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Remuneration for Directors and Audit & Supervisory Board Members (KANSAYAKU)

For the purpose of continuously improving corporate value and strengthening its competitiveness, NEC's basic policy of the remuneration for Directors and Audit & Supervisory Board Members (KANSAYAKU) ("A&SBMs") is to set the level and system appropriate for a global company which enables NEC to secure excellent human resources and serves as an incentive to improve performance of the NEC Group.

Remuneration System

  1. Remuneration for Directors
    Remuneration for Directors consists of fixed monthly remunerations and performance-linked bonuses as short term incentive, and performance-linked stock compensation as mid- and long-term incentive.

    The fixed monthly remunerations
    The fixed monthly remunerations are determined according to the positions of Directors and the distinction of Inside Director and Outside Director, to the extent of the maximum amount approved at the General Meeting of Shareholders.

    The bonuses
    The bonuses are calculated by, adding to the standard amount determined for each positions of Directors, evaluation, under certain rules, of the contribution by Director to the business results during previous fiscal year. No bonuses are paid to Outside Directors from the viewpoint of securing their independence from NEC because NEC expects that Outside Directors play a leading role in supervision over business execution.

    The stock compensation
    The Company shares will be granted after the expiry of period of Mid-term Management Plan in accordance with the Directors' titles and the level of the achievement of Mid-term Management Plan.
    • (*)
      1. No Company shares are granted to Outside Directors from the viewpoint of securing their independence from NEC because NEC expects that Outside Directors play a leading role in supervision over business execution.
      2. As for a certain specific portion of Company shares, NEC will sell the shares on the stock market and pay cash instead of the shares in consideration of tax payment at the time of granting shares.
  2. Remuneration for A&SBMs
    Remunerations for A&SBMs are only fixed monthly remunerations and do not include bonuses linked to the business results because the responsibility of A&SBMs is to audit execution of Director's duty.
    The fixed monthly remunerations are determined depending on whether he or she is a full-time A&SBM or not, to the extent of the maximum amount approved at the General Meeting of Shareholders.

Process of Determination

  1. Remuneration for Directors
    Remuneration for Directors is determined by the resolution of the Board of Directors, based on the results of their deliberation from an objective viewpoint by the Nomination and Compensation Committee, the majority of the members of which are the Outside Directors (one of whom is the chairperson).

  2. Remuneration for A&SBMs
    Remuneration for A&SBMs is determined through discussions between A&SBMs.

Links between Remuneration and NEC Performance

The bonuses
Directors' Bonuses are calculated according to the certain indexes (Revenue, Operating profit and others) that NEC considers are important regarding the consolidated business results of the NEC Group during previous fiscal year.

The stock compensation
The stock compensation is calculated using the following formula.

<Calculation formula>
"Number of granting shares based on the applicable Directors' titles" (*1) x "Performance-based allotment rate" (*2)

  • *1:
    "basic compensation" x "multiplying factors for titles of the applicable Directors (#1)" /
    "average value of closing price of Company shares on the Tokyo Stock Exchange in the fiscal year immediately preceding the evaluation period"
    • (#1)
      multiplying factors for titles of the applicable Directors
      - Chairman of the Board, President, Senior Executive Vice President and Member of the Board 25%
      - Executive Vice President and Member of the Board 20%
      - Senior Vice President and Member of the Board 15%
  • *2:
    the level of the achievement of consolidated revenue in the period of Mid-term Management Plan at the time of granting shares x 35% + the level of the achievement of consolidated operating profit in the period of Mid-term Management Plan at the time of granting shares x 35% + the level of the achievement of consolidated ROE in the final fiscal year of Mid-term Management Plan at the time of granting shares x 30%

Determination of the Level of Remuneration

In order to ensure objectiveness and properness of the Remuneration for Directors and A&SBMs, the level of the remuneration is determined on the result of the third party's investigation regarding the remunerations of other companies whose business contents and scale are similar to those of NEC.

Remuneration for NEC's Directors and A&SBMs for fiscal year ended March 31, 2017 is as follows:
  Remuneration
Headcount Total Amount
(In millions of yen)
Directors
(of which Outside Directors)
13
(5)
337
(60)
A&SBMs
(of which Outside A&SBMs)
6
(4)
96
(36)
  • Notes:
    1. The above headcount includes 2 Directors and 1 A&SBM who retired at the close of the 178th Ordinary General Meeting of Shareholders held on June 22, 2016.
    2. The maximum monthly remuneration for Directors is 65,000,000 yen.
    3. The maximum monthly remuneration for A&SBMs is 12,000,000 yen.