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 on April 26th 2024 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. | Fixed compensation 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 responsibility 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. |
| b. | Results-linked compensation Results-linked compensation shall be results-linked bonuses (monetary compensation) and Performance Share Unit (PSU). The payment amounts of results-linked bonuses 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. The payment ratio of PSU is linked to the achievement ratio of the targets of the consolidated performance indicators in the Medium-Term Plan. Results-linked bonuses are paid out at a certain time each year, PSU is paid out after the Medium-Term as determined by the Board of Directors after consulting the original proposal with and obtaining a report from the Compensation Advisory Committee. |
| c. | Non-monetary compensation Non-monetary compensation shall be Restricted Stock Unit (RSU) and Performance Share Unit (PSU) and those are paid to Directors excluding Outside Directors. RSU shall be paid 50% by stock and the rest by cash, after the 3 years or longer period defined by the Board of Directors from the first year to the last year of the Medium-Term plan. The number of PSU to be vested for Directors who also serves as Corporate Officers shall be calculated based on the achievement ratio and paid 50% by stock and the rest by cash. Details are determined by the Board of Directors after consulting the original proposal with and obtaining a report from the Compensation Advisory Committee. |
| d. | Ratio of remuneration 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 responsibility, 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 responsibility 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 0.6-1.0 : approximately 0.8-1.6 (assuming 100% achievement of performance targets). |
| e. | Return of remuneration, etc. (clawback and malus) In the event that the Company’s performance sharply and significantly deteriorates, or there are illegal activities or violations of laws and regulations, the right to the payment or delivery of remuneration may be forfeited or 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. |
(ⅱ) Remuneration Decision-making Process, Etc.
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.
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.
As explained 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.
(ⅲ) 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, ROIC) 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 pre-determined 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 company shares and monetary amounts calculated based on the degree of achievement of the performance targets set forth in the mid-term management plan, will be granted after the completion of the target period. The payment ratio will fluctuate according to the level of achievement of the consolidated performance targets in the mid-term management plan. | Fluctuating (medium- to long-term) | |
| Note: | Directors and Audit & Supervisory Board Members remuneration classification for results-linked compensation, non-monetary 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 | ● | ― | ― | ― |
<Composition ratio of remuneration (when the Representative Director President and CEO achieves performance goals 100%)>
<Evaluation Criteria and Payment Ratios of PSU>
| Classification | Evaluation Indicator | Target (FY ending March 2027) | Payout Ratio |
|---|---|---|---|
| Financial Indicator | Operating profit target under the Medium-Term Management Plan (3-year cumulative) | ¥668.4 billion | 0-100% |
| ROIC target under the Medium-Term Management Plan | 8.1% | ||
| Pre-Financial Indicator | CO₂ emissions reduction target under the Medium-Term Management Plan (vs. FY2022, SBTi Scope 1+2) | 23.3% | |
| Employee engagement targets under the Medium-Term Management Plan: a. Communication score b. Survey participation rate |
a. 75 points b. 80% |
||
| Stock Price Indicator | Relative TSR (vs. TOPIX) | - | 0-200% |
| 1. | Relative TSR (vs. TOPIX): TSR stands for Total Shareholder Return, which refers to the total investment yield for shareholders, encompassing both capital gains and dividends. Relative TSR (vs. TOPIX) compares our TSR during the specified period against the average TSR of TOPIX constituent stocks. |
| 2. | The PSU linked to Financial Indicators and those linked to Pre-financial Indicators were granted in a lump sum for three years in the first year in line with the medium-term management plan; however, for the PSU linked to Stock Price Indicator, it will be granted annually for one year. |
(ⅳ) Indicators related to performance-linked remuneration, reasons for selecting the indicators, and methods for determining the amount of performance-linked remuneration
| a. | In calculating results-linked bonuses, the amount is designed to fluctuate within a range of 0% to 200% of the standard payment amount depending on the degree of attainment of targets, using the consolidated results for each fiscal year (operating income, ROIC) and the indicators set for each division in charge. The reason for selecting these indicators is to use the same indicators as management targets with an emphasis on the linkage with short-term performance. The targets and results for the main indicators that relate to results-linked bonuses in the fiscal year under review are as follows.
|
| b. | The number of shares of our company granted as PSU and the amount of money provided will be determined based on the achievement level of the performance targets outlined in the medium-term management plan. The evaluation indicators and payment ratios are described in "(ⅲ) Structure of Remuneration for Directors and Audit & Supervisory Board Members <Evaluation Indicators and Payment Ratios of PSU>". Furthermore, the reason for selecting these indicators is not only to emphasize the correlation with medium- to long-term performance and corporate value but also to enhance the willingness to contribute to the realization of a sustainable society, by employing the same indicators as those used in the financial and pre-financial management targets of the medium-term management plan. Additionally, to further motivate the implementation of management practices that consider capital costs and stock prices, Stock Price Indicator has also been introduced. |
| c. | In the fiscal year under review, 136,500 stocks (following the stock split conducted at a ratio of 5 shares for each ordinary share, effective October 1, 2024.) were delivered to 6 Directors (excluding Outside Directors, including retired Directors) as RSU. PSUs are scheduled to be delivered in the fiscal year ending March 31, 2025. |
| d. | The types of remuneration in the table above are classified as Results-linked compensation, etc., Non-monetary compensation, etc., and Compensation other than above, as defined by the Company Law Enforcement Regulations. |
(ⅴ) Others
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.
②Total amount of remuneration and other payments, total amount of remuneration and other payments by type and Number of eligible officers by officer category
| 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 eligible officers | |||
|---|---|---|---|---|---|---|
| Basic remuneration (Fixed remuneration) |
Results-linked bonus (Results-linked remuneration) |
Restricted Stock Units (RSU) |
Performance Share Units (PSU) |
|||
| Directors (Excluding Outside Directors) |
701 | 203 | 266 | 93 | 139 | 4 |
| Outside Directors | 72 | 72 | - | - | - | 4 |
| Audit & Supervisory Board Members (Excluding Outside Audit & Supervisory Board Members) |
70 | 70 | - | - | - | 2 |
| Outside Audit & Supervisory Board Members | 43 | 43 | - | - | - | 3 |
| 1. | Although there were three Directors (Excluding Outside Directors), four Outside Directors, two Audit & Supervisory Board Members and three Outside Audit & Supervisory Board Member as of March 31, 2025. The total number of payees, the total amount of remuneration and the basic remuneration in the breakdown there of regarding Audit & Supervisory Board Members as shown above include one (1) Directors (Excluding Outside Directors) who retired at the close of the 128th Ordinary General Shareholders meeting held on June 21, 2024, and the amount of remuneration paid to the person. |
| 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. |
<Directors (Numbers as of the date of filing of this Annual Securities Report: 7 numbers prescribed in the Articles of Incorporation of the Company: within 10)>
| (ⅰ) | Basic remuneration The amount of basic remuneration for Directors is ¥25 million or less per month, as approved by the 106th Ordinary General Meeting of Shareholders held on June 27, 2002. There were seven (7) Directors (including one (1) Outside Director) as of the close of the said Ordinary General Meeting of Shareholders. |
| (ⅱ) | Results-linked bonuses The amount of results-linked bonuses for Directors concurrently serving as Corporate Officers is ¥350 million or less per year, as approved by the 119th Ordinary General Meeting of Shareholders held on June 26, 2015. There were four (4) Directors concurrently serving as Corporate Officers as of the close of the said Ordinary General Meeting of Shareholders. |
| (ⅲ) | Post-delivery Type Stock Remuneration Restricted Stock Unit (RSU) The amount of compensation for directors, excluding outside directors in the form of Restricted Stock Unit (RSU) has been approved at the 128th Annual General Shareholders meeting, to be held on June 21, 2024, to be within the total amount of monetary compensation claims multiplied by the stock price at the time of issuance, based on an upper limit of the number of basic stock units (40,000 shares), with the number of shares to be issued being within 20,000 shares per year. At the time of the conclusion of the said Ordinary General Shareholders meeting, the number of directors excluding outside directors is three(3). |
| (ⅳ) | Post-delivery Type Stock Remuneration Performance Share Unit (PSU) The amount of compensation in the form of Performance Share Unit (PSU) for directors who also serve as Corporate Officers will be based on the total amount of monetary compensation receivables, multiplied by the payment ratio according to the maximum number of basic stock units (capped at 200,000 shares), and the value calculated by multiplying the stock price at the time of transfer. It has been approved that the number of shares to be issued shall not exceed 100,000 shares per year at the 128th General Shareholders meeting to be held on June 21, 2024. At the time of resolution of the said Ordinary General Shareholders meeting, the number of Directors concurrently serving as Corporate Officers is three(3). |
- (Note)
- 1. The number of standard stock units in post-delivery stock compensation is calculated by dividing the standard amount, which is determined by Board of Directors meeting according to the responsibilities of the relevant directors, by the stock price at the time of grant. The stock price at the time of delivery is the closing price of our common stock on the Tokyo Stock Exchange on the last business day prior to the date of the Board of Directors' resolution regarding the delivery of shares (if there were no transactions on that day, it will be based on the closing price of the most recent trading day prior to that).
- 2. Regarding the distribution ratio of PSU, every time a mid-term management plan is formulated, evaluation indicators (including any revisions) and the distribution ratios are decided by the Board of Directors meeting. The current distribution ratio of PSU is as described in the above "<Evaluation indicators and distribution ratio of PSU >".
- 3. We conducted a stock split at a ratio of 5 shares for each common share, effective October 1, 2024. Consequently, the limits concerning RSU has been adjusted such that the total amount of cash compensation claims is within the total calculated by multiplying the number of units capped at a base of 200,000 shares by the stock price at the time of issuance, and the number of shares to be issued is capped at 100,000 shares per year. Similarly, the limits regarding PSU has been adjusted so that the total amount of cash compensation claims is within the total calculated by multiplying the number of units capped at a base of 1,000,000 shares by the issuance ratio and the stock price at the time of issuance, and the number of shares to be issued is capped at 500,000 shares per year.
<Audit & Supervisory Board Members (Numbers as of the date of filing of this Annual Securities Report: 5 numbers prescribed in the Articles of Incorporation of the Company: within 5 )>
The amount of basic remuneration for Audit & Supervisory Board Members is ¥120 million or less per year, as approved by the 124th Ordinary General Meeting of Shareholders held on June 23, 2020. There were five (5) Audit & Supervisory Board Members (including three (3) Outside Audit & Supervisory Board Members) as of the close of the said Ordinary General Meeting of Shareholders.
