Remuneration for Directors and Audit & Supervisory Board Members

Alignment of Corporate Officer Remuneration with Long-term Performance

Policies for Determining Remuneration of Directors

The remuneration 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. NGK reviews the level and composition, etc. of remuneration, etc. as necessary to determine whether they are appropriate in view of this purpose. NGK also endeavors to ensure the transparency and fairness of remuneration governance.

The remuneration of directors (excluding outside directors) and corporate officers consists of the following three components: basic remuneration, 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 remuneration, which is designed to raise 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 does not pay any performance-linked bonus or stock compensation-type stock options to outside directors and Audit & Supervisory Board members and only pays fixed annual basic remuneration from a perspective that emphasizes independence because they assume roles in supervising and auditing management.

NGK emphasizes the stability and enhancement of medium-to-long-term business performance, and has designed the variable part of remuneration so that the sum of the performance-linked bonus amount and the conversion value of stock compensation-type stock options accounts for an appropriate proportion of the total amount of remuneration, etc. The total amount of remuneration, including basic remuneration, is based on data from a reliable external organization, and is set according to the position and rank of the recipient, while taking into consideration the level of remuneration according to the size of the company.

The Nomination and Compensation Advisory Committee is composed 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; proposes the range of remuneration for all directors and Audit & Supervisory Board members; and proposes the amounts and details of individual remuneration for each director and corporate officer. The committee then reports its decisions on these matters to the Board of Directors.

Composition of remuneration

Performance-linked bonus calculation method (Fiscal 2021)

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

NGK version ROIC calculated based on operating income and business assets (sales receivables, inventories, and fixed assets)

Overview of stock options

• Exercise price: 1 yen/share
• Number of stock options granted according to position
• Condition for exercise of rights: Rights are vested for five years, in principle, beginning on the day when one year has elapsed after the recipient’s retirement as an officer of NGK.

Amount of Remuneration for Directors and Audit & Supervisory Board Members

Remuneration of Directors and Audit & Supervisory Board Members (Fiscal 2020)

Director category	Total remuneration (million yen)	Total remuneration by type (million yen)			Applicable directors (people)
		Fixed remuneration	Performance-linked remuneration	Stock options
Directors (excluding Outside Directors)	591	425	123	42	11
Outside Directors	39	39	‒	‒	3
Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members)	59	59	‒	‒	2
Outside Audit & Supervisory Board Members	26	26	‒	‒	2

Directors Receiving Total Remuneration of ¥100 Million or More (Fiscal 2020)

Name	Director category	Company category	Total remuneration by type (million yen)			Total remuneration (million yen)
			Fixed remuneration	Performance-linked remuneration	Stock options
Taku Oshima	Director	Submitting companies	68	26	7	103

Average Employee Remuneration and President Remuneration

At NGK, the remuneration for the President was 13.5 times that of the average employee remuneration.

(Fiscal 2020)

President Remuneration 103,000,000 yen
Average Employee Remuneration 7,635,830 yen