Executive Compensation System

The process for determining compensation

The Nomination and Compensation Committee has been established as an advisory body to the Board of Directors to ensure the fairness, transparency, and objectivity of the process. This system ensures that the independent Outside Directors are proactively involved in the nomination of director candidates and the setting of their remuneration. The Chairperson of the Committee and the majority of its members are independent Outside Directors. In addition to the nomination of the Company's candidate directors and executive officers, the Committee also deliberates the design of the system of compensation and the amount of remuneration for each individual. The Committee reports its opinions to the Board of Directors.
Our CEO and Representative Director determines the remuneration of individual Directors and other officers, within the scope delegated by the resolution of the General Meeting of Shareholders and the resolution of the Board of Directors, while respecting the deliberations of the Nomination and Compensation Committee.

Our compensation system

Director compensation consists of monthly compensation, which pays a fixed amount each month, stock-based compensation as a long-term incentive, and performance-linked, stock-based compensation as a medium-term incentive. The monthly compensation is further divided into basic compensation, which is determined based on the weight of the officer’s roles and responsibilities, and variable compensation which is determined each year based on factors that include the degree to which the annual plan (operating income) in the previous fiscal year was achieved and an individual performance evaluation. Outside Directors only receive a basic compensation.
The performance-linked stock-based compensation plan is a stock remuneration system in which Company shares and other securities are issued and paid to eligible Directors according to their rank and degree of achievement of performance targets. This plan consists of two parts: a “performance-linked grant” portion based on the degree of achievement of the Medium-Term Management Plan and a “fixed grant” based on the position of the eligible Director.
The performance-linked part is positioned as a medium-term incentive for the realization of the FANCL Group’s Medium-Term Management Plan. In addition to the rate of achievement rate of financial indicators, non-financial indicators are also taken into account. These include CO2 emissions, employee engagement, and business partner evaluation and have been established to strengthen relationships with various stakeholders and contribute to society in a sustainable manner. In this way, compensation is determined from multiple perspectives by incorporating the rate of achievement of both financial and non-financial indicators.
The fixed portion is positioned as a long-term incentive to improve corporate value throughout the Director’s term in office.

The compensation of our CEO and Representative Director

Medium-term incentives Performance-linked compensation indicators

Director compensation in the fiscal year ended March 2023