Roundtable with outside directors and institutional investors

Kimura: Since the leadership change in April last year, both the quantity and quality of discussions at the Board of Directors have improved significantly, with more substantive and meaningful discussions taking place. This has been driven primarily by two key changes.
First, the number of executive members attending Board meetings has increased, leading to closer communication between the Board and management. Previously, discussions were mainly centered around the CEO and CFO, but now four to five functional heads also attend, enhancing the Board’s ability to effectively challenge management and oversee execution. Second, there has been a change in the composition of the Board members nominated by Renault. While Renault continues to appoint two directors, the composition has shifted toward individuals with a higher degree of independence.
As background, the Company transitioned to a Company with Three Committees in 2019 as part of its response to governance issues, with a strong focus on fairness and transparency. At that time, the Board maintained a certain level of distance from management. Since then, the approach has evolved to strengthen constructive engagement with management while maintaining a clear distinction between oversight and execution. As a result, discussions at the Board have become more forward-looking and constructive.

Nagai: Re:Nissan is a two-year initiative aimed at restoring business performance through reductions in fixed and variable costs and improvements in top-line performance, with the goal of returning the automotive business to profitability in terms of operating income and free cash flow (before tariff impacts).
From a monitoring perspective, progress on fixed cost reductions, including plant closures, is generally proceeding as planned. In contrast, variable cost reductions require more time, as they involve renegotiations with suppliers. Therefore, we closely monitor both the progress and the execution structure of these initiatives. Management is working cross-functionally to identify cost reduction measures, and we receive monthly updates from the CEO on both the accumulation of initiatives and their implementation status.
With respect to the top line, the focus is not simply on increasing sales volume but on improving profitability. We review progress on region-specific sales strategies aligned with local demand. In addition, we monitor the use of sales incentives on a monthly basis to ensure that they do not have a negative impact on profitability or brand value.
Furthermore, in addition to improvements in operating income, achieving net income profitability is also a key priority, and we monitor this closely, including the impact of restructuring-related impairments.
From a governance perspective, the Audit Committee meets prior to each Board meeting and receives progress updates from executive management, including the CEO, CFO, and CPO. Based on these discussions, further deliberations are conducted at the subsequent Board meeting. This structure supports effective oversight and informed challenge by the Board.

Delmas: The level of discussions at the Board of Directors has improved significantly over the past year. With the increased participation of executive members, discussions have become more diverse and more grounded in operational realities.
Under Re:Nissan, the Company is steadily advancing reductions in both fixed and variable costs while also focusing on top-line growth. In doing so, we believe that maintaining the right balance between profitability and sales volume is particularly important. From this perspective, the Board monitors inventory levels and the use of sales incentives, particularly in North America.
At present, a key challenge is the recovery of sales volumes, with a particular focus on the U.S., China, and Japan. In China, despite the highly competitive environment, we have seen some progress through early structural reforms and the introduction of locally developed and manufactured models. In the U.S., while the Company has been impacted by tariffs, it has taken various measures to maintain profitability. In Japan, however, recovering sales remains a challenge, and efforts such as the introduction of new models are underway.
In addition, at a company-wide level, decision-making had previously been slower than desired. Since the appointment of CEO Ivan Espinosa, efforts have been made to improve the speed of decision-making. Furthermore, in response to changes in the external environment, the Board has strengthened its oversight by requiring timely updates from management on their responses.
Looking ahead, we believe that the most important priorities are to steadily execute Re:Nissan, restore product competitiveness, and strengthen sales capabilities.

Nagai: Monitoring had already been in place under the previous structure; however, we have seen improvements in both its content and the overall framework.
Previously, for example, in the North American market, when the use of sales incentives to adjust inventory levels resulted in comparatively higher levels than peers, we would receive reports on inventory conditions and management approaches and review the underlying factors. We also monitored how management addressed the alignment between production plans and sales plans.
Currently, rather than relying on sales incentives primarily for inventory clearance, they are used more strategically to support the competitiveness of strong SUV models and other key products. Monitoring now also places greater emphasis on ensuring profitability alongside sales performance.
In terms of governance structure, reporting was previously centered on the CFO. Today, however, the CEO, CFO, CPO, and the head of corporate planning attend both Board and Audit Committee meetings, enabling more detailed and direct discussions. We believe this has contributed significantly to the enhancement of monitoring quality.

Ihara: Compensation is determined by the Compensation Committee in accordance with the Company’s compensation policy, ensuring transparency in the process. Compensation levels are regularly reviewed against a benchmark group of global companies.
At the same time, given the fact that the Company has recorded net losses for two consecutive years, the appropriateness of the compensation framework in supporting a recovery in performance has been an ongoing topic of discussion at both the Compensation Committee and the Board.
For FY2025, as the first year of Re:Nissan, annual bonuses were based on key indicators such as reductions in fixed and variable costs and mitigation of tariff impacts, with an overall achievement level of approximately 84%. These bonuses were paid in accordance with the defined framework.
However, the CEO voluntarily forfeited 50% of his variable compensation, following discussions at the Board and the Compensation Committee, and the Committee accepted this decision.
Looking ahead, the FY2026 compensation framework is being revised to place greater emphasis on profitability, with KPIs focused on operating income and free cash flow as part of the second year of Re:Nissan. We will continue to review and refine the compensation framework in light of business conditions and performance.

House: At the 127th General Meeting of Shareholders, three directors are scheduled to step down. Ms. Ihara will retire upon completion of her eight-year term.
As for Mr. Asada and Mr. Kimura, although their terms have not yet expired, both have decided to step down for personal reasons. These decisions were not made by the Nomination Committee.

Kimura: Beyond Re:Nissan, in addition to volume and profitability, we believe that further strengthening of leadership by management is a key challenge. While we recognize that leadership has been improving, we expect continued progress in enabling management to effectively mobilize the organization and its people, taking into account lessons learned from the past.

Nagai: With respect to CEO Ivan Espinosa’s leadership, we assess that the pace of decision-making has improved. At the same time, one of the Company’s challenges remains organizational siloing, where individual functions tend to operate in isolation and the ability to integrate and drive initiatives across the organization remains insufficient.
To address this, it is essential to ensure that top management’s direction is quickly and effectively cascaded throughout the organization. The Audit Committee continues to monitor specific initiatives, such as simplifying governance structures and streamlining approval processes.
In addition, while cost reduction and structural reforms remain important, the formulation of a concrete growth strategy is also a key challenge. While a certain direction has been outlined at the recently announced Vision presentation, we believe there is still room to enhance its specificity. As independent directors, we intend to actively review and provide input as management develops the upcoming mid-term management plan.
Furthermore, based on past lessons where reductions in development investment led to a decline in competitiveness, we are closely monitoring the balance between cost reductions and strategic investments to ensure that such situations are not repeated.

Harvey: Management has been working to simplify organizational layers and improve management spans while implementing workforce reductions. At the same time, efforts are underway to address siloed structures and transition toward a simpler, faster, and more agile organization.
As part of this transformation, management is reviewing delegation of authority and improving decision-making processes within the internal control framework. Beyond expanding authority or reducing the number of meetings, the Company is leveraging AI to streamline routine operations, allowing employees to focus on more critical areas such as development and production.
In parallel with workforce reductions, efforts are also being made to strengthen human capital. For example, more than 150 new graduates have recently joined the Company, many of whom possess skills in software and AI. These new hires are expected to contribute to strengthening capabilities in areas such as mobility and intelligent technologies.
We believe that it is essential to strike a balance between structural reform and investment in people, while fostering faster decision-making and enhancing competitiveness.

Asada: One of the Company’s challenges is the relative weakness in sales capabilities, which has acted as a constraint on performance. In addition, during periods of business downturn, there has been a tendency for management to become more inward-looking, with increased time spent in head office discussions and reduced engagement with frontline operations.
Going forward, it is important for management to spend more time in the field, directly engaging with customers and gaining first-hand insights into market needs. It is encouraging to see that the CEO and other members of management have already begun to strengthen their engagement with frontline operations both in Japan and overseas.

House: Regarding the three newly appointed directors, they were selected with the intention of strengthening the effectiveness of the Board by complementing areas where the Company identified skill gaps.
For example, Ms. Greenway brings experience across both automotive manufacturers and suppliers, as well as business experience in the United States. Mr. Shinbo has expertise in risk management, portfolio management, and finance. Mr. Koji is expected to contribute to performance improvement through his experience in turnarounds and M&A.
In this way, we are enhancing the composition of the Board by focusing on complementary skill sets.

Tokuno: We believe that one of the Company’s key challenges is the speed of decision-making. This is partly due to the number of layers in the decision-making process, and as part of the ongoing transformation, efforts are being made to streamline organizational layers and promote delegation of authority. In addition, the Company is improving operational efficiency through initiatives such as the use of AI.
With respect to human resource development, collaboration across organizational boundaries has been strengthened through initiatives such as cross-functional teamwork, and we believe that this transformation process itself is contributing to the development of talent.
From a cultural perspective, changes are underway, particularly with an increased emphasis on a field-oriented approach. It is encouraging to see that senior management, including the CEO, are spending more time in the field, engaging directly with frontline operations and gaining a renewed understanding of the importance of sales.
In addition to internal improvements, strengthening relationships with stakeholders such as suppliers and dealers will be key to enhancing sales capabilities and driving overall improvement in the Company’s performance.

Ihara: The Company has maintained long-standing alliances with Renault and Mitsubishi Motors, with a relationship with Renault spanning over 20 years. In the current business environment, it would be extremely challenging to compete without such alliances, and we recognize that they have contributed to improving profitability and maintaining competitiveness across regions.
In this context, as publicly stated by CEO Ivan Espinosa, the Company is further strengthening collaboration with Renault and Mitsubishi Motors, including efforts to optimize production capacity.
At the Board level, we receive reports from management on these initiatives and actively discuss them, including their alignment with market conditions and product strategy, as well as their contribution to optimizing production capacity.
Looking ahead, we will continue to oversee whether each alliance truly contributes to enhancing corporate value, focusing on the realization of concrete synergies and the effectiveness of profit contribution.

Harvey: Risk management is one of the key areas of internal control for the Company. This fiscal year, we have been addressing a wide range of strategic and operational risks, including geopolitical risks, supply chain, cybersecurity, regulatory, financial, battery, and BEV-related risks.
The Board of Directors and the Audit Committee regularly receive reports from management and engage in discussions on both strategic and operational aspects. We also review the effectiveness of the risk management framework and monitor key risk items on an ongoing basis. In addition, we review KPI management, the potential impact of risks on business and financial performance, and the appropriateness of mitigation measures.
As a specific example, in response to logistics disruptions arising from geopolitical tensions in the Middle East, when routes through the Strait of Hormuz were constrained, management quickly secured alternative routes and adjusted logistics plans. Through such responses, we have confirmed improvements in overall supply chain resilience.
We will continue to oversee the Company’s risk response capabilities and management framework, with a focus on transparency and agility.

Nagai: Progress toward the ¥250 billion fixed cost reduction target is on track, and we receive regular updates from management, including on major structural actions such as plant closures.
At the same time, development investment is maintained at approximately ¥500 billion annually, with a significant portion allocated to new vehicle development. From the perspective of ensuring future competitiveness, the Board confirms that these investments are being preserved. Based on past experience, where reductions in development investment led to disruptions in product cycles, the Company has made it clear that such actions will not be repeated. In addition, CEO Ivan Espinosa and Director Akashi, both with development backgrounds, strongly recognize the importance of maintaining investment that supports growth.
Going forward, we will monitor the progress of these initiatives through metrics such as net income, operating income, and cash flow.

Asada: This is a very difficult question. From the perspective of an independent outside director, whose role is to oversee management, while the current priority is the execution of Re:Nissan and restoring performance, the Board remains actively engaged in overseeing the development of the Company’s mid- to long-term strategy. Based on my past experience, when a company is in a period of significant operational challenges, it is difficult to define a clear long-term vision looking 10 years ahead. In such situations, the priority is to firmly execute the ongoing transformation—in this case, Re:Nissan—restore stability and rebuild trust with shareholders and stakeholders.
The pursuit of new business models, cross-industry collaboration, and the formulation of concrete growth strategies should be addressed as the next step. At this stage, the Board continues to work with management to further develop and refine the Company’s long-term strategic direction.

Nagai: At present, restoring financial performance and strengthening the Company’s financial position are the top priorities. Without achieving this, it is difficult to present a credible and actionable growth story.
That said, with respect to the post–Re:Nissan strategy, in addition to the Vision presentation that has already been announced, the Board intends to engage in thorough discussions as part of the formulation of the mid-term management plan currently under development.

Tokuno: The very definition and role of automobiles are undergoing significant change, and customer expectations are evolving accordingly. Within this context, we believe there are emerging opportunities that may help define the Company’s future direction and growth potential.
While this environment presents challenges, it also offers opportunities for new value creation, and we view this as an important phase in shaping the Company’s future growth trajectory.

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.

Ihara: Improving the quality of sales was one of our primary goals under Nissan NEXT. However, given that the company was still in the midst of its recovery, we determined that achieving a certain level of sales volume was also necessary. As a result, sales volume was included as part of the evaluation metrics. We also engaged in discussions regarding the weighting of these metrics.
For FY2025, in addition to the traditional metrics, we have decided to incorporate the cost reduction targets for both fixed and variable costs outlined in the Re:Nissan initiative. These adjustments reflect our commitment to addressing key structural challenges and ensuring a balanced approach to performance evaluation moving forward.

Nagai: Regarding the performance of FY2023, we acknowledge that favorable external factors, such as the resolution of supply-demand imbalances, contributed significantly to the results. During monthly Audit Committee and Board of Directors meetings, we closely monitored performance and questioned whether the company’s true capabilities could sustain growth once the COVID-19 pandemic subsided.
The executive team assured us that they were working diligently, and with the improvement in FY2023 performance, coupled with the resumption of dividend payments, Nissan gained momentum. This led to the introduction of "The Arc" plan, which was backed by the company’s technological strengths. However, reflecting on whether the realization of "The Arc" was truly feasible, we believe there could have been a more thorough consideration of potential risks.
Outside directors not only provide warnings but also play a supportive role in helping the executive team enhance corporate value, particularly as performance improves. While I do not believe the executive team ignored the advice of outside directors, the sharp deterioration in performance has underscored the need for deeper monitoring and stronger oversight. Moving forward, we are committed to adopting a more rigorous and critical approach to ensure effective governance.

Ihara: The rationale for this lies in the establishment of the Compensation Committee, which initially focused on addressing irregularities in retirement compensation. The system was designed to ensure a smooth leadership transition, prevent competitive activities after retirement, and enforce compliance with confidentiality obligations.
Regarding the payment of retirement compensation despite lower performance-linked compensation due to unmet targets, this is governed by the Special Gratitude Allowance system and severance arrangements. The Special Gratitude Allowance system was communicated to executive officers appointed after FY2018, and the Compensation Committee maintains a policy of not altering previously communicated arrangements. This policy explains the announced amounts.
Additionally, the severance payment framework is determined by the Compensation Committee, and the amounts announced represent the minimum payments within that framework. While performance-based compensation was reduced in alignment with unmet targets, the retirement-related compensation follows established policies to ensure fairness and consistency.

Ihara: There is a rule that retirement remuneration is not open to discussion; however, there is an ongoing debate about the appropriateness of the current remuneration system. For new executive officers, we have eliminated the special retirement allowance notification. Consequently, only the components determined by the remuneration committee will remain in the future. Regarding the compensation for outside directors, we benchmark against similar companies and do not consider it excessively high. Since outside directors have different roles, their remuneration is not linked to performance, although we review the compensation structure annually.

Tokuno: I understand the rules, but concerning the perception that it differs from market sentiment, we have adhered to the remuneration committee's standards to prevent arbitrary decisions regarding compensation. If we were to modify the rules due to poor performance, it could lead to arbitrary management practices.
Therefore, I would like you to understand that this approach is intended to eliminate any potential for arbitrary decision-making.

Asada: Speed and leadership are critical in management. Attempting to reach a consensus with all stakeholders can lead to delays, so it is essential for top management to take decisive action. Additionally, understanding the situation on the ground is paramount; top management must quickly implement recovery measures. In this context, securing liquidity through fundraising, maintaining credit ratings, and optimizing personnel systems must be executed swiftly, and I believe these areas have improved since the new management team took charge.
The key to successful execution lies in adhering to the key performance indicators (KPIs) established for the capital policy. Moving forward, I would like to advise the new management team on various information and opinions based on my experiences, to ensure that the turnaround initiatives are implemented promptly.

Delmas: We are currently evaluating what types of partnerships would be appropriate as part of our strategic review. In the Re:Nissan initiative, our goal is to integrate and optimize platforms while reducing the variety of parts and development costs. We have announced plans to rethink our supply chain to achieve these objectives.

Tokuno: As a newly appointed director, I would like to share my thoughts. I believe that the most important aspect of a company with a nomination committee is fostering a relationship of trust between the executive team and the directors. Without this trust, information will not be shared promptly or transparently, and the board's decisions may lack completeness. I believe both the directors and the new management team recognize this issue and will work diligently to improve it moving forward.

Kimura: Starting this April, we have established a system where members of the executive team regularly participate in board meetings to enhance communication between directors and executive committee members. While we are still in the process of implementing this, I wanted to inform everyone that we are considering such measures.

Tokuno: I believe that, due to the circumstances surrounding Nissan's transition to a company with a nomination committee, the board has sometimes hindered trust-based communication with the executive team by attempting to exert strong oversight to prevent misconduct. While independent outside directors do have a supervisory role, it is also essential to consider how to enhance corporate value collaboratively with the executive team. As the chairman mentioned, we are implementing new initiatives, such as having all chief officers participate in each board meeting. Through these initiatives, we aim to foster a sense of urgency in changing our organizational culture.

Kimura: Rather than simply maintaining the status quo, we believe it is vital to support the new management team during this fiscal year. Beginning next fiscal year, we will start to replace members of the board; however, given the rapid changes our company has experienced this year, we decided to monitor the situation with the current members for now.

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.