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Governance

Directors’ and Audit & Supervisory Board Members’ Remuneration, etc.

Directors’ and Audit & Supervisory Board Members’ Remuneration

In line with the Basic Policy on Corporate Governance, MC has established a remuneration package for Directors and Audit & Supervisory Board Members to ensure a sustainable increase in corporate value, and to ensure that their respective roles are fulfilled properly according to business execution and management supervision functions. The basic approaches behind the package are as follows.

Basic Approach to the Package
Remuneration levels
  • Levels of remuneration are set based on the functions and roles of the Directors and Audit & Supervisory Board Members, the MC’s performance level and others.
  • Based on performance targets, MC makes remuneration levels globally competitive to foster a desire for growth among human resources who will be responsible for the next generation of management and to improve organizational vitality.
Remuneration composition
  • To strengthen the performance-linked component of remuneration for Executive Directors (Directors for business execution, excluding Chairman of the Board and Outside Directors, hereinafter the same), remuneration shall not only be based on the relevant single-year’s business results, but also be in line with medium- to long-term corporate value. Remuneration composition shall be commensurate with the enhancement of medium- to long-term corporate value based on a new stock-based component (with market conditions) that strengthens the link with shareholder value in addition to cash rewards. From this perspective, consolidated net income (single year and medium to long term), the share price and share growth rates (medium to long term) are adopted as key performance indicators.
  • The assurance of independence is necessary for the Chairman of the Board and Outside Directors, who undertake functions of management oversight, and Audit & Supervisory Board Members, who undertake audits, in order for them to appropriately perform their respective roles. For this reason, MC will pay them only fixed monthly remuneration, and not remuneration that is linked with business results.
Governance of remuneration
  • Regarding the policy for determining both the remuneration for Directors and Audit & Supervisory Board Members and the appropriateness of remuneration levels and composition, the Governance, Nomination and Compensation Committee, which comprises a majority of Outside Directors, shall engage in discussion of and monitor the status of the remuneration package on an ongoing basis.

Reference: Governance, Nomination and Compensation Committee

MC SIM事務局, 人事部 人事組織チーム(PJ-P)

The Process for Setting Remuneration for Directors and Audit & Supervisory Board Members

The Governance, Nomination and Compensation Committee deliberates and the Board of Directors decides the policy for setting Directors’ remuneration and the remuneration amount (actual payment amount).

The total remuneration amount (actual payment amount) and individual payment amounts for Directors, excluding individual performance bonuses, are determined by a resolution of the Board of Directors within the upper limits for each type of remuneration decided by resolution of the Ordinary General Meeting of Shareholders held on June 21, 2019. Base salary and annual deferral for retirement remuneration, forms of fixed remuneration, are paid in amounts determined by the Board of Directors. As for variable remuneration, payments of performance-linked bonuses (short term), performance-linked bonuses (medium to long term) and stock-based remuneration linked to medium- to long-term share performance are determined, while reflecting key performance indicators (KPIs), based on a formula set by the Board of Directors following deliberation by the Governance, Nomination and Compensation Committee.

The payment amounts of individual performance bonuses paid to Directors based on their individual performance assessment, including qualitative assessment, shall be determined and paid on an individual basis, reflecting the President’s yearly performance assessment of each Director for the relevant fiscal year (the Board of Directors delegates authority to the President for deciding the individual payment amounts). Performance evaluations of Executive Directors comprehensively take into account their contributions to the organizations and businesses they oversee; their contributions to management of the entire Company, Corporate Staff Section, Business Groups and offices; the achievement of triple-value growth; and the state of sustainability initiatives from an ESG perspective.

The annual assessment on the President’s performance is decided by the President’s Performance Evaluation Committee, which is delegated this authority by the Board of Directors (and is a subcommittee of the Governance, Nomination and Compensation COmmittee.) The subcommittee is comprised of the Chairman of the Board, who also serves as the chair of the Governance, Nomination and Compensation Committee, and Outside Directors sitting on the committee.
Results of the performance assessment are reported to the Board of Directors and the Governance, Nomination and Compensation Committee to ensure objectivity, fairness, and transparency.

Based on the policy for determining remuneration packages (including methods for calculating performance-linked bonuses) that was approved at the ordinary meeting of the Board of Directors held on May 17, 2019, and the extra ordinary meeting of the Board of Directors held on June 21, 2019, each year, the Governance, Nomination and Compensation Committee deliberates and the Board of Directors makes a resolution determining that the total amount of director remuneration packages and methods for deciding payments to individual directors are consistent with said policy for determining remuneration packages.
Each year, the Governance, Nomination and Compensation Committee deliberates and evaluates the fairness of remuneration levels and composition based on compensation data provided by an external consulting firm (Willis Towers Watson). 

Total and individual amounts of remuneration for Audit & Supervisory Board Members are determined within the upper limits decided by resolution of the Ordinary General Meeting of Shareholders, held on June 21, 2019 subject to discussions by the Audit & Supervisory Board Members.

Remuneration Package for Directors and Audit & Supervisory Board Members (from Fiscal Year Ending March 31, 2020)

Note:
1) to 5) in the table indicate the numbers of limits on remuneration that correspond to each remuneration item.
Remuneration limits for Directors and Audit & Supervisory Board members are approved at the 2019 Ordinary General Meeting of Shareholders held on June 21, 2019.
The number of directors to whom the above amounts of director remuneration (excluding stock-based remuneration linked to medium- to long-term share performance) applied was 13 (including 5 Outside Directors); the number of directors to whom the above amount of stock-based remuneration linked to medium- to long-term share performance applied was 7; and the number of Audit & Supervisory Board Members to whom the above amount of Audit & Supervisory Board Member remuneration applied was 5 (including 3 outside members).

  1. 1) The total annual amount for base salary, annual deferral for retirement remuneration and individual performance bonuses shall be up to ¥1.5 billion per year (For the base salary paid to Outside Directors, up to ¥180 million per year)
  2. 2) The annual amount for performance-linked bonus (short term) shall be up to 0.06% of consolidated net income (attributable to owners of MC) for the relevant fiscal year.
  3. 3) The annual amount for performance-linked bonus (medium to long term) shall be up to 0.06% of the average consolidated net income (attributable to owners of MC) over the relevant fiscal year and subsequent two fiscal years.
  4. 4) The annual amount for stock-based remuneration linked to medium- to long-term share performances shall be no more than ¥600 million per year (with regard to number of shares, limited to 400,000 shares per year). 
  5. 5) The annual amount for base salary paid to Audit & Supervisory Board Members shall be up to ¥250 million per year.
MC SIM事務局, 人事部 人事組織チーム(PJ-P)

Calculation Method for Performance-Linked Remuneration

● Performance-linked bonus (fiscal year ending March 31, 2022)
1. Performance-linked bonus (short term)
Details of the calculation formulas are as follows.
(1)Upper limit on total payment
The upper limit will be the lower of i) ¥600 million or ii) the maximum total of individual payment amounts prescribed in (2) below.
(2)Individual payments
The specific calculation formula for each position is as follows (rounded to the nearest ¥1,000). However, the payment amount will be ¥0 if the consolidated net income falls below the consolidated capital cost for the fiscal year ending March 31, 2022 (¥440 billion).

President and CEO:
(consolidated net income [attributable to owners of MC] in the fiscal year ending March 31, 2022 – ¥440 billion) × 0.025% + 0.35 (¥100 million)

Executive Vice President:
(consolidated net income [attributable to owners of MC] in the fiscal year ending March 31, 2022 – ¥440 billion) × 0.0075% + 0.105 (¥100 million)

Given the composition of Directors as of June 25, 2021, the maximum payment amount and its total for each position as Executive Officers of eligible Executive Directors are as follows.
Position Maximum payment amount Number of persons Total
President and CEO ¥175 million 1 ¥175 million
Executive Vice President ¥52.5 million 4 ¥210 million
Total 5 ¥385 million
2. Performance-linked bonus (medium to long-term)
The payment amount will be calculated by replacing the above performance-linked bonus (short term) calculation formula with the formula below. Upper limits on total payment amounts and the maximum payment amount with its total for each Executive Officer position as of eligible Executive Directors, given the composition of Directors as of June 25, 2021, are identical to those for performance- linked bonuses (short term).
  • “Consolidated net income (attributable to owners of MC) in the fiscal year ending March 31, 2022”
    →Replace with “the average of consolidated net income (attributable to owners of MC) for the three fiscal years ending March 31, 2022, March 31, 2023, and March 31, 2024.”
  • “The payment amount will be ¥0 if the consolidated net income falls below the consolidated capital cost for the fiscal year ending March 31, 2022 (¥440 billion).”
    → Replace with “the payment amount will be ¥0 if the average of consolidated net income falls below the average consolidated capital cost for the three fiscal years ending March 31, 2022, March 31, 2023, and March 31, 2024.”
● Stock-based remuneration linked to medium- to longterm share performances
  • (1)Upper limit on total number of shares
    The upper limit will be 400,000 shares of common stock (4,000 units of stock acquisition rights) per fiscal year. The number of shares to be issued per stock acquisition right is 100.
  • (2)Conditions for exercise of stock acquisition rights
  • 1) A stock acquisition rights holder may exercise all or a portion of their stock acquisition rights during the exercisable period, in accordance with the stock growth rate in MC’s shares as a market condition (see “Market conditions” below).
  • 2) A stock acquisition rights holder may not exercise the stock acquisition rights after 10 years from the day after losing the position as either Director or Executive Officer of MC.

Market conditions

  • a) The number of stock acquisition rights that can be exercised by each position will be determined by the following formula.

    ・Initial number of allocated stock acquisition rights for the position (based on position as of April 1, 2021) × vesting ratio

  • b) Vesting ratio
    The vesting ratio for stock acquisition rights varies, as shown below, depending on the growth rate in MC’s shares (see (c) below) over the three-year period from the allocation date.

    ・Growth rate of at least 125% in MC’s shares: 100%

    ・Growth rate between 75% and 125% in MC’s shares: 40% + (MC’s shares growth rate [%] – 75 [%]) × 1.2 (amounts less than 1% rounded to the nearest whole number)

    ・Growth rate less than 75% in MC’s shares: 40%

  • c) Growth rate in MC’s shares

    Growth rate in MC’s shares = MC’s TSR (three years)/TOPIX growth rate (three years)

    MC’s TSR = (A + B)/C

    A: Average closing price for shares of MC’s common stock on the Tokyo Stock Exchange on each trading day during the three months preceding the month when the exercise period began (excluding days on which no transactions were made)

    B: Total amount of dividends per share of MC’s common stock from the date of allocation of stock acquisition rights to the date when the exercise period began

    C: Average closing price for shares of MC’s common stock on the Tokyo Stock Exchange on each trading day during the three months preceding the month when stock acquisition rights are allocated (excluding days on which no transactions were made)

    TOPIX growth rate = D/E

    D: Average closing price for TOPIX on the Tokyo Stock Exchange on each trading day during the three months preceding the month when the exercise period began (excluding days on which no transactions were made)

    E: Average closing price for TOPIX on the Tokyo Stock Exchange on each trading day during the three months preceding the month when stock acquisition rights are allocated (excluding days on which no transactions were made)

Conceptual Image of Payment Mix for Remuneration of Executive Directors

Note: The proportions shown above are based on certain values for consolidated earnings and the share price, and are for illustrative purposes only. The actual mix will vary depending on changes in Mitsubishi Corporation’s consolidated financial results and stock market conditions.

Deliberation Process Regarding the Revision of Remuneration Package for Executive Directors

MC resolved to revise the remuneration package for Executive Directors after continual deliberations by the Board of Directors and the Governance, Nomination and Compensation Committee. The specific review process is as follows.

October 2018 Governance, Nomination and Compensation Committee
  • Remuneration-related issues (remuneration levels and composition, proportion of fixed and variable components etc.) were reviewed.
  • The basic approach to revisions of remuneration package was deliberated.
November 2018 Board of Directors’ meeting
  • The results of the Governance, Nomination and Compensation Committee deliberations were reported.
February 2019 Meetings of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members
* MC holds the meeting of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members approximately once every quarter to provide them opportunities for free discussion outside of Board of Directors’ meetings.
  • The basic approach to revisions of remuneration package was confirmed.
  • Revised remuneration levels and composition, and remuneration governance-related issues were deliberated.
March 2019 Governance, Nomination and Compensation Committee
  • The specific remuneration levels and composition were confirmed.
  • Specific proposals for breakdown of composition and calculation formulae (including related conditions) for variable remuneration were deliberated.
  • Proposed disclosures relating to the revised remuneration package were deliberated.
April 2019 Board of Directors’ Meeting
  • The results of the Governance, Nomination and Compensation Committee deliberations were reported.
May 2019 Board of Directors’ Meeting
  • The proposed revisions to remuneration package were approved.
June 2019 Ordinary General Meeting of Shareholders
  • Based on the revisions to remuneration package, resolutions were approved at the Ordinary General Meeting of Shareholders regarding revisions to the remuneration limits for Directors and introduction of stock-based remuneration linked to medium- to long-term share performances.
MC SIM事務局, 人事部 人事組織チーム(PJ-P)

Directors’ and Audit & Supervisory Board Members’ Remuneration: Total Amounts and Number of Eligible Persons in the Fiscal

Total remuneration amounts for Directors and Audit & Supervisory Board Members and numbers of eligible people are as follows.

(Millions of yen)
Title Total Remuneration Base salary Annual deferral for retirement remuneration Individual performance bonus Performance-linked bonus (short term) Performance-linked bonus (medium to long term) Stock-based remuneration linked to medium- to long-term share performances
Eligible Persons Total Eligible Persons Total Eligible Persons Total Eligible Persons Total Eligible Persons Total Eligible Persons Total
In-house Directors 1,265 8 735 6 80 5 140 5 0 5 0 6 308
Outside Directors 149 6 149 - - - - - - - - - -
(Figures less than one million yen are rounded down)
Title Total
Remuneration
Base salary Annual deferral for retirement remuneration Individual performance bonus Performance-linked bonus (short term) Performance-linked bonus (medium to long term) Stock-based remuneration linked to medium- to long-term share performances
Eligible Persons Total Eligible Persons Total Eligible Persons Total Eligible Persons Total Eligible Persons Total Eligible Persons Total
In-house Audit & Supervisory Board Members 174 2 174 - - - - - - - - - -
Outside Audit & Supervisory Board Members 63 5 63 - - - - - - - - - -

Notes:

  1. 1. The above figures include 3 Directors and 2 Audit & Supervisory Board Members who retired during the fiscal year ended March 31, 2021. Furthermore, there were 11 Directors (including 5 Outside Directors) and 5 Audit & Supervisory Board Members (including 3 Outside Audit & Supervisory Board Members) as of March 31, 2021.
  2. 2. The above amounts of individual performance bonuses represent the amounts provided for in the fiscal year ended March 31, 2021.
  3. 3. The above amounts for Performance-linked Bonus (Short term) is determined based on consolidated net income of 172.6 billion yen for the fiscal year ended March 31, 2021, based on a formula confirmed in advance by the Governance, Nomination and Compensation Committee and resolved by the Board of Directors.
  4. 4. The above amounts for Performance-linked Bonus (Medium to long-term) is paid on an average of the consolidated net income for the fiscal years ended March 31, 2020 to 2022 and the fiscal years ended March 31, 2021 to 2023, but as this cannot be decided currently, the amount shown is as of the fiscal year ended March 31, 2020. The actual amount paid will be based on a formula confirmed in advance by the Governance, Nomination and Compensation Committee and resolved by the Board of Directors, and the amount for the fiscal year ended March 31, 2020/2021 disclosed in the Fiscal 2021/2022 Business Report.
  5. 5. The above amounts for Stock-Based Remuneration linked to Medium- and Long-term Share Performances (stock options with market conditions) is the amount recorded as an expense granted for the fiscal year ended March 31, 2021. In regard to Stock-Based Remuneration linked to Medium- and Long-term Share Performances, the number of exercisable shares will be determined according to the growth rate in MC's shares over three years from being granted, based on a formula confirmed in advance by the Governance, Nomination and Compensation Committee and resolved by the Board of Directors.
  6. 6. In addition to the above, Mitsubishi Corporation paid executive pensions to retired Directors and Audit & Supervisory Board Members. The amounts paid in the fiscal year ended March 31, 2021 were as follows:
    The retirement bonus system, including executive pensions for Directors and Audit & Supervisory Board Members, was abolished at the close of the 2007 Ordinary General Meeting of Shareholders.
    Mitsubishi Corporation paid ¥107 million to 63 Directors (Outside Directors were ineligible for payment).
    Mitsubishi Corporation paid ¥4 million to 7 Audit & Supervisory Board Members (Outside Audit & Supervisory Board Members were ineligible for payment).
Names, Titles, Total Amounts of Consolidated Remuneration and Amount by Type of Remuneration for Each Director and Audit & Supervisory Board Member

Remuneration amounts for Directors and Audit & Supervisory Board Members whose total remuneration was ¥100 million or more are shown in the table below.

(Figures less than one million yen are rounded down)
Name Title Total consolidated remuneration
(Millions of yen)
Amount by Type of Remuneration (Millions of yen)
Base
salary
Annual deferral for retirement remuneration*1 Individual performance bonus Performance-linked bonus (short term) Performance-linked bonus (medium to long term)*2 Stock-based remuneration linked to medium- to long-term share performances*3
Ken Kobayashi Director 386 386 0 0 0 0 0
Takehiko Kakiuchi Director 365 126 39 57 0 0 142
Kazuyuki Masu Director 114 42 9 22 0 0 39
Shinya Yoshida Director 118 49 9 20 0 0 39
Akira Murakoshi Director 114 42 9 22 0 0 39
Masakazu Sakakida Director 114 42 9 22 0 0 39
  1. *1 The amount of annual deferral for retirement remuneration is accumulated each year as a fixed amount of remuneration for the exercise of duties by each Director over one year. It is paid to the Director after his or her retirement.
  2. *2 The amount of Performance-linked Bonus (Medium to long-term) is paid on an average of the consolidated net income for the fiscal years ended March 31, 2020 to 2022 and the fiscal years ended March 31, 2021 to 2023, but as this cannot be decided currently, the amount shown is as of the fiscal year ended March 31, 2021, and differs from the actual paid amount. The actual amount paid will be based on a formula confirmed in advance by the Governance, Nomination and Compensation Committee and resolved by the Board of Directors, and the amount for the fiscal year ended March 31, 2021/2022 disclosed in the Fiscal 2021/2022 Business Report.
  3. *3 The amount of Stock-Based Remuneration linked to Medium- and Long-term Share Performances is the amount recorded as an expense in the accounting treatment for that fiscal year and differs from the actual amount received from the exercise or sale of stock options. In regard to Stock-Based Remuneration linked to Medium- and Long-term Share Performances, the number of exercisable shares will be determined according to the growth rate in MC's shares over three years from being granted, based on a formula confirmed in advance by the Governance, Nomination and Compensation Committee and resolved by the Board of Directors. Under the conditions for exercise of stock acquisition rights, the starting date of the exercise period for stock acquisition rights had not arrived as of March 2021.
  4. *4 None of the above Directors receive remuneration as a Director or an Audit & Supervisory Board Member of a consolidated subsidiary.
Significant Employee Salaries of Directors and Audit & Supervisory Board Members Serving Concurrently as Employees

None of MC’s Directors and Audit & Supervisory Board Members serve concurrently as employees.

MC SIM事務局, 人事部 人事組織チーム(PJ-P)