Compensation

Compensation Policy for Directors

Overview of Compensation Structure for Directors

(1)Compensation composition ratio

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 (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 monthly 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 as a lump sum after the fiscal year concludes to Directors excluding Outside Directors 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 (stock compensation)

Stock compensation is paid as medium-to-long-term, performance-linked compensation to Directors excluding Outside Directors. Stock compensation comprises the performance-linked component (60%), which is linked to the degree of achievement of the medium-term management plan, and the non-performance-linked component (40%), which aims for retention and motivation to improve share prices over the medium- to longterm, and is paid under the condition of a certain term of service. The performance-linked component of stock compensation is paid after the medium-term management plan concludes, while the non-performance-linked component is paid after the Director retires.
The performance-linked component will fluctuate in the range of 0% to 200% depending on the degree of achievement of performance targets in the medium-term management plan. In the event of serious misconduct during their term of office, 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 for Directors.

^*1 Indicator that compares total shareholder return (TSR) of OMRON in the covered period to the percentage change of TOPIX
Total Return Index (Relative TSR = TSR ÷ Percentage change of TOPIX Total Return Index)
^*2 Survey measuring employees’ voluntary motivation to contribute to targets of the organization
^*3 Indicator that measures the presence of a high level of motivation to contribute to the achievement of targets, maintained
through good mental and physical health, or a strong sense of belonging to the organization, or a productive work environment

(5)Performance indicators of performance-linked compensation

• The performance indicators for short-term performance-linked compensation (bonuses) were set from the short-term management plan’s indicators for financial targets towards the realization of the Short-Term Management Plan based on the medium-term management plan “SF 1st Stage” (fiscal 2022 to fiscal 2024).
• The performance indicators for medium- to long-term performance-linked compensation (stock compensation) were set from the Medium-Term Management Plan’s indicators for financial targets, non- financial targets and strategic targets towards the realization of the medium-term management plan “SF 1st Stage” (fiscal 2022 to fiscal 2024). In addition, the long-term vision for 2030 “SF2030” aims to maximize corporate value, and indicators for directly evaluating corporate value have been set.

• Advanced Compensation Governance for Improving Corporate Value (Integrated Report 2021)

^* 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

Fiscal 2023 Amount of Compensation of Directors and Audit & Supervisory Board Members

Notes:

1. The amounts include compensation paid to three Directors and one Audit & Supervisory Board Member who retired at the close of the 86th Ordinary General Meeting of Shareholders held on June 22, 2023.
2. The maximum limit of the aggregate compensation of Directors was set at JPY 35 million per month (by resolution of the 63rd Ordinary General Meeting of Shareholders held on June 27, 2000; the said resolution pertained to seven (7) Directors). The amounts of base salaries for each Director are determined by resolution of the Board of Directors based on discussions by and recommendations from the Compensation Advisory Committee.
3. The maximum limit of the aggregate compensation of Audit & Supervisory Board Members was set at JPY 11 million per month (by resolution of the 81st Ordinary General Meeting of Shareholders held on June 19, 2018; the said resolution pertained to four (4) Audit & Supervisory Board Members). The amount of base salary for Audit & Supervisory Board Members is determined by discussions among Audit & Supervisory Board Members.
4. The maximum limit of Directors’ bonuses was set at JPY 600 million per year (by resolution of the 81st Ordinary General Meeting of Shareholders held on June 19, 2018; the said resolution pertained to five (5) Directors). The amount of bonus for each Director is calculated based on the targets and actual results of operating income, net income, and ROIC for the 87th term (fiscal year ended March 31, 2024), and determined by resolution of the Board of Directors based on discussions by and recommendations from the Compensation Advisory Committee. Regarding each indicator’s actual results, please refer to Trends in Consolidated Results (available in Japanese only).
5. The 84th Ordinary General Meeting of Shareholders held on June 24, 2021 made a resolution to introduce stock compensation. Based on the resolution, the maximum limit of money to be contributed by the Company is JPY 2.4 billion, and the maximum limit of the number of the Company’s shares to be granted and delivered as sales proceeds (“grant(ing), etc.”) is 600,000 shares during the four fiscal years from fiscal 2021 to fiscal 2024. The said resolution pertained to five (5) Directors. Regarding stock compensation, the Company shall award points to Directors calculated according to a prescribed formula, and the trust shall grant, etc. the Company’s shares corresponding to the points awarded during a certain period to the Directors. The final calculation of the number of points to be granted and the actual delivery will be carried out after the end of the target period from fiscal 2021 to fiscal 2024, but the expenses of stock compensation, as indicated above, are associated with the points granted during the fiscal year under review. The amount of stock compensation for each Director is calculated based on the financial targets evaluation (EPS, ROE) from fiscal 2021 to fiscal 2024, the sustainability evaluation (reduction of greenhouse gas emissions, score of Sustainable Engagement Index (SEI) in engagement survey and Dow Jones Sustainability Indices) targets and achievements, as well as the corporate value evaluation (relative TSR), and determined by resolution of the Board of Directors based on discussions by and recommendations from the Compensation Advisory Committee.
6. No Directors of the Company received any employee wages other than their compensation as Directors.