(2) Compensation structure for Officers
The Group sets policies on compensation for officers as follows. However, in cases there are reasonable grounds to believe that those policies should not be applied, the amount and composition of compensation are determined by the Board of Directors based on the recommendation of the Nomination and Compensation Committee.
The Nomination and Compensation Committee examines compensation budget for all directors and executive officers and makes recommendations to the Board of Directors on an annual basis. The amount of compensation for directors and executive officers are determined by the Board of Directors within the budget.
a.Composition of compensation for directors and how it is determined
Compensation for directors shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation.
With regard to monthly compensation, performance-linked compensation and performance-linked stock compensation, fixed amount shall be determined for monthly compensation, while a base amount and the number of standard point (one point = one common share) shall be determined for performance-linked compensation and performance-based stock compensation depending on whether the person in an outside or internal director, or does or does not have authority to represent the Company.
Nevertheless, performance-linked compensation and performance-linked stock compensation will not be paid to outside directors.
Compensation as a director and compensation as an executive officer shall be totaled and paid together to those directors who are serving concurrently as executive officers.
Overview of performance-linked compensation and performance-linked stock compensation are described in d. and e. below.
b.Composition of compensation for executive officers and how it is determined
Compensation for executive officers shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation. The amount and composition of compensation for the group CEO are examined and recommended by the Nomination and Compensation Committee, and determined by the Board of Directors based on the business environment and market level of compensation for executive officers, and group CEO's achievements and skills. The amount and composition of compensation for executive officers other than group CEO are determined based on the business environment and market level of compensation for executive officers and shall reflect the significance of duties, strategic positioning, achievements and skills. Fixed amount shall be determined for monthly compensation, while a base amount and the number of standard point (one point = one common share) shall be determined for performance-linked compensation and performance-linked stock compensation
Overview of performance-linked compensation and performance-linked stock compensation are described in d. and e. below.
c.Composition of compensation for Audit & Supervisory Board members and how it is determined
The form and level of compensation for Audit & Supervisory Board members shall commensurate with their duties and responsibilities and determined at a fixed amount through discussion between the Audit & Supervisory Board members depending on whether the Audit & Supervisory Board member is full-time or part-time while giving due consideration to their independence.
d. Performance-linked compensation
The Company has introduced performance-linked compensation system in order to align compensation for officers and business strategy and promote officer's incentive to improve performance for further growth of the Group. Below is overview of the system:
- Performance-linked compensation shall be determined by reflecting single-year corporate performance and individual performance to the base amount of performance-linked compensation.
- Performance metrics to evaluate corporate performance are adjusted consolidated profit and adjusted consolidated ROE, and coefficient is determined as a ratio of actual figures to targeted figures (projected figures in business plan). For performance metrics to evaluate individual performance, coefficient is determined depending on evaluation result in individual performance evaluation of officers.
- Coefficient for performance-linked compensation is calculated by multiplying the above-mentioned coefficient for company performance by coefficient for individual performance, and the amount of payment is calculated by multiplying base amount of performance-linked compensation by the coefficient for performance-linked compensation.
- For officers who serve as business owners or in charge of those businesses, sales and profit of the business are used as performance metrics to evaluate corporate performance.
e.Performance-linked stock compensation
The company had introduced performance-linked stock compensation system in order to increase the linking between compensation and increases in corporate value over the medium to long-term. Below is overview of the system:
- Performance-linked stock compensation shall be determined by reflecting the medium to long-term stock value and consolidated performance to the number of performance-linked stock compensation standard point in comparison to the market.
- Coefficient for stock value shall be determined by comparing 3-year growth rate of our stock value to the TOPIX growth rate.
- Coefficient for consolidated performance shall be determined by comparing our growth rate of consolidated net income over the past 3 business years to the growth rate of peer group (global companies centering around insurance companies).
- Coefficient for performance-linked stock compensation is calculated by adding on the above-mentioned coefficient for stock value with coefficient for consolidated performance, and the point to provide is calculated by multiplying the number of performance-linked stock compensation standard point by the coefficient for performance-linked stock compensation.