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

Basic Policy on the Remuneration for Directors/Audit&Supervisory Board Members(KANSAYAKU) (A&SBMs) and Methods on Determining the Level of Remuneration

For the purpose of continuously improving corporate value and strengthening its competitiveness, NEC's basic policy on the remuneration for Directors and A&SBMs is to set a level and structure 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.  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 Directors and A&SBMs 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.

Remuneration Structure

  1. Remuneration for Directors consists of basic remuneration, bonuses and stock compensation (a performance-based stock compensation (the "Performance-based Stock Compensation") and the stock compensation in which stock equivalent to a pre-determined monetary amount is granted (the "Fixed Stock Compensation")).
    The remuneration for Directors includes the employee salary portion for Directors concurrently serving as employees and the Senior Vice President remuneration for Directors concurrently serving as Senior Vice Presidents.


    Basic remuneration
    Basic remuneration is fixed-monthly payments that do not exceed the limit established by resolutions of the General Meetings of Shareholders, and is determined separately for each job title and for Inside Directors and Outside Directors.
    However, for some Executive Directors basic remuneration increases or decreases depending on the performance of these individuals in each fiscal year.  The Board of Directors determines for each job title the standard amount of basic remuneration and the range of fluctuations.

    Bonuses
    Bonuses serve as short-term incentives to achieve performance targets in each fiscal year for the sustained growth of the NEC Group. Executive Directors are eligible to receive these bonuses. The limit for total payments of these bonuses is determined by a resolution of the General Meetings of Shareholders.  Individual bonus payments are determined by adjusting the standard bonus amount determined for each job title of Directors to reflect the achievement level of performance targets.

    Stock compensation
    Stock compensation is granted to Inside Directors and consists of the Performance-based Stock Compensation and the Fixed Stock Compensation.
    (i) The Performance-based Stock Compensation serves as a mid- to long-term incentive to further raise Directors' awareness for contribution to improvement in NEC's medium- and long-term performance and its corporate value, by clarifying the link between remuneration of Directors and NEC's performance as well as value of NEC shares. The Performance-based Stock Compensation is linked to a single fiscal year. Following the end of each applicable fiscal year, the number of points granted to a Director is determined according to job title and the level of achievement of performance targets in the fiscal year. In principle, Directors receive a number of shares (however, part of which shall be an amount of cash equivalent to the NEC shares as converted and disposed of) corresponding to the number of points after three years from the beginning of the applicable fiscal year.

    (ii) The Fixed Stock Compensation further clarifies the link between remuneration for Directors and the value of NEC shares by increasing the ratio of stock compensation in the remuneration for Directors, and encourage Directors to operate the business with a higher consciousness of NEC's share price by sharing with shareholders not only the benefits of rising share prices but also the risks associated with falling share prices.  The Fixed Stock Compensation applies to the period beginning on the day of each Ordinary General Meeting of Shareholders and ending on the day of the Ordinary General Meeting of Shareholders in the following year. Following the end of this period, Directors receive points corresponding to monetary amounts that do not exceed the limit established by resolutions of the General Meetings of Shareholders.  In principle, Directors receive a number of shares (however, part of which shall be an amount of cash equivalent to the NEC shares as converted and disposed of) corresponding to the number of points after three years from the beginning of the applicable period.

  2. Remuneration for A&SBMs
    Remunerations for A&SBMs are only basic 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.
    Basic 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.
Remuneration for NEC's Directors and A&SBMs for fiscal year ended March 31, 2019 is as follows:
  Fixed Remuneration Bonus Stock Compensation
Head count Total Amount
(In millions of yen)
Head count Total Amount
(In millions of yen)
Head count Cost posting relating to the Stock Compensation
Directors
(of which Outside Directors)
14
(7)
345
(60)
6
(-)
168
(-)
6
(-)
44
(-)
A&SBMs
(of which Outside A&SBMs)
7
(4)
96
(36)
-
(-)
-
(-)
-
(-)
-
(-)
  • Notes:
    1. The above fixed remuneration includes the remuneration amount of 3 Directors and 2 A&SBMs who retired at the close of the 180th Ordinary General Meeting of Shareholders held on June 25, 2018.
    2. The above cost posting relating to the stock compensation is the value posted during the fiscal year ended March 31, 2019.
    3. The maximum monthly remuneration for Directors is 65 million yen.
    4. The maximum monthly remuneration for A&SBMs is 12 million yen.