Executive Compensation

Basic Policy

The compensation for our directors (excluding outside directors and directors who are audit and supervisory committee members) consists of a fixed base salary, executive bonuses, and performance-linked stock compensation, with the aim of providing appropriate compensation for their responsibilities and motivating them to improve corporate value in the medium to long term through the expansion of the company's size and profits.

Outside directors and directors who are audit and supervisory committee members are independent of business execution and their compensation consists solely of a fixed base salary. The Board of Directors is the body that has the authority to decide on the amount of compensation for individual directors (excluding directors who are audit and supervisory committee members) or the method of calculating it.

To ensure objectivity and transparency in the procedures for determining the amount or calculation method of remuneration for directors (excluding directors who are audit and supervisory committee members), our company will establish a voluntary remuneration advisory committee composed of all directors appointed by the Board of Directors and directors who are audit and supervisory committee members. The majority of the members of this committee will be independent outside directors, and the chairperson will be elected by mutual vote from among the independent outside directors on the committee.

Policy on Determining the Amount of Basic Compensation and Other Payments for Each Individual

The basic remuneration for individual directors (excluding directors who are audit and supervisory committee members) will be a fixed monthly remuneration, determined by comprehensively considering their position, duties, years in office, company performance, employee salary levels, etc. The maximum amount of remuneration will be within the range of the remuneration amount resolved at the general meeting of shareholders.

Policies regarding the determination of performance metrics and other factors related to performance-based compensation, as well as the methods for calculating the amount or number thereof, and policies regarding the determination of the nature, amount, or number of non-monetary compensation and the methods for calculating the same

(a) Executive bonuses

Executive bonuses are intended to function as an incentive to pursue profits while expanding the scale of operations, in order to improve performance in the medium to long term. The specific amounts will be set for each position, taking into account the ratio of fixed and variable compensation, and statistics on compensation levels in listed companies. As indicators for executive bonuses, ROE and EBITDA margin will be used as appropriate indicators, taking into account our company's policy of aiming for high profitability while also aiming for scale expansion. The maximum amount of compensation will be within the range of the compensation amount resolved at the general shareholders' meeting.
Executive bonuses are linked to the absolute values of the consolidated performance indicators ROE and EBITDA margin for a single fiscal year, and no targets are set. For the current fiscal year, ROE was 16.0% and EBITDA margin was 18.1%.

(b) Performance-linked stock compensation

To clarify the link between directors' compensation and the value of our company's shares, and to enhance their awareness of contributing to medium- to long-term performance improvement and increased corporate value, we have introduced a mechanism called the Board Incentive Plan (BIP) Trust (hereinafter referred to as the "BIP Trust"). The BIP Trust provides directors with company shares and cash equivalent to the proceeds from the sale of company shares upon their retirement, in accordance with their consolidated operating profit margin performance and their position. The BIP Trust determines compensation within a range of 33% to 150% depending on the consolidated operating profit margin performance. Differences are also made according to the director's position, with the President and CEO set at 1.00 and the compensation within a range of 1.00 to 0.25. As an indicator for performance-linked stock compensation, we have determined that the consolidated operating profit margin, which shows how much profit was made relative to the sales generated by the core business, is appropriate for evaluating management efficiency and will use it as an indicator. The maximum amount of compensation will be within the range of compensation amounts resolved at the general meeting of shareholders.
The "performance-linked stock compensation" is linked to the consolidated operating profit margin for a single fiscal year, and no target is set. The consolidated operating profit margin for the current fiscal year was 16.7%.
For the current fiscal year, the ratio of fixed compensation to performance-linked stock compensation paid to directors (excluding outside directors and directors who are audit and supervisory committee members) is approximately 7:1.
 

Matters concerning the determination of the individual basic compensation of directors

The individual basic compensation of directors (excluding directors who are audit and supervisory committee members) is deliberated and decided by a Compensation Advisory Committee, which is delegated by a resolution of the Board of Directors, in order to ensure objectivity and transparency in the deliberations. The delegated Compensation Advisory Committee has the authority to determine the individual compensation amount of directors (excluding directors who are audit and supervisory committee members) in accordance with the policy decided by the Board of Directors and within the range of compensation amounts resolved at the General Meeting of Shareholders.
The Compensation Advisory Committee is chaired by an independent outside director, and independent outside directors constitute the majority of its members. Independent outside directors are in a position to objectively evaluate the performance of each director. Furthermore, the President and CEO, who is also a member of the committee, is responsible for overseeing the company's performance and business environment, and understanding the performance of each director. For these reasons, the Board of Directors has delegated the determination of individual compensation amounts to the committee, ensuring objectivity and transparency, and enabling fair and thorough deliberation.
The body with the authority to determine the amount of compensation, etc., for directors who are audit and supervisory committee members, or the method of calculating such compensation, is the Audit and Supervisory Committee. The amount is determined by consultation among the directors who are audit and supervisory committee members, taking into consideration the duties and responsibilities of each member, within the range of compensation amounts resolved at the general meeting of shareholders.

Matters concerning the determination of the details of individual performance-linked compensation and non-monetary compensation for directors.

The Board of Directors will resolve on the Board of Directors' regulations regarding the details of executive bonuses for directors (excluding outside directors and directors who are audit and supervisory committee members), based on the decision-making policy set forth above. The details of individual executive bonuses will be determined by the Board of Directors' regulations.

Reasons why the Board of Directors determined that the individual compensation and other benefits of directors for the current fiscal year were in line with the policy for determining compensation and other benefits

The individual compensation and other benefits for directors (excluding directors who are audit and supervisory committee members) are deliberated and decided upon by a Compensation Advisory Committee, which consists of all directors who are audit and supervisory committee members and who are independent of business execution, as well as the President and CEO who has an overview of the company's performance and business environment and is aware of the status of each director's performance of duties. Because the objectivity and transparency of the procedure are ensured, the Board of Directors has determined that the individual compensation and other benefits are in line with the decision-making policy.

Activities of the Board of Directors and Committees in the process of determining directors' compensation, etc.

The determination of individual compensation amounts is made by the Compensation Advisory Committee, which is delegated the authority to do so by a resolution of the Board of Directors.
In the process of determining the fixed compensation amount for our directors (excluding directors who are audit and supervisory committee members) for the current fiscal year, the Compensation Advisory Committee met four times from May 29, 2024 onwards to exchange opinions on directors' compensation. The Compensation Advisory Committee was delegated the authority to determine individual compensation amounts by a resolution of the Board of Directors, and the compensation amounts were then determined.

Matters concerning shareholder resolutions regarding directors' compensation, etc.

Directors (excluding audit and supervisory committee members)

fixed remuneration

Date of resolution: May 28, 2026 (64th Ordinary General Meeting of Shareholders)
Summary of the shareholders' meeting resolution: Up to 450million yen per year (excluding employee salaries).
Number of directors at the time of the resolution: 4

Performance-based compensation

Executive bonuses

Date of resolution: May 28, 2026 (64th Ordinary General Meeting of Shareholders)
Summary of the Shareholders' Meeting Resolution: Up to 150 million yen per year (excluding outside directors).
Number of directors at the time of the resolution: 4

Stock-based compensation

Date of resolution: May 27, 2016 (54th Ordinary General Meeting of Shareholders)
Summary of the Shareholders' Meeting Resolution: Covering three fiscal years, the total amount will be within 100 million yen (excluding outside directors).
Number of directors at the time of the resolution: 5

Directors who are members of the Audit and Supervisory Committee

fixed remuneration

Date of resolution: May 23, 2025 (63rd Ordinary General Meeting of Shareholders)
Summary of Shareholder Meeting Resolution: Up to 100 million yen per year
Number of directors at the time of the resolution: 5