3. Remuneration for Directors and Chief Officers

9.    Remuneration for Directors and Chief Officers

9.1   Matters regarding policy on determination of amount of remuneration for officers (Directors and Chief Officers), etc. or calculation method thereof

The Company changed to a company with a nominating committee, etc. by resolution of the 9th Ordinary General Meeting of Shareholders held on June 22, 2023. The composition of remuneration for the Company's officers (Directors and Chief Officers) after the Company changed to a company with a nominating committee, etc. is as described below.  

(1) Composition of remuneration and persons eligible to receive payment of remuneration

Remuneration of the Company’s Directors (excluding Outside Directors) and Chief Officers　consists of monetary remuneration comprising (i) fixed remuneration made up of basic remuneration and service remuneration and (ii) performance-based variable remuneration.  In addition, the Company has introduced performance-based stock remuneration.
Remuneration of Outside Directors consists only of fixed remuneration.

Officer category Monetary remuneration Non-monetary remuneration
Fixed
remuneration		 Variable
remuneration		 Stock-based
remuneration
Directors
(excluding Outside Directors)
and Chief Officers		 〇 〇 〇
Outside Director 〇 ‐ ‐
(2) Policy, etc. on determination of details of remuneration for officers (Directors and Chief Officers), etc.

At the meeting of the Remuneration Committee held on June 22, 2023, the Company adopted a resolution specifying the policy for determining the details of individual remuneration, etc. for Directors and Chief Officers. The policy is as described below.
Moreover, as individual remuneration, etc. for Directors regarding the fiscal year ended on March 31, 2023 was appropriately determined by Nomination and Evaluation Remuneration Committee, which was a non-mandatory committee, the Board of Directors considers that the decision was in line with the policy resolved by the Board.

(i) Basic policy
The Company has adopted a remuneration structure that links remuneration for Directors (excluding Outside Directors) and Chief Officers to shareholder interests so that the structure can fully function as an incentive to achieve sustained improvement of corporate value, in accordance with its basic policy that remuneration for individual Directors shall be determined at an appropriate level based on their respective duties.
Specifically, remuneration of the Company’s Directors (excluding Outside Directors) and Chief Officers consists of (1) monetary remuneration comprising (i) fixed remuneration made up of basic remuneration and service remuneration and (ii) performance-based variable remuneration, and (2) performance-based stock remuneration which is a non-monetary remuneration. Remuneration of Outside Directors consists only of fixed monetary remuneration.

(ii) Policy on determination of amount of fixed monetary remuneration for individuals
Fixed remuneration is determined based on the standard amount according to positions and responsibilities of eligible Directors and Chief Officers. Fixed remuneration is paid monthly.

(iii) Policy on determination of details and amount or number of performance-based variable remuneration (monetary remuneration) and calculation method of the amount or number
The base amount of performance-based variable remuneration is set based on fixed remuneration for eligible Directors and Chief Officers. They are evaluated based on the Company’s financial results and their individual performance related to their responsibilities. The amount of payment is determined within a range of 20% to 200% of the base amount.
For the evaluation of performance-based variable remuneration, consolidated results, division results and individual qualitative targets according to roles of eligible Directors and Chief Officers are weighted to total 100%.
Evaluation indicators for performance-based variable remuneration are based on consolidated net sales and consolidated operating profit from a perspective of emphasizing the Group’s growth potential and profitability.
Performance-based variable remuneration is paid with monthly fixed remuneration.

(iv) Policy on determination of details and amount or number of non-monetary remuneration and calculation method of the amount or number
The Company has adopted a stock-based remuneration plan as non-monetary remuneration, etc.
The stock-based remuneration plan is a performance-based stock remuneration system in which the Company’s shares are acquired through a trust funded by the Company and are delivered to individuals based on the individuals’ performance and contributions to the Company’s financial results for each fiscal year in accordance with the Rules of Stock-Based Remuneration Plan.
Under the stock-based remuneration plan, consolidated operating profit is an indicator for the stock-based remuneration plan and a basic criterion for determining the level of achievement of business results because the Company reviews it as key financial data for achieving a sustained improvement in corporate value.
For share-based compensation, the Company shall grant points in June each year based on individual performance, contributions to the Company's financial results for each fiscal year, etc.
In the event that it is decided to deliver share-based compensation, the Company shall deliver 50% of the Company’s shares in August in a determination year, and the remaining 50% shall be delivered in August three years after the determination year.

(v) Policy on determination of amount of monetary remuneration, amount of performance-based remuneration, etc. or the ratio of non-monetary remuneration, etc. to individual remuneration, etc. for each Director and Chief Officers
The ratio of fixed remuneration to variable remuneration for Directors (excluding Outside Directors) and Chief Officers is set as 50%:50%, in principle. The ratio of stock-based remuneration to fixed remuneration is not set.

(vi) Matters regarding the determination of details of individual remuneration, etc. for Directors and Chief Officers
The Remuneration Committee adopts a resolution specifying remuneration, etc. for Directors and Chief Officers. The Remuneration Committee is chaired by an Independent Outside Director. Independent Outside Directors accounts for a majority of the committee members. The Committee considers and determines remuneration in accordance with the above basic policy.

(3) Method of determination of individual remuneration

The Remuneration Committee determines the amounts of all remunerations for each Director and Chief Officer. The Remuneration Committee consists of Independent Outside Directors and is chaired by an Independent Outside Director.

Chairperson: Ruth Marie Jarman
Committee members: Hiroo Unoura, Yu Sasamoto, David Macdonald

The Remuneration Committee is entrusted to determine all remuneration because the Company has decided that the Remuneration Committee, which consists of only Independent Outside Directors and is chaired by an Independent Outside Director, can determine remuneration from an objective and neutral position. Moreover, Rules of Remuneration Committee have been established to ensure that the Committee properly exercises its authority, and the Committee is administered based on those rules.
Remuneration, etc. for each Director and Chief Officer for the fiscal year ended March 31, 2023 was determined by the Nomination and Evaluation Remuneration Committee, a non-mandatory committee chaired by an Independent Outside Director, a majority of whose members were Independent Outside Directors. The committee directly determined remuneration under the abovementioned basic policy. The Board of Directors thus considers that the determination is in line with its policy.
Monetary remuneration for Directors (excluding Directors who are Audit & Supervisory Committee Members) for the fiscal year ended March 31, 2023 was examined and determined by the Nomination and Evaluation Remuneration Committee, which was a non-mandatory committee. With regard to stock-based remuneration for the fiscal year ended March 31, 2022, the Board of Directors has resolved to pay remuneration according to the Company's policy, and the Remuneration Committee has determined the amounts of remunerations for individual Directors and Chief Officers.
Individual remuneration, etc. for Directors who are Audit & Supervisory Committee Members for the fiscal year ended March 31, 2023 was determined through discussions among the Members within the limit of remuneration for Audit & Supervisory Committee Members.

9.2   Total amount of remuneration, etc. by officer category and by type of remuneration, etc. and number of eligible officers

Officer category Total amount
of remuneration
(millions of yen)		 Total amount by type of remuneration
(millions of yen)		 Number of
eligible
officers
Monetary
remuneration		 Non-monetary
remuneration
Fixed
remuneration		 Variable
remuneration		 Stock-based
remuneration
Directors
(excluding Audit &
Supervisory Committee Members
and Outside Directors)		 360 146 165 48 9
Audit & Supervisory Board Members
(excluding Outside Audit &
Supervisory Board Members)		 9 9 0 ‐ 2
Outside officers 60 60 ‐ ‐ 9

(Notes)
1. The Company changed to a company with a nominating committee, etc. on June 22, 2023 by resolution of the 9th Ordinary General Meeting of Shareholders held on the same date.
2. The Company changed to a company with an audit & supervisory committee on June 24, 2022 by resolution of the 8th Ordinary General Meeting of Shareholders on the same date. The total amount of remuneration, etc. for Audit & Supervisory Board Members above includes remuneration for four Audit & Supervisory Board Members (including two Outside Audit & Supervisory Board Members) who left office at the conclusion of the 8th Ordinary General Meeting of Shareholders held on June 24, 2022.
3. The above includes a Director and four Audit & Supervisory Board Members (including two Outside Audit & Supervisory Board Members) who retired as of the closing of the 8th Ordinary General Meeting of Shareholders held on June 24, 2022 and two Directors who retired in the current fiscal year.  The sum total of the numbers of eligible officers is not the number of officers who actually received remuneration, which is 17 (including the number of outside officers, 6).
4. The above amounts indicate the stock-based remuneration for the fiscal year ended March 31, 2022, which was paid in the fiscal year ended March 31, 2023. The amount of stock-based remuneration for the fiscal year ended March 31, 2023 has not been included in the amounts of payment presented above as it has not been determined at this time. For accounting purposes, however, provision for stock-based remuneration for officers has been recorded.
5. Included in the basis for calculating the amount paid in the fiscal year ended March 31, 2023, are consolidated results (fiscal year ended March 31, 2022) that were used as evaluation indicators; consolidated net sales of 221,208 million yen and consolidated operating profit of 18,519 million yen.  Further, the degree of achievement for each department was approximately 80% to 160%.

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