Nomination Committee

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:

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

<Major shareholder>

• 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 has 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

<Donation, etc.>

• 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

<Others>

• 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%. At these meetings, the Committee spent a great deal of time discussing, including with outside experts, the important issue of CEO succession.

Compensation Committee

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%. During these meetings, the Committee held in-depth deliberations, particularly on remuneration under the new executive structure.

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 10 years.

From fiscal 2022, Restricted Stock Unit (hereinafter referred to as “RSU”) will be introduced in place of stock options. Every year, the basic deliverable number of shares equivalent to fixed remuneration for independent directors will be announced for the target period of three years from the relevant year. After the end of the target period, the basic compensation amount equivalent to the market value of the Company’s shares based on the basic deliverable number of shares will be determined. HOYA will grant independent directors a claim for monetary remuneration accounting for 50% of the basic compensation amount. Independent directors will contribute such monetary remuneration claim in kind and receive an allotment of shares, the number of which will be equal to the amount of such monetary remuneration claim divided by the paid-in amount for the Company’s shares. In view of securing funds for tax payment, the amount corresponding to the residual basic compensation amount will be paid in cash. HOYA plans to issue RSU for the target period of three fiscal years from fiscal 2023 and subsequent fiscal years as well.

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. Of note, as indicators of performance during three fiscal years, HOYA has selected net sales, earnings per share (EPS) and return on equity (ROE) in the Consolidated Financial Statements, and in fiscal 2022, newly introduced an ESG indicator. The objective of the PSU is to boost the motivation and morale of HOYA’s executive officers with respect to medium- to long-term business performance and higher corporate value, and secure 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, 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 shown in the table below.

Basic deliverable
number of shares

Position/ responsibilities	Basic deliverable number of shares
CEO	7,300
CFO	4,200
CBDO and CLO	3,400
CSO	3,200

Medium- to long-term
performance targets

Indicator		Target (consolidated)	Reason for the selection of the indicator
Financial Indicators *1	Net sales	760 billion yen	Selected as an indicator to measure growth potential of the HOYA Group in the domestic and overseas markets.
	Earnings per share (EPS)	560 yen	Selected as an indicator to measure growth of the Company from the same perspective as shareholders.
	ROE	20.00%	Selected as an indicator to measure whether the Company has generated return on shareholders’ investment effectively.
ESG indicator Evaluations by external organizations*2 Status of initiatives on priority ESG themes			Selected as an indicator to measure sustainability initiatives from the viewpoint of ESG

• *1 The targets above are set in consideration of, among others, the Company’s business environment and market consensus and do not constitute the Company’s financial forecasts.
• *2 Evaluations by three companies, namely, CDP, MSCI and Sustainalytics, will be used.
• The above are target figures for the three fiscal years from fiscal 2022 to fiscal 2024.

Total amount of remuneration, etc. of Directors and Executive Officers for the fiscal year under review

Amount of consolidated remuneration for each Director

Executive Officers (whose consolidated remuneration, etc. totaled 100 million yen or more during the consolidated fiscal year)

Audit Committee

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 nine times in fiscal 2021, in which the attendance ratio of all members was 100%.

The Committee discussed mainly the following agenda items:

• Agreement on the accounting auditor of the HOYA Group and its remuneration
• Resolution on the audit report of the Audit Committee
• Review reporting from the accounting auditor (five times in total per year)
• Quarterly reporting from the Audit Department and the Help Line

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.