Overview of the Compensation Plan

OMRON’s officer compensation plan, which is based on the structure introduced in fiscal 2017, has been revised for the second time after the first revision in 2021. This structure aims to reflect the perspectives of all stakeholders, including shareholders, in OMRON’s management. By clarifying the linkage between officer compensation and improved corporate value (business value, shareholder value, and social value), we motivate officers to achieve the performance targets. We also maximize their motivation to contribute to the sustainable improvement of corporate value by encouraging them to hold the company’s stock.

Specifically, officer compensation consists of a base salary, or fixed compensation; short-term performance-linked compensation (bonuses) that varies depending on the company’s performance; and medium-to-long-term, performance-linked compensation (stock compensation). The base salary is determined at a level that ensures objectivity, based on the compensation data of over 100 major companies in Japan surveyed by a specialized outside organization. In addition, the composition ratio of each performance-linked compensation to base salary is determined according to each officer’s position, role, and responsibility. For example, the ratio for the CEO, who commits to enhancing medium- to long-term corporate value and is responsible for driving sustainable growth, is 1:1:1.7 (base salary : bonuses : stock compensation). This structure emphasizes performance-linked compensation, particularly with a relatively higher ratio allocated to the medium to long term. By having a composition focusing on medium- to long-term performance in addition to short- term performance, the structure provides stronger incentive for contributing to sustained improvements in corporate value.

Background and Aim of the Revision

The evaluation period of the medium-to-long-term, performance-linked compensation (stock compensation) started in fiscal 2021 and ended in fiscal 2024. On this occasion, we comprehensively reviewed the compensation plan. The revision was decided upon after deliberation of the Compensation Advisory Committee, which is composed of members the majority of whom are Outside Directors, and is chaired by an Outside Director.

The basic policy for the revision is to have a “framework that is responsive to social demands and changes in the business environment, while leveraging the strength of our current structure,” considering that OMRON is currently in a transitional period, in which we aim to enter a growth phase after completing the structural reform. Among other matters, we especially focused on further enhancement of shared interest with shareholders to further incentivize officers to commit to the improvement of corporate value over the medium to long term. We aimed to establish a new compensation plan that balances autonomous efforts by officers to take on challenges with sustainable corporate growth, while being responsive to changes in the external environment.

Short-term performance-linked compensation (bonuses)

Medium-to-long-term, performance-linked compensation (stock compensation)* Performance-linked component

Compensation Policy for Directors

1. ① Basic policy
   • Basic policy The Company shall provide compensation sufficient to recruit exceptional individuals who are capable of putting the OMRON Principles into practice as Directors.
   • The compensation structure shall be sufficient to motivate Directors to contribute to sustainable enhancement of corporate value.
   • The compensation structure shall maintain a high level of transparency, fairness, and rationality to ensure accountability to shareholders and other stakeholders.
2. ② Structure of compensation
   • 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.
   • The compensation composition ratio of performance-linked compensation to base salary shall be determined according to each Director’s role and responsibility.
   • Compensation for Outside Directors shall consist of a base salary and non-performance-linked stock compensation, reflecting their roles and the need for maintaining independence.
3. ③ Base salary
   • The amount of the base salary, paid monthly, shall be determined by taking into account the salary levels of other companies, as surveyed by a specialized outside organization.
4. ④ Performance-linked compensation
   • 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. Bonuses shall be paid as a lump sum after the conclusion of the fiscal year.
   • As medium- to long-term performance-linked compensation, the Company shall grant stock compensation linked to the improvement in corporate value (value of stock).
   • The stock compensation shall be paid after the Director retires.
   • 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.
5. ⑤ Governance of compensation
   • The compensation composition, compensation composition ratio, level of the base salary, as well as performance indicators and evaluation methods of performance-linked compensation, shall be determined based on the deliberations and recommendations of the Compensation Advisory Committee.
   • The amount of compensation for each Director shall be determined by a resolution of the Board of Directors reflecting the deliberations and recommendations of the Compensation Advisory Committee.