Nidec (6594) investor relations material

Apology, Background, and Context

• Management apologized for delayed earnings disclosure and the stock's designation as a Security on Special Alert by the Tokyo Stock Exchange, following audit disclaimers and significant internal management deficiencies.

• An improvement plan was submitted to address governance, accounting, and internal control weaknesses, aiming for removal of the special alert status.

• Third-Party and Corporate Reform Committees were established to investigate issues and guide reforms, with interim and final reports scheduled.

• Multiple incidents of suspected improper accounting, customs violations, and tax underreporting were identified across subsidiaries.

• The company acknowledges the negative impact of past disclosure failures on investors and is committed to regaining trust.

Root Causes and Cultural Analysis

• Excessive top-down pressure, short-term profit focus, and prioritization of shareholder value led to unrealistic targets and micromanagement.

• Corporate culture discouraged missing targets or voicing concerns, with authority concentrated in former leadership.

• Board of Directors lacked sufficient risk information and diversity of expertise.

• Internal audit and group management systems were fragmented and insufficient.

• Internal controls were materially weak, especially in information flow and financial reporting.

Reform Process and Improvement Measures

• The Corporate Reform Committee, with 13 members and external experts, analyzed systems, rules, and culture to identify root causes and propose reforms.

• Multiple working groups conducted in-depth discussions and interviews across the organization.

• Six major causes of issues were identified, with measures targeting accounting practices, governance, internal audits, whistleblowing, and disciplinary actions.

• Legal & Compliance and Trade Compliance functions have been strengthened, with new leadership and global teams.

• Concrete actions include compliance training, improved controls, and a new Culture Transformation Office/Lab.