Compensation for Directors and Audit & Supervisory Board Members

Alignment of Officer Compensation with Long-term Performance

Policies for Determining Compensation of Directors

The compensation system for directors (excluding outside directors) and corporate officers has been established for the purpose of contributing to the Group’s sustainable growth and the enhancement of its medium-to-long-term corporate value by practicing the NGK Group Philosophy and realizing the NGK Group Vision. We reassess whether the level and composition of compensation is appropriate in light of those objectives and revise it as appropriate. The Company also strives to ensure transparency and fairness in governance of compensation.
The compensation of directors (excluding outside directors) and corporate officers consists of the following three components: basic compensation, which is a fixed annual amount in accordance with their position; a performance-linked bonus that varies depending on business performance each fiscal year; and stock-related compensation. This system is designed to raise director sensitivity toward the Company’s stock price, share with shareholders not only the benefits of a rise in the stock price but also the risks associated with a fall in the stock price, and motivate directors and corporate officers to enhance corporate value over the medium-to-long-term through appropriate corporate management.
NGK only pays fixed annual compensation to outside directors and Audit & Supervisory Board members. We do not pay them performance-linked bonuses and stock-based compensation by granting restricted shares.
The relative proportions of variable compensation and fixed annual compensation are determined from the perspective of focusing on stability and improvement in performance over the medium and long term. Total variable compensation consists of a performance-linked bonus and the cash conversion value of restricted shares granted. It is set at an appropriate percentage of total compensation. The total amount of compensation, including basic compensation, is set according to the position and rank of the recipient. It is also taking into consideration the level of compensation according to the size of the company, which is based on data from a reliable external organization.
The Nomination and Compensation Advisory Committee consists of a majority of independent outside directors. At the request of the Board of Directors, the committee deliberates on the policies and procedures for determining compensation. The committee deliberates on and proposes the range of compensation for all directors and Audit & Supervisory Board members, basic compensation, and the basic amounts used as the basis for calculating performance-linked bonuses, and the number of restricted shares to grant (the level of monetary claims for payment as compensation for restricted shares granted) according to the position and rank of each individual director and corporate officer; and deliberates and proposes the amount of the performance-linked bonus for each individual director. The committee then reports its decisions on these matters to the Board of Directors.
The Board of Directors determines the amounts of compensation for directors and corporate officers after sufficient consideration of the recommendations received from the Nomination and Compensation Advisory Committee, as described above.

Composition of compensation

Performance-linked bonus calculation method (FY2022)

The following indicators are used in calculating the performance-linked bonus.

Overview of Restricted Shares

• Restriction period: The period extending from the date on which shares were granted as restricted share compensation for 2022 until the directors (excluding outside directors) and corporate officers resign from their positions as determined by the Board of Directors in advance.
• Conditions for release from restriction period: The restrictions on shares will be released when the restriction period has expired, provided that the individual granted the shares has continuously served in any of the positions determined by the Board of Directors in advance during the period extending from the date on which individual assumed the position until the immediately prior to the conclusion of the first annual Shareholders’ Meeting subsequently convened.
• Gratis acquisition of shares by NGK: NGK will acquire all of the shares granted without paying compensation when certain grounds specified in the allotment agreement apply, such as when the grantee has violated laws and regulations.

Amount of compensation for Directors and Audit & Supervisory Board Members

Compensation for Directors and Auditor & Supervisory Board Members (FY2021)

Officers receiving total compensation of ¥100 Million or More (FY2021)

Resigned on June 27, 2022

Average Employee Compensation and President Compensation

At NGK, the compensation for the President was 19.5 times that of the average employee compensation in FY2021.

(FY2021)

President compensation: 151,000,000 yen
Average employee compensation: 7,731,189 yen