Roundtable with outside directors and institutional investors

Kimura: In a company with a nomination committee structure, the roles of "execution" and "supervision" are clearly separated. The role of outside directors is to evaluate the decision-making processes of the executive team and ensure their appropriateness. When concerns arise within the board of directors, we instruct the executive team to consider alternative plans or improvements. Our focus is on ensuring that decisions are based on thorough deliberation, identifying any gaps in the process, and confirming that execution risks are fully recognized. We also assess whether contingency plans, such as Plan B or C, are in place.
Another key responsibility is overseeing the speed and sequence of actions taken by management. While routine matters are left to the executive team, in times of crisis, the board must decide the extent to which it intervenes in execution.
For example, while operations proceeded smoothly through fiscal year 2023, a sharp performance decline in fiscal year 2024 required closer monitoring by the board. This allowed us to evaluate the management team more rigorously and, if necessary, take steps such as the selection or dismissal of executives.

Delmas: When formulating the turnaround strategy, we carefully monitored the executive team’s proposals to ensure they included robust measures for reducing both variable and fixed costs, properly addressed restructuring and impairment accounting, and maintained sound funding plans and relationships with banks.
In addition, given the challenging business environment, we emphasized the importance of top-line measures aimed at improving future sales. By leveraging our expertise, we provided detailed advice and constructive feedback to enhance the quality of the executive team’s plans. These efforts ensured that their strategies were both comprehensive and actionable.

House: The Nomination Committee, which is primarily composed of outside directors, holds regular discussions, with one of its key responsibilities being CEO succession planning. We closely monitor the progress of successor development, and following the business downturn in December of last year, we engaged in rigorous debates regarding the suitability of the management team.
At that time, we recognized that Honda and Nissan were at a critical juncture in their negotiations, which led us to believe that maintaining the existing management structure was essential. However, as it became evident that the negotiations were not progressing, the Nomination Committee acted swiftly to identify a successor candidate and decided to replace the CEO.
I believe the ability to respond with urgency was due to the robust succession plan we had in place. Among the internal candidates, we determined that Mr. Espinosa was the most suitable choice for the position.

House: As part of the succession plan, we did consider the possibility of appointing someone from outside the company. However, given the urgency of turning Nissan around quickly, we decided to appoint someone from within the company who already had a deep understanding of Nissan and could act decisively.
Regarding the evaluation criteria, as I mentioned earlier, speed and urgency were the most critical considerations. For external candidates, we also assessed their ability to understand Nissan’s culture, challenges, and organizational structure, as well as their appreciation of Japan’s heritage. These factors were key in determining their suitability for the role.

Kimura: As a company with a nomination committee structure, the primary responsibilities of outside directors are to replace management when necessary and to reflect evaluations of management in their compensation. While we have been closely monitoring the execution of management plans, the current situation unfortunately required us to replace the CEO and oversee the transition to a new leadership team.
Regarding the continuation of outside directors, there have been several changes in the past, and we will continue to make regular adjustments while ensuring stability and continuity. We are committed to fulfilling our responsibilities appropriately.

Delmas: I have served as the lead independent external director for two years now. During this time, I have worked to strengthen relationships with the executive team, enabling outside directors to make informed and timely decisions by gaining a deep understanding of the management’s intentions.
Despite challenges like the COVID-19 pandemic and semiconductor shortages, I believe the Nissan NEXT initiative achieved a certain level of success. When performance began to deteriorate, we closely analyzed the situation and consistently challenged management on how they planned to address the issues. For the new management team, we have requested the implementation of appropriate structural reforms to address these challenges.

Asada: It has been a year since I was appointed as a director at the last shareholders' meeting. Drawing on my experience, I have provided input and advice to the executive team. However, We recognize that overseeing the executive team in situations like the current one is a complex challenge for the board of directors, particularly in a company with a nomination committee structure.
That said, the board benefits from the diverse experiences of its members, who actively share opinions and provide guidance without hesitation, encouraging management to exhibit strong leadership. Due to unforeseen environmental changes, Nissan recorded a loss exceeding 670 billion yen, and discussions about a business integration with Honda were shelved. In response, we replaced the CEO and established a new management structure, which I believe demonstrates the board’s effectiveness in fulfilling its responsibilities.

Ihara: Since Nissan transitioned to a company with a nomination committee structure, I believe its performance steadily improved until FY2023. Regarding the decline in sales volume, the executive team prioritized securing profits by improving sales quality, and the board closely monitored this approach.
For compensation, in FY2022 and FY2023, we used the financial targets of the Nissan NEXT initiative as evaluation metrics, focusing on restoring the company’s trajectory after past brand damage and prioritizing profit recovery. These metrics were consistently achieved until FY2023.

House: The Nomination Committee, like the Compensation Committee, has been using similar evaluation metrics and conducting rigorous annual assessments. Until now, the high achievement rate of targets justified the decision to retain the CEO. However, FY2024 was different, and we decided to replace the CEO.

Nagai: The budget and plans for FY2025 were thoroughly discussed at the board level. However, given the uncertainty of the current business environment, our approach is to review these plans quarterly. For FY2025, we have adopted a more conservative stance, maintaining flat sales volume as a reference point, which contrasts with the previous upward trajectory.
While there are markets where Total Industry Volume (TIV) is growing, our strategy focuses on recovering and expanding market share in those regions while keeping overall sales volume stable. We will continue to reassess the situation quarterly to ensure adaptability.
Regarding the criticism of overly optimistic targets, I believe the ambition to aim higher following the recovery achieved under Nissan NEXT may have been somewhat optimistic. Until FY2023, supply constraints meant demand outpaced production, leading to favorable outcomes. This year, however, we are taking a much more cautious approach, especially considering external factors such as tariffs, which are expected to have an impact. We will continue to monitor and adjust our plans accordingly.

Harvey: As a member of the Audit Committee alongside Mr. Nagai, I would like to highlight the importance of regional commitment in our approach. During audits in North America, the Audit Committee has engaged in transparent and systematic discussions with the executive team, addressing all concerns. These discussions have emphasized the need for faster decision-making and the importance of balancing a global top-down approach with a bottom-up perspective from the regions.
Regional challenges, such as managing tariffs while advancing localization efforts, remain critical. From our observations, we’ve seen positive transformations in the regions, and we believe the FY2025 business plans are realistic. The Audit Committee will continue to oversee North America and follow up on developments in Japan and China.
Looking ahead, under the leadership of the new CEO, Mr. Espinosa, we will place strong emphasis on speed, decision-making, and transparency. The Audit Committee will continue to monitor these areas closely to ensure progress and accountability.

Kimura: I agree that evaluating the performance of outside directors is an important issue. Currently, the evaluation process is limited to self-assessment, and we are actively exploring ways to establish more objective criteria for individual evaluations moving forward. This includes considering whether self-evaluation is the most appropriate method.
We aim to develop a robust evaluation system by referencing best practices from other companies.

I acknowledge the severity of this issue and am treating it with utmost seriousness. I have been informed on a timely basis about the developments of the case and ensured that all communications with external parties are transparent. We have already fully reimbursed the subcontractors for the excessive charges. The Audit Committee pursued responsibility of related management for these illegal activities and consulted with the board of directors to determine the appropriate disciplinary actions. Following the Japan Fair Trade Commission's recommendation and reports of continued overbilling, we engaged external legal counsel to investigate and they found no further illegal activities. To enhance our relationship with suppliers moving forward, we established a dedicated channel for suppliers to speak up concerns. Maintaining robust supplier relationships is crucial. We will continue to prioritize monitoring compliance with the Subcontract Law through the Audit Committee's audits, including preventive measures. Furthermore, fostering an ethical culture is essential, and I will review our compliance training for employees.

The automotive industry is at a major turning point, and in determining its adaptability to external changes, the outside independent directors participated in several discussion rounds with the executive team before the announcement of "The Arc". I emphasized the importance of the plan being actionable and aligning with Nissan’s long-term vision, "Nissan Ambition 2030". My focus was to ensure that Nissan leverages its strengths and weaknesses effectively, selects and concentrates on key business areas, and utilizes alliances strategically. At the board of directors, we consistently engage in open and detailed discussions and will continue to oversee the implementation of "The Arc".

Enhancing corporate value is critical, as you mentioned. In upcoming board meetings, we plan to engage in detailed discussions with the executive team about the progress of the new business plan, stock price trends, financial soundness, and considerations for repurchasing Nissan shares held by Renault, which are all aimed at enhancing corporate value. Reflecting on the past five years, enhancing financial structure and sales quality were essential for our sustainable growth. Despite challenges such as the COVID-19 pandemic and semiconductor shortages, we made steady progress. The automotive industry is undergoing a significant transformation, and we must continue to enhance our brand and corporate value by delivering good products and effectively marketing them to our customers.

In the dynamic automotive industry, it is crucial to focus on the long-term sustainability of business operations, stock price, and enhancement of corporate value. We have incorporated long-term evaluation metrics such as sales quality improvement, carbon neutrality efforts, and initiatives on human rights. Aligning with shareholders to enhance stock price and corporate value, and foster commitment to medium and long-term business growth, we introduced Restricted Stock Units (RSUs) to provide long-term incentives beyond mere monetary compensation in order to motivate the executive team.

Coexistence and mutual prosperity with suppliers are of the highest priority to Nissan. Going forward, it is also important to comprehensively and carefully review how Nissan interacts with all suppliers, and promptly detect and manage any issues, which I intend to closely monitor.

Following the recent vehicle certification fraud issue, we conducted a thorough investigation of approximately 27,000 inspection items across all 358 events, including model changes and minor modifications, and found no fraudulent activities within our organization. Since the vehicle inspection issue in fiscal year 2018, there has been an increased awareness of compliance in our production and development departments, which contributed to the positive outcome of this investigation. We will continue to work closely with the executive team to maintain vigilance and prevent weathering.

In FY2019, the company transitioned to a three statutory committee structure and the committees established respective policies and principles. In FY2020, each committee is functioning more strategically.
Active discussions are taking place at the BOD and committees with the involvement of diverse members and close communication with executives. The effectiveness of the BOD is ensured.
Currently, the biggest challenge is to deliver the results of Nissan NEXT. The BOD is holding in-depth discussions regarding the performance recovery as well as the mid to long-term strategies.

One of the three key challenges for the nomination committee is to develop a succession plan for the future CEO. About a year ago, we began identifying requirements for the future CEO. We are entering the final stages of developing the program and expediting the process to execute the program.
Nissan has next generation leaders with great potential.

Climate change will become one of the top priorities going forward. Nissan announced to be carbon neutral by 2050 and there are many items to be completed by the 2030s, including electrification and innovation of production technology. Nissan will decide on a strategy to address climate change, while utilizing its strengths in electrification and core competencies.

The performance recovery is on track, but it is still insufficient for the long-term sustainability of the company. It is important to increase unit sales to achieve profitable growth. Therefore, it is necessary to consider the value proposition of the company, which needs to be encompassed in the business plan.

As an outside director, we represent minority shareholders and protect their interests. Nissan has a policy to eliminate conflicts of interest; the company established a conflicts of interest elimination team to enforce this policy, which is headed by the chair of the audit committee. The Alliance is an important asset, and it is important that the company fully utilize the assets of the Alliance to enhance its corporate value. We will manage from a neutral standpoint by checking for conflicts of interest and monitoring benefits to Nissan’s minority shareholders.

The CEO/COO are actively involved in diversity and inclusion efforts, but the number of female workers are still small at gemba. Nissan is a leader in diversity and inclusion among Japanese companies. However, we need to discuss this at the BOD level and on the business execution side, including HR, in order to further enhance diversity in Japan.

BOD meetings used to be around 30 minutes but now last approximately 3 to 4 hours and 7 to 8 hours if pre-BOD meetings are included. Discussions have become more active due to the diversity of the board members.

We will work toward enhancing sustainable profitability through the transition from quantity to quality, selection and concentration and maximizing the Alliance.

We discussed the plan not only at the monthly BOD meetings but also at the Independent Directors Committee and extraordinary BOD meetings. We provided our feedback on the plan, which was prepared by the management team, and checked for possible areas of conflicts of interest.

We would like to proceed with the development and implementation of a long-term-vision for the next MTP as soon as possible. However, the content is most important. Technology is the key factor for the future corporate value of an automobile company and Nissan has a considerable amount of potential.

There is no specific ESG-related KPI but implementation of the Nissan Way is one of the factors in determining compensation. We designed the scheme to incorporate many factors including performance and the Nissan Way in a balanced manner.