Investor Relations | Corporate Governance
Remuneration for Directors and Audit & Supervisory Board Members
①Matters Concerning the Policy on Determining the Details or the amount of Remuneration for Individual Directors
(ⅰ) Policy on Determining the Details of Remuneration for Individual Directors
Regarding the Company’s policy on determining the details of remuneration for individual Directors (hereinafter, “Determining Policy”), the Board of Directors passed a resolution on the Determining Policy after consulting the original proposal with and obtaining a report from the Compensation Advisory Committee, an advisory body to the Board of Directors. Outline of the Determining Policy is as follows.
<Basic Policy>
The Company designs its remuneration system through deliberation and examination of the Compensation Advisory Committee, an advisory body to the Board of Directors, for the following purposes.
To promote as much as possible behavior on the part of Directors geared towards enhancing corporate results and stock value and sustainably increase the corporate value of the overall TDK Group by constantly pursuing the formulation of a competitive remuneration system to secure diverse and excellent human resources that focuses on linkage with short-term as well as medium to long-term results.
<Policy, Etc. Concerning Determination of Each Remuneration>
The remuneration of Directors is comprised of basic remuneration, results-linked bonus and stock-linked compensation. The policy, etc. on determining the amounts or numbers for each type of the remuneration or the method of calculation thereof is described below.
| a. | Policy on determining the amount of remuneration for individual Directors (excluding results-linked compensation and non-monetary compensation; hereinafter “fixed compensation”) or the method of calculation thereof (including the policy on determining the timing and conditions for compensation, and the method of determining the details; same through c. below) For fixed compensation, the Company pays basic remuneration on a monthly basis. Remuneration amounts for individual Directors are determined based on remuneration tables approved by the Board of Directors for each rank after consulting the original proposal with and obtaining a report from the Compensation Advisory Committee, while referring to studies, etc. on corporate management remuneration performed by third parties and comparisons of compensation levels at other companies of similar scale, mainly in the same business category. |
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| b. | Policy on determining the details of performance indicators for results-linked compensation and the method of calculation of amounts or numbers of said results-linked compensation Results-linked compensation shall be results-linked bonuses (monetary compensation). The payment amounts are linked to the degree of attainment of targets, using the consolidated results for the fiscal year and the indicators set for each division in charge, with an emphasis placed on short-term performance. Results-linked bonuses are paid out at a certain time each year, as determined by the Board of Directors after consulting the original proposal with and obtaining a report from the Compensation Advisory Committee. |
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| c. | Policy on determining the details of non-monetary compensation and the amounts or numbers or the method of calculation thereof Non-monetary compensation shall be stock-linked compensation. The system emphasizes the linkage with medium- to long-term results and uses some consolidated performance indicators from the Medium-Term Plan, where the number of shares to be delivered fluctuates based on the degree of achievement of the targets. Details are determined by the Board of Directors after consulting the original proposal with and obtaining a report from the Compensation Advisory Committee. Stock-linked compensation to be granted after the fiscal year ended March 31, 2021 shall be post-delivery type stock remuneration. Post-delivery type stock remuneration will be paid with approximately half of the number of shares to be delivered in shares and the remainder in monetary form after the end of a period of three (3) years from the first day of the first year to the last day of the last year of the Medium-Term Plan or a period of three (3) years of more as determined by the Board of Directors of the Company. |
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| Note: | In accordance with the introduction of the post-delivery type stock remuneration plan that was approved by the 124th Ordinary General Meeting of Shareholders held on June 23, 2020, the stock-linked compensation stock option plan was abolished, except for those that had already been granted. As a result, the stock-linked compensation stock option plan is not included in the Determining Policy in regard to non-monetary compensation. | |
| d. | Policy on determining the ratio of amounts of fixed compensation, results-linked compensation and non-monetary compensation to amounts of remuneration for individual Directors Regarding the ratio of remuneration, by type, for Directors concurrently serving as Corporate Officers, the ratio of results linked compensation is structured so that the higher the rank, the higher the ratio of performance-linked remuneration, based on comparisons of compensation levels at other companies of similar scale, mainly in the same business category, while referring to studies, etc. on corporate management remuneration performed by third parties, and is consulted with the Compensation Advisory Committee. While respecting the report from the Compensation Advisory Committee, the Board of Directors determines remuneration tables for each rank based on the ratio of remuneration by type indicated in the report. The guideline for the ratio of remuneration by type is basic remuneration : results-linked bonus : stock-linked compensation = 1 : approximately 0.5-0.6 : approximately 0.6-0.8 (assuming 100% achievement of performance targets). |
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| e. | Other important matters concerning determinations about details of remuneration for individual Directors In the event that the Company’s performance sharply and significantly deteriorates, or there are illegal activities or violations of laws and regulations, remuneration may be reduced or returned to the Company based on deliberations by the Compensation Advisory Committee and a resolution by the Board of Directors. |
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(ⅱ) Structure and Role of Compensation Advisory Committee
A majority of the members and the Chairman of the Compensation Advisory Committee are Independent Outside Directors. The Compensation Advisory Committee deliberates the framework and levels of remuneration for Directors and Corporate Officers and reports to the Board of Directors, thereby contributing to ensuring the transparency in the remuneration decision-making process and the appropriateness of individual remuneration.
(ⅲ) Reason for Board of Directors judging the details of remuneration for individual Directors for the fiscal year under
review are in accordance with the Determining Policy
As the Compensation Advisory Committee had conducted a multi-faceted examination of the original proposal, including from the viewpoint of accordance with the Determining Policy, the Board of Directors basically respected the Committee’s report and judged that the details of remuneration for individual Directors for the fiscal year under review are in accordance with the Determining Policy. In addition, for the fiscal year under review, stock-linked compensation stock options had been granted before the Board of Directors’ resolution on the Determining Policy, but the concept which is basically the same as the Determining Policy had been adopted for stock-linked compensation stock options.
As explained in (i) above, at the Company, the Board of Directors determined the details of remuneration for individual Directors, and does not delegate this determination to a Director or other third party.
(ⅳ) Structure of Remuneration for Directors and Audit & Supervisory Board Members
| Type of Remuneration | Details of Remuneration | Fixed/Fluctuating | |
|---|---|---|---|
| Basic remuneration | Monetary compensation paid monthly | Fixed | |
| Results-linked bonus | Monetary compensation which is paid at predetermined times each year with an emphasis on the linkage with short-term performance. The amount of the bonus fluctuates within a range of 0% to 200% of the standard payment amount depending on the degree of attainment of the consolidated results for the fiscal year under review (operating income, ROE) and the targets set for each division. | Fluctuating (single fiscal year) | |
| Post-delivery type stock remuneration | Restricted Stock Unit (RSU) | RSU is a type of stock remuneration which is issued based on continuous service. In the case of RSU, subject to continuous service for a period of three years from the first day of the first year to the last day of the last year of the Medium-Term Plan (or a period of three years or more as determined by the Board of Directors of the Company, the "Target Period"), a predetermined amount of the Company’s shares and money is delivered after the end of the Target Period. | Fixed |
| Performance Share Unit (PSU) | PSU is a type of stock remuneration which is issued based on performance. In the case of PSU, an amount of the Company’s shares and money calculated in accordance with the degree of achievement of performance targets set by the Medium-Term Plan is delivered after the end of the Target Period. The degree of achievement of performance targets shall vary from 0% to 100% depending on the degree of achievement of consolidated performance targets (operating income, ROE) outlined in the Medium-Term Plan. | Fluctuating (medium- to long term) | |
| Note: | Directors and Audit & Supervisory Board Members remuneration classification for results-linked compensation, nonmonetary compensation and other remuneration is as follows. |
| Classification | Basic Remuneration | Results-linked Bonus | RSU** | PSU*** |
|---|---|---|---|---|
| Results-linked compensation | ― | ● | ― | ● |
| Non-monetary compensation | ― | ― | ● | ● |
| Compensation other than the above | ● | ― | ● | ― |
Under RSU, the stock remuneration portion is classified as “non-monetary compensation” and the monetary compensation portion is classified under “compensation other than the above.”
** PSU is classified as “results-linked compensation” and the stock remuneration portion is also classified as “non-monetary compensation.”
** PSU is classified as “results-linked compensation” and the stock remuneration portion is also classified as “non-monetary compensation.”
<Eligible for Payment>
| Classification | Basic Remuneration | Results-linked Bonus | Post-delivery Type Stock Remuneration | |
|---|---|---|---|---|
| RSU | PSU | |||
| Directors concurrently serving as Corporate Officers | ● | ● | ● | ● |
| Directors not concurrently serving as Corporate Officers | ● | ― | ● | ― |
| Outside Directors | ● | ― | ― | ― |
| Audit & Supervisory Board Members | ● | ― | ― | ― |
<Breakdown of Remuneration for Directors Concurrently Serving as Corporate Officers (for Standard Payments)>
<Dilution ratio of stock remuneration-type stock options and post-delivery type stock remuneration as of the end of fiscal year>
| Classification | Type and number of shares to be issued | Percentage in total shares issued |
|---|---|---|
| Shares subject to stock acquisition rights as stock remuneration-type stock options | 808,500 common shares | 0.21% |
| Shares to be delivered as post-delivery type stock remuneration | Equivalent to 135,800 common shares | 0.03% |
| Total | Equivalent to 944,300 common shares | 0.24% |
| 1. | With the introduction of the post-delivery stock renumeration plan approved at the 124th Ordinary General Meeting of Shareholders held on June 23, 2020, the stock remuneration-type stock option plan was abolished, except for those already granted. As a result, there were no stock acquisition rights newly issued as stock remuneration-type stock options in the current fiscal year. |
| 2. | No shares of the Company's stock were delivered as post-delivery type stock-based remuneration in the current fiscal year. The RSUs are scheduled to be delivered in the fiscal year ending March 31, 2024 or later, and the PSUs in the fiscal year ending March 31, 2025 or later. |
(ⅳ) Others
| a. | The Company has established Corporate Stock Ownership Guidelines. The Company makes an effort to ensure that eligible Directors and Corporate Officers hold at least a certain number of shares in the Company pursuant to their rank, including share-based compensation type stock options. |
| b. | In regard to remuneration of Directors and Corporate Officers, Clawback provisions are set forth by the Company. When there has been an illegal behavior or violation of the law, the Company may ask for a repayment of remuneration with consideration of the Compensation Advisory Committee and decision by the Board of Directors. |
②Total Amount of Remuneration for the Fiscal Year Under Review
| Officer category | Total amount of remuneration and other payments (Millions of yen) | Total amount of remuneration and other payments by type (Millions of yen) |
Number of Basic eligible officers | ||||
|---|---|---|---|---|---|---|---|
| Basic remuneration (Fixed remuneration) |
Results-linked bonus (Results-linked remuneration) |
Stock-linked remuneration stock options | Restricted Stock Units (RSU) |
Performance Share Units (PSU) |
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| Directors (Excluding Outside Directors) |
454 | 245 | 156 | △6 | 39 | 19 | 5 |
| Outside Directors | 48 | 48 | - | - | - | - | 4 |
| Audit & Supervisory Board Members (Excluding Outside Audit & Supervisory Board Members) |
62 | 62 | - | - | - | - | 2 |
| Outside Audit & Supervisory Board Members | 36 | 36 | - | - | - | - | 3 |
| 1. | Although there were five Directors (Excluding Outside Directors), three Outside Directors, two Audit & Supervisory Board Members and three Outside Audit & Supervisory Board Member as of March 31, 2022 in the table above, the total number of payees, the total amount of remuneration and the basic remuneration in the breakdown thereof regarding Directors as shown above include one (1) Outside Director who retired at the close of the 125th Ordinary General Meeting of Shareholders held on June 23, 2021, and the amount of remuneration paid to him. |
| 2. | For Result-linked bonuses, stock remuneration-type stock options, RSUs and PSUs for directors, the amounts recorded as expenses for the current fiscal year are shown. Stock remuneration-type stock options were abolished, except for those already granted, due to the introduction of a post-delivery type stock remuneration approved at the 124th Ordinary General Meeting of Shareholders held on June 23, 2020. However, the number of exercisable rights based on the rate of achievement of business results was fixed in June 2021, resulting in an adjustment to the amount of expenses recorded in prior periods. |
