Policies for Risk Management. These policies identify the types of risks to be managed and the basic framework for risk management, including organizational structure and methodology. Based on the Basic Policies, the Bank is working on the management task of ceaselessly upgrading its risk management framework with the managerial goals to fully demonstrate its competitive edge and presence and fulfill its role adequately as a financial institution involved in the AFF industries, as well as food production and consumption; further reinforce the business base of its cooperative banking business; and realize stable returns to its members through the further evolution of its existing globally diversified investments.

Basic Policy on The Norinchukin Bank Governance

Chapter 1 General Provisions

(Purpose)

Article 1. The Basic Policy on The Norinchukin Bank Governance (hereinafter “the Policy”) stipulates the basic views and framework regarding the governance of The Norinchukin Bank (hereinafter “the Bank”) so that it serves as action guidelines for the Bank’s Supervisory Committee Members, Directors, Executive Officers and Audit & Supervisory Board Members.

(Basic Views on the Governance of the Bank)

Article 2. The Bank is an organization established with the Norinchukin Bank Act (hereinafter “the Bank Act”) as its legal basis. The Bank Act’s Article 1 stipulates the purpose of the Bank as follows: “As a financial institution based on agricultural, fisheries and forestry cooperatives as well as other members of the agriculture, fisheries and forestry cooperative system, the Bank contributes to the development of the nation’s economy by supporting the advancement of the agriculture, fishery and forestry industries by providing financial services for the member organizations of the cooperative system.” With this purpose as its management philosophy, the Bank stipulates the Code of Ethics and a code of conduct for all senior management and employees accordingly and constructs a governance system to realize the philosophy.

Chapter 2 Relationship with Members and Other Stakeholders

(Cooperation with Members)

Article 3. The Bank is a cooperative financial institution and the Bank’s members (equity holders) are equally given voting rights regardless of the amount of contribution. Given such nature of a cooperative financial institution, all senior management and employees understand and share a corporate culture with high regard to dialogues and thorough discussions with members to ensure appropriate cooperation with members.

(Dialogue with Members)

Article 4. For the Bank to have dialogues with members, the Directors or Executive Officers in charge of respective areas maintain close contact with the Bank’s headquarters and local business sites to ensure an understanding of the Bank’s management philosophy, management strategies, management plans, etc. In addition, the Bank provides such frameworks as briefings and social meetings for the Delegates mutually elected by members from prefectures and the areas stipulated in the Articles of Association, and the content of such meetings is regularly reported to the Board of Directors.

(Transactions with Related Parties)

Article 5. The Bank stipulates and manages appropriate procedures to prevent transactions between the Supervisory Committee Members and/or Directors and the Bank or transactions between the Bank and its group companies from causing any damage to the Bank’s managerial integrity so that there is no harm to the interests of members who are holders of equity in the Bank.

(Relationship with Stakeholders Other than Members)

Article 6. The Bank confirms that the purpose set forth in Article 1 of the Bank Act is its management philosophy and, with the recognition that constructing an appropriate and smooth relationship with not only members but also other various stakeholders, including customers, employees and local communities, is important to achieve said purpose, endeavors to construct such relationship and executes business activities. To pursue these activities, the Bank formulates the Medium-Term Management Plan(the Medium-Term Vision) and establishes the Code of Ethics as guidelines for the conduct of all senior management and employees.

Chapter 3 Appropriate Information Disclosure and Transparency

(Disclosure of Information)

Article 7.

The Bank ensures the appropriate disclosure and transparency of quantitative information, including financial information and risk management, and qualitative information, including business strategies and the status of concurrent office holding of the Supervisory Committee Members, Directors and Audit & Supervisory Board Members, so that the Bank can enjoy the trust of its stakeholders and receive their proper evaluation.
For the disclosure of information, the Bank sets the Voluntary Disclosure Rules as its standards to ensure appropriateness when voluntarily disclosing unreleased managerial information, in addition to statutory information disclosure.

(Auditing by the Accounting Auditor)

Article 8. The Bank endeavors to secure the independence of the accounting auditor and take appropriate measures to ensure appropriate auditing, with recognition of the responsibilities of the accounting auditor specified by applicable laws and regulations.

Chapter 4 The Bank’s Form of Organization and Roles of the Respective Organs

(The Bank’s Form of Organization)

Article 9. In accordance with the Bank Act, the Bank adopts the form of organization consisting of the Supervisory Committee, the Board of Directors and the Audit & Supervisory Board.

(Roles of the Supervisory Committee)

Article 10. Under Article 28 of the Bank Act, the Supervisory Committee appoints Directors, decides the basic policy of the Bank’s business operations and makes decisions regarding any matters so prescribed in the Articles of Association, including important issues executed by the Bank in relation to the agricultural, fisheries and forestry (hereinafter “AFF”) cooperatives.

(Roles of the Board of Directors)

Article 11. Under Article 27 of the Bank Act, the Board of Directors makes decisions regarding the Bank’s execution of business operations and supervises the execution of duties by the Directors. Although the Board of Directors is entitled to make decisions on any matters concerning business execution except those to be resolved by the Supervisory Committee in accordance with applicable laws and regulations and/or the Articles of Association, making decisions on the execution of business other than that to be resolved by the Board of Directors in accordance with applicable laws and regulations, the Articles of Association and internal rules including the Rules for the Board of Directors is appropriately delegated to Directors and Executive Officers from the viewpoint of expediting decisions on business execution.

(Roles of the Audit & Supervisory Board)

Article 12. Under Article 29 of the Bank Act, the Audit & Supervisory Board makes decisions on the preparation of audit reports, the appointment and dismissal of full-time Audit & Supervisory Board Members, the policy of audits, the method of investigating the status of the Bank’s operations and assets, and other matters concerning the execution of duties of Audit & Supervisory Board Members.

Chapter 5 Responsibilities of Supervisory Committee Members, Directors, Executive Officers and Audit & Supervisory Board Members

(Responsibilities of Supervisory Committee Members)

Article 13.

Appointed by the Council of Delegates, Supervisory Committee Members are entrusted to engage in management of the Bank by mainly supervising Directors. As such, Supervisory Committee Members assume the duty of care of a good manager and the duty of loyalty regarding the execution of their duties, thereby contributing to the achievement of the purpose set forth in Article 1 of the Bank Act.
Supervisory Committee Members make decisions in a timely and appropriate manner based on information reasonably collected when determining the basic policy on the Bank’s operations and making managerial judgments on the Bank’s execution of important business matters concerning the AFF cooperative organizations.
Supervisory Committee Members conduct careful deliberations on the reports and proposals from Directors and discuss them while requesting explanations and/or expressing opinions as needed.

(Independent Roles of Supervisory Committee Members)

Article 14. Supervisory Committee Members, excluding those who also serve as the Bank’s Directors, are elected from among the senior management of the member organizations and people engaged in the AFF industries, and have an in-depth knowledge of finance. Supervisory Committee Members are highly independent from the Directors, who mainly engage in business execution, and supervise the Directors from such an independent and objective standpoint. As such, Supervisory Committee Members are expected to provide the business executors with appropriate advice and support based on their expertise to ensure that opinions from equity holders and other stakeholders are appropriately reflected in the management of the Bank.

(Responsibilities of Directors and Executive Officers)

Article 15.

Appointed by the Supervisory Committee and approved by the Council of Delegates, Directors are entrusted to engage in management of the Bank by mainly executing business. Executive Officers are appointed by the Board of Directors and execute the duties entrusted by the Board of Directors. As such, the Directors and the Executive Officers assume the duty of care of a good manager and the duty of loyalty regarding the execution of their duties, thereby contributing to the achievement of the purpose set forth in Article 1 of the Bank Act.
The Directors and the Executive Officers execute their duties with recognition of the Bank’s role of satisfying the social responsibilities as a national-level institution in the cooperative banking business and as a member of Japan’s financial system. They are required to have highly advanced knowledge, experience and capabilities regarding financial businesses and make decisions in a timely and appropriate manner based on information reasonably collected.

(Responsibilities of Audit & Supervisory Board Members)

Article 16. Appointed by the Council of Delegates, Audit & Supervisory Board Members audit the execution of business by the Directors and the Supervisory Committee Members from an independent and objective standpoint. As such, Audit & Supervisory Board Members assume the duty of care of a good manager regarding the execution of their duties. In addition, as members that constitute the Audit & Supervisory Board, the Audit & Supervisory Board Members appropriately execute their duties regarding auditing policies, method of investigating the status of operations and assets, and other matters concerning the execution of duties of the Audit & Supervisory Board Members, which are prescribed in the Bank Act as matters to be resolved by the Audit & Supervisory Board.

Chapter 6 Configuration of the Supervisory Committee, the Board of Directors and the Audit & Supervisory Board

(Member Number, etc., of the Supervisory Committee , the Board of Directors and the Audit & Supervisory Board)

Article 17.

The Bank, as its senior management, has not more than 20 Directors, not more than 20 Supervisory Committee Members and not more than five Audit & Supervisory Board Members.
The position of a Supervisory Committee Member is held by an officer of a member organization, a person engaging in the AFF industries and/or a person who has an in-depth knowledge of finance (including a person also serving as the Bank’s Director).
The position of a Director is held by a person who has the knowledge and experience that would allow for the accurate, fair and efficient execution of the Bank’s operations and has sufficient social credibility.
The position of an Audit & Supervisory Board Member is held by a person who has the knowledge and experience that would allow for the accurate, fair and efficient execution of audits on the execution of duties by the Directors and the Supervisory Committee Members and has sufficient social credibility. External auditors are included in accordance with the Bank Act.
Directors and full-time Audit & Supervisory Board Members must not engage in other duties or operate businesses for remuneration.

(Appointment of Supervisory Committee Members, Directors, Executive Officers and Audit & Supervisory Board Members)

Article 18.

Supervisory Committee Members and Audit & Supervisory Board Members are appointed by the Council of Delegates, based on the recommendation of the Nomination Committee.
Directors are appointed by the Supervisory Committee based on a recommendation by the Nomination Committee, and the appointed Directors take office upon the approval of the Council of Delegates. Executive Officers are appointed by the Board of Directors.
The Nomination Committee recommends candidates who have the qualities and abilities deemed appropriate to fulfill the aforementioned responsibilities of Supervisory Committee Members, Directors and Audit & Supervisory Board Members.
The appointment of the senior management of member organizations and people engaged in the AFF industries as Supervisory Committee Members is made with due consideration to ensure that the intentions of the Bank members, etc., are reflected in the Bank’s business operations and that the role of Supervisory Committee Members is fully fulfilled. The appointment of people who have an in-depth knowledge of finance as Supervisory Committee Members is made with consideration of their relationship with the Bank and cooperative organizations and their academic knowledge and experience in financial business and to ensure smooth cooperation with the Board of Directors, which makes overall decisions on the execution of financial business.
The appointment of Directors and Executive Officers is made with consideration of their business experience, as well as the diversity of the Bank’s operations, including the cooperative banking business, investments and loans, risk management and systems.
The appointment of Audit & Supervisory Board Members is made with consideration of their relationship with the Bank and cooperative organizations and their academic knowledge and experience in financial business.
The appointment of senior management is made to ensure balance and diversity across the Supervisory Committee, the Board of Directors and the Audit & Supervisory Board, and other requirements are prescribed in the Rules for Appointment of Senior Management established by the Council of Delegates.

(Tenure of Supervisory Committee Members, Directors, Audit & Supervisory Board Members and Executive Officers)

Article 19.

The tenure of senior management is until the conclusion of the annual Council of Delegates for the final fiscal year ending within three years of service, provided that the tenure of a substitute senior management is the remaining period of his/her preceding senior management and that the tenure of an officer who takes office to fill an additional post is the remaining period of the incumbent senior management.
Should the number of senior management fall short of a quorum, a senior management who has been dismissed due to expiration of his/her tenure or by resignation has the rights and obligations of a senior management until a newly appointed senior management assumes office.
The tenure of Executive Officers is until the end of the fiscal year when they take office.

Chapter 7 Management of the Supervisory Committee, the Board of Directors and the Audit & Supervisory Board

(Resolution of the Supervisory Committee, the Board of Directors and the Audit & Supervisory Board)

Article 20.

Unless otherwise provided for by laws, regulations and the Articles of Association, a resolution of the Supervisory Committee is adopted by the majority vote of the attending Supervisory Committee Members at a meeting where a majority of the Supervisory Committee Members are present.
Unless otherwise provided for by laws, regulations and the Articles of Association, a resolution of the Board of Directors is adopted by the majority vote of the attending Directors at a meeting where a majority of the Directors are present.
Unless otherwise provided for by laws, regulations and the Articles of Association, a resolution of the Audit & Supervisory Board is adopted by the majority vote of the Audit & Supervisory Board Members.

(Requirements for the Chairpersons of the Supervisory Committee and the Board of Directors)

Article 21.

The meetings of the Supervisory Committee are chaired by the Chairman of the Supervisory Committee.
The meetings of the Board of Directors are chaired by the President, who has the ultimate responsibility for the execution of business.
The meetings of the Audit & Supervisory Board are chaired by one of the Audit & Supervisory Board Members.

(Secretariat)

Article 22. The Bank provides the Supervisory Committee Members, Directors and Audit & Supervisory Board Members with opportunities to promote the understanding of their roles and responsibilities and to acquire and update necessary knowledge when they assume office and on a continual basis thereafter to ensure that they can fully fulfill their functions. In addition, a secretariat is established for communication and coordination with each of the Supervisory Committee Members, Directors and Audit & Supervisory Board Members to provide support and sufficient information.

(Supply of Information to Supervisory Committee Members, Directors, Executive Officers and Audit & Supervisory Board Members)

Article 23.

The Bank’s Directors provide Supervisory Committee Members with sufficient information regarding the execution of duties by the Supervisory Committee Members and supply proposed items on the agenda and their written details for a meeting of the Supervisory Committee before the meeting is held, in principle, to ensure the opportunity for the Supervisory Committee Members to understand the contents beforehand. In addition, they conduct briefings on the Bank’s business operations and environment when the Supervisory Committee Members take office and continually thereafter so that any necessary information, even if not included in the agenda for a meeting of the Supervisory Committee, can be supplied.
The Bank’s Executive Officers and employees provide Directors with sufficient information regarding the execution of duties by the Directors and supply proposed items on the agenda and their written details for a meeting of the Board of Directors before the meeting is held, in principle, to ensure the opportunity for the Directors to understand the contents beforehand. In addition, they conduct necessary briefings to ensure that any necessary information, even if not included in the agenda for a meeting of the Board of Directors, can be supplied.
In accordance with applicable regulations, the Bank’s employees provide Executive Officers with sufficient information regarding the execution of duties by the Executive Officers and conduct necessary briefings.
Supervisory Committee Members, Directors, Executive Officers and the Bank’s employees provide Audit & Supervisory Board Members with sufficient information regarding the execution of duties by the Audit & Supervisory Board Members and supply proposed items on the agenda and their written details for meetings of the Supervisory Committee and the Board of Directors before they are held, in principle, to ensure the opportunity for the Audit & Supervisory Board Members to understand the contents beforehand. In addition, they conduct necessary briefings to ensure that any necessary information, even if not included in the agenda for meetings of the Supervisory Committee and the Board of Directors, can be supplied.

(Maintenance and Enhancement of the Effectiveness of the Supervisory Committee and the Board of Directors)

Article 24. The Supervisory Committee and the Board of Directors make efforts to maintain and enhance their effectiveness by conducting periodic evaluations and other measures.

Chapter 8 Outline of Committees, etc.

(Installation of Committees, etc.)

Article 25.

Under the provisions of the Articles of Association, the Bank installs the Nomination Committee, which recommends candidates for Supervisory Committee Members, Directors and Audit & Supervisory Board Members. The Director Compensation Deliberation Committee, which deliberates on issues related to compensation and retirement benefits of officers, is installed as an advisory body to the Supervisory Committee by a resolution of the Supervisory Committee.
Under the provisions of the Articles of Association, the Bank installs the JA Bank Headquarters, which deliberates on matters regarding the operational guidance necessary for reorganization and reinforcement of the banking business conducted by the agricultural cooperative organizations, and the JF Marine Bank Headquarters, which deliberates on matters regarding the operational guidance necessary for reorganization and reinforcement of the banking business conducted by the fishery cooperative organizations.
By a resolution of the Board of Directors, the Bank establishes the Advisory Board as an advisory organ to the Board of Directors to obtain advice from a broad range of external experts on issues to address regarding the Bank and cooperative organizations and reflect the advice in the management of the Bank.

(Nomination Committee)

Article 26.

The Nomination Committee deliberates on matters regarding the selection of candidates for Supervisory Committee Members, Directors and Audit & Supervisory Board Members and recommends the candidates to the Supervisory Committee.
The Nomination Committee consists of 17 members (including representatives of the cooperative organizations and experts with in-depth knowledge of finance) who are elected in accordance with the Articles of Association, and the chairperson of a Committee meeting is determined by mutual vote of the members who are present.
The appointment of Supervisory Committee Members and Audit & Supervisory Board Members is made by a resolution of the Council of Delegates based on a recommendation by the Nomination Committee. The appointment of Directors is made by a resolution of the Supervisory Committee based on a recommendation by the Nomination Committee, and the appointed Directors take office upon approval of the Council of Delegates.

(Director Compensation Deliberation Committee)

Article 27.

The Director Compensation Deliberation Committee deliberates on such matters as the Bank’s director compensation standards and the total amount of such compensation, as well as those who are eligible to receive retirement benefit payments and standards for such payments.
The Director Compensation Deliberation Committee consists of not more than seven members delegated by the Supervisory Committee from among experts familiar with the treatment and situation of financial institutions and the Bank’s operations, representatives of cooperative organizations and the Bank’s Representative Director and President. The chairperson of a meeting of said Committee is designated by the Chairman of the Supervisory Committee from among said member experts.
Based on deliberation results by the Director Compensation Deliberation Committee, the Supervisory Committee finalizes a proposal on the total amount of director compensation and the payment of retirement benefits, which is presented to the Council of Delegates, where said proposal is deliberated to make a resolution.

(JA Bank Headquarters)

Article 28.

JA Bank Headquarters deliberates on matters regarding the operational guidance necessary for enhancement and restructuring of the banking business conducted by the agricultural cooperative organizations.
The positions of the members of JA Bank Headquarters are held by senior management of the agricultural organizations that are members of the Bank from among the Supervisory Committee Members, as well as persons delegated by the Supervisory Committee.
Meetings of the JA Bank Headquarters committee are chaired by the Chairman of JA Bank Headquarters.

(JF Marine Bank Headquarters)

Article 29.

JF Marine Bank Headquarters deliberates on matters regarding the operational guidance necessary for enhancement and restructuring of the banking business conducted by the fishery cooperative organizations.
The positions of the members of JF Marine Bank Headquarters are held by senior management of the fishery organizations that are members of the Bank from among the Supervisory Committee Members, as well as persons delegated by the Supervisory Committee.
Meetings of the JF Marine Bank Headquarters committee are chaired by the Chairman of JF Marine Bank Headquarters.

(Advisory Board)

Article 30.

The Advisory Board deliberates on the items on which the Board of Directors asks for advice regarding the line of roles to play and appropriateness of measures, etc., to address the issues surrounding the Bank and cooperative organizations and provides advice to the Board of Directors.
The Advisory Board consists of members delegated by the Board of Directors.

Disclosure Items under Japan’s Corporate Governance Code