Meetings of the Board of Directors and Corporate Officer Compensation

Results of FYE 2019 under the corporate governance system is as follows.

Meetings of Management Bodies in FYE 2019

 

FYE2017

FYE2018

FYE2019

Board of Directors

16times

15times

17times

Outside director attendance at Board of Directors' meetings

98%

100%

100%

Outside Audit & Supervisory Board Member attendance at Board of Directors' meetings

94%

98%

98%

Board of Audit & Supervisory Board Members

12times

14times

13times

Outside Audit & Supervisory Board Members attendance at Board of Audit & Supervisory Board Members' meetings

94%

98%

100%

Actual Corporate Officer Remuneration for FYE2019

Type Number
of
people
Amount paid
(Millions of Yen)
Details Maximum remuneration paid
Directors
(Outside directors)

10
(5)

1,779
(48)

  • (1) Monthly remuneration ¥493 million
  • (2) Bonuses ¥1,000 million
  • (3) Special Bonuses ¥113 million
  • (4) Stock remuneration ¥173 million
  • (1) ¥0.8 billion per year as total monthly remuneration
    (including ¥0.1 billion per year as a portion to outside directors)
  • (2) ¥2.0 billion per year as total bonuses paid to all directors (excluding outside directors)
    (Both (1) and (2) were resolved at the General Meeting of Shareholders on June 21, 2019)
Audit & Supervisory Board Members
(Outside Audit & Supervisory Board Members)

6
(3)

115
(43)

  • (1) Only monthly remuneration
  • (1) ¥13 million per month
    (Resolved at the General Meeting of Shareholders on June 29, 2005)
Total
(Outside directors and Audit & Supervisory Board Members)

16
(8)

1,894
(91)

   
  • Contingent upon the approval of Proposal No. 4 (Revision of Remuneration Amount for Directors) at the General Meeting of Shareholders on June 21, 2019, ITOCHU decided to pay a special bonus, in accordance with the resolution passed at the Board of Directors meeting held on April 18, 2019, after examination by the Governance and Remuneration Committee. The Director bonus calculated by the applicable formula for FYE2019 shall be paid within the range of the previous rule (maximum 1.0 billion yen per year which was approved by the resolution at the General Meeting of Shareholders on June 24 2011), and any amount exceeding the said range shall be paid as a special bonus, separately from the Director bonus.
  • The retirement benefits system for directors and Audit & Supervisory Board Members was abolished on the date of the 81st Ordinary General Meeting of Shareholders held on June 29, 2005, and it was resolved that directors and Audit & Supervisory Board Members retaining their positions after the conclusion of the said General Meeting of Shareholders shall be presented with retirement benefits on the date of their retirement for the period up to the time the retirement benefits system was abolished.

FYE 2020 Corporate Officer Remuneration System

ITOCHU Corporation’s current remuneration plan for Directors is designed to be an incentive to grow business performance. Performance-linked bonus has a high proportion of overall remuneration, and this remuneration plan, including the calculation method, has been previously disclosed publicly, making it highly transparent. In order to increase awareness of contribution to raising business performance and enlarging corporate value over the medium- to long-term, we are including stock remuneration as part of the remuneration plan.


Remuneration Plan for Directors for FY2020 consists of (1) monthly remuneration, (2) performance-linked bonuses, (3) share price-linked bonuses, and (4) performance-linked stock remuneration (trust type). Of these, (3) share price-linked bonuses is a revision of the market capitalization-linked bonuses, which were introduced in FY2019, and the share price-linked bonuses are not designed on the single year base used when the market capitalization-linked bonuses was introduced. The bonus amount is calculated based on the evaluation of the relative growth rate of ITOCHU Corporation’s share price during the period of each medium-term management plan versus the growth rate of Tokyo Stock Price Index (TOPIX). The share price-linked bonuses are, like the stock remuneration, also for further strengthening awareness of enlarging corporate value from a medium- to long-term perspective.


Net profit (consolidated) is of high interest on the stock market because it is an easy-to-understand indicator of capital for growth-oriented investment and returns to shareholders and we have an unshakeable belief in its importance as an indicator going forward. In addition, bonuses for employees are linked to net profit (consolidated) so we have net profit attributable to ITOCHU (consolidated) as the linked indicator for performance-linked bonuses ((2), above) and performance-linked stock remuneration ((4), above). Also, regarding share price-linked bonuses ((3), above), as stated above we have the growth rate of ITOCHU Corporation’s share price during the period of each medium-term management plans as the linked indicator, but for the calculation of the growth rate of the share price, we use the simple average of the final price for each fiscal year.

[写真]

Type of remuneration Content Remuneration limit Resolution of General Meeting of Shareholders
Directors
  • (1)Monthly remuneration
    (Fixed)
  • Determined according to factors that include degree of contribution to ITOCHU, based on a standard amount for each position
  • ¥0.8 billion per year as total monthly remuneration (including ¥0.1 billion per year as a portion to the outside directors)
  • June 21, 2019
  • (2) Performance-linked bonuses
    (Variable(Single Year))
  • Total amount is determined based on net profit (consolidated), and individual amount is determined in relation to the position points for the Director
    *Formula is described below
  • ¥2.0 billion per year as total bonuses paid to all directors (excluding outside directors)
  • (3) Share price-linked bonuses
    (Variable(Medium- to Long-term))
  • Calculated based on an evaluation of the relative growth rate of ITOCHU's share price during the period of the medium-term management plan versus the growth rate of TOPIX (*1)
    *Formula is described below
  • (4) Performance-linked stock remuneration
    (Variable(Medium- to Long-term))
  • Total amount is determined based on net profit (consolidated), and individual amount is determined in relation to the position points for the Director used in calculating the individual performance-linked bonus (*2)
    *Formula is described below
  • The following is the limit for a two-year period for directors and executive officers
    ·Upper limit for contribution to trust from ITOCHU: ¥1.5 billion
    ·Total points awarded to persons eligible for the plan: 1.3 million points (conversion at 1 point = 1 share)
    *Not paid to Outside Directors
  • June 24, 2016
Corporate Auditors
  • Only monthly
    remuneration
  • ¥13 million per month
  • June 29, 2005

Formulas for Performance-linked Bonuses and Stock Remuneration

In accordance with confirmed results for FYE 2020, director bonuses for fiscal 2020 will be paid in amounts calculated according to the methods described below, following the conclusion of the 96th Ordinary General Meeting of Shareholders (in regard to stock remuneration, points will be awarded).

Total Amount Paid to all Directors

Total amount paid to all directors = (A + B + C) x Sum of Position points for all the eligible directors/55 (but not exceeding ¥1.0billion)
  A = (Of net profit attributable to ITOCHU for FYE2020, for the portion up to ¥200.0 billion) × 0.35%
  B = (Of net profit attributable to ITOCHU for FYE2020, for the portion more than ¥200.0 billion but up to ¥300.0 billion) x 0.525%
  C = (Of net profit attributable to ITOCHU for FYE2020, for the portion exceeding ¥300.0 billion) × 0.525% (0.175% for stock remuneration)

Amount Paid to an Individual Director

Amount paid to an individual director = Total amount paid to all directors × Assigned position points / Sum of position points for all the eligible directors

  Chairman and Chief Executive Officer President and Chief Operating Officer Executive Vice President Senior Managing Executive Officer Managing Executive Officer
Points

10

7.5

5

4

3

Of the amount paid to an individual director, the portion corresponding to A and B in the total amount paid to all directors is paid entirely in cash. In regard to the portion corresponding to C, the portion of 0.175% is paid as share-based stock remuneration and the rest paid in cash. In addition, 70% of the amount paid in cash is linked the plan achievement rate of the consolidated net profit of the assigned division/department. (The plan achievement rate shall be 100% for the eligible director for whom no plan achievement rate is measurable.)
In regard to share-based remuneration during the term of office, annual points are awarded (1 point = 1 share), and at the time of retirement share-based remuneration is paid from the trust in correspondence with accumulated points. Plans call for all of the shares paid from the trust to be acquired on the stock market, and accordingly there will be no dilution of shares.

A director of non-residents in Japan is not eligible for performance-linked stock remuneration. As a substitute for the individual stock remuneration which would have been paid in accordance with the above formula as if such director were subject to performance-linked stock remuneration, the amount equivalent to the said invidual stock remuneration will be paid to such director, separately from the performance-linked bonus based on the above formula.

Formulas for Share price-linked Bonuses

By resolution of Board of Directors held on 2 February, 2018 and for the purpose of the incentive towards increasing the Company’s corporate value, ITOCHU introduced Market Capitalization-linked Bonuses structure which is linked to the increased amount of the Company’s market capitalization as compared to the last fiscal year. In order to further strengthen awareness of enhancing corporate value from a medium- to long-term perspective, the following changes were made, and the name was changed from market capitalization-linked bonus to share price-linked bonus:

- Changed a design based on the medium-term business plan (3 years) rather than on a single year
- Changed a linked indicator from market capitalization to stock price in order to better align with shareholders
- In order to secure fairness, included an index relative to the absolute amount

For Share price-linked bonuses, the bonus amount for individual director is calculated for each fiscal year based on the following specific calculation formula for individual payment amounts, and when the director retires or when, in the case of taking on the position of executive officer after retirement of the director, the executive officer retires, such amount will be paid.

Amount Paid to an Individual Director (Aggregate amount during the Medium-Term Management Plan)

The amount paid to an individual director = ((simple average of daily closing price in the final fiscal year of the Medium-Term Management Plan) – (simple average of daily closing price in the previous fiscal year of the first fiscal year of the Medium-Term Management plan)) × 1,300,000 × (total position points of each fiscal year during the Medium-Term Management Plan) / (108.8 points × 3 (years)) × Relative Stock Price Growth Rate

  • Relative Stock Price Growth Rate = (simple average of daily closing price in the final fiscal year of the Medium-Term Management Plan / simple average of daily closing price of the previous fiscal year of the first fiscal year of the Medium-Term Management Plan) / (simple average of daily TOPIX of the final fiscal year of the Medium-Term Management Plan / simple average of TOPIX in the previous fiscal year of the first fiscal year of the Medium-Term Management)
  • TOPIX= Tokyo Stock Price Index, the principal index consisting of all Japanese common stocks listed on the First Section of Tokyo Stock

The Position Points assigned to each position are same as those applied for performance-linked bonuses.
Share Price-linked bonuses together with performance-linked bonuses are paid to the eligible directors within the director bonuses limit of ¥2.0 billion.

Please see Corporate Governance Report (596KB)[PDF] for the formula applied to amount paid to individual director in each year.