Basic Policy
The Company’s remuneration plan for directors and Audit & Supervisory Board members is designed to achieve sustainable growth and enhanced corporate value over the medium to long term for the group based on the corporate philosophy, while also ensuring that functions such as business execution and management supervision are exercised appropriately, maintaining transparency and fairness.
Remuneration Levels
Considering the need to acquire and motivate outstanding personnel who will take responsibility for the Company’s global business activities, the Company sets remuneration levels fully commensurate with the roles and responsibilities expected of such personnel, while also considering levels at companies that the Company considers benchmarks based on the scale, industry, and business model.
Remuneration System
With regard to remuneration for directors responsible for business execution, the Company has formulated a remuneration system that is closely linked to performance in individual fiscal years, as well as over the medium to long term, while emphasizing sustainable enhancement of corporate value. Remuneration consists of fixed remuneration as basic remuneration, performance-linked bonuses, and share-based payments, emphasizing the link to shareholder value. Remuneration for outside directors and Audit & Supervisory Board members comprises only fixed remuneration as basic remuneration in light of their duties.
Method of Determining the Content of Remuneration of Individual Directors
The Board of Directors receives recommendations on evaluations of the Directors, the individual remuneration for each Director, the appropriateness of the remuneration system and remuneration levels, and the performance evaluation for performance-linked bonuses and share-based payments from the Corporate Governance Committee, following deliberations within the Nomination and Remuneration Committee.
Based on these recommendations, the Board determines the individual remuneration for directors as follows.
- The president is delegated with deciding the specific payment amounts of individual fixed remuneration as basic remuneration to directors and individual performance-linked bonuses for each director (excluding outside directors) pursuant to resolution of the Board of Directors. In accordance with this delegation, the president makes the final decision on remuneration amounts based on deliberation and reports by the Corporate Governance Committee regarding remuneration levels.
- Individual share-based payments for each director (excluding outside directors) are determined by resolution of the Board of Directors based on reports on performance evaluation, etc. by the Corporate Governance Committee.
Content of Remuneration to Directors (Excluding Outside Directors)
| Remuneration type | Payment method Fixed/Variable |
Remuneration content (Including policy for determining timing or conditions of remuneration) |
|---|---|---|
| Fixed remuneration | Cash/ Fixed |
|
| Performancelinked bonus | Cash/ Variable |
|
| Share-based payment | Non-cash (restricted stock)/ Variable |
|
Overview of Non-Cash Remuneration (Restricted Stock)
To determine the number of shares to be allocated to grantees of restricted stock, a standard number of shares is set for each fiscal year for each individual, giving consideration to his or her performance of duties, responsibilities, and the weighting versus fixed remuneration as basic remuneration. Based on this standard number of shares, shares are allotted for each series each fiscal year or at the same time in the first fiscal year of an evaluation period of several fiscal years, according to the specified release conditions.
The restricted stock allocation agreements concluded with the grantees stipulate that in certain cases, the transfer restrictions on restricted stock shall not be released and the Company shall acquire all of the restricted stock without paying compensation.
For example,
- If a director of the Company retires before the end of the transfer restriction period, the Company shall acquire without paying compensation all of the director’s restricted stock upon the retirement of the director, except when the Company recognizes a just reason, such as completion of the term of office or death;
- If a director retires before the end of the transfer restriction period due to a just reason, such as completion of the term of office or death, the number of shares of restricted stock to be released and the timing of the release shall be reasonably adjusted as necessary, and the Company shall acquire without paying compensation all of the shares for which it has decided that the transfer restriction is not to be released; or
- If the performance-based release conditions have not been met, the Company shall acquire without paying compensation all of the shares for which it has decided that the transfer restriction is not to be released.
| Allotment ratio | Fiscal year for evaluation and allocation timing |
Summary of release conditions | |
|---|---|---|---|
| Series A (Incumbency condition) |
40% of the standard number of shares | Allocated each year, taking a single fiscal year as the evaluation period | On condition of incumbency in the subject fiscal year (single fiscal year) (However, the shares will not be released if the combined consolidated revenue and consolidated operating profit target achievement rate is less than 80%) |
| Series B (Achievement of medium-term performance targets) |
30% of the standard number of shares | Evaluation Period 1 is the three fiscal years from fiscal 2019 through fiscal 2021, with the shares for the three years allocated at the same time at the start of the period Evaluation Period 2 is the two fiscal years from fiscal 2022 through fiscal 2023, with the shares for the two years allocated at the same time at the start of the period |
In each evaluation period, the value of (2) below may not fall below the value of (1) (1)The cumulative amount of the planned value of “consolidated business profit before R&D expenses” of the Third Medium-Term Management Plan (2)The cumulative amount of the actual value of “consolidated business profit before R&D expenses” for the evaluation period |
| Series C (Satisfaction of the medium-term cost of capital condition) |
30% of the standard number of shares | Evaluation Period 1 is the three fiscal years from fiscal 2019 through fiscal 2021, with the shares for the three years allocated at the same time at the start of the period Evaluation Period 2 is the two fiscal years from fiscal 2022 through fiscal 2023, with the shares for the two years allocated at the same time at the start of the period |
In each evaluation period, the value of (2) below may not fall below the value of (1) (1) The cumulative amount of the “consolidated cost of capital” calculated in accordance with the consolidated capital cost ratio for the evaluation period (2) The cumulative amount of the actual value of “consolidated net operating profit after tax” for the evaluation period |
Reason for Selection of the Indicators
For the performance indicators for performance-linked bonus, by combining consolidated revenue, consolidated operating profit, and consolidated business profit before R&D expenses, it is possible to evaluate the results of business management for a single fiscal year from multiple perspectives.
For the performance indicators for share-based payment, by selecting incumbency contribution for achievement of single-fiscal year financial results, consolidated business profit before R&D expenses from a medium-term perspective, and consolidated cost of capital as evaluation items, it is possible to comprehensively evaluate the level of contribution to increasing corporate value.
Composition of Remuneration to Directors (Excluding Outside Directors)
The remuneration plan emphasizes medium-to-long-term enhancement of corporate value, and is designed so that performancelinked remuneration as a percentage of total remuneration varies according to the Company’s single-year and medium-to-long-term consolidated performance.
As a rough guide to the ratio of remuneration by remuneration type, performance-linked bonuses are designed to be variable over the range of 0%–100% of fixed remuneration, and share-based payments over the range of 0%–100% of fixed remuneration. Performancelinked bonuses and share-based payments combined are roughly a maximum of 66% of total remuneration (200% of 300% total).
Composition of Outside Director Remuneration
Remuneration for outside directors comprises only fixed remuneration, with no variable components based on business performance.
Composition of Audit & Supervisory Board Member Remuneration
Remuneration for Audit & Supervisory Board members comprises only fixed remuneration, with no variable components based on business performance.
Total Remuneration to Directors and Audit & Supervisory Board Members in 2022
| Total amount of remuneration (¥ million) |
Total amount by type of remuneration (¥ million) | Number of eligible officers | |||
|---|---|---|---|---|---|
| Fixed remuneration | Performance-linked bonus | Share-based payment | |||
| Directors [of which Outside Directors] |
774 [51] |
350 [51] |
150 [-] |
273 [-] |
14 [5] |
| Audit & Supervisory Board Members [of which Outside Audit & Supervisory Board Members] |
56 [32] |
56 [32] |
- | - | 6 [5] |
| Total [of which Outside Directors and Outside Audit & Supervisory Board Members] |
830 [83] |
407 [83] |
150 [-] |
273 [-] |
20 [10] |
Includes directors and auditors who retired during 2022