Governance

Remuneration for Directors, etc.

Remuneration for Directors, etc.

Remuneration for Directors, etc.

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, MC’s performance level and other factors.
  • Based on performance targets, MC sets globally competitive remuneration levels to encourage a desire for growth among human resources who will be responsible for the next generation of management and to improve organizational vitality.

Remuneration Composition

  • Remuneration for Executive Directors (excluding Directors who are Audit & Supervisory Committee Members) is designed for greater focus on increasing medium- and long-term corporate value by more closely linking remuneration to medium- to long-term corporate value and fiscal year earnings, as well as the creation of stock remuneration with stronger ties to shareholder value, in addition to cash compensation. From this perspective, profit (single year and medium to long term), sustainability factors (medium to long term) , the share price and share growth rates (medium to long term) are adopted as key performance indicators.
  • To ensure the independence of the Chairman of the Board and Independent Directors (excluding Directors who are Audit & Supervisory Committee Memebers), who undertake functions of management oversight, and Directors who are Audit & Supervisory Committee Memberes , who undertake audits, MC only pays them fixed monthly remuneration.

Governance of Remuneration

  • TheCompensation Committee , where a majority of the members are Independent Directors and which is chaired by an Independent Director,  continuously deliberates and monitors methods for deciding remuneration packages, the fairness of remuneration levels and compositions (including components of remuneration subject to clawback policy),*To enhance the management from the longer-term perspective, MC has adopted a clawback policy, applicable to the individual performance-linked remuneration, performance-linked bonuses (short term) and performance-linked bonuses (medium to long term) of Executive Directors. In addition, non-payment or reduction of the amount is possible in the event of serious violation of a delegation agreement etc, regarding annual deferral for retirement remuneration.* and the status of implementation.
Reference:
Compensation Committee

The Process for Setting Remuneration for Directors

The 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-linked remuneration, 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, 2024. 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, based on a formula set by the Board of Directors following deliberation by theCompensation Committee.

MC has adopted a clawback policy*In the event that an executive officer causes any loss or damage to the company from willful misconduct or negligence, a serious violation of a delegation agreement, or a serious accounting error/ex-post revision of a financial report due to misconduct resolved by the Board of Directors, non-payment or reduction of the amount/reclaiming of the paid amount is possible by resolution of the Board of Directors. The Compensation Committee continuously deliberates and monitors the appropriateness of remuneration compositions, including remuneration items which are subject to the clawback policy.*, applicable to the individual performance-linked remuneration, performance-linked bonuses (short term) and performance-linked bonuses (medium to long term) of Executive Directors, revising the regulations for executive officers by resolution at the Board of Directors’ meeting held on February 18, 2022.

The payment amounts of individual performance-linked remuneration paid to Directors based on their individual performance assessment, including qualitative assessment, are determined and paid on an individual basis, reflecting the President’s yearly assesment of performance in both financial and non-financial terms of each Director for the relevant fiscal year (it is appropriate that yearly assessment is conducted by the President who is the Chief Executive Offier of the Company and therefore 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 the management of the entire Company, Corporate Staff Section, Business Groups and offices; and the initiatives related to value creation that leads to sustainability.

The annual assessment on the President’s performance is decided by the Compensation Committee (in addition to four members of the Compensation Committee, all Independent Directors (including Independent Audit and Supervisory Committee Members) participate in deliberations and decisions) .
Results of the performance assessment are reported to the Board of Directors and the 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 extraordinary meeting of the Board of Directors held on June 21, 2024, each year, the 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 Compensation Committee deliberates and monitors the fairness of the remuneration levels and compositions (including remuneration items which are subject to the clawback policy) as well as the operational status of remuneration systems. This is done with the reference to data on remuneration levels and composition ratios provided by an external consulting firm (Willis Towers Watson).

To ensure the independence of the Chairman of the Board and Independent Directors (excluding Direcotrs who are Audit & Supervisory Committee Members), who undertake functions of management oversight, and Audit & Supervisory Committee Members, who undertake audits and functions of management oversight, MC only pays them fixed monthly remuneration.

Total and individual amounts of remuneration paid to Audit & Supervisory Committee  Members are determined following deliberations by the Audit & Supervisory Committee  within the scope of remuneration for Audit & Supervisory Committee  Members approved at the Ordinary General Meeting of Shareholders, held on June 21, 2024.

Remuneration Package for Directors (excluding Directors who are Audit & Supervisory Committee Members) and Audit & Supervisory Committee Members (from FY2024)

Remuneration Package for Directors and Audit & Supervisory Board Members (from FY2024)

Note:
1) to 5) in the table indicate the number of limits on remuneration that correspond to each remuneration item.
Remuneration limits for Directors (excluding Direcotrs who are Audit & Supervisory Committee Members) and Audit & Supervisory Committee Members are approved at the 2024 Ordinary General Meeting of Shareholders for FY2023 held on June 21, 2024, as described in 1) to 4) and 5) below.

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 10 (including 4 Independent Directors); the number of directors to whom the above amount of stock-based remuneration linked to medium- to long-term share performance applied was 5; and the number of Audit & Supervisory Committee Members to whom the above amount of Audit & Supervisory Committee Member remuneration applied was 5 (including 3 Independent members).

  1. 1) The total annual amount for base salary, annual deferral for retirement remuneration and individual performance-linked remuneration shall be up to ¥1.5 billion per year (For the base salary paid to Independent Directors, up to ¥250 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 three 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 1,200,000 shares per year).
  5. 5) The annual amount for base salary paid to Directors who are Audit & Supervisory Committee Members shall be up to ¥400 million per year.

Calculation Method for Performance-Linked Remuneration

● Performance-linked bonus (FY2024)

1. Performance-linked bonus (short term)

Details of the calculation formulas are as follows.

  1. (1) Upper limit on total payment

    The upper limit will be the lower of i) ¥648 million or ii) the maximum total of individual payment amounts prescribed in (2) below.

  2. (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 profit falls below the profit threshold resolved ahead of time by the Board of Directors based on the consolidated capital cost (¥680billion).

    President and CEO:
    (profit in FY2024 – ¥520 billion) × 0.025% + 0.35 (¥100 million)

    Senior Executive Vice President:
    (profit in FY2024 – ¥520 billion) × 0.01% + 0.14 (¥100 million)

    Executive Vice President:
    (profit in FY2024 – ¥520 billion) × 0.0075% + 0.105 (¥100 million)

Please check the link below for data on the maximum payment amount and its total for each position as Executive Officers of eligible Executive Directors.

Reference:
ESG Data
2. Performance-linked bonus (medium to long-term)

The payment amount will be calculated as follows.
(Payment amount replacing the above performance-linked bonus (short term) calculation formula with the formula prescribed below) × (Results of evaluations initiatives related to sustainability factors*Sustainablity factors over three fiscal years of the performance period in both quantative and qualitative terms evaluated at a newly established subcommittee of the Compensation Committee (the members of the committee are the Chairman of the Board and all Independent Directors (including Directors who are Audit & Supervisroy Committee Members), to whom this form of remuneration does not apply, and the committee is chaired by an Independent Director.)*) [80%~120%]

  • “Profit in FY2024”
    →Replace with “the average of the profit for the three fiscal years, FY2024, FY2025, and FY2026.”
  • “The payment amount will be ¥0 if the profit falls below the profit threshold resolved ahead of time by the Board of Directors based on the consolidated capital cost (¥680billion).”
    → Replace with “the payment amount will be ¥0 if the average of profit falls below the average profit threshold resolved ahead of time by the Board of Directors based on the consolidated capital cost for the three fiscal years, FY2024, FY2025, and FY2026.”

The upper limit will be the lower of i) ¥648 million or ii) the maximum total of individual payment amounts prescribed below.

Please check the link below for data on the maximum payment amount and its total for each position as Executive Officers of eligible Executive Directors. 

Reference:
ESG Data

● Stock-based remuneration linked to medium- to longterm share performances

  1. (1)Upper limit on total number of shares
    The upper limit will be 1,200,000 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 300.

  2. (2)Conditions for exercise of stock acquisition rights
    1. 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. 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

  1. 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, 2024) × vesting ratio

  2. 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%

  3. 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

    1. 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)
    2. 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
    3. 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)
    4. TOPIX growth rate = D/E

    5. 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)
    6. 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

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.

Guideline for Share Ownership (Standard)

MC sets the guideline for share ownership. The basic policy of the guideline is that Executive Directors and Executive Officers are obliged to hold any shares including those acquired through the exercise of stock options while in office. Sales of such shares are restricted until their aggregate market value exceeds approximately 300% (500% for President and CEO) of the base salary.

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.

February 2019 Meetings of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members

  • 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.

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.

July and October 2022 Governance, Nomination and Compensation Committee

  • The basic approach to add sustainability factors to remuneration package was deliberated.

March 2023 Governance, Nomination and Compensation Committee

  • Proposed revisions to a part of remuneration package (Sustainability factors to performance-linked bonuses (medium to long term), Revision of a formula for performance-linked bonuses (short term/medium to long term), and others) were deliberated.

May 2023 Board of Directors’ Meeting

  • Proposed revisions to a part of remuneration package (Sustainability factors to performance-linked bonuses (medium to long term), Revision of a formula for performance-linked bonuses (short term/medium to long term), and others) were approved .

June 2023 Ordinary General Meeting of Shareholders

  • Based on the revisions to a part of remuneration package, the resolution was approved at the Ordinary General Meeting of Shareholders.

February 2024 Governance, Nomination and Compensation Committee

  • The amount of remuneration for Directors (excluding Directors who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members in response to the transition into a Company with an Audit & Supervisory Committee were deliberated.

March 2024 Board of Directors’ Meeting

  • The amount of remuneration for Directors (excluding Directors who are Audit & Supervisory Committee Members) and Directors who are Audit & Supervisory Committee Members in response to the transition into a Company with an Audit & Supervisory Committee were approved.

June 2024 Board of Directors’ Meeting

  • The policy for determining remuneration packages in this fiscal year was approved.

 

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

Please check the link below for data on Directors’ and Audit & Supervisory Board Members’ Rmuneration: Total Amounts and Number of Eligible Persons in the Fiscal. 

Reference:
ESG Data

Names, Titles, Total Amounts of Consolidated Remuneration and Amount by Type of Remuneration for Each Director and Audit & Supervisory Board Member

Please check the link below for data on Names, Titles, Total Amounts of Consolidated Remuneration and Amount by Type of Remuneration for Each Director and Audit & Supervisory Board Member. 

Reference:
ESG Data

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.

Employee Salaries

MC has a performance-linked bonus system for non-executive employees, including some fixed-term contract employees.

MC SIM事務局, 人事部 (PJ)