Updated on July 22, 2019

Compensation Committee

Members: 3 outside Directors (as of June 18, 2019)

Name Position
Eriko Sakurai Chairman of the Compensation Committee (Outside Director)
Koichi Miyata Compensation Committee Member (Outside Director)
Wendy Becker Compensation Committee Member (Outside Director)

Purpose/Authority

  • To set policy on the content of individual compensation for Directors, Senior Executives and other officers
  • To determine the amount and content of individual compensation of Directors and Senior Executives in accordance with the policy

Policy of Composition of the Compensation Committee

The Compensation Committee must consist of at least three Directors, the majority of whom must be outside Directors and the chair is to be selected from among the outside Directors. In addition, a Director who is a CEO, a Chief Operating Officer or a Chief Financial Officer of Sony Corporation or who holds any equivalent position shall not be a member of the Compensation Committee. In determining whether to appoint or remove a member of the Compensation Committee, continuity of the Compensation Committee shall be duly taken into account. As of June 18, 2019, the Compensation Committee is comprised of three outside Directors.

Basic policy for Director and Senior Executive remuneration

The basic policy regarding remuneration for Directors and Senior Executives, as determined by the Compensation Committee, is as follows:

(a) Basic policy regarding Director remuneration

The primary duty of Directors is to supervise the performance of business operations of the Sony Group as a whole. In order to improve this supervisory function over the business operations of Sony, which is a global company, the following two elements have been established as the basic policy for the determination of remuneration of Directors. No Director remuneration is paid to those Directors who concurrently serve as Corporate Executive Officers.

  • Attracting and retaining an adequate talent pool of Directors possessing the requisite abilities to excel in the global marketplace; and
  • Ensuring the effectiveness of the supervisory function of the Directors.

Based upon the above, remuneration of Directors consists of the following three components:

  • Fixed remuneration;
  • Remuneration linked to share price; and
  • Phantom Restricted Stock Plan.

The amount of each component and its percentage of total remuneration shall be at an appropriate level determined in accordance with the basic policy above and based upon research conducted by a third party regarding remuneration of directors of both domestic and foreign companies.

Regarding remuneration linked to share price, restricted stock is used to further promote shared values between the shareholders and Directors, and incentivize Directors to develop and maintain a sound and transparent management system. Appropriate restrictions and conditions shall be set in order to enhance the effectiveness of the programs.
Regarding the Phantom Restricted Stock Plan, points determined every year by the Compensation Committee shall be granted to Directors every year during his/her tenure, and at the time of resignation, the remuneration amount shall be calculated by multiplying the Common Stock price by the individual’s accumulated points. Sony will not grant any points pursuant to the Phantom Restricted Stock Plan to a Director for a fiscal year in which Sony granted restricted stock to the Director.

(b) Basic policy regarding Senior Executive remuneration

Senior Executives are key members of management responsible for executing the operations of the Sony Group as a whole and/or each business. In order to further improve the business results of Sony, the following two elements have been established as the basic policy for the determination of remuneration of Senior Executives.

  • Attracting and retaining an adequate talent pool possessing the requisite abilities to excel in the global marketplace; and
  • Providing effective incentives to improve business results on a short-, medium- and long- term basis.

Based upon the above, remuneration of Senior Executives shall basically consist of the following four components:

  • Fixed remuneration;
  • Remuneration linked to business results;
  • Remuneration linked to share price; and
  • Phantom Restricted Stock Plan.

The amount of each component and its percentage of total remuneration shall be at an appropriate level determined in accordance with the above basic policy and the individual’s level of responsibility and based upon research conducted by a third party regarding remuneration of management of both domestic and foreign companies, with an emphasis on linking remuneration to business results and shareholder value.

Remuneration linked to business results shall be structured appropriately and based upon appropriate indicators to ensure that such remuneration effectively incentivizes Senior Executives to achieve the mid- to long-term and the corresponding fiscal year’s corporate targets. Specifically, the amount shall be determined based upon the level of achievements of the targets of (1) certain key performance indicators linked to consolidated or individual business results of Sony of the corresponding fiscal year, such as Return on Equity (“ROE”) , Net Income attributable to Sony Corporation’s Stockholders and Operating Cash Flow (“Financial Performance KPIs”) , which indicators are selected based on the areas of responsibility of the relevant Senior Executive and (2) the individual performance of the area (s) for which the relevant Senior Executive is responsible. The amount to be paid to Senior Executives shall fluctuate, in principle, within the range from 0 percent to 200 percent of the standard payment amount (“Business Results Linked Standard Payment Amount”) based on the achievement of the above-mentioned targets. The Business Results Linked Standard Payment Amount shall be determined so that such amount is within a certain percentage of the cash compensation (total of the fixed remuneration and the remuneration linked to business results) , which percentage shall be determined in accordance with each individual’s level of responsibility.

Remuneration linked to the share price, such as stock options and restricted stock, will be used to incentivize Senior Executives to increase mid- to long-term shareholder value. Appropriate restrictions and conditions shall be set in order to enhance the effectiveness of this program. The amount of remuneration linked to the share price shall be determined, so that the amount is within a certain percentage of the total cash compensation (total of the fixed remuneration and the remuneration linked to business results) and remuneration linked to the share price.

Regarding the Phantom Restricted Stock Plan, points determined every year by the Compensation Committee shall be granted to Senior Executives every year during his/her tenure in office, and at the time of resignation, the remuneration amount shall be calculated by multiplying the Common Stock price by the individual’s accumulated points.

Procedures to determine remuneration of Directors and Senior Executives

Based on the policy outlined above, the Compensation Committee determines the amount and content of the compensation for each Director and Senior Executive. Specifically, in principle, each year at the meeting of the Compensation Committee held after the Ordinary General Meeting of the Shareholders, the amount of basic remuneration and the content of each Director’s and Senior Executive’s compensation for the corresponding fiscal year is determined. Thereafter, at the meeting of the Compensation Committee held after the corresponding fiscal year end, the final amount of compensation of each Director and Senior Executive is determined, including the amount of remuneration linked to business results.

For determining the amount of the remuneration linked to business results for each Senior Executive, the Business Results Linked Standard Payment Amount, the targets for the Financial Performance KPIs and the targets for the individual performance of the areas (s) for which the relevant Senior Executive is responsible are determined and thereafter, at the meeting of the Compensation Committee held after the corresponding fiscal year end, the amount of such remuneration is determined based on the level of achievement of such targets for the Financial Performance KPIs and the individual performance.

In accordance with the above procedure, the Compensation Committee determined the amount of compensation of each Directors and Senior Executives for the fiscal year ended March 31, 2019.

Corporate Executive Officer remuneration linked to business results for the fiscal year ended March 31, 2019

The Business Results Linked Standard Payment Amount for the fiscal year ended March 31, 2019 was between 37.5 percent and 50.0 percent of cash compensation (total of the fixed remuneration and the remuneration linked to business results). The Financial Performance KPIs mainly used for the Corporate Executive Officers and their weighting, targets and results were as follows:

KPI Weight Target to be achieved for the fiscal year ended March 31, 2019 (Consolidated) Result for the fiscal year ended March 31, 2019 (Consolidated)
Operating CF 50% Amount determined in order to achieve the Operating CF (as defined below) target under Sony’s Third Mid-Range Plan of 2 trillion yen or more for the three-year period from the fiscal year ended March 31, 2019 753.4 billion yen
Net Income 40% 480 billion yen 916.3 billion yen
ROE 10% 15.1% 27.3%

Operating cash flow, excluding the Financial Services Segment (“Operating CF”) , was selected as a Financial Performance KPI and was weighed the highest due to operating cash flow being determined as the most important performance metric under the Third Mid-Range Plan of Sony. ROE was also selected due to it being one of the financial targets of Sony’s Third Mid-Range Plan. Net Income attributable to Sony Corporation’s Stockholders was selected in order to incentivize management to achieve the current fiscal year’s corporate target.

For the target to be achieved for the Operating CF for the fiscal year ended March 31, 2019, an amount which the Compensation Committee determined as appropriate was set in order to achieve the Operating CF target under Sony’s Third Mid-Range Plan of 2 trillion yen or more (target as of as of April 1, 2018) for the three-year period from the fiscal year ended March 31, 2019. The target for the Net Income attributable to Sony Corporation’s Stockholders for the fiscal year ended March 31, 2019 was set as 480 billion yen, which was the forecasted amount for the Net Income attributable to Sony Corporation’s Stockholders for the fiscal year ended March 31, 2019 announced in April 2018. The target for ROE was 15.1% for the fiscal year ended March 31, 2019. The results for the Financial Performance KPIs for the fiscal year ended March 31, 2019 were as follows: Operating CF: 753.4 billion yen, Net Income attributable to Sony Corporation’s Stockholders: 916.3 billion yen, ROE: 27.3%, each exceeding the targeted amount.

As outlined above under “Basic policy regarding Director and Senior Executive remuneration,” remuneration linked to business results for Corporate Executive Officers for the fiscal year ended March 31, 2019 was determined based upon the level of achievement of the indicators which were selected based on the areas of responsibility of the relevant Corporate Executive Officer and the individual performance of the area (s) for which the relevant Corporate Executive Officer was responsible. The amounts to be paid to the Corporate Executive Officers were determined within the range from 0 percent to 200 percent of the Business Results Linked Standard Payment Amount. As a result, the ratio of remuneration linked to business results of Corporate Executive Officers for the fiscal year ended March 31, 2019 was in the range of 148.1% to 169.4% of the Business Results Linked Standard Payment Amount.

(For Reference)

Restricted Stock

Sony has introduced a restricted stock plan starting from the fiscal year ended March 31, 2018, pursuant to which shares of restricted stock will be allotted to Sony Corporation’s Corporate Executive Officers and other executives, and non-executive Directors of Sony Corporation (the “Non-Executive Directors”) . The purpose of the plan for the Corporate Executive Officers and other executives of Sony Corporation is to further reinforce management’s alignment with shareholder value, and to incentivize management to improve mid- to long- term performance and increase shareholder value. Furthermore, the purpose of the plan for the Non-Executive Directors is to incentivize these Directors to develop and maintain a sound and transparent management system by further promoting shared values between the shareholders and the Non-Executive Directors.

The grantees will not be able to sell or transfer the granted shares during the restricted period, and Sony Corporation will acquire the granted shares from a grantee without any consideration to, or consent of, the grantee under certain conditions. Details of the plan, such as vesting conditions, eligibility and the number of grants, will be determined by the Compensation Committee.

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