Directors’ Compensation

Principle of Directors’ Compensation

Yaskawa Electric has designed its directors’ compensation system based on the following principles.

For directors who are not Audit and Supervisory Committee Member (Hereinafter, “Director”), the compensation system consists of basic compensation, single year performance-linked compensation, and medium- to long-term stock compensation. For directors who are Audit and Supervisory Committee Members (Hereinafter, “Audit and Supervisory Committee Members”), the compensation system consists of basic compensation and stock compensation.

・Single year compensation
 Distribute the profits generated during the fiscal year to raise awareness of the need to improve profits throughout the company

・Medium- and long-term compensation
 Raise awareness of improving corporate value over the medium to long term and share profits with stakeholders

Compensation for Directors (Excluding Audit and Supervisory Committee Members)

1. Basic compensation

At the 99th Ordinary General Meeting of Shareholders held on June 18, 2015, a fixed limit of no more than 430 million yen was adopted and the details are as follows. The number of directors subject to this basic compensation shall be 12 or less pursuant to the provisions of the our company Articles of Incorporation.

・Directors (Excluding Outside Directors.)
 A certain amount will be paid according to the performance evaluation and the position of each director as he/she is responsible for improving corporate value.

・Outside director
 A fixed amount will be paid because he/she is responsible for supervising the execution of duties.

2. Performance-linked compensation

The resolution of the 99th Ordinary General Meeting of Shareholders held on June 18, 2015 was as follows. The number of directors subject to this performance-linked compensation shall be 12 or less as stipulated in the our company Articles of Incorporation.

・Directors (Excluding Outside Directors.)
 The limit for performance-linked compensation shall be 1.0% or less of the consolidated net income for the previous fiscal year of the general meeting of shareholders, to clarify the linkage with consolidated performance. The amount of remuneration for each director shall be calculated by taking into account the relative results to our company’s business performance from the standard deviation based on the operating profit ratio, operating profit growth ratio and ROA of other companies in the same industry.

・Outside directors
 Performance-linked compensation shall not be paid.

3. Stock-based compensation

1) Outline and purpose of stock-based compensation

Based on the resolution of the 101st Ordinary General Meeting of Shareholders held on June 15, 2017 and the resolution of the 103rd Ordinary General Meeting of Shareholders held on May 28, 2019, Yaskawa Electric adopted a stock compensation system “Share Benefit Trust (BBT)” for directors of Yaskawa Electric. This system is a stock-based compensation system that is linked to the level of achievement of corporate performance indicators under the mid-term management plan. This is intended to encourage directors to share not only the benefits of a rise in stock prices but also the risk of a decline in stock prices with shareholders, and to motivate them to improve the medium- to long-term business performance and to increase corporate value. The number of directors subject to this basic compensation shall be 12 or less pursuant to the provisions of the our company Articles of Incorporation.

2) Recipients of benefits

Payment will be made to directors who meet the following requirements. The common stock of Yaskawa Electric and cash (hereinafter referred to as “the equities, etc.”) will be provided to eligible directors.

a. Having served as a director for at least six months during the fiscal year under review.
b. The absence of certain illegal acts

3) Method of calculating the amount of performance-linked stock remuneration, etc.

a. Stock compensation paid (Number of points awarded)
 At the first Ordinary General Meeting of Shareholders held after the end of the mid-term business plan period, the directors will receive fixed points according to the degree of achievement of “corporate performance indicator” (Points less than 1 are rounded down).

b. Evaluation period
 The evaluation period covers multiple business years corresponding to the mid-term business plan.

c. Timing of payment
 The shares of Yaskawa Electric calculated in accordance with this paragraph will be paid when directors retire.

d. Corporate performance indicators

  • Index and formula of stock-based compensation for directors

(i) Base amount by position

Based on the scale and responsibility of the area of duty of the Directors, etc., and the contribution to the Group’s management, etc., the standard amount is determined according to the position after deliberation by the Compensation Advisory Committee.

(ii) Cumulative operating profit target achievement (Total operating income during the mid-term business plan)

It is evaluated according to the accumulated operating income recorded in the mid-term business plan “Challenge 25” for fiscal years 2019 to 2021. Specifically, when total operating income exceeds the target set in the mid-term business plan “Dash 25” for fiscal years 2016 to 2018, a certain coefficient is used for the assessment, and after “Challenge 25” is achieved, a higher coefficient is set. By doing so, we aim to increase the motivation of directors and others to achieve the plan, and to continue their active commitment after the plan is achieved.

  • Assessment image of cumulative operating income target achievement (Total operating income during the mid-term business plan)

(iii) Achievement in the final year (Net sales and operating income)

With the aim of achieving steady performance targets for the final fiscal year, which is the culmination of the “Challenge 25” mid-term business plan for fiscal years 2019 to 2021, evaluations are made according to the degree to which sales and operating income have been achieved in the final fiscal year of the “Challenge 25”.

(iv) Achievement of ROIC (Return on Invested Capital) in the final year

To motivate directors and others to improve capital efficiency and profitability, evaluations are made according to ROIC achievement.

(v) Comparison with TOPIX in TSR (Total Shareholders Return)

Evaluations are made according to the degree of TSR achievement with the aim of motivating to raise corporate value through the eyes of shareholders

(vi) Achievement of CO2 emissions reduction targets through Yaskawa products

With the aim of realizing sustainable corporate activities and responding to social issues, evaluations are made according to the degree of achievement of CO2 emissions reduction targets through Yaskawa products.

Compensation for Audit and Supervisory Committee Members

1. Basic compensation

At the 104nd Ordinary General Meeting of Shareholders held on May 27, 2020, a fixed limit of no more than 150 million yen per annum was adopted for the basic remuneration of Audit and Supervisory Committee Members. The number of Audit and Supervisory Committee Members subject to this basic compensation shall be six or less pursuant to the provisions of the our company Articles of Incorporation.

2. Stock-based compensation

1) Outline and purpose of stock-based compensation

Based on the resolution of the 101st Ordinary General Meeting of Shareholders held on June 15, 2017, Yaskawa Electric introduced a stock compensation system for Audit and Supervisory Committee Members. Under this system, in addition to the function of supervising business execution, the Audit and Supervisory Committee members are responsible for monitoring the execution of management and other functions to ensure the achievement of the mid-term business plan. In order to share the value with shareholders, the remuneration is a stock remuneration. The number of shares to be provided to the Audit and Supervisory Committee Members is not linked to business performance, and the remuneration value is linked only to the Yaskawa Electric’s stock price, thereby eliminating the impact on the Audit and Supervisory Committee Members’ function of supervising business execution. The number of Audit and Supervisory Committee Members subject to this basic compensation shall be six or less pursuant to the provisions of the our company Articles of Incorporation.

2) Recipients of benefits

Yaskawa Electric’s shares, etc. will be provided to Audit and Supervisory Committee Members who meet the following requirements.

a. Having served as an Audit and Supervisory Committee Member for at least six months during the fiscal year under review.
b. The absence of certain illegal acts

3) Method of calculating the amount of share remuneration, etc.

a. Stock compensation paid (Number of points awarded)
A fixed point is awarded depending on whether or not the company has achieved its performance targets.

b. Evaluation period
The evaluation period is from March 1 to the end of February of the following year.

c. Timing of payment
The shares of Yaskawa Electric calculated in accordance with this paragraph will be paid when the Audit and Supervisory Committee Member retires.

d. Corporate performance indicators
Preset points will be awarded based on the achievement or non-achievement of the corporate performance targets in the mid-term business plan “Challenge 25” for fiscal years 2019 to 2022.

Methods of Determining Directors’ Compensation

Yaskawa Electric has established the Compensation Advisory Committee as an advisory body to ensure the appropriateness and transparency of remuneration for directors (excluding Audit and Supervisory Committee Members) and executive officers through fair deliberations.

The remuneration of Audit and Supervisory Committee Members is determined through discussions of the Audit and Supervisory Committee.

Total Amount of Compensation, etc. by Director Category, Total Amount of Compensation, etc. by Type, and Number of Applicable Directors (FY2018)

Director category No. of directors Total amount of compensation (millions of yen)
Basic compensation Performance-linked compensation Stock-based compensation
Directors
(excluding Audit and Supervisory Committee Members)
6 616 276 255 84
Directors who are Audit and Supervisory Committee Members
(excluding outside directors)
3 64 57 6
Outside directors 4 59 46 13

(Note)The above includes 1 director who was an Audit and Supervisory Committee Member and who retired at the conclusion of the 102nd Annual General Meeting of Shareholders held on May 29, 2018.

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