Policy for Determining Individual Director Compensation (Excluding Directors who are Audit & Supervisory Committee Members)
(1) General Approach
In determining compensation for the Company's Directors (excluding those who are Audit & Supervisory Committee Members; the same shall apply hereinafter), the following points shall be taken into consideration.
- a. Reasonableness of the amount of compensation for which the Company shall be held accountable and responsible to stakeholders including shareholders.
- b. Reasonableness of the amount of compensation as an incentive for the accomplishment of management policies and the enhancement of corporate earnings and shareholder value.
- c. Effectiveness of compensation as a means to drive efforts for not only achieving the short-term results but also consistently increasing corporate and shareholder value.
- d. Reasonableness of the amount of compensation as consideration for the execution of duties, as well as in terms of whether the amount is at a justifiable level to recruit/promote, to motivate and to retain talented personnel.
- e. Appropriateness of the level of compensation: in determining individual compensation, the Company shall refer to the executive compensation levels of domestic competitors and of similar size corporations as benchmarks, and shall annually participate in an external executive compensation survey to verify the appropriateness of compensation levels for the Company’s Directors.
(2) Executive Directors
- Compensation for Executive Directors shall be structured so as to increase the motivation of said directors to achieve short-term performance targets and improve medium- to long-term corporate value, as well as to increase an awareness of shared values with shareholders.
- Compensation of Executive Directors shall consist of basic fixed base salary (in cash), year-end bonus for a single fiscal year (in cash) as a short-term incentive, and stock compensation as a medium- to long-term incentive.
(3) Non-Executive Directors (Outside Directors)
- Remuneration for Non-Executive Directors (excluding directors who are Audit & Supervisory Committee Members; the same shall apply hereinafter) shall consist of fixed base salary (in cash) only, in light of their position of supervising and advising management based on a high degree of objectivity and independence.
(1) Executive Directors
- Base salary for each individual Executive Director shall be at a level appropriate to his or her responsibilities. Such compensation shall be determined by position, with the President and Representative Director at the top, in consideration of the nature of his or her duties and responsibilities.
- Base salaries for Executive Directors shall be determined on an annual basis and paid in equal monthly installments.
(2) Non-Executive Directors (Outside Directors)
- Base salary for each individual Non-Executive Director shall be at a level appropriate to his or her responsibilities, and shall be determined on a case-by-case basis, taking into consideration such factors as status as full-time or part-time and individual responsibilities.
- Base salaries for Non-Executive Directors shall be determined on an annual basis and paid in equal monthly installments.
- A year-end bonus, which is short-term performance-linked compensation, shall be paid to Executive Directors for the purpose of incentivizing them to achieve targets established for a single fiscal year.
- Year-end bonuses shall be paid in conjunction with the rate of achievement of the Group consolidated performance indicators as a common indicator for all Executive Directors, the degree of achievement of strategic targets set for each individual director, and the rate of achievement of the targets of the performance indicators in the departments over which a director is responsible.
Key performance indicators to be used as evaluation indicators shall be determined in accordance with the importance of the business at the time and the strategic targets for each individual and the evaluation ratio based on each evaluation indicator shall be determined in accordance with the responsibilities and roles of each eligible director.
- The bonus amount for a single fiscal year for an individual director shall be determined by multiplying the base bonus amount for each eligible director (determined for each position) by a payment rate in accordance with the degree of achievement of the above-mentioned indicators. Each individual base bonus amount shall be determined taking into consideration the nature of each director's duties, roles, responsibilities, and the composition ratio of compensation components. The payment rate shall be 100% when the target is achieved. The range of payment shall be between 0% and 200% depending on the rate of achievement of the Group consolidated performance indicators and the performance indicators of the division for which the director is responsible. The range of payment shall be between 0% and 120% depending on the degree of achievement of strategic targets established for each individual.
- Year-end bonuses shall be paid at a certain time after the end of each fiscal year.
- Stock compensation shall be provided to Executive Directors for the purpose of incentivizing them to achieve performance targets established in the medium-term management plan, as well as to enhance corporate value sustainably and to encourage greater sharing of value with shareholders.
- Specifically, the Company shall adopt a performance-linked restricted stock compensation plan (performance share units).
- In principle, stock compensation will be linked to the rate of achievement of performance targets established in the medium-term management plan as an evaluation indicator. Performance indicators to be used as evaluation indicators shall be determined in accordance with the business importance of each item in the medium-term management plan.
- The number of shares to be delivered as stock compensation for each individual director shall be determined according to the base amount for each eligible director, which shall be determined in consideration of the nature of each director's duties, roles and responsibilities, and the composition ratio of compensation components, multiplied by the rate of payment in accordance with the achievement of performance targets as of the end of the predetermined applicable period (in principle, the applicable period shall coincide with the period of the medium-term management plan).
The range of performance payment rate shall be between 0% and 200%.
In delivering shares as stock compensation, the Company shall, in principle, enter into a performance-linked restricted stock allotment agreement between the Company and eligible directors, which shall include the following details.
- a. Eligible directors shall not transfer, grant a security interest in, or otherwise dispose of Company shares allotted until his or her retirement.
- b. The Company shall acquire shares without compensation if certain events occur. Such events include when the Board of Directors determines that there has been a material breach of the appointment agreement, etc. between the Company and the relevant director during the term of office of the relevant.
- c. Other details of the conditions for the release of restrictions on transfer, etc., established in advance by the Board of Directors.
- In the event of resignation from the position of director or certain acts of non-compliance during the applicable period, the Company shall not provide stock compensation.
- The delivery of restricted stock as stock compensation shall be made at a certain time after the end of each applicable period by granting monetary compensation claims in the proper proportion to eligible directors, who shall then contribute all such monetary compensation claims in kind upon the issuance of shares or disposal of treasury stock by the Company.
- The Company policy regarding composition of compensation for Executive Directors shall reflect higher proportions of year-end bonuses (short-term incentives) and stock compensation (medium- to long-term incentives). The purpose of this policy is to further strengthen the linkage of performance with medium- to long-term corporate growth and corporate value, as well as to encourage greater sharing of value with shareholders.
- For Executive Directors, the ratio of fixed base salary, year-end bonus, and stock compensation to the annual remuneration shall be generally equal to the following respective ratios when the targets are achieved, in principle: Base salary to year-end bonus to stock compensation = 45-47 : 22-26 : 26-33.
- Compensation, etc. for Non-Executive Directors shall consist of fixed base salaries only, as described above.
Overview of the Company's Director Compensation System
（Short-Term Incentive Compensation）
（Medium-to Long-Term Incentive Compensation）
|Recipient||Director||Executive Director||Executive Director※1|
|Form of Payment||Cash||Cash||Performance-Based Restricted Stock
（Performance Share Unit: PSU）
|Determination Method||Determined by position||A variable provision rate multiplied by the standard bonus amount. The provision rate varies based on indicators of achievement of targets set for each fiscal year with respect to consolidated performance, the performance of the division the director is responsible for, and individual performance.||Calculated with a provision rate based on the achievement rate of performance indicators (consolidated net profit and consolidated ROE) for the final year of the medium-term management plan.|
※1 Includes executive officers of the Company, directors and executive officers of domestic subsidiaries, and other key employees
（note）Please refer to Medium-Term Management Planfor the planned values for the final year of the plan.
- To ensure the appropriateness of director compensation and strengthen the objectivity and the accountability of the decision-making processes thereof, the Company has established the Nomination and Compensation Committee as an advisory body to the Board of Directors and that consists entirely of Independent Outside Directors (including directors who are Audit and Supervisory Committee Members). The Nomination and Compensation Committee shall deliberate the following in advance, which shall be then determined by resolution of the Board of Directors, with maximum respect for the content of the aforementioned deliberations: the basic policies, guidelines, rules and procedures, etc., necessary for the determination of executive compensation; evaluation indicators and other items for performance-linked compensation; matters relating to individual director compensation.
- The Nomination and Compensation Committee shall deliberate on the following in advance, which shall then be determined by resolution of the Board of Directors, with maximum respect for the content of the aforementioned deliberations and within the range of amount and details of compensation as resolved at the General Meeting of Shareholders: the amount of basic compensation and single-year bonuses for each individual director; the individual amount of stock compensation.