Directors' Compensation

1. Basic Policy

Compensation for directors (excluding directors who are Audit and Supervisory Committee members) is comprised of "fixed remuneration" and "performance-linked stock compensation," with the aim of ensuring an appropriate level commensurate with their responsibilities. Directors who are Audit and Supervisory Committee members receive only "fixed remuneration," given their independent position from business execution. The Board of Directors shall be the body with the authority to determine the policy regarding the amount or calculation method of individual compensation, etc., for directors (excluding directors who are Audit and Supervisory Committee members). Our company will establish a voluntary Compensation Advisory Committee, composed of directors appointed by the Board of Directors and all independent outside directors, for the purpose of ensuring the objectivity and transparency of procedures for determining the amount or calculation method of directors' compensation, etc. (excluding directors who are Audit and Supervisory Committee members). The decision policy regarding the content of individual directors' compensation, etc., will be resolved by the Board of Directors based on proposals submitted after deliberation by the Compensation Advisory Committee. The determination of individual directors' compensation, etc. (excluding directors who are Audit and Supervisory Committee members), is delegated to and decided by the Compensation Advisory Committee through a resolution of the Board of Directors.

2. Policy Regarding the Determination of Individual Fixed Remuneration Amounts or Calculation Methods

The individual fixed remuneration for directors (excluding directors who are Audit and Supervisory Committee Members) shall be paid monthly. It will be determined comprehensively considering factors such as position, duties, years in service, company performance, and employee salary levels, all within the compensation limits resolved at the General Meeting of Shareholders.

3. Decision-Making Method and Delegation for Individual Fixed Remuneration Amounts

The content of individual "fixed remuneration" for directors (excluding directors who are Audit and Supervisory Committee Members) is deliberated and determined by the Compensation Advisory Committee, which is entrusted by a resolution of the Board of Directors. The committee, having received this delegation, has the authority to determine the individual remuneration amounts for directors (excluding directors who are Audit and Supervisory Committee Members) within the scope of the remuneration amount resolved at the General Meeting of Shareholders, in accordance with the policy determined by the Board of Directors.

The Compensation Advisory Committee is chaired by an Independent Outside Director, and the majority of its members are Independent Outside Directors. Independent Outside Directors are in a position to objectively evaluate the status of each director's execution of duties. Furthermore, the President and Representative Director, who is a member of the committee, is in a position, due to their responsibilities, to oversee the company's performance and business environment and to grasp the status of each director's execution of duties. Therefore, to ensure objectivity and transparency in the process of determining individual remuneration amounts and to enable fair and sufficient deliberation, the Board of Directors has delegated the determination of individual remuneration amounts to this committee.

4. Reasons Why the Board of Directors Determined that the Content of Individual Directors' Remuneration, etc., for Fiscal Year 2024 Aligns with the Decision Policy

The content of individual remuneration, etc., for directors (excluding directors who are Audit and Supervisory Committee Members) is deliberated and determined by the Compensation Advisory Committee. This committee includes all outside directors, who are independent from business execution, and the President and Representative Director, who oversees our company's performance and business environment and understands the status of each director's execution of duties. As the objectivity and transparency of the procedures are ensured through this process, the Board of Directors has determined that the content of individual remuneration, etc., aligns with the decision policy.

5. Matters Concerning Compensation for Directors Who Are Audit and Supervisory Committee Members

The Audit and Supervisory Committee is the body with the authority to determine the policy regarding the amount or calculation method of compensation, etc., for directors who are Audit and Supervisory Committee Members. This is decided through discussions among the directors who are Audit and Supervisory Committee Members, taking into account their duties and responsibilities, and within the compensation limits resolved at the General Meeting of Shareholders. 

6. Policy Regarding the Content of Non-Monetary Compensation, etc., and the Amount or Number, or Calculation Method Thereof

We adopt "performance-linked stock compensation" as non-monetary compensation, etc.

Regarding "performance-linked stock compensation," for directors (excluding directors who are Audit and Supervisory Committee Members), we have introduced an Executive Compensation BIP Trust with the aim of clearly linking directors' compensation to our company's share value and enhancing their motivation to contribute to medium- to long-term performance improvement and increased corporate value. The details of this system are described in "Part 4: Status of the Submitting Company, 1. Status of Shares, etc., (8) Details of Officer and Employee Stock Ownership Plans."

"Performance-linked stock compensation" is determined within a range of 33% to 150% depending on the actual consolidated operating profit margin. Furthermore, compensation varies according to position, ranging from 1.00 to 0.25, with the President and Representative Director set at 1.00. The reason for selecting consolidated operating profit margin as the indicator for "performance-linked stock compensation" is that it is a metric showing how much profit was generated from sales earned through the core business, and thus it is considered appropriate for evaluating management efficiency.

"Performance-linked stock compensation" is linked to the actual consolidated operating profit margin for a single fiscal year, and no specific target is set. For the fiscal year 2024, the consolidated operating profit margin was 17.4%.

Regarding the ratio of individual fixed remuneration to performance-linked stock compensation for directors (excluding directors who are Audit and Supervisory Committee Members), fixed remuneration is primary. The ratio of fixed remuneration to performance-linked stock compensation for directors (excluding directors who are Audit and Supervisory Committee Members) in fiscal year 2024 is approximately 17:1.

7. Activities of the Board of Directors and Committees in the Process of Determining Directors' Remuneration, etc.

The determination of individual remuneration amounts, etc., is delegated to and decided by the Compensation Advisory Committee through a resolution of the Board of Directors.

In the process of determining the fixed remuneration amounts for our company's directors (excluding directors who are Audit and Supervisory Committee Members) for fiscal year 2024, the Compensation Advisory Committee convened twice since May 25, 2023. During these meetings, opinions were exchanged regarding directors' remuneration, and the Compensation Advisory Committee, having received the authority to determine individual remuneration amounts through a resolution of the Board of Directors, then determined the remuneration amounts. Furthermore, the details of the "performance-linked stock compensation" are determined by the stock grant regulations resolved by the Board of Directors.

8. Matters Concerning Resolutions of the General Meeting of Shareholders Regarding Directors' Remuneration, etc.

The maximum remuneration for directors (excluding directors who are Audit and Supervisory Committee Members) was resolved at the 61st Ordinary General Meeting of Shareholders held on May 25, 2023, to be within an annual amount of ¥400 million (excluding salaries for those concurrently serving as employees). (At the time of resolution, the number of directors subject to this provision was 6, and as of the date of submission of the Annual Securities Report, it remains 6). Separately, regarding directors (excluding directors who are Audit and Supervisory Committee Members), a performance-linked stock compensation amount totaling within ¥100 million for a period of three fiscal years was resolved at the 54th Ordinary General Meeting of Shareholders held on May 27, 2016. (At the time of resolution, the number of directors (excluding directors who are Audit and Supervisory Committee Members) subject to this provision was 5, and as of the date of submission of the Annual Securities Report, it is 6). Furthermore, at the 61st Ordinary General Meeting of Shareholders held on May 25, 2023, the maximum remuneration for directors who are Audit and Supervisory Committee Members was resolved to be within an annual amount of ¥60 million. (At the time of resolution, the number of directors who are Audit and Supervisory Committee Members subject to this provision was 4, and as of the date of submission of the Annual Securities Report, it is 5). Additionally, at the 63rd Ordinary General Meeting of Shareholders held on May 23, 2025, the maximum remuneration for directors (excluding directors who are Audit and Supervisory Committee Members) was revised to be within an annual amount of ¥600 million (excluding salaries for those concurrently serving as employees). The number of directors (excluding directors who are Audit and Supervisory Committee Members) at the conclusion of the 63rd Ordinary General Meeting of Shareholders is 6. Also, at the 63rd Ordinary General Meeting of Shareholders held on May 23, 2025, the maximum remuneration for directors who are Audit and Supervisory Committee Members was revised to be within an annual amount of ¥100 million. The number of directors who are Audit and Supervisory Committee Members at the conclusion of the 63rd Ordinary General Meeting of Shareholders is 5.

(Note) 

1. The breakdown of the total non-monetary compensation, etc., for directors (excluding Audit and Supervisory Committee Members) is performance-linked stock compensation totaling ¥17 million.

2. The compensation amounts for directors do not include salaries for directors concurrently serving as employees. There are no directors who concurrently serve as employees.

3. The performance-linked stock compensation represents the amount appropriated for the executive stock benefit reserve for fiscal year 2024.