Nidec (6594) Investor update summary

Background and Key Milestones

• Shares were designated as Security on Special Alert due to significant internal management deficiencies and audit disclaimers for financial statements.

• Multiple incidents of suspected improper accounting, customs violations, and tax underreporting were identified across subsidiaries, prompting internal and third-party investigations.

• Establishment of Corporate Reform and Third-Party Committees to address governance and accounting issues, with interim and final reports scheduled.

Root Causes and Cultural Analysis

• Excessive focus on shareholder value and stock price led to unrealistic profit targets, micromanagement, and discouraged voicing concerns.

• Authority was concentrated with the former representative, resulting in governance and risk management weaknesses and insufficient board expertise.

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

Improvement Plan and Measures

• A comprehensive improvement plan targets governance, accounting, and cultural weaknesses, with six major causes identified and targeted for correction.

• Measures include reforming systems, processes, and corporate culture, strengthening internal audits, whistleblowing, and clarifying responsibilities with disciplinary actions.

• Adoption of bottom-up planning, medium- to long-term performance evaluations, and independence of accounting functions from business divisions.

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

• Corporate culture reforms include a new Culture Transformation Office/Lab and enhanced compliance education.