Meetings of the Board of Directors and Corporate Officer Compensation

Results of FYE 2021 under the corporate governance system is as follows.

Meetings of Management Bodies in FYE 2021

 

FYE 2019

FYE 2020

FYE 2021

Board of Directors

17 times

15 times

12 times

Outside Director attendance at Board of Directors' meetings

100%

100%

100%

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

98%

96%

100%

Board of Audit & Supervisory Board Members

13 times

13 times

14 times

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

100%

100%

100%

Actual Corporate Officer Remuneration for FYE 2021

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

10
(4)

2,351
(76)

  • (1) Monthly remuneration ¥651 million
  • (2) Performance-linked bonuses ¥1,009 million
  • (3) Share price-linked bonuses ¥268 million
  • (4) Special benefits
    ¥355 million
  • (5) Stock remuneration ¥67 million
  • - ¥0.8 billion per year as total monthly remuneration
    (including ¥0.1 billion per year as a portion to outside directors)
  • - ¥2.0 billion per year as total bonuses paid to all directors (excluding outside directors)
    (Resolved at the General Meeting of Shareholders on June 21, 2019)
Audit & Supervisory Board Members
(Outside Audit & Supervisory Board Members)

6
(3)

148
(57)

  • (1) Monthly remuneration only
  • (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
(7)

2,498
(133)

   
  • Monthly remuneration is decided based on the standard amount by position and the level of contribution to ITOCHU Corporation, including its response to climate change, ESG, and the SDGs.
  • Following deliberation by the Governance and Remuneration Committee, at a meeting of the Board of Directors held on April 14, 2021, ITOCHU resolved to pay special benefits. These special benefits for FYE 2021 were paid within the limit of Director bonuses based on the minimization of earnings reductions caused by the COVID-19 pandemic, the achievement of the earnings goal in the “FYE 2021 Management Plan,” the significant improvement of corporate value, and the Company claiming the top position in the general trading company industry for this first time in terms of annual average stock price and average market capitalization.

Corporate Officer Remuneration System

ITOCHU's remuneration plan for Directors is designed to be an incentive to grow business performance.Variable remuneration is approximately 75% of overall remuneration (FYE 2021), which is extremely high, even when compared to other companies. The system clarifies management’s responsibility, with Director remuneration increasing as performance improves, and significantly decreasing if performance deteriorates. Furthermore, this remuneration plan, including the calculation method, has been previously disclosed publicly, making it highly transparent.


More specifically, the remuneration plan consists of (1) monthly remuneration, (2) performance-linked bonuses, (3) share price-linked bonuses, and (4) performance-linked stock remuneration, with performance-linked bonuses reflecting short-term performance and share price-linked bonuses and performance-linked stock remuneration reflecting the increase of corporate value in the medium to long term.


We have consolidated net profit as the linked indicator for the performance-linked bonus and performance-linked stock remuneration, which is a non-monetary remuneration. Consolidated net profit 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 believe that its importance as an indicator going forward is unshakeable. In addition, employee bonuses are also linked to consolidated net profit.

To align with our shareholders and create greater awareness of increasing corporate value, we have introduced share-price linked bonuses with ITOCHU's share price as the linked indicator. This bonus is an index linked to the increase in the average daily value of ITOCHU's stock price for each consecutive two fiscal years. To ensure fairness, the calculation scheme includes the relative evaluation between the growth rate of the average value of the ITOCHU's stock price and the growth rate of the average value of the Tokyo Stock Price Index (TOPIX) 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 Corporation, including addressing climate change, ESG and SDGs, 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 consolidated net profit, and individual amount is determined in relation to the position points for the Director, etc.
    *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 by adding the evaluation of the relative growth rate of ITOCHU's share price compared to Tokyo Stock Price Index (TOPIX) to the amount of increase of ITOCHU's share price for two consecutive fiscal years
    *Formula is described below
  • (4) Performance-linked stock remuneration
    (Variable(Medium- to Long-term))
  • Total amount is determined based on consolidated net profit, 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 2022, director bonuses for FYE 2022 will be paid in amounts calculated according to the methods described below, following the conclusion of the 98th 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 consolidated net profit for FYE 2022, for the portion up to ¥200.0 billion) × 0.35%
  B = (Of consolidated net profit for FYE 2022, for the portion more than ¥200.0 billion but up to ¥300.0 billion) x 0.525%
  C = (Of consolidated net profit for FYE 2022, 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
(resident in Japan)
Executive Vice President
(resident outside Japan)
Senior Managing Executive Officer Managing Executive Officer

10

7.5

5

4

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, 80% of the amount paid in cash is linked the plan achievement rate of the consolidated net profit of the assigned division/department*. 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, such Director is eligible for the Equivalent Amount of Individual stock remuneration. The Equivalent Amount of Individual stock remuneration is calculated in accordance with the above formula (except the points assigned to such Director being 15) as if such Director were subject to performance-linked stock remuneration, and the amount will be added or subtracted according to a certain performance achievement rate. The remuneration will be determined and paid separately from the performance-linked bonus based on formula above.

*Formula for 80% of the Amount Paid in cash to an Individual Director :
(Total base amount paid to all Directors as above x Position Point/Sum of Position points for all the eligible Directors) x 80% x the Rate (defined below) determined based on plan achievement rate of the consolidated net profit of the assigned division/department
-The Rate: 100% + (plan achievement rate of the consolidated net profit of the assigned division/department -100%) x 2 (if negative, it will be 0%)
-The plan achievement rate shall be 100% for the eligible director for whom no plan achievement rate is measurable.

Formulas for Share price-linked Bonuses

To align with our shareholders and create greater awareness of increasing corporate value, we have introduced share-price linked bonuses with ITOCHU's share price as the linked indicator. This bonus is an index linked to the increase in the average daily value of ITOCHU's stock price for each consecutive two fiscal years. To ensure fairness, the calculation scheme includes the relative evaluation between the growth rate of the average value of the ITOCHU's stock price and the growth rate of the average value of the Tokyo Stock Price Index (TOPIX) for each fiscal year.

Amount Paid to an Individual Director (Aggregate amount for FYE 2022 and FYE 2023)

The amount paid to an individual director = ((simple average of daily closing price from FYE 2022 to FYE 2023) – (simple average of daily closing price from FYE 2020 to FYE 2021)) × 1,300,000 × (total position points of FYE 2022 and FYE 2023) / (108.8 points × 2 (years)) × Relative Stock Price Growth Rate

  • Relative Stock Price Growth Rate = (simple average of daily closing price from FYE 2022 to FYE 2023 / simple average of daily closing price from FYE 2020 to FYE 2021) / (simple average of daily TOPIX from FYE 2022 to FYE 2023 / simple average of TOPIX from FYE 2020 to FYE 2021)
  • TOPIX= Tokyo Stock Price Index, the principal index consisting of all Japanese common stocks listed on the First Section of Tokyo Stock

Except for the point for Executive Vice President (resident outside Japan) which is 5, 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 (872KB)[PDF] for the formula applied to amount paid to individual director in each year.