Executive Remuneration System

Under the Company’s system for the compensation of officers, compensation comprises basic compensation, which is fixed; bonuses linked to the Company’s performance in each fiscal year; and share-based stock options, which provide medium- to long-term incentives. Given that they are not involved in the execution of duties, independent outside directors and Audit & Supervisory Board members only receive fixed basic remuneration.
Further, in July 2022 the Company revised the ratios of stock compensation to basic compensation so that stock compensation accounts for a larger percentage of the compensation of officers as they rise in rank. The breakdown of rank-based percentages reflecting said change will be within the ranges shown below. Further, this breakdown assumes calculation methods for performance-based bonuses that are in accordance with standard values.

Breakdown of the fixed basic compensation, performance-based bonuses, and Transfer-restricted stock compensation as rcentages of the compensation of officers is shown below.

Roles and Activities of Remuneration of Directors Advisory Committee

As an advisory body to Board of Directors, the Remuneration of Directors Advisory Committee discusses and resolves matters related to officers’ remuneration and system from an independent and objective perspective. A majority of the members of the Remuneration of Directors Advisory Committee, chaired by Independent External Director Mr. Tsunehiko Iwai, are Independent External Directors. The Remuneration of Directors Advisory Committee is also attended by the External Audit & Supervisory Board Member(s) as an observer to ensure transparency.

August 10, 2022 : Review of remuneration system
September 29, 2022 : Method of Calculating of executive bonus
February 24, 2023 : Remuneration (monthly remuneration) for fiscal Year ended March 31 2024
March 29, 2023 : Performance-based Bonus for fiscal Year ended March 31 2023
April 28, 2023 : Performance-based Bonus for fiscal Year ended March 31 2023

Roles and Agenda at the Board of Directors’ Meeting

Board of Directors discusses and resolves matters related to officers’ remuneration based on recommendations received from the Remuneration of Directors Advisory Committee.

May 12, 2022 : Review of total amount of restricted stock
May 12, 2023 : Performance-linked bonus for fiscal Year ended March 31 2023
May 31, 2023 : Remuneration (monthly remuneration) for fiscal Year ended March 31 2024

Basic Remuneration

The basic remuneration is based on the so-called single rate remuneration system, in which the same remuneration is paid for the same position. The Company annually verifies the adequacy of the level of remuneration, which has been set according to the business results and scale of the Company and is based on comparison with other companies within the same industry or of the same scale through the investigation results on remuneration prepared by an external agency.
Specific details of basic remuneration amount for Directors are determined by the Board of Directors based on the reports prepared by the Remuneration of Directors Advisory Committee, which is composed by members, majority of which are Independent External Directors. The basic remuneration amount for Audit & Supervisory Board Members is determined after discussion within the Audit & Supervisory Board.

Performance-Based Bonuses

The total amount of the performance-based bonus is based on achievement as a percentage of the consolidated operating income recorded for each fiscal year, plus other performance factors (consolidated net sales, consolidated income before income taxes), to increase the degree of linkage between bonuses and consolidated business performance. Performance-based bonus is paid once a year after approval at the general meeting of shareholders for the relevant fiscal year.
The amount of performance-based bonus to Directors is resolved at a Board of Directors meeting and the total amount is approved at the general meeting of shareholders based on reports prepared by the Remuneration of Directors Advisory Committee, which is composed of members, half of which are Independent Directors.

Restricted Stock

The restricted stock are determined in consideration of the monthly amount of basic remuneration and the fair value of stock, which in turn are determined pursuant to the recommendations of the Remuneration of Directors Advisory Committee, which is composed of members, majority of which are Independent External Directors and will be allotted in the number determined and resolved at a Board of Directors meeting once a year. Allotted shares will be subject to transfer restriction during the period from the date allotted shares are granted until the date such Director, Audit & Supervisory Board Member or Corporate Officer designated by the Company retires from their position. The transfer restrictions on all allotted shares will be removed upon the expiration of the transfer restriction period if such eligible grantee has continuously held the position of Director, Audit & Supervisory Board Member or Corporate Officer until the date of the first Ordinary General Meeting of Shareholders. The Company may repurchase all of the allotted shares bearing transfer restrictions as a result of a breach of restricted stock allotment agreement without consideration.

Policy on Reviewing the System for the Compensation of Officers with a View to Strengthening Its Effectiveness

The Executive Compensation Advisory Committee is engaged in an ongoing review of the entire system for the compensation of officers. Going forward, the committee will consider the following matters:

Remunerations Paid to Officers in fiscal Year ended March 31 2023