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Compensation

Compensation for Directors, Executive Officers, and Audit & Supervisory Board Members

OMRON has set up the Compensation Advisory Committee for the purpose of bolstering the management oversight function of the Board of Directors by enhancing transparency and objectivity in determining compensation amounts for each director and executive officer.
In response to a consultation request from the chairperson of the Board of Directors, the Compensation Advisory Committee deliberates on and makes recommendations regarding the Compensation Policy for Directors. The Compensation Advisory Committee also deliberates on and determines the Compensation Policy for Executive Officers in response to a consultation request from the CEO. Reflecting the committee's recommendations, the Board of Directors determines the Compensation Policy for Directors. Based on the above-mentioned respective Compensation Policy, the Compensation Advisory Committee deliberates on compensation of Directors and Executive Officers. The amounts of compensation for individual Directors shall be determined by a resolution of the Board of Directors, reflecting the recommendations of the Compensation Advisory Committee. These amounts shall be within the maximum limit of the sum of compensation amounts for all directors, as set by a resolution of the General Meeting of Shareholders. The amounts of compensation for individual executive officers shall be determined according to the recommendations of the Compensation Advisory Committee.

The amounts of compensation for individual Audit & Supervisory Board members shall be determined in accordance with the Compensation Policy for Audit & Supervisory Board Members, which is set forth through discussions among Audit & Supervisory Board members. These amounts shall be within the maximum limit of the sum of compensation amounts for all Audit & Supervisory Board members, as set by a resolution of the General Meeting of Shareholders.

Compensation Policy for Directors

  • Basic policy
    1. The Company shall provide compensation sufficient to recruit as directors exceptional people who are capable of putting the OMRON Principles into practice.
    2. The compensation structure shall be sufficient to motivate directors to contribute to sustainable enhancement of corporate value.
    3. The compensation structure shall maintain a high level of transparency, fairness, and rationality to ensure accountability to shareholders and other stakeholders.
  • Structure of compensation
    1. Compensation for directors shall consist of a base salary, which is fixed compensation, and performance-linked compensation, which varies depending on the Company’s performance.
    2. Compensation for outside directors shall consist of a base salary only, reflecting their roles and the need for maintaining independence.
  • Base salary
    1. The amount of a base salary shall be determined by taking into account the salary levels of other companies, as surveyed by a specialized outside organization.
  • Performance-linked compensation
    1. As short-term performance-linked compensation, the Company shall provide bonuses linked to yearly performance indicators, and to the degree of achievement of performance targets.
    2. As medium- to long-term performance-linked compensation, the Company shall grant stock compensation linked to the degree of achievement of the goals of the medium-term management plan, and to the improvement in corporate value (value of stock).
    3. The Company shall determine the target amounts for short-term performance-linked compensation and medium- to long-term performance-linked compensation based on the target pay mix specified according to each director’s role and responsibility.
  • Compensation governance
    1. All compensation for directors shall be determined by a resolution of the Board of Directors reflecting the deliberations and recommendations of the Compensation Advisory Committee.

Overview of Compensation Structure for Directors

1)Ratio of compensation

Compensation consists of a "base salary" (fixed compensation) and compensation according to Company performance, namely "short-term performance-linked compensation (bonuses)" and "medium-to-long-term, performance-linked compensation (performance-linked stock compensation)." The ratio of compensation consisting of performance-linked compensation compared to base salary has been determined for each role:

2)Base salary

A base salary is paid to Directors as fixed compensation. Base salaries are determined for each role by taking into account the salary levels of officers at other companies (benchmarked companies of the same industry and scope selected by the Compensation Advisory Committee), as surveyed by a specialized outside organization.

3)Short-term performance-linked compensation (bonuses)

Bonuses are paid to Directors excluding Directors (Independent) as short-term performance-linked compensation, which is linked to yearly performance indicators and the degree of achievement of performance targets. Director bonuses vary between 0% and 200% according to the achievement of operating income, net income, and ROIC targets defined in the annual operating plan.

4)Medium-to-long-term, performance-linked compensation (performance-linked stock compensation)

Stock compensation is paid as medium-to-long-term, performance-linked compensation to Directors excluding Directors (Independent). Stock compensation comprises the performance-linked component (60%), which is linked to the degree of achievement of the medium-term management plan, and the nonperformance- linked component (40%), which aims for retention and motivation to improve share prices over the medium- to long-term, and is paid under the condition of a certain term of service. Stock compensation for performance-linked component varies between 0% and 200%, according to achievement of net sales, EPS, and ROE targets based on the medium-term management plan, as well as sustainability evaluation* based on a third-party organization.

As a rule, stock paid in stock-based compensation must be held by the individual during their term of service. In the event that an individual Director in question engages in serious misconduct during their term of service, and such misconduct harms the Company, the Compensation Advisory Committee will deliberate and make a recommendation. Based on this discussion and recommendation, the Board of Directors shall resolve to limit the payment of stock-based compensation.

*Sustainability Evaluation
An evaluation based on the Dow Jones Sustainability Indices (DJSI). The DJSI are a series of ESG Indices which include companies evaluated and selected based on long-term shareholder value perspective, reflecting economic, environmental, and social factors comprehensively.

*A similar compensation policy and structure have been adopted for executive officers toward achieving medium- to long-term performance targets.

Compensation Policy for Audit & Supervisory Board Members

  1. Basic policy
    • The Company shall provide compensation sufficient to recruit exceptional people who are capable of performing the duties of Audit & Supervisory Board Members entrusted by shareholders.
    • The compensation structure shall maintain a high level of transparency, fairness, and rationality to ensure accountability to shareholders and other stakeholders.
  2. Compensation structure
    • Compensation for Audit & Supervisory Board Members shall consist only of a base salary (monthly compensation) from the perspective of their roles and independence.
  3. Base salary
    • The amount of a base salary shall be determined by taking into account the salary levels of other companies, as surveyed by a specialized outside organization.
  4. Compensation governance
    • All compensation for Audit & Supervisory Board Members shall be determined through discussions by Audit & Supervisory Board Members.

Amount of Compensation of Directors and Audit & Supervisory Board Members

Notes:

  1. The above amounts include compensation paid to three (3) Directors (including one (1) Director (Independent)) and one (1) Audit & Supervisory Board Member (Independent) who retired at the close of the 80th Ordinary General Meeting of Shareholders held on June 22, 2017.
  2. Expenses of the performance-linked stock compensation plan, as indicated above, are associated with the points granted during the fiscal year under review.

About OMRON

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