Why NIDEC's internal checks did not stop the improper accounting

analysisNIDEC became a company with an Audit and Supervisory Committee on 17 June 2020. According to the Third-Party Committee's report, its Board of Directors, a majority of whom are outside directors, was chaired by founder Shigenobu Nagamori until 19 December 2025 and then by Mitsuya Kishida. At the end of September 2025 the Audit and Supervisory Committee had five members, four of them outside directors; two members served full-time, one of whom was an outside director. The accounting auditors attended about eight of the committee's 12 regular annual meetings, and the committee itself did not conduct on-site audits. ¹

analysisNagamori had substantial influence over personnel matters, the report states. A voluntary Nomination Committee was established in November 2022 on his own initiative, mainly to select his successor. It has been chaired by an outside director and in 2024 selected Kishida from five executive vice presidents, with an outside director member saying Nagamori appeared to deliberately avoid having a say, but it basically nominated candidates from lists presented by executives including Nagamori. The Remuneration Committee, set up in February 2021, was chaired in succession by Nagamori, Jun Seki, Nagamori again and Hiroshi Kobe before an outside director took the chair. According to the committee's report Nagamori sat on both committees until May 2025, whereas NIDEC's annual securities report for the year ended 31 March 2026 records that he left the Remuneration Committee on 20 June 2025. ^{1 2}

analysisThe committee's report lists the outside directors who served after NIDEC's 2020 transition as Teiichi Sato, Shinichi Sato, Osamu Shimizu, Yayoi Komatsu, Takeshi Nakane, Aya Yamada, Takako Sakai, Tamame Akamatsu, Hiroe Toyoshima, Kunio Umeda, Junko Watanabe and Hiroshi Yoshii, and describes them as former government officials, scholars and attorneys. Takeshi Nakane resigned in October 2022, and Junko Watanabe, a reserve Audit and Supervisory Committee member, was appointed director and committee member. A board seat is not evidence of involvement: the committee found no facts suggesting that any outside director or outside corporate auditor was aware of the improper accounting it discovered. ¹

analysisThe committee concluded that the Audit and Supervisory Committee, and before 2020 the Board of Corporate Auditors, 'failed to function as a check', and said the same issues applied to the outside directors who were not members. Some full-time members worked closely with the Internal Audit Department and understood that the fundamental cause of the repeated improper accounting was severe performance pressure from headquarters, yet raised it neither at committee nor at board meetings and took no steps to rectify it. The finding concerns the body and its full-time members, none of whom the report names. One of them told the committee that setting high targets and striving to meet them 'was exactly the management style of the founder, Mr. Nagamori, and I thought it would be difficult to call that into question directly.' NIDEC's annual securities report for the fiscal year ended 31 March 2026 states that the company takes seriously the findings that the check function of Audit and Supervisory Committee members and outside directors had failed and that its officers lacked diversity. It increased the number of outside directors at the June 2026 general meeting and set up a Board Office on 1 June 2026 to support them; at the time of that annual report, 10 of its 12 directors were outside directors, five of them Audit and Supervisory Committee members. ^{1 2}

analysisThe committee also examined what reached the outside officers. Results of special investigations came to the Audit and Supervisory Committee, and earlier the Board of Corporate Auditors, only as summaries without materials and without the Internal Audit Department's and full-time members' understanding that headquarters pressure was the root cause. 'Legacy liabilities' were not reported to the board or to that committee; the Asset Revitalization Project was explained only superficially in March 2019; and the minutes of the committee meeting of 3 October 2023 record the structural reforms of fiscal 2022 (year ended 31 March 2023) only as large impairments of production equipment. Relying on minutes and interviews, the committee found no facts suggesting that any outside director or outside corporate auditor was aware of the improper accounting, and none of those interviewed understood that pressure caused it or that the reforms aimed to eliminate legacy liabilities; the finding concerns what they were told, not misconduct by them. Outside members told the committee, for example, 'I was not aware that instances of improper accounting were occurring repeatedly due to pressure from headquarters', and said they had felt that efforts to meet high targets were beneficial for NIDEC's growth. ¹

analysisThe committee also traced how monthly financial reporting to the board came to an end. At a July 2022 meeting on improper accounting found at Nidec Global Appliance Brasil (NGAB), the executive officer responsible for the Management Department said false monthly figures were also being reported to the Board of Directors and that the headquarters CFO wanted to stop reporting them because they were false. Monthly financial reporting to the board was discontinued from the board meeting of 7 January 2023; the minutes give as formal reasons differences from external segment classifications and the imprecision of preliminary figures, and an outside director at the time said nothing seemed out of place. The committee's account rests on meeting minutes and does not name the officers involved. ¹

analysisNIDEC's Internal Audit Department was, unusually among companies, a unit staffed with accounting specialists that audited about 60 sites a year, and the committee found that it had exercised its expertise. Through its special investigations it became aware that the fundamental cause of repeated improper accounting was strong performance pressure from headquarters but, the committee found, 'deliberately refrained from addressing this issue', did not investigate how legacy liabilities possibly involving intentional misconduct had arisen, and gave the financial closing schedule the highest priority, which the committee linked to reluctance to oppose Nagamori's management philosophy. Under a policy reflecting Nagamori's intent, the report notes, NIDEC announced results earlier than any other company, leaving the accounting department only a few days to prepare statements, and in the fourth quarter of fiscal 2019 (January–March 2020) Nagamori rejected a request to postpone the release because of COVID-19 travel restrictions. A former executive officer responsible for the department told the committee that because Nagamori insisted on announcing results earlier than any other company and a delay would anger him, 'we moved with the highest priority on meeting the financial closing schedule.' These are the committee's findings, not a court decision. ¹

analysisThe Legal & Compliance Department, the committee found, became aware through whistleblowing reports and compliance seminars of the excessive performance pressure on business units and group companies but never raised it to have it corrected. After a September 2018 whistleblowing report that an executive of the Affiliates Management Department was pressuring a group-company officer to recognise sales improperly, the department only gave guidance to the group company's executive and closed the matter. The committee regards that executive as the Executive Officer Responsible for Group Companies; the identification is its own reading, and the officer is not named. A former executive officer responsible for the department told the committee: 'negating Mr. Nagamori's management style was not possible at Nidec. If you tried to, you immediately would be told "You should quit."' ¹

analysisIn its review of NIDEC's improvement plan, the committee's report notes that the Internal Audit Department audited accounting at about 60 group sites a year but reported only to the president, and to the Audit and Supervisory Committee only irregularly on important matters, so risk information did not reach that committee. NIDEC decided to report internal-audit results periodically to the committee and the president, to hold three-way meetings with the accounting auditors, to require the committee's prior approval to appoint or replace the department's general manager and to increase internal-audit staff from 12 to around 20–30. The report summarises these as measures NIDEC decided on, not as a record of their implementation. ¹

analysisThe separate committee on quality misconduct describes the internal audit department as comprising an internal audit group handling accounting audits and an internal control group, with no routine internal audits aimed at quality assurance or quality compliance. NIDEC's annual securities report for the fiscal year ended 31 March 2026 states that the company has set up a structure so that improper internal-audit activity, such as the earlier special audits of unclear status and the deletion of parts of interview minutes, does not recur, and that since April 2026 hiring or transferring the head of the internal audit department requires the prior consent of the Audit and Supervisory Committee. ^{2 3}