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Compensation System for Corporate Officer

Overview of Basic Policy Regarding Compensation for Directors and Audit & Supervisory Board Members

Lion has designed a corporate officer compensation system to provide sound and appropriate incentives necessary for retaining outstanding management talent that will achieve the Company’s management policies and continuously increase its corporate value over the medium to long term. Director and Audit & Supervisory Board member compensation is decided by the Board of Directors and the Audit & Supervisory Board, respectively, based on consultations with the Compensation Advisory Committee. Compensation is set within the limits decided by resolution of the General Meeting of Shareholders.

Compensation for directors (excluding external directors) consists of fixed monthly compensation and performance-linked compensation (bonuses and stock-based compensation). It is made up of approximately 50% fixed compensation and 50% performance-linked compensation (30% of which is bonus and 20% stock-based compensation), according to the director’s rank. The proportion of performance-linked compensation increases according to rank and is revised as needed. Fixed monthly compensation is raised or lowered once per year following an appraisal of the results of each director’s management supervision and execution of duties、and the degree to which the director has contributed to addressing the Sustainability Material Issues. Performance-linked compensation is calculated based on the degree to which performance targets have been met in each year and is paid individually at a designated time after the end of the relevant year.

Approximate Composition of Compensation of Executive Corporate Officers
(Excluding External Directors and Audit & Supervisory Board Members)

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Performance-Linked Compensation System

Type Performance-Linked Bonus Performance-Linked Stock-Based Compensation
Indicators

Core operating income
An earnings indicator used to measure regular business performance, calculated by subtracting selling, general and administrative expenses from gross profit (one of the most emphasized indicators under the medium-term management plan)

Profit for the period attributable to owners of the parent
An earnings indicator that expresses final business results and is directly linked to increases and decreases in shareholder value

Total payment amount

Total payment amount: Sum of (1) and (2) below
(1) 50% of 0.5% of core operating income for the relevant year
(2) 50% of 0.75% of profit for the period attributable to owners of the parent

Note: Rounded down to the nearest ¥10,000. If the result of either calculation is negative, its value is set at 0.

Total number of points (number of shares) assigned
Total number of points for individual directors as calculated in “Individual payment amount,” below

Individual payment amount

(1) Calculation of payment per point
Total payment amount ÷ (Points assigned according to rank × Number of officers)

(2) Individual payment amount
Payment per point × Points assigned according to rank

(3) Points assigned according to rank
From 3,000 points for Chairman and President and Executive Officer to 0.900 points for Executive Officer

(1) Calculation of number of points
(Fixed base amount + Performance-linked base amount × Performance-linked coefficient) ÷ Per-share acquisition cost

  • Fixed base amount and performance-linked base amount: ¥4 million each (multiplied by 1.0–3.625, depending on rank)
  • Performance-linked coefficient: 0–2.0, depending on achievement rate for each indicator
  • Per-share acquisition cost: ¥2,078
Time of payment End of March of each year In principle, shares are issued to directors upon retirement in a number equivalent to the total number of points they have been assigned
Upper limit ¥250 million per year ¥200 million (per year)
Total number of shares.: 120,000 (per year)
Clawback clause No Yes*

*In the event of a serious violation of internal rules or professional duties, forfeiture of points already granted or return of the amount equivalent to the shares already received

Fixed Monthly Compensation

Determining Policy Upper Limit
Overview
  • Flat-rate system
  • Compensation levels are set taking into consideration similar levels at other companies, and once per year fixed monthly compensation is raised or lowered following an appraisal of the results of each director’s management supervision and execution of duties, and the degree to which the director has contributed to addressing the Sustainability Material Issues.
¥300 million (per year)

Achievement of Performance-Linked Compensation Indicators(2023)

Achievement of targets for core operating income and profit for the period attributable to owners of the parent are as below.

Indicator Target Achievement Achievement rate
Core operating income ¥25,000 million ¥20,133 million 81%
Profit for the period attributable to owners of the parent ¥17,500 million ¥14,624 million 84%

Compensation System for External Directors and Audit & Supervisory Board Members

Compensation for external directors and Audit & Supervisory Board members consists solely of fixed monthly compensation. Compensation levels are set taking into consideration similar levels at other companies and are based on individual roles and responsibilities.

Total Compensation for Directors and Audit & Supervisory Board Members(2023)

Number of Corporate Officers Fixed Compensation
(Millions of yen)
Performance-Linked Compensation Total
(Millions of yen)
Bonuses
(Millions of yen)
Stock-Based
Compensation
(Millions of yen)
Directors
(External Directors)
12 (4) 285 (45) 105 (–) 56 (–) 448 (45)
Audit & Supervisory Board Members
(External Audit & Supervisory Board Members)
9 (5) 96 (36) – (–) – (–) 96 (36)
Total
(External Officers)
21 (9) 381 (84) 105 (–) 56 (–) 544 (84)

1.There are no individuals serving concurrently as employees and corporate officers.

2.An upper limit on directors’ fixed compensation of ¥300 million per year was set by resolution of the 156th Annual Meeting of Shareholders held on March 30, 2017. There were nine directors at the closing of this meeting.

3.An upper limit on Audit & Supervisory Board members’ fixed compensation of ¥110 million per year was set by resolution of the 156th Annual Meeting of Shareholders held on March 30, 2017. There were four Audit & Supervisory Board members at the closing of this meeting.

4.Within performance-linked compensation, bonus amounts are calculated and determined based on the core operating income and the profit attributable to the owners of the parent for each year, in accordance with the methods described above. An upper limit for bonuses of ¥250 million per year was set by resolution of the 156th Annual Meeting of Shareholders held on March 30, 2017. There were six directors (excluding external directors) at the closing of this meeting.

5.Within performance-linked compensation, stock-based compensation is the amount obtained by using the share acquisition price to convert the number of points (shares) granted to eligible individuals under the system, depending on the degree of achievement of the Group’s business targets for the year. An upper limit of ¥200 million on the contribution amount of stock-based compensation per year and an upper limit of 120,000 shares on the total number of shares granted per were set by resolution of the 160th Annual Meeting of Shareholders held on March 30, 2021. There were seven directors (excluding external directors) at the closing of this meeting.

6.The amounts shown are rounded down to the nearest million yen.

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