Officer Remuneration

Policy for determining officer remuneration

AMADA has established the following policy for determining the details of individual director remuneration.

Basic policy

The Company’s basic policy on remuneration for directors is to have a system that (1) functions as sufficient incentive to seek the sustainable improvement of corporate value toward the realization of the Long-term Vision, and (2) to have a transparent and fair remuneration system and decision-making process to ensure accountability to shareholders and other stakeholders.
In accordance with this basic policy, the Company’s Board of Directors, at a meeting held on May 14, 2024, resolved to revise the Company’s policy for determining the details of individual director remuneration, as follows.
The Company has established the Compensation Committee, chaired by an independent external director, to serve as a voluntary advisory body to the Board of Directors. When revising the policy for determining the details of individual director remuneration, etc., the Company consults the Compensation Committee on the draft of the policy prepared by the Human Resources Department, and the Board of Directors resolves the policy at its meetings, respecting the report of the Compensation Committee.

Remuneration level

The level of remuneration for directors shall be set at an appropriate level based on their respective positions and responsibilities, and shall be reviewed as necessary and appropriate in light of changes in the business environment and data from external surveys.

Remuneration composition

The composition of remuneration for directors shall be such that it will serve as a sufficient incentive for the sustainable enhancement of corporate value toward the realization of the Long-term Vision and the Medium-term Business Plan. Specifically, the remuneration of directors (excluding external directors) shall consist of (1) basic remuneration, which is fixed remuneration, (2) bonuses, which are performance-linked remuneration, and (3) stock-based compensation, which is performance-linked remuneration. The performance-linked remuneration (bonuses) is designed so that the percentage of performance-linked remuneration (bonuses) in total director remuneration increases as the Company’s performance grows. The performance-linked remuneration (stock-based compensation) is designed so that the percentage of performance-linked remuneration (stock-based compensation) in total director remuneration is based on the director's position.
In addition, remuneration for external directors, who are responsible for supervisory functions, shall consist only of basic remuneration in consideration of their independent position from the execution of business.

(1) Basic remuneration

Basic remuneration for the Company’s directors shall be monthly fixed remuneration in cash, and the amount to be paid to each individual director shall be determined based on a predetermined remuneration base amount in accordance with their position and responsibilities.

(2) Performance-linked remuneration (bonuses)

Bonuses as performance-linked remuneration, which are positioned as short-term incentives, shall be cash remuneration reflecting a performance indicator, and shall be paid at a certain time each year. The performance indicator used shall be profit attributable to owners of parent (hereinafter referred to as “profit”) for a single fiscal year. This is because it is an important management indicator and a source of dividends, hence it is conscious of management from the shareholder standpoint. Specifically, the total amount to be paid shall be determined by taking into account the number of persons to be paid and the growth rate of dividends, up to a maximum amount calculated by multiplying the profit for the fiscal year in question by 1/50th of the dividend payout ratio. Individual allocation shall be determined based on position and responsibility, and the amount shall be calculated by modifying a certain percentage based on performance.

(3) Performance-linked remuneration (stock-based compensation)

The performance-linked stock compensation, positioned as a medium- to long-term incentive, is intended to motivate directors to contribute to the enhancement of the Company’s medium- to long-term corporate value and to further increase the sense of shared interest with shareholders by encouraging them to own the Company’s shares. The plan is based on the fiscal years covered by the Company’s Medium-term Business Plan (hereinafter referred to as the “eligible period”), and shares are to be issued to directors after the eligible period once an evaluation has been made for the respective eligible period’s performance indicator achievement levels, among other factors, for each fiscal year. Specifically, each fiscal year, directors (excluding external directors) are granted points in accordance with their position which serve as rights to receive stock delivery, and the number of points granted is adjusted within a range of 0% to 200% depending on the achievement of performance indicator targets, with one share of the Company issued for each point. The performance indicators shall be set based on the management indicators and others set forth in the Company’s Medium-term Business Plan. For the initial eligible period, (i) revenue, (ii) operating profit, and (iii) return on equity (ROE) shall be used. In the event that a director is found to have committed a serious misconduct or wrongdoing, the Company may seize the points (malus clause) granted to said director, or demand that the director return the amount of money equivalent to the Company’s shares that have been granted to the director (clawback clause).

* A Board Incentive Plan (BIP) trust is a performance-based stock compensation (Performance Share) plan commonly used in the United States.

Remuneration determination process

The Board of Directors shall have the authority to determine the amount of remuneration, etc., for individual Company directors and the method of calculation thereof, within the total amount of remuneration resolved at the General Meeting of Shareholders after requesting advice from the voluntary Compensation Committee chaired by an external director and respecting the advice provided. The amount of monetary remuneration for the Company’s directors was resolved at the 81st Ordinary General Meeting of Shareholders held on June 26, 2019 to be no more than ¥468 million per year (no more than ¥50 million per year for external directors). The number of directors at the conclusion of the Ordinary General Meeting of Shareholders in question was eight (including three external directors). The amount of stock-based compensation for the Company’s directors shall be (1) ¥150 million multiplied by the number of years of the eligible period (the maximum amount of money to be contributed by the Company) and (2) 200,000 points (the maximum number of points [equivalent to the number of Company shares] to be granted in one fiscal year).

Total officer remuneration

Note: Bonuses are paid to directors (excluding external directors) as performance-linked remuneration.

Stock option plan

The Company does not issue any stock acquisition rights.