May 16, 2022
Sumitomo Corporation

Revision of the Officer Remuneration System

Sumitomo Corporation (head office: Chiyoda-ku, Tokyo; Representative Director, President and Chief Executive Officer: Masayuki Hyodo; hereinafter the “Company”) passed a resolution to revise the officer remuneration system of the Company in the Board of Directors meeting as follows. This revision will take effect subject to the approval of the agenda item related to the director remuneration (which is the prerequisite of the revision) by the shareholders in the 154th annual general meeting of shareholders to be held in June, 2022.

1. Officer remuneration structure (represents the target recipient of each remuneration, etc.)

Type of remuneration, etc. Target recipient
Executive director /Executive officer Chairman of the Board Outside director Auditor
Fixed Monthly remuneration
Variable Performance-linked bonus
Restricted Performance
Share Unit-Based Remuneration

Background and purpose of the revision of officer remuneration system

The Company will revise the remuneration levels, remuneration breakdown and contents of performance-linked bonus for officers, in order to realize a remuneration system based on the management environment, corporate strategy, and personnel strategy of the Company, for the purpose of strengthening the governance of the Company group through the provision of sound incentives as well as strengthening the motivations towards improvement of the mid to long-term enterprise value and achievement of the management goals. Please refer to 3. hereunder, for details. In order to realize the corporate management with higher awareness of the stock price, the Company will introduce some changes. First, given the assumption that the market evaluation of our efforts as per the “SHIFT 2023” (Medium-Term Management Plan) will be reflected in the stock price, regarding the total payment amount of performance-linked bonus will change the system to enable reflection of the stock price growth rate of the Company (ratio of the stock price growth rate of the Company over the TOPIX growth rate) in the payment amount. In addition, regarding share unit-based remuneration, the Company will maintain the current restricted performance share unit-based remuneration; and will also endeavor to increase the share of share-unit remuneration in the total remuneration, in order to further promote the corporate management prioritizing the improvement of mid- to long-term enterprise value and the sharing of values with our shareholders.

Overview of the revision of the officer remuneration system

(1)Remuneration levels and remuneration breakdown of executive directors and executive officers
Given the current performance of the Company and the proper performance level to be targeted from now, the Company will revise the remuneration levels and remuneration breakdown appropriately, in order to realize a remuneration system that could contribute to the acquisition and retention of the corporate management personnel for the Company and the maintenance of motivations for them, while considering the roles expected of the executive directors and executive officers as well as referencing certain objective market research data on remuneration compiled by an external professional agency (Willis Towers Watson “Executive Remuneration Database”), etc.

(2)Performance-linked bonus
From the viewpoint of strengthening the relevance with the corporate strategy, in the process to determine the total payment amount, the Company will newly reflect the stock price growth rate of the Company (ratio of the stock price growth rate of the Company including dividends over the TOPIX growth rate), in addition to the performance management indicators contained in the “SHIFT2023.” After the allocation depending on the job title and the individual evaluation, payment amount to each officer will be paid after the end of each fiscal year. Also, individual evaluation of each officer will be conducted by using both financial indicators (achievement status of business plan, etc. in the responsible business area) and non-financial indicators (achievement status of KPIs and KAIs in each organizational unit to pursue business strategy [Strategic Business Unit], status of making efforts for companywide priority challenges, etc.), in order to enable them to have stronger awareness of the corporate strategy and the commitment to results. In the individual evaluation, comparative weight between evaluation by the financial indicators and the evaluation by non-financial indicators will be set as 50%:50%. Among the non-financial indicators (50%), the three companywide priority challenges (i. e., business transformation through digital transformation [DX], enhancement of sustainability management, and promotion of Diversity & Inclusion) will be given 20% weight of the total.

(3)Restricted Performance Share Unit-Based Remuneration
(Current system to be kept)
The Company will maintain the current system whereby providing certain number of common shares of the Company each year, as calculated in accordance with the stock growth rate of the Company (ratio of the stock price growth rate of the Company including dividends over the TOPIX growth rate) in the 3-year valuation period, a to increase the share of restricted performance share unit-based remuneration in the total remuneration. 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.

Corporate Communications Department, Sumitomo Corporation
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