The Company’s Board of Directors has resolved a policy for determining the details of compensation for individual Directors. In such resolution by the Board of Directors, the details to be resolved were deliberated at a voluntary advisory committee, consisting mainly of Outside Directors (“Nomination and Compensation Committee”), and then reported to the Board of Directors.

The compensation for Directors (excluding Outside Directors) consists of base compensation, performance-linked compensation, and stock compensation. The ratio is approximately 60:25:15 (base compensation: performance-linked compensation: stock compensation). Compensation for Outside Directors consists only of base compensation.

Base compensation is a fixed monthly compensation based on position, determined in consideration of social standards and other factors.

Performance-linked compensation is determined as monetary compensation, a short-term incentive, based on standard amounts specific to each position, considering qualitative and quantitative evaluation according to performance indicators, etc. In qualitative evaluation, the status of execution of duties and the degree of contribution, etc. are considered based on the Company’s annual business performance, including consolidated net sales and consolidated operating profit. On the other hand, in quantitative evaluation, ESG indicators (such as evaluation from external institutions and reduction of GHG emissions) are taken into consideration.
Performance-linked compensation is paid monthly in conjunction with the base compensation.

Non-monetary compensation is set as stock compensation, a medium- to long-term incentive, aiming to clarify the link between the Directors’ compensation and the Company’s stock value, with the intent that Directors share both profits and risks from stock price fluctuations with all shareholders, thus fostering a heightened awareness to contribute to medium- to long-term performance improvement and increased corporate value. A stock compensation system using a trust has been adopted for non-monetary compensation.
Under this system, one share is assigned one point, and in addition to the base points set for each position, performance-linked points are awarded according to results. In calculating performance-linked points,
consolidated net sales, consolidated operating profit, and consolidated ROE are used as clear and objective performance indicators based on results, considering the financial goals set forth in the long-term management plan. Performance-linked points are awarded according to the degree of achievement of each indicator. They are based on the percentage of achievement compared to the previous fiscal year for consolidated net sales and consolidated operating profit, and for consolidated ROE, they are based on actual values based on financial statements as of the end of each fiscal year. The shares are delivered to each Director upon their retirement.

Decisions on base compensation and performance-linked compensation are delegated to the Representative Director, President based on the resolution by the Board of Directors, within the maximum amount of total compensation determined by the resolution of the General Meeting of Shareholders. This authority entails the decision on the individual payment amounts for each Director. For stock compensation, amounts are determined based on the stock compensation system. The delegation of authority to the Representative Director, President is subject to deliberation by the Nomination and Compensation Committee, a voluntary advisory committee consisting mainly of Outside Directors. The authority and operation of the Nomination and Compensation Committee are stipulated in the Nomination and Compensation Committee Regulations. With the Representative Director, President as the chairman, it deliberates on the basic policy for officer compensation, the compensation framework, compensation amount, etc., and reports to the Board of Directors.