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Release: April 27, 2005

Reforms of Management Structure (Restructuring Board of Directors & Introducing "Corporate Officers System") and of Compensation System for Directors, Corporate Auditors and Corporate Officers (Introducing Performance-Linked Bonus, Abolishing Retirement Benefits System for Directors and Corporate Auditors & Introducing Stock Compensation-Type Stock Options)

NGK INSULATORS, LTD. (President & COO: Shun Matsushita; Head Office: Nagoya, Aichi, Japan) hereby notifies that its board of directors today resolved to reform its management structure and compensation system for directors, corporate auditors and corporate officers as described in the following. The said reforms are to be implemented after being resolved at NGK's annual general meeting of shareholders scheduled for June 2005 and the succeeding meeting of board of directors.

1. Reform of Management Structure

With a rapid change in the business environment surrounding the company, NGK considers that it is necessary to accommodate itself to such changes in a timely, flexible manner, and to promptly make and carry out the best decisions. Accordingly, NGK will divide its management's "decision-making/supervisory function" and "business operating function" clarifying respective roles and strengthening each function.

(1) Reform of the board of directors
To expedite decision-making with regard to the company's management and to enhance an operating, supervisory function, NGK makes the following revisions concerning the board of directors including its structure.

  • Decrease the total number of directors from "up to 25" to "up to15", and reduce the current number of directors from 19.*
  • Abolish the positions such as "Executive Managing Director" and "Managing Director."*
  • The term of service as directors shall be one year. * (The current term is two years.)

* (Note) Decreasing the total number of directors, abolishing the said two positions and changing the term of service as directors are subject to an approval of changing the company's articles of incorporation and bylaws at the annual general meeting of shareholders scheduled for June 2005.

(2) Introduction of "corporate officers system"
"Corporate officers system" will be introduced in order to promptly accommodate to changes in business climate and to form a structure that enables quick, flexible business operation. Corporate officers will perform their duties with the authority in regard of business operation delegated to them pursuant to the allocation determined by a resolution of the board of directors. The detail of this "corporate officers system" is as follows:

  • Corporate officers shall be elected by a resolution of the board of directors. Corporate Officers can be assigned as directors at the same time.
  • The total number of corporate officers shall be 25 at the maximum.
  • Corporate officers consist of President, Executive Vice President, Senior Vice President and Vice President.
  • The term of service as corporate officers shall be one year.

(3) Candidates for NGK's directors, corporate auditors and corporate officers after the introduction of "corporate officers system" are scheduled to be announced along with the company's annual financial statements on May 11, 2005.

2. Reform of a compensation system of directors, corporate auditors and corporate officers

With the reform, NGK intends to boost motivation toward a realization of the company's philosophy or management strategy, as well as to clarify the accountability of directors, corporate auditors and corporate officers, enhancing fairness and transparency.

(1) Introduction of performance-linked bonus
At present NGK's directors and corporate auditors are provided with "special bonus for directors," but the new bonus system that is linked more to business performance will be introduced so as to further clarify the accountability of each director and corporate officer for the company's annual business performance. The provision of the said bonus for corporate auditors will be terminated.

(2) Abolishment of retirement benefits system
The existing retirement benefits system for directors or corporate auditors, which is rather linked to seniority, will be abolished upon the close of the annual general meeting of shareholders scheduled for June 2005. As to the directors who continue their services and the corporate auditors who are still in term of their services, NGK will submit at the said shareholders' meeting a bill concerning a payment of retirement benefits for termination in accordance with the length of the time for such services until the close of the said meeting.

(3) Introduction of stock compensation-type stock options
In replacement of providing the current retirement benefits, NGK will grant stock compensation-type stock options as a long-term incentive to its directors, corporate auditors and corporate officers. This new compensation system is more linked to the company's stock price and consolidated business performance, which will make them share with stockholders both advantages and risks generated by ups and downs of the stock price. With this new system, NGK intends to enhance motivation and morale of its directors, corporate auditors and corporate officers to raise the value of the stock and consolidated business performance through appropriate management of the company.

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