Executive Officer Remuneration, etc.

Matters Pertaining to Policies for Determining the Amount and Means of Calculating Executive Officer Compensation, etc.

Policy for Determining Executive Officer Compensation, etc.

The compensation for directors (excluding external directors) consists of basic fixed compensation, based on their position within the Hulic Group and the weight of their responsibilities, as well as performance-based compensation, which is linked to earnings performance of the Company and their contribution to those earnings. In accordance with a resolution at the 86th General Meeting of Shareholders, a portion of performance-based compensation is allocated to a share-based payment plan designed to give incentives for performing duties, in order to achieve the sustainable growth of the Company and to enhance corporate value from the shareholders’ standpoint and perspective.
Furthermore, compensation for external directors and Audit & Supervisory Board members consists solely of basic compensation in light of their roles and responsibilities. Moreover, a resolution pertaining to the method for determining executive officer compensation was passed at a Board of Directors meeting held on February 18, 2021.

General Meeting of Shareholders Resolution Details and Determination of specific remuneration, etc. Related to Executive Officer Compensation, etc.

At the 92nd General Meeting of Shareholders, it was resolved that the annual amount for Board of Director monetary compensation is up to JPY1,000 million. (Of this amount, up to JPY120 million can be paid to external directors.) Additionally, a resolution at the 85th General Meeting of Shareholders stipulates an annual amount of up to JPY150 million for Audit & Supervisory Board member monetary compensation.
A resolution at the 94th General Meeting of Shareholders stipulates a change in Board Benefit Trust (BBT) to a maximum of 400,000 points per fiscal year with regard to share-based payments for directors (excluding external directors).
When determining the amount of remuneration for individual directors, the Remuneration Committee, which consists entirely of independent external directors authorized by the Board of Directors, deliberates and makes decisions within the scope of compensation determined by the General Meeting of Shareholders. Further, Audit & Supervisory Board member compensation is determined as a separate system from director compensation within the scope of compensation determined by the General Meeting of Shareholders, in consultation with the Audit & Supervisory Board.

Persons Authorized to Determine the Amount of Remuneration, etc. for Each Individual Executive Officer and Their Authority, and the Procedures of Voluntary Committees

The Company has established a Remuneration Committee, which consists solely of independent external directors (four members). The decision on the amount of remuneration, etc. for each individual Director is entrusted to the Remuneration Committee, within the amount resolved at the General Meeting of Shareholders. This is to ensure that the evaluation and determination of Directors’ remuneration, etc. is conducted from an objective perspective.
The Remuneration Committee is composed of independent external directors Tsukasa Miyajima (Chairman of the Board), Hideo Yamada, Atsuko Fukushima and Shinji Tsuji. The Committee determines the details of remuneration, etc. for each individual director for the fiscal 2024 under review, after a multifaceted review, including consistency with the policy for determining the details of remuneration, etc. for each individual Director. The Board of Directors believes that the process of such review, and the details of the determination are reasonable, and judges that the details are in line with such determination policy. In addition, retirement benefits for Directors have been abolished.
Remuneration for Audit & Supervisory Board Members is structured separately from that for Directors, and is determined by discussion among the Audit & Supervisory Board Members, within the amount resolved at the General Meeting of Shareholders.

Performance-based Compensation

Director compensation (excluding external directors) includes performance-based compensation, which consists of bonus payments and stock compensation, and basic compensation, which is in addition to performance-linked compensation. Performance-linked compensation accounts for 40 to 50% and basic compensation accounts for 50 to 60% of total director remuneration. Hulic uses the percentage of change in preceding fiscal year consolidated ordinary profit as an indicator for performance-based compensation. Our business performance is concisely represented by consolidated ordinary profit as it takes into account interest expenses and other nonoperating income, thus we decided to use the percentage of change in consolidated ordinary profit as it is considered to represent a medium- to long-term sustainable increase in shareholder value.
Moreover, the total amount of performance-based compensation for directors will not change if the percentage change in the preceding fiscal year's consolidated ordinary profit falls below a certain level. The ratio of performance-based compensation in the form of bonuses (monetary portion) to share-based compensation (BBT) is 1:1.
With regard to the actual results of the indicators related to performance-based compensation, actual consolidated ordinary profit was JPY154,329 million (up 12.2% year-on-year), compared to the consolidated earnings forecast of ordinary profit at JPY150,000 million for FY2024, as announced in the Notice of Revisions to Annual Performance and Dividend Forecast released on October 28, 2024. As a result, the Company’s performance progressed steady because we achieved the profit target of the medium-term management plan (end year is FY 2025 in initial plan), one year ahead of schedule, and we can start new medium-term management plan (2025-2027) and so on.

Clawback Clause

A clawback mechanism is in place that will revoke share -based compensation granted in the past of any misconduct occurs.

Directors/Auditors’ Compensation

FY2024

• *1The amount of stock compensation is provision to reserves for stock benefits posted as the portion for the current fiscal year, for performance-linked variable compensation system.
• *2The total non-monetary compensation to directors (excluding external directors) consists of JPY283 million in performance-linked variable compensation (in stock).