Overview of Executive Remuneration Plan


Matters related to policy for deciding the remuneration for individual directors

The above policy was decided in March 24, 2021 Board of Directors resolution (after discussion within the Nomination and Remuneration Advisory Committee).

  1. Remuneration structures and rules for deciding the ratios of remuneration components for individual directors

    (i) System for remuneration of individual Directors (● indicates such Director may be granted such remuneration)

    Type of Remuneration Director Type
    Executive Director
    (*1)
    Chairman of the Board
    (*2)
    Outside Director
    (*3)
    Fixed Monthly Remuneration
    Variable Performance Linked Bonus
    Stock-based remuneration
    1. The remuneration of Executive Directors and Executive Officers consists of “monthly remuneration,” “performance-linked bonus,” “Restricted Stock-based remuneration” and “Performance Share Unit-based remuneration.”
    2. The remuneration of the Chairman of the Board of Directors, whose main role is management supervision as stipulated in the “Sumitomo Corporation Corporate Governance Principles,” consists of “Restricted Stock-based remuneration” and “Performance Share Unit-based remuneration,” which contribute to improving shareholder value, in addition to “monthly remuneration.”
    3. The remuneration of Outside Directors, who are in a position to supervise management with a high degree of objectivity and independence, consists solely of fixed remuneration (“monthly remuneration”) and is provided on a monthly basis.

    (ii) Rules for deciding the ratios of allocating monthly remuneration, performance-linked bonus and stock-based remuneration for respective categories of directors
    In order to determine remuneration details for respective categories of directors, a proper remuneration system must be designed in a way to promote the Group’s sustainable growth in line with its management strategies, with a view to reinforcing the Group’s governance and increasing its corporate value over the medium to long term. The ratios of allocating the remuneration components are determined, by reference to the data on remuneration market research conducted by independent research agencies or other objective data, based on the Company’s business environment, management strategies and human resources strategies. Firstly, standard remuneration amounts are set at such levels that are appropriate for finding and retaining outstanding business leaders and managers who have the ability to realize the Group’s sustainable growth and enhance its medium- to long-term business value. Then, an appropriate ratio of a fixed-amount portion (i.e., monthly remuneration) and variable portions (i.e., performance-linked bonus, which depends on short-term performance, and stock-based remuneration, which is linked to medium- to long-term business results and shareholder value) is specified for each category of directors defined based on their roles and responsibilities, in order to ensure that the remuneration system designed as aforesaid will serve as a sound incentive for achieving sustainable growth.
    Separately from the remuneration explained above, Executive Directors are paid appropriate amounts for participating in individual health promotion programs.

  2. Rules for deciding or calculating monthly remuneration amounts for directors on an individual basis (including the rules for deciding the timing for remuneration payment or the payment conditions)

    The monthly remuneration, which is payable to each Director at a fixed amount, is set at an appropriate level by the Board of Directors, in light of the Director’s role and responsibility, after seeking consultations and advice from the Nomination and Remuneration Advisory Committee, the majority of whose members are Outside Directors and which is chaired by an Outside Director. To determine such monthly remuneration amounts, the data on remuneration market research conducted by independent research agencies or other objective data are used as reference, and the Company’s business environment, management strategies and human resources strategies are taken into consideration.
    To each of the Outside Directors serving as a member of the Nomination and Remuneration Advisory Committee, an allowance for committee duties is paid in an amount determined by the Board of Directors, in addition to the standard executive remuneration.

  3. Rules for deciding the components and amounts or quantities of performance-linked remuneration and nonmonetary compensation to be individually determined or for calculating those amounts or quantities (including the rules for deciding the timing for remuneration payment or the payment conditions)

    (i) Performance-linked bonus
    Performance-linked bonus for Executive Directors is designed with a focus on the relationship between the Group’s management strategies and such bonus and is thereby intended to encourage Executive Directors’ execution of duties in line with such management strategies and to strongly motivate them to achieve particular business objectives. To associate performance-linked bonus more closely with management strategies, the total annual amount to be paid to all Executive Directors is determined based on the performance management metrics specified in the medium-term management plan, and the amount to be allocated to each Executive Director is determined based on their post and individual evaluation and paid after the end of the fiscal year. For their individual evaluation, both financial metrics and non-financial metrics are used in order to make them strongly aware of their commitment to the management strategies and their respective achievements. In this regard, the ratio of weight for the evaluation based on financial metrics and the one based on non-financial metrics is set appropriately.
    To determine the amounts of performance-linked bonus, the Board of Directors sets appropriate levels of the bonus amounts, in light of the roles and responsibilities assigned to respective directors, after seeking consultations and advice from the Nomination and Remuneration Advisory Committee. For this purpose, the data on remuneration market research conducted by independent research agencies or other objective data are used as reference, and the Company’s business environment, management strategies and human resources strategies are taken into consideration.

    (ii) Stock-based remuneration
    Stock-based remuneration for individual directors (excluding Outside Directors) is designed with a focus on the linkage with shareholder value, with the intention of further optimizing business portfolios and enhancing corporate value from medium- to long-term perspectives while promoting the sharing of value between us and our shareholders. More details, including the timing for giving such remuneration are determined by the Board of Directors after seeking consultations and advice from the Nomination and Remuneration Advisory Committee.
    To determine the value or amount of stock-based remuneration to be given, the Board of Directors set appropriate levels of the stock amount, in light of the roles and responsibilities assigned to respective directors, after seeking consultations and advice from the Nomination and Remuneration Advisory Committee. For this purpose, the data on remuneration market research conducted by independent research agencies or other objective data are used as reference, and the Company’s business environment, management strategies and human resources strategies are taken into consideration.

  4. Methods and procedures for delegating the authority to decide director remuneration on an individual basis to all or some specified directors in office or a third party and for making other decisions regarding such individual remuneration

    Remuneration payable to each director (excluding performance-linked bonus) is determined by the Board of Directors within the maximum limits approved by the General Meeting of Shareholders. The details of the resolutions on such individual remuneration adopted by the Board of Directors are reviewed by the Nomination and Remuneration Advisory Committee and their feedback is reported to the Board of Directors. This review process is implemented as part of our efforts to further enhance transparency and objectivity. Regarding the amount of performance-linked bonus payable to each Executive Director for each fiscal year, the Board of Directors determines a performance-linked bonus formula for that fiscal year at a Board meeting held within the same year, based on a review report of the Nomination and Remuneration Advisory Committee obtained in advance. Then, the Company asks the General Meeting of Shareholders to approve the Company’s payments of the remuneration amounts calculated by the abovementioned formula to respective directors after the close of the fiscal year in question, together with the approval of the maximum limit on all those payments. When calculating the bonus amount to be paid to each Executive Director, the President conducts an interview with each of them to fix their individual evaluation corresponding to the indicator constituting the approved formula, subject to the specified maximum limit on the total annual value to be given to all Executive Directors. To ensure that the individual evaluation for each Executive Director is properly performed, the President is required to report the evaluation results to the Nomination and Remuneration Advisory Committee.

Remuneration system

In order to further enhance the effectiveness of the Company's executive remuneration system, which is linked to the Company's management strategy and encourages sustainable enhancement of corporate value, the executive remuneration system has been partially revised in fiscal 2021, the first year of the Medium-Term Management Plan SHIFT 2023, with the aim of strengthening the Group's governance and increasing its corporate value over the medium to long term.
Specifically, the ratio of the fixed-amount portion of total remuneration has been reduced, while that of the variable portion, consisting of performance-linked bonus and stock-based remuneration, has been increased. Furthermore, the details of performance-linked bonuses and stock-based remuneration have been reviewed.

  1. Executive remuneration plan (● indicates the persons eligible for each type of remuneration, etc.)
    Type of remuneration, etc. Eligibility
    Executive Directors /
    Executive Officers
    (*1)
    Chairman of the Board of Directors
    (*2)
    Outside Directors
    (*3)
    Audit & Supervisory Board Members
    (*4)
    Fixed Monthly Remuneration
    Variable Performance-Linked Bonus
    Restricted Performance
    Share Unit-Based Remuneration
    1. The remuneration of Executive Directors and Executive Officers consists of “monthly remuneration,” “performance-linked bonus”, and “Restricted Performance Share Unit-based remuneration.”
    2. The remuneration of the Chairman of the Board of Directors, whose main role is management supervision as stipulated in the “Sumitomo Corporation Corporate Governance Principles,” consists of “Restricted Performance Share Unit-based remuneration,” which contribute to improving shareholder value, in addition to “monthly remuneration.”
    3. The remuneration of Outside Directors, who are in a position to supervise management with a high degree of objectivity and independence, consists solely of fixed remuneration (“monthly remuneration”) and is provided on a monthly basis.
    4. The remuneration of Audit & Supervisory Board Members, who are in a position to audit and supervise management with a high degree of objectivity and independence, consists solely of fixed remuneration (“monthly remuneration”) and is provided on a monthly basis. The remuneration of each Audit & Supervisory Board Member is decided through discussions between the Members within the maximum amount approved by shareholder resolutions.
  2. Levels of remuneration and the remuneration composition ratios for Executive Directors
    • To set appropriate levels of remuneration and define the remuneration composition ratios for Executive Directors and Executive Officers, the data on remuneration market research conducted by independent research agencies (e.g., the executive compensation database offered by Willis Towers Watson) or other objective data are used as reference, and the Company’s business environment, management strategies and human resources strategies are taken into consideration.
    • The remuneration composition ratio for Executive Directors is set in a way that the ratio of monthly remuneration, performance-linked bonus and stock-based remuneration is as indicated below on the assumption that the Group’s consolidated net income and basic profit cash flow are 200 billion yen and that the Company’s stock growth rate (meaning the ratio of the Company’s stock growth including dividends to the growth rate of TOPIX (Tokyo Stock Price Index)) is 100%.

      Remuneration composition ratio
      President and Chief Executive Officer: 40:35:25
      Other Executive Directors: 47.5:32.5:20

    1. “Consolidated net income” is equivalent to the “profit attributable to owners of the parent” set out in International Financial Reporting Standards (IFRS).
    2. “Basic profit cash flow” = “Basic profit(*)” – “Share of profit (loss) of investments accounted for using the equity method” + “Dividend from investments accounted for using the equity method.”
      *:“Basic profit” = (Gross profit + Selling, general and administrative expenses (excluding provision for doubtful receivables) + Interest expense, net of interest income + Dividends) × (1-Tax Rate) + Share of profit (loss) of investments accounted for using the equity method.
    3. “Stock growth rate” = {(Average price of Company’s common shares in the month of termination of Evaluation Period + Total amount of dividends during Evaluation Period)÷(Average price of Company’s common shares in the month of commencement of Evaluation Period) }÷{(Average of TOPIX in the month of termination of Evaluation Period)÷ (Average of TOPIX in the month of commencement of Evaluation Period)}
  3. Performance-linked bonus

    With a view to focusing on the relationship between performance-linked bonus and the Group’s management strategies, the total annual amount of performance-linked bonus to be paid to all Executive Officers is determined based on the performance management metrics specified in the ongoing medium-term management plan, “SHIFT 2023,” and the amount to be allocated to each Executive Officer is determined based on their post and individual evaluation and paid after the end of the fiscal year. For their individual evaluation, both financial metrics (consolidated net income, base earnings cash flow or other targets falling within their respective scope of responsibility) and non-financial metrics (degree of execution of business strategies within their respective scope of responsibility, and the the degree of attainment in company-level priority challenges such as business innovation through digital transformation (DX) , the sophistication of sustainability-oriented management, the promotion of diversity and inclusion, and other relevant targets). In principle, the ratio of the evaluation measured based on financial metrics and the one measured based on non-financial metrics is 50:50.

  4. Restricted Performance Share Unit-Based Remuneration

    To drive forward our business management focused on the effort of enhancing the Group’s value and shareholder value from medium- to long-term perspectives, the Company will grant its common shares to Executive Directors every year in principle. The numbers of shares to be granted are calculated based on the Company’s stock growth rate (meaning the ratio of the Company’s stock growth including dividends to the growth rate of TOPIX (Tokyo Stock Price Index)) for a 3-year evaluation period, and the common shares so granted are subject to transfer restrictions. In order to have those Executive Directors share value with our shareholders over the medium to long term, the period for transfer restrictions will last from the date of grant and delivery of the shares until the date of resignation or retirement from all the posts of Director or Executive Officer or any other positions designated by the Board of Directors.

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