Corporate Officer Remuneration

1.Total Amount of Remuneration by Corporate Officer Title, by Type of Remuneration, and Number of Officers Receiving

(From April 1, 2023 to March 31, 2024)

Corporate officer title

 

Total remuneration (Millions of yen)

 

Total remuneration by type (Millions of yen)

Number of corporate officers eligible for remuneration

 

Fixed remuneration

Performance-based remuneration

Retirement Benefit

Non-monetary remuneration etc.

Directors
(excluding External Directors)

279

247

32

19

6

Audit &Supervisory Board

Members
(excluding External Audit

&Supervisory Board Members)

21

21

1

External Corporate Officer

74

74

7

Total

376

343

32

19

14


2.Matters Pertaining to the Policy, etc. Concerning the Determination of the Amount of Remuneration, etc. for Directors, etc. and its Calculation Method

Policy Concerning the Determination of Remuneration, etc., for Directors and Outline of Method of Determination

The Company determines Directors' remuneration, bonuses, and other economic benefits to be received as consideration for the execution of duties ("remuneration, etc. of Directors") by resolution at a Shareholders' Meeting.
The remuneration, etc. of Directors consists of a three-tier structure, including fixed remuneration, short-term incentive (hereinafter, "STI"*1) and medium- to long-term incentive (hereinafter, "LTI"*2), each of which is clearly defined.

*1  STI: Short Term Incentive.
*2  LTI: Long Term Incentive.

The Company has set forth a method for determining the amount of remuneration based on internal rules resolved by the Board of Directors, following a report from the Nomination and Remuneration Advisory Committee, within the scope of the total amount of remuneration resolved at a Shareholders' Meeting.
Specifically, at the 13th Ordinary General Meeting of Shareholders held on June 25, 2021, a resolution was passed stipulating that in addition to the fixed remuneration, the amount of remuneration, etc., including bonuses and other monetary remuneration as the above STI, shall be no more than 432 million yen per year (including no more than 96 million yen per year for external Directors). The aforementioned total amount of remuneration for Directors also includes the portion of remuneration as an employee for Directors who work as employees at the same time (including the Executive Officer's portion), and the above stock-based payment as LTI is separate.


Executive Compensation Structure

Officer compensation consists of (1) fixed remuneration, (2) short-term incentive (STI), and (3) medium- and long-term incentive (LTI), in order to create an incentive for officers to increase short-term performance, as well as medium- and long-term performance, and corporate value. The proportion of each type of compensation is as follows: (1) fixed remuneration = 75%, (2) short-term incentive (STI) = 10% or 15%, and (3) medium- and long-term incentive (LTI) = 15% or 10%.

* For Executive Officers who serve as Directors of the Board at the same time, STI and LTI make up 10% and 15% of compensation, respectively. For Executive Officers who do not serve as Directors of the Board at the same time, STI and LTI make up 15% and 10% of compensation, respectively.


Fixed Remuneration

Fixed remuneration is an amount of remuneration determined in accordance with internal rules for each title (President, Executive Vice President, Senior Managing Executive Officer, Managing Executive Officer, etc.) and each position (Representative, Chairman of the Board, Member of Nomination and Remuneration Advisory Committee, etc.), paid as monthly remuneration in cash.


STI

The Company pays as a bonus the STI that will be added to or subtracted from the calculation base amount calculated from the individual amount of base remuneration, ranging from 0% (no payment) to 200% (double the amount of the calculation base) according to business performance (profit, capital efficiency indicators, etc.) (STI is not paid to Directors who do not serve as Executive Officers at the same time).
STI for FY2023 was determined according to specific indicators linked to performance and adjustment coefficients determined at a meeting of the Board of Directors in July 2023, based on performance in FY2023. A total amount of 32 million yen was paid to six Directors serving as Executive Officers at the same time in FY2023.

A sample of the STI calculation formula is as follows.
Bonus = STI standard annual amount (Y) × comprehensive assessment (X%)
Comprehensive assessment (X%) = (a × A) + (b × B) + (c × C)]

Assessment
Assessment item, proportion, and actual results Comprehensive assessment
Assessment item 1 Assessment item 2 Assessment item 3
Proportion Proportion Proportion X%
a% b% c%
Actual results Actual results Actual results
A% B% C%

* For assessment items 1 through 3, up to three are selected for each Executive Officer based on the attributes of the areas that they oversee
The assessment items are determined in accordance with the mission of each Executive Officer, from among the following six items: revenue, core operating income, profit, return on invested capital (ROIC), free cash flow, and year-end inventories

* Allocated such that a+b+c=100

* Comprehensive assessment X is the total result of multiplying the proportion of each assessment item by its actual result


LTI

The Company introduces a stock remuneration system using trusts ("this system") as LTI for Directors of the Company (excluding External Directors).
The purpose of this system is to raise Directors’ awareness of contributing to the improvement of medium- to long-term performance and the enhancement of corporate value by further clarifying the linkage between the remuneration for Directors and the value of the Company's shares, and enabling Directors to share profit and risks arising from share price fluctuation with shareholders. The Company also introduces a similar stock remuneration system for Executive Officers who do not concurrently serve as Directors.

An outline of this system is as follows.

(1) Individuals eligible for the System

  • Directors of the Company (excluding external Directors)

(2) Applicable Period

  • The period of up to five fiscal years prescribed by the Company
  • The initial Applicable Period shall be from the fiscal year ending March 31, 2025 to the fiscal year ending March 31, 2027.

(3) Upper limit of cash contributed by the Company as funds for the acquisition of the Company's shares necessary to be delivered to the eligible individuals described in (1) during the applicable period (three fiscal years) described in (2)

  • The amount obtained by multiplying the number of fiscal years of the Applicable Period by 100 million yen
  • A total amount of 300 million yen in the initial Applicable Period (three fiscal years)

(4) Acquisition method of the Company's shares

  • Disposal of treasury stock or acquisition from the exchange market (including off-floor trading)

(5) Upper limit for the total number of points to be granted to the eligible individuals of (1) and the number of the Company's shares equivalent to this

  • 250,000 points per fiscal year
  • One point corresponds to one share of the Company.
  • The ratio of such shares against the total number of issued shares of the Company (as of March 31, 2024, after the deduction of treasury stock) is 0.16%.

(6) Criteria for granting points

  • Points to be granted according to title, etc.

(7) Timing of delivery of the Company's shares to the eligible individuals described in (i)

  • A fixed time each fiscal year during the trust period

(8) Transfer restriction period in the transfer restriction agreement

  • In principle, the period from the day on which the delivery of the Company's shares was received through to the retirement date as Director or Executive Officer of the Company

Provisions have also been established to the effect that the Company may also acquire the shares that have been delivered without consideration in cases such as the following: the transfer, provision as collateral, or disposal of shares that have been delivered during the transfer restriction period; illegal acts; petition for the commencement of bankruptcy or civil rehabilitation proceedings; resignation for reasons that are not legitimate; material compliance violations; or defamation of the Company. In addition to the above, as a result of the voluntary acquisition of a certain amount of the Company's shares every month through the Executive Shareholding Association, Directors and Executive Officers engage in management from a shareholder's perspective that prioritizes medium- to long-term performance.


3. Matters Related to the Policy Concerning the Determination of the amount of Remuneration for Audit & Supervisory Board Members and its Calculation Method

The 1st Ordinary General Meeting of Shareholders on June 24, 2009 resolved that remuneration to Audit & Supervisory Board Members would be no more than 9 million yen per month. Note that at the end of the 15th Ordinary General Meeting of Shareholders on June 24, 2009 there were five Audit & Supervisory Board Members, of which three were outside auditors.
With regard to remuneration for Audit & Supervisory Board Members, the Company has provided for a method of determining the amount of remuneration in internal rules up to a total amount of remuneration approved by resolution at the General Meeting of Shareholders. To be more specific, the remuneration for Audit & Supervisory Board Members comprises the base remuneration set for full-time and part-time members and the remuneration set according to the job title (Chairman of the Audit & Supervisory Board). The amount of remuneration for Audit & Supervisory Board Members is not linked to performance, but fixed. In the internal rules, the Company prescribes the method of determining the amount of monetary remuneration only and does not pay Audit & Supervisory Board Members non-monetary remuneration, such as shares or share acquisition rights, as consideration for executing their duties.
The Company has established an environment in which Audit & Supervisory Board Members as well as Directors can voluntarily acquire the Company’s shares corresponding to a certain amount of money each month through the Executive Shareholding Association in order to enable management from the perspective of shareholders.

 

The internal rules prescribing the remuneration for Audit & Supervisory Board Members have been established by the Audit & Supervisory Board through discussions based on the report on the appropriateness of remuneration by the Nomination and Remuneration Advisory Committee, in order to ensure the consistency with the internal rules prescribing the remuneration for Directors and Executive Officers. Regarding the revision and repeal of the internal rules prescribing the remuneration for Audit & Supervisory Board Members, the Company made a revision in August 2020 that allows Audit & Supervisory Board Members to voluntarily make a certain amount of contribution from their fixed remuneration for acquiring the Company’s shares through the Executive Shareholding Association. Such contribution was previously mandatory, but the revision was proposed to the Nomination and Remuneration Advisory Committee, which concluded that it was appropriate, and was carried out by the Audit & Supervisory Board.