Remuneration for officers

[Quoted from the Securities Report issued on June 19, 2023]

The Company has established the “basic policy on determining remuneration of Directors, etc.” and prescribed the policy for determining the details of each Director not serving on the Audit and Supervisory Committee, etc. as follows. The basic policy is set by Board of Directors’ resolution, but appropriate consultations are conducted with the Remuneration Committee.The amount of remuneration for each Director serving on the Audit and Supervisory Committee is decided through consultation among Directors serving on the Audit and Supervisory Committee, within the scope of remuneration resolved at the general meeting of shareholders.

Remuneration for Directors (excluding Directors serving on the Audit and Supervisory Committee) is divided into basic remuneration, bonuses, and restricted shares remuneration, and the basic policy is to determine remuneration within the scope of remuneration resolved at the general meeting of shareholders based on the Articles of Incorporation, in-house rules and similar items, and a Board of Directors’ resolution.

A fixed-amount approach is applied for basic remuneration to provide a stable standard of living. The amount of remuneration for individual officers is decided, in principle, based on position, duties and other elements from the perspective of fairness in personnel administration.

For bonuses, a certain level of incentive factor for contributions made to business results is incorporated based on a performance-linked remuneration system. Bonuses are determined in consideration of the performance and the status of execution of responsible duties, etc. for each period.
The total amount of provision for bonuses for directors (and other officers) and the amount of remuneration for individual officers are determined based on the amounts of remuneration resolved by the Remuneration Committee and the financial results for each year once they are largely finalized in the course of the preparation of financial statements for that year. Once the amounts are determined, they are reported to the Remuneration Committee.

Restricted shares remuneration shall provide monetary remuneration claims to Directors (excluding Outside Directors and Directors serving on the Audit and Supervisory Committee, hereinafter referred to as “Eligible Directors”) as remuneration in order to grant shares with restriction on transfer to them, for the purpose of providing incentives for achieving sustained improvement in the corporate value of the Company and further promoting value sharing with shareholders. Regarding the number of shares, in view of that purpose, we shall decide as principle to continuously grant shares at a level that is considered an incentive for Eligible Directors and that does not harm the interests of our shareholders.

Regarding decisions concerning officer remuneration, etc. for the fiscal year under review, the Remuneration Committee met four times from June 2021 through March 2022 and committee members attended all meetings.

When deciding on remuneration for individual officers for the fiscal year under review, the Remuneration Committee, which is composed of three or more directors at least half of whom are independent outside Directors, decides on the details of remuneration, etc., for individual Directors not serving on the Audit and Supervisory Committee after carefully examining factors such as consistency with the basic policy. Therefore, the Board of Directors judged that the details of remuneration, etc. are consistent with the basic policy.

The amount of remuneration for Directors (excluding Audit and Supervisory Committee Members) was resolved to be 300 million yen or less per annum (excluding the employee salaries for Directors who concurrently serve as an employee) at the 27th Ordinary General Meeting of Shareholders held on June 19, 2015. The maximum amount of monetary remuneration claims to be provided to Eligible Directors in order to grant shares with restriction on transfer is 60 million yen per year within the said limit of resolution at the general meeting of shareholders, and the maximum number of common shares of the Company that can be issued or disposed of under the system is 60,000 shares per year (the 31st Ordinary General Meeting of Shareholders held on June 21, 2019). For the record, the number of Directors (excluding Audit and Supervisory Committee Members) was ten (10) at the conclusion of the 27th Ordinary General Meeting of Shareholders and seven (7) at the conclusion of the 31st Ordinary General Meeting of Shareholders. The amount of remuneration for Directors who are Audit and Supervisory Committee Members was resolved to be 50 million yen or less per annum at the 27th Ordinary General Meeting of Shareholders held on June 19, 2015. For the record, the number of Directors who were Audit and Supervisory Committee Members was three (3) at the conclusion of the 27th Ordinary General Meeting of Shareholders.

Authority to make decisions regarding actual remuneration, etc., for individual Directors not serving on the Audit and Supervisory Committee (this excludes remuneration that should be based on general meeting of shareholders or Board of Directors resolution or remuneration that should be decided based on rules stipulated by the Company) is delegated to the Remuneration Committee.

To increase the fairness and objectivity of procedures, etc. for deciding remuneration, etc., for Directors not serving on the Audit and Supervisory Committee, decisions concerning actual remuneration, etc., for individual Directors is delegated to the Remuneration Committee, a majority of whose members are independent outside Directors to ensure its independence.

Decisions regarding issues such as actual remuneration, etc., for individual Directors not serving on the Audit and Supervisory Committee are made by the Remuneration Committee in line with standard compensation amount, etc., which are based on position.

The restricted shares remuneration from the Company falls under non-monetary remuneration, etc., and the outline of this remuneration system is as described below.

Eligible Directors may not transfer, hypothecate or otherwise dispose of common shares of the Company allotted per the restricted share allotment agreement (hereinafter referred to as “Allotted Shares”) during a certain period of 20 to 30 years from the day on which under restricted share allotment agreement, they are Allotted Shares (hereinafter referred to as the “Restriction Period”) specified in advance by the Board of Directors of the Company (hereinafter referred to as the “Transfer Restriction”).

If an Eligible Director retires from the position of Director of the Company before the expiration of the Restriction Period, the Company will necessarily acquire his or her Allotted Shares without contribution, unless there is any justifiable reason for the retirement including the expiration of his or her term of office and death (however, this does not apply when an Eligible Director is reelected as and assumes the office of Director following the expiration of the terms of the office, or when an Eligible Director retires from the position of Director not serving on the Audit and Supervisory Committee, and is reappointed to and assumes the office of Director serving on the Audit and Supervisory Committee immediately after the retirement).

Notwithstanding the provision of a. above, the Company shall lift the Transfer Restriction of all of Allotted Shares upon expiration of the Restriction Periods, on the condition that Eligible Directors have remained in the position of Director of the Company throughout the Restriction Periods. If, however, an Eligible Director retires from the position specified in b. above before the Restriction Period expires due to the expiration of the term of office or death, or any other justifiable reason, the Company shall reasonably adjust, as required, the number of his or her Allotted Shares and the time at which the Transfer Restriction will be lifted (however, this does not apply when an Eligible Director is reelected as and assumes the office of Director following the expiration of the terms of office, or when an Eligible Director retires from the position of Director not serving on the Audit and Supervisory Committee and is reappointed to and assumes the office of Director serving on the Audit and Supervisory Committee immediately after the retirement). In cases specified above, the Company shall necessarily acquire such Allotted Shares whose Transfer Restrictions have not been lifted, as of the time immediately after Transfer Restriction is lifted.

Notwithstanding the provision of a. above, if, during the Restriction Period, a merger agreement in which the Company is the disappearing company, a share exchange agreement or share transfer plan in which the Company becomes a wholly owned subsidiary, or any other matter relating to reorganization, etc. is approved at the Company’s general meeting of shareholders (or at a meeting of its Board of Directors in cases where approval at the Company’s general meeting of shareholders is not required regarding the reorganization, etc.), the Company shall lift, prior to the date on which the reorganization, etc. becomes effective, Transfer Restriction on Allotted Shares at the number that is reasonably determined by a resolution of the Board of Directors of the Company in light of the period from the start date of the Restriction Period to the date of approval of the reorganization, etc. In cases specified above, the Company shall necessarily acquire without contribution such Allotted Shares whose Transfer Restrictions have not been lifted, as of the time immediately after Transfer Restriction is lifted.