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In order to maximize the performance of duties in line with the management strategies and management goals, compensation for officers of the Company is based on job position and contribution to performance. With the aim of sharing profits and risks with shareholders, the compensation provides incentives to manage the Company from the perspective of shareholders.
For outside directors who are independent from business execution, variable compensation such as performance-linked compensation is not necessarily appropriate. Therefore, outside directors are paid fixed compensation only.
We revised our compensation system to directors/auditors when we launched of our new medium-term management plan, JT-2025 Management Plan.
Overview and the purposes of revisions to the compensation system for directors/auditors
1) Clarify management responsibilities by expanding and improving performance-linked compensation
2) Motivate officers to increase corporate value over the medium to long term by expanding and improving our stock compensation (long-term incentives)
3) Promote sustainability management by adding ESG indicators to our compensation calculations
To ensure transparency and objectivity, the compensation system and compensation amounts are determined by the Board of Directors after consideration by the Nomination and Compensation Committee, in which outside directors account for the majority of members and one of them serves as chairman.
* The table above assumes that the level of achievement of performance targets is 100%.
* The composition of directors’ compensation is common to all executive directors.
1 Changed from stock-based compensation to monetary compensation.
The percentage was also changed from 20% to 10%.
Summary of director compensation components
[Monetary compensation (70%)]
・Fixed monetary compensation (50%)
The amount is determined according to the director’s position, and paid as fixed monthly compensation.
(Monetary compensation as short-term incentives)
・Individual performance-linked monetary compensation (10%)
Each fiscal year, the Nomination and Compensation Committee evaluates the results of the business execution of each director, and the amount paid varies between 50% and 150%, with 100% indicating achievement of the targets. This amount is added to the fixed monetary compensation and paid monthly as monetary compensation.
・Financial indicator-linked monetary compensation (10%)
To encourage both management and labor to work toward improvement of business performance, this compensation is determined according to achievement of the operating profit target, in the same way as year-end bonuses of employees. The amount paid varies between 0% and 150%, with 100% indicating achievement of the target.
[Stock compensation (30%)]
(Stock compensation as long-term incentives)
・Financial indicator-linked stock compensation (10%)
To reflect improvement of the profitability of capital in compensation, we grant shares of stock as compensation based on the level of achievement of the ROE target in the medium-term management plan.
・Stock compensation based on environmental management indicator (10%)
To embed environmental issues related to climate change into management strategy from the perspective of risks and opportunities, and connect our positive impacts on society to the sustainable growth of the Company, we have introduced this compensation as an incentive to encourage the active involvement of directors, and grant shares of stock as compensation based on an environmental management indicator (the CDP Climate Change score).
・Stock compensation based on employee engagement index (10%)
In order to link the improvement of CS (creation of social value) through the advancement of employee engagement to the Company’s sustainable growth by actively investing in the creation of an internal environment in which diverse human resources can thrive and in the development of human resources, based on the four themes of “securing human resources in response to environmental changes,” “diversity & inclusion,” “work-life balance,” and “respect for human rights,” we continuously measure the progress of these activities as an “engagement score,” and grant shares of stock as compensation based on the engagement score.
The reference value of compensation for directors is defined as “Director and Executive Officer,” for which the standard monthly compensation is set at no more than 300% of the maximum monthly salary as set forth in the employee salary system. Compensation for each director is determined by the compensation multiplier based on the director’s position, and the Company’s business performance. The compensation multipliers according to position are as follows.
|
Position |
Compensation multiplier(total) |
|
Director and Chairperson |
1.7 |
|
Director and President |
2.2(Note) |
|
Director and Executive Vice President |
1.7 |
|
Director and Senior Managing Executive Officer |
1.4 |
|
Director and Managing Executive Officer |
1.2 |
|
Director and Executive Officer |
1.0 |
(Note: Includes CEO compensation multiplier of 0.2x)
（1）Monetary compensation paid as short-term incentive compensation
Each fiscal year, the Nomination and Compensation Committee evaluates the results of the business execution of each director, and the evaluation compensation (varying between 50% and 150%), with 100% indicating the achievement of the targets, and the fixed monetary compensation are combined and paid monthly as monetary compensation. The Individual performance-linked compensation is determined by multiplying the performance-based coefficient, which is based on an overall evaluation covering both monitoring and managing evaluations.
（2）Stock compensation paid as long-term incentive compensation
Directors are awarded points for each position once a year, calculated by multiplying the base points for each position by the performance-based coefficient based on the performance of the immediately preceding fiscal year (one ordinary share of the Company per one point), and each director receives ordinary shares of the Company (some are converted to cash) upon their retirement.
|
Position |
base points |
|
Director and Chairperson |
3,060pts. |
|
Director and President |
3,960pts. |
|
Director and Executive Vice President |
3,060pts. |
|
Director and Senior Managing Executive Officer |
2,520pts. |
|
Director and Managing Executive Officer |
2,160pts. |
|
Director and Executive Officer |
1,800pts. |
The total amount of compensation for directors is set by resolution at the General Meeting of Shareholders, and monetary compensation is set within the range of 240 million yen per year. The Nomination and Compensation Committee, in which independent outside directors account for the majority of members and one of them serves as chairman, consults with the Board of Directors and deliberates on the allocation of compensation to individual directors based on the Regulation on Compensation for Directors, and the Board of Directors then makes the decision based on their report.
Criteria regarding compensation for directors is set as “Directors and Executive Officers” and the standard monthly compensation is set at no more than 300% (revised from 200%) of the maximum monthly salary as set forth in the employee salary system. Maximum compensation multiplier according to position was also changed from 2.2 to 2.5.
Currently, the Company strategically holds shares of listed companies from the perspective of enhancing the Company’s corporate value over the medium to long term, with the aim of strengthening business relationships and promoting smooth business operations. The Company is gradually reducing the number of shares held, and as a general rule, will not purchase any new shares.
The Company conducts qualitative assessments of the shares currently held to maintain smooth and amicable business relationships with business partners and to establish smooth-running supply chains. In addition, every quarter the Board of Directors conducts quantitative reviews of the percentage of total assets as well as profits and dividends derived from business relationship and then sells the shares, if necessary.
In the fiscal year ended March 31, 2014, the Company held 39 stocks, but as of June 30, 2022, this number had been reduced to 26.
The Company exercises its voting rights by comprehensively taking into consideration the governance system and business performance of the issuing company.
