As internal organizations of the Board of Directors, we have the Nomination Committee, Compensation Committee, and Audit Committee; each of which is composed exclusively of independent directors
The Nomination Committee fairly and rigorously selects candidates for directors, ensuring said candidates possess knowledge, expertise, and capabilities suited to HOYA’s business environment, based on the “Standard for Election of Candidates for Director,” and proposes the candidates to the General Meeting of Shareholders for voting. The Committee also fairly and rigorously selects candidates for executive officers and the representative executive officer, based on the “Standard for Election of Candidates for Executive Officer,” and proposes the candidates to the Board of Directors for voting. In cases that meet the criteria for dismissal, the Committee makes decisions to propose the dismissal of directors to the General Meeting of Shareholders and the dismissal of executive officers to the Board of Directors for voting.
The Committee has set out independence criteria for director candidates that are stricter than the rules of the Tokyo Stock Exchange to ensure the effective functioning of independent directors’ overseeing executive officers.
The outline of the Standard for Election of Candidates for Director is as follows:
[For both internal and independent director candidates]
- Those with appropriate personalities and insights as director
- Those with no health problems in performing their duties
[For internal director candidates]
- Those with a high level of knowledge and ample experience in our business
- Excellent business decision-making ability and business execution ability
[For independent director candidates]
- Those with extensive experience as business managers
- Or those who are in positions as professionals in law, accounting, finance or similar fields
- Those who are able to participate in at least 75% of the HOYA Group’s Board meetings.
- Those who have no significant interests in the HOYA Group and are able to maintain their independence
Independence criteria for independent director candidates
To ensure the independence of candidates for independent directors, candidates must not fall under any of the categories below.
<Those who are related to the HOYA Group>
- Those who previously worked for the HOYA Group
- Those who have a family member (spouse, child or relatives by blood or by affinity within the second degree) who have held the position of director, executive officer, corporate auditor or management employee of the HOYA Group in the past five years.
- Those who are major shareholders (10% or more) of the HOYA Group, or those who are directors, executive officers, corporate auditors or employees of companies that are major shareholders of the HOYA Group or those who have a family member who holds a top management position at such companies
- Those who execute operations of a company of which a major shareholder is the HOYA Group
＜Those who are related to major business partners＞
- Those who are operating directors, executive officers or employees of any important business partner, either for the HOYA Group or the corporate groups which the candidates come from, the sales to which business partner comprises 2% or more of the consolidated net sales of the HOYA Group or the company groups for either of the past three years, or those who have a family member who is a top management of such business partner
<Those who provide professional services (lawyers, certified public accountants, certified tax accountants, patent attorneys, judicial scriveners, etc.)>
- Those who have received remuneration of 5 million yen or more per year or those who have a family member who have received remuneration of 5 million yen or more per year, from the HOYA Group in the past three years
- When the organization that the candidate belongs to, such as a company and association, has received cash, etc. from the HOYA Group, the amount of which exceeds 100 million yen per year or 2% of consolidated net sales of the said organization, whichever is higher
- When the association or organization which the candidate belongs to as director or operating officer has received donations or grants in the past three years, the amount of which exceeds 10 million yen per year or 30% of the said organization’s average annual total costs, whichever is higher, or when the association or organization which the candidate’s family member belongs to has received donations or grants equivalent to the aforementioned amount
- When directors are exchanged
- When the candidate has any other important interest in the HOYA Group
The Nomination Committee held 12 meetings during fiscal 2021, in which the attendance ratio of all members was 100%, and spent a great deal of time discussing the Nomination Committee’s important issue of CEO change, including with outside experts.
The objective of the Compensation Committee is to establish a remuneration system that incentivizes directors and executive officers and to contribute to improved financial performance for HOYA by undertaking appropriate evaluations of their performance. The Compensation Committee decides on a remuneration package for each director and executive officer in accordance with the following policies:
The Compensation Committee held 11 meetings during fiscal 2021, in which the attendance ratio of all members was 100%, and held discussions especially on remuneration in the new executive organization.
Policy concerning remuneration for Directors
The remuneration of Directors consists of a fixed salary and a medium- and long-term incentive (stock options). The fixed salaries consist of a basic compensation and compensation for being a member or a chairperson of the Nomination, Compensation, or Audit Committee. The compensation levels are set appropriately by taking into consideration such factors as the Company’s business environment and the levels set by other companies as determined by a survey conducted by an outside professional organization.
Furthermore, fixed numbers of stock options are granted to newly appointed and reappointed officers in order that they may hold a common viewpoint with shareholders regarding the share price and share interests with shareholders on a medium- to long-term basis. Stock options become exercisable after a waiting period of approximately one year, in increments of 25% of the granted number of stock options in each subsequent year. Stock options are exercisable for a period of ten years.
From the fiscal year 2022, the Company will introduce the restricted stock unit (“RSU”), which delivers shares prescribed in accordance with the period employed as an Independent Director of the Company, instead of stock options.
[Composition ratio of remuneration for directors]
Fixed salary: Medium- and long-term incentive (stock options) = Approximately 1:0.3–0.6
(Note) The ratio of the above medium- and long-term incentive shall fluctuate with changes in the Company’s share price and other factors.
[Future composition ratio of remuneration for directors]
Fixed salary : Medium- and long-term incentive (RSU) =Approximately 1:1
(Note) Assuming a share price in three years roughly equivalent to the share price when the RSU was granted.
Policy concerning remuneration for Executive Officers
The remuneration of Executive Officers consists of a fixed salary, an annual incentive (performance-based bonuses), and a medium- and long-term incentive (Performance Share Unit). For fixed salaries, basic compensation is set appropriately according to the office and responsibility of each Executive Officer (Representative Executive Officer, CFO, etc.) and by taking into consideration such factors as the Company’s business environment and the levels set by other companies as determined by a survey conducted by an outside professional organization. Other than basic compensation described above, benefits granted to expatriates (such as housing) are also set at appropriate levels in consideration of the Company’s business environment and the levels set by other companies as determined by a survey conducted by an outside professional organization.
The annual incentive is determined according to quantitative results and qualitative evaluations and varies within the range roughly from 0% to 200%. As indicators of quantitative results, net sales, profit attributable to owners of the Company, and basic earnings per share (EPS) stated in the Consolidated Financial Statements of the Company have been adopted.
As a medium- and long-term incentive, the Company introduced the Performance Share Unit.
Performance Share Unit
The Company has introduced the Performance Share Unit (PSU) in place of the existing stock option plan since fiscal 2019. The PSU is a system for granting shares at a number that is in proportion to the level of achievement of the predetermined performance conditions. The payment ratio that corresponds to the level of achievement of the performance targets will range from 0% to 200%, based on performance during three fiscal years. The Company has selected net sales, earnings per share (EPS) and return on equity (ROE) in the Consolidated Financial Statements as indicators of performance during three fiscal years.
The objective of the PSU is to further increase the motivation and drive of the Company’s Executive Officers to medium- to long-term business performance goals and enhance the corporate value of the HOYA Group, and also to serve as a mechanism for retention of highly talented human resources by setting a competitive compensation level.
Under this plan, after determining the basic deliverable number of shares according to the position and responsibilities of each eligible recipient (CEO, CFO, and others), the Company grants compensation in an amount equivalent to the market price of the Company’s shares according to the degree of achievement of the medium- to long-term performance targets.
The Company also plans to issue new PSU covering the next three fiscal years in the following fiscal year onward.
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The Audit Committee formulates the audit policies and audit plans for each fiscal year and verifies financial statements, etc., based on the quarterly reports, year-end reports, and timely reports received from the accounting auditor according to such policies and plans. It also interviews the Audit Department and the Internal Control Department to obtain the results of operational audits, and verifies the soundness, legality, efficiency, etc., of management. All important matters are reported to the Board of Directors, and countermeasures are taken as necessary.
Audit Committee meetings were convened 9 times in fiscal 2021, in which the attendance ratio of all directors was 100%.
Deliberations during the fiscal year under review also focused on reports from the accounting auditor, the Audit Department, and the Internal Control Department, while providing advice and suggestions to the executive team with regard to any issues that came to light.