Directors’ Compensation
Matters concerning the policy for determining the amount or calculation method of Directors’ compensation
We have established a policy for determining the details of individual Directors’ compensation as outlined below. This policy was approved by the Board of Directors following consultation with the non-statutory Compensation Committee.
1. Basic Policy
The Company will provide Directors’ compensation on an individual basis to offer an incentive for the sustainable enhancement of corporate value, share interests and values with shareholders and other stakeholders, and attract and retain qualified personnel. Directors’ compensation will be provided in accordance with an appropriate compensation structure and at appropriate levels, and will be determined based on such factors as the roles of individual Directors, the Company’s business environment and corporate performance, and trends and levels of compensation for companies of comparable size or within the same industry.
The Company will determine the compensation of individual Directors at a meeting of the Board of Directors, following consultation with the Compensation Committee, a non-statutory advisory body whose members are a majority of independent outside officers.
The Company reviews its compensation structure and compensation levels on an ongoing basis as necessary, taking into account the business environment, the Company’s performance, and compensation levels at companies of comparable size or in the same industry.
2. Compensation Structure
The Company has a compensation structure as set forth below.
The compensation of Directors (excluding Outside Directors; the same will apply hereinafter to bonuses and share-based compensation) will comprise fixed monthly base compensation; bonuses as annual incentive compensation determined based on such factors as the Company’s corporate performance for each fiscal year, its business environment, and the roles and achievements of individual Directors; and share-based compensation as a medium- to long-term incentive. The target proportions of base compensation, bonuses, and share-based compensation in the total compensation of each Director are approximately 57%, 30%, and 13%, respectively.
These proportions are illustrative and based on the Company’s standard Directors’ bonus. The actual percentages may vary depending on the Company’s business performance, stock price movements and other factors.
The compensation of Outside Directors will consist solely of base compensation in light of their roles.
3. Policy for Determining Base Compensation
The Board of Directors will determine the amount of base compensation for each Director at its first meeting following the annual General Meeting of Shareholders, in principle, after consultation with the Compensation Committee. The amount of base compensation will be within the limit of monetary compensation approved by a resolution of the General Meeting of Shareholders, and will be determined based on the title and duties of each Director, taking into account the business environment, corporate performance, and survey findings by an external research organization on the trends and levels of compensation for companies of comparable size or within the same industry.
The Company will pay the base compensation to each Director on a specified date of each month.
4. Policy for Determining Bonuses
To determine the amount of bonus for the Directors on an individual basis, the Board of Directors will set consolidated sales, consolidated operating profit, and similar segment-specific indicators of responsible departments as financial evaluation items, and contributions to strategic initiatives that are difficult to measure using financial metrics and other factors as non-financial evaluation items. The Board will determine the standard evaluation amount for each Director based on their title and duties and allocate 80% thereof to financial evaluation items and 20% thereof to non-financial evaluation items. For the financial evaluation items, the amount will be calculated by multiplying the allocated standard evaluation amount by a percentage from 37.5% to 125% according to the achievement level of each evaluation item; and for the non-financial evaluation items, the amount will be calculated by multiplying the allocated standard evaluation amount by a percentage from 0% to 125%.
The total of these amounts is determined as the individual bonus amount for each Director, excluding Outside Directors.
The Board of Directors will determine the amount of bonus for each Director, within the limit of monetary compensation approved by a resolution of the General Meeting of Shareholders, in principle at the Board meeting held to approve the Company’s financial results, and following consultation with the Compensation Committee.
A bonus will be paid to each Director annually at a designated time.
5. Policy for Determining Share-Based Compensation
- Policy for determining the number and value of shares granted as share-based compensation
The number and value of shares to be granted as share-based compensation (or the value of monetary compensation claims for the payment of share-based compensation) will be 36,000 shares or less per year (which will be the number of shares adjusted following any stock split or free allotment of shares) and 25 million yen or less per year. The number and value of such shares will be determined based on the title and duties of each Director and such factors as the Company’s business environment and corporate performance, and trends and levels of compensation for companies of comparable size or within the same industry.
- Policy for determining the content of share-based compensation
Share-based compensation will be granted in the form of common shares of the Company, subject to certain restrictions as set forth in the Restricted Stock Allocation Agreement (the “Allocation Agreement”) entered into between the Company and each Director, which will include the following provisions:
- (1) The Director may not transfer, create any security interest in or otherwise dispose of any common shares of the Company’s stock allocated under the Allocation Agreement (“Allocated Shares”) until such time as the Director loses the position of a Director, an Executive Officer who does not concurrently serve as a Director, an Auditor or any similar position (“Transfer Restriction Period”) (“Transfer Restrictions”).
- (2) Upon expiration of the Transfer Restriction Period, the Company will lift the Transfer Restrictions for all of the Allocated Shares on the condition that the Director has continuously held such position as set forth in (1) for the period from the date of commencement of the execution of duties until immediately before the end of the first annual General Meeting of Shareholders held thereafter (the “Service Period”). However, this will not apply if the loss of such a position as set forth in (1) occurs due to reasons that are not justifiable.
- (3) Notwithstanding the provisions of (2), if the Director loses any and all of the positions set forth in (1) due to death or for other justifiable reasons before the expiration of the Service Period, the Company will lift the Transfer Restrictions for the number of Allocated Shares calculated by multiplying the total Allocated Shares by the number of months in office divided by 12 (rounded down to the nearest whole number).
- (4) In the event that a merger agreement which will make the Company a non-surviving company, a stock exchange agreement which will make the Company a wholly-owned subsidiary, a stock transfer plan or other reorganization events are approved by the Company’s General Meeting of Shareholders (or the Company’s Board of Directors if such reorganization events do not require the approval of the Company’s General Meeting of Shareholders) before expiration of the Transfer Restriction Period, the Company will, by resolution of the Board of Directors, lift the Transfer Restrictions prior to the effective date of any such reorganization event for the number of Allocated Shares reasonably determined based on the period from the commencement of the Transfer Restriction Period until the date of approval of such reorganization event.
- (5) If the Transfer Restrictions are not lifted for all or part of the Allocated Shares upon expiration of the Transfer Restriction Period or upon adoption of a resolution of the Board of Directors as set forth in (4) (including when loss of any such position as set forth in (1) occurs without due cause), the Company will automatically acquire without consideration all of the Director’s Allocated Shares for which the Transfer Restrictions are not lifted.
- Policy for determining the conditions for the allocation of share-based compensation
The number of shares allocated to each Director as share-based compensation will be determined, in principle, at the first Board meeting following the annual General Meeting of Shareholders, after consultation with the Compensation Committee, taking into account the title and duties of each Director and such factors as the Company’s business environment and corporate performance, and trends and levels of compensation for companies of comparable size or within the same industry.
Total Compensation and Compensation by Type for Each Director/Auditor Category, and Number of Directors/Auditors Covered
(Notes) 1. Among the Auditors listed above, one Auditor retired at the conclusion of the 49th annual General Meeting of Shareholders held on June 20, 2025.
2. The aggregate amount of non-monetary compensation of Directors (excluding Outside Directors) was 20 million yen in share-based compensation.