Updated on August 23, 2017
Under the Companies Act, the Compensation Committee must consist of at least three Directors, the majority of whom must be outside Directors. In addition, under the Board Charter, as a general rule, at least one Director of the Compensation Committee must be a Corporate Executive Officer and the chair is to be selected from among the outside Directors; provided, however, that a Director who is a CEO or a Chief Operating Officer of Sony 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. For a list of the latest members of the Compensation Committee, please refer to the page below.
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.
Based upon the above, remuneration of Directors consists of the following two components:
The schedule for the amount of each component and its percentage of total remuneration is determined in accordance with the basic policy above. Remuneration of Directors shall be at an appropriate level determined based upon research made by a third party regarding remuneration of directors of both domestic and foreign companies. 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. The resigning Director shall purchase shares of Common Stock with this remuneration.
Corporate Executive Officers are key members of management responsible for executing the business operations of Sony. In order to further improve the business results of the Corporation, the following two elements have been established as the basic policy for the determination of remuneration of Corporate Executive Officers.
Based upon the above, remuneration of Corporate Executive Officers shall consist of the following four components:
The schedule for the amount of each component and its percentage of total remuneration shall be determined in accordance with the above basic policy with an emphasis on linking remuneration to business results and shareholder value. Remuneration of Corporate Executive Officers shall be at an appropriate level determined based upon research made by a third party regarding remuneration of management of both domestic and foreign companies.
The basis for the schedule for the amount of each component is below.
The amount of remuneration linked to business results shall be determined based upon 1) the consolidated financial results of the Corporation, such as ROE (return on equity), operating income, net income and cash flow, for the fiscal year for which remuneration is being given, and 2) the level of achievement of business results in the business area(s) for which the relevant Corporate Executive Officer is responsible. The amount paid shall fluctuate within a range from 0 percent to 200 percent, in principle, of the standard payout amount.
Remuneration linked to the share price, such as stock options and restricted stocks, will be used to incentivize 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.
Regarding the Phantom Restricted Stock Plan,
points determined every year by the Compensation Committee shall be granted to Corporate Executive Officers 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. The resigning Corporate Executive Officer shall purchase the shares of Common Stock with this remuneration.
(i) Remuneration linked to business results
The standard payout amount of remuneration linked to business results for the fiscal year ended
March 31, 2017 shall be between 37.5 percent and 50.0 percent of cash compensation (fixed remuneration plus remuneration linked to business results) related to each individual's level of responsibility. The KPIs and the weighting of each KPI related to the performance of consolidated Sony shall be as follows:
(ii) Restricted Stock
The Compensation Committee decided to introduce a restricted stock plan starting from the fiscal year ending March 31, 2018. The purpose of the plan 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.
The Corporation intends to grant shares of Common Stock to Corporate Executive Officers and key management as a partial replacement for stock options. The grantees will not be able to sell or transfer the stocks during the restricted period, and the Corporation will acquire free of charge the granted shares under certain conditions. Details of the plan such as vesting conditions, eligibility and the number of grants will be determined by the Compensation Committee.