Basic Policies and Procedures for Determining Executive Compensation

1. Basic principles and procedures

  1. (1)Compensation for individual Directors is within a range determined by the General Meeting of Shareholders and decided by the Board of Directors following deliberation by the Nomination and Compensation Committee.
  2. (2)Compensation for individual Audit & Supervisory Board Members is based on a system separate from that for Directors and is within a range determined by the General Meeting of Shareholders and decided based on deliberation by the Audit & Supervisory Board. Consulting with the Nomination and Compensation Committee concerning the determination of compensation for Audit & Supervisory Board Members shall be regarding the adequacy and appropriateness of the total compensation level.
  3. (3)Compensation for individual Executive Officers is based on a system separate from that for Directors and Audit & Supervisory Board Members and is decided by the Board of Directors following deliberation by the Nomination and Compensation Committee.

2. Basic compensation policy

  1. (1)Executive Directors (Directors other than Outside Directors)
    • Compensation for Executive Directors shall be based on a scale designed to increase director motivation towards maximizing corporate value and focus on being linked to medium- to long-term shareholder profit.
    • Compensation for Executive Directors shall be comprised of fixed compensation commensurate to respective duties and performance-linked compensation (short-term performance-linked compensation, medium- to long-term performance-linked compensation).
    • Short-term performance-linked compensation shall be paid based on consolidated performance for the given fiscal year as well as based on department performance and the Director’s level of contribution to said department. The standard for short-term performance-linked compensation to Executive Directors shall be a maximum of 100% of fixed compensation for said Director, with the lower limit being no compensation provided.
    • Medium- to long-term results-linked remuneration may include restricted stock and other stock-linked compensation.
  2. (2)Outside Directors
    • In light of the purpose of Outside Directors being to provide management supervision and advice from an independent perspective, compensation for Outside Directors shall be based solely on fixed compensation.
    • Fixed compensation shall be commensurate to the responsibilities of an Outside Director and shall be determined based on consideration separately for full-time and part-time, and based on the roles of each individual.
  3. (3)Audit & Supervisory Board Members
    • In light of the position of Audit & Supervisory Board Members to audit business operations by Directors regardless of corporate performance, compensation for Audit & Supervisory Board Members shall be based solely on fixed compensation.
    • Fixed compensation shall be commensurate to the responsibilities of an Audit & Supervisory Board Member and shall be determined based on consideration separately for full-time and part-time, and based on the roles of each individual.
  4. (4)Executive Officers
    • Compensation for Executive Officers shall be set to provide strong motivation to execute business and shall be linked to performance.
    • Compensation for Executive Officers shall be comprised of fixed compensation commensurate to respective duties and performance-linked compensation (short-term performance-linked compensation, medium- to long-term performance-linked compensation).
    • Short-term performance-linked compensation shall be paid based on consolidated performance for the given fiscal year as well as based on department performance and the Executive Officer’s level of contribution to said department.
    • Medium- to long-term results-linked remuneration may include restricted stock and other stock-linked compensation.

3. Performance evaluation benchmarks

Performance evaluations for Executive Directors and Executive Officers shall be based on the level of contribution to the relevant department for a given consolidated fiscal year as well as the level of achievement for targets such as sales revenue, pre-amortization income for a given year and relevant benchmarks rate of increase/decrease compared to the previous fiscal year. Furthermore, benchmarks shall be determined based on an evaluation of initiatives promoting long-term corporate growth, including the development of internal control systems, compliance, and human resource development.

4. Other

  1. (1)There is no retirement allowance system for Directors, Audit & Supervisory Board Members, and Executive Officers. However, this may not be the case in the event of special circumstances, including when a subsidiary joining the Group via corporate acquisition has an existing retirement allowance system and when such a system is deemed necessary.
  2. (2)In addition to this “Basic Policies and Procedures for Executives Compensation,” the Company also provides disclosure via appropriate methods concerning compensation paid to Directors and Audit & Supervisory Board Members. The Company shall disclose the amount of compensation paid to Directors and Audit & Supervisory Board Members of the Company in an appropriate manner as well as these policies and procedures.
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