Revision of the Amount of Compensation Payable to Members of the Board and Introduction of the Restricted Shares Compensation Plan
Kariya (Japan) ― We hereby inform, as set forth below, that, at the meeting of the Board of Directors held today, DENSO Corporation (the “Company”), reviewed the executive compensation system, revised the amount of compensation payable to members of the board and resolved to introduce a restricted share compensation plan(the “Plan”), and will propose an agenda item concerning the Plan at the 97th Ordinary General Shareholder’s Meeting of the company to be held on June 19, 2020(the “Shareholders’ Meeting”)
1. Revision of the Amount of Compensation Payable to Members of the Board
Regarding the amount of compensation payable to the Members of the Board of the Company, the 84th Ordinary General Meeting of Shareholders held on June 26, 2007 adopted a resolution to set the maximum amount of basic compensation at 80 million yen per month. Meanwhile, the Company obtains approval for the total amount of bonuses payable to the Members of the Board per year at the Ordinary General Meeting of Shareholders on a yearly basis.
We propose setting a yearly limit of the compensation for Members of the Board instead of the monthly limit that we currently set. Moreover, we propose setting the maximum amount of compensation at 1.0 billion yen per year (including compensation for Outside Members of the Board of up to 150 million yen per year.)
If the proposal is approved as proposed, the number of Members of the Board will be eight (8) (including three (3) Outside Members of the Board.)
2. Introduction of the Restricted Shares Compensation Plan
⑴ Purpose of the Introduction Plan
This Plan is designed to have Eligible Members of the Board further share value with shareholders and to provide them with more incentives to achieve medium- to long-term enhancement of corporate value.
⑵ Condition with respect to the Introduction of the Plan
The introduction of the Plan is subject to our shareholders’ approval at the Shareholders’ Meeting to grant such compensation to Eligible Members of the Board of Directors. At the Shareholders’ Meeting, we plan to propose the introduction of the Plan and establishment of compensation concerning the Plan for Eligible Members of the Board of Directors. If this proposal is approved, the composition of the compensation payable to Members of the Board (excluding the amount of employee salaries payable to Members of the Board who are also employees) will be as shown in the table below.
<Compositions of Compensation Payable to Members of the Board >
|Compensation composition||Maximum Amount of Compensation|
|Basic compensation||Up to 1.0 billion yen per year (including up to 150 millionyen per year for Outside Members of the Board)|
|Share-based compensation||Up to 200 millionyen per year|
|Total||Up to 1.2 billionyen per year (including up to 150 million yen per year for Outside Members of the Board)|
Compensation for Members of the Board shall be determined by the Board of Directors within the amount mentioned above ,following deliberation by the Officer Nomination and Compensation Advisory Council, a body where an independent Outside Member of the Board serves as chairperson and a majority of the members are independent Outside Members of the Board.
3. Outline of the Plan
The outline of the Restricted Share-based Compensation System is as shown below. Other details related to this compensation system and the restricted share allotment agreement (hereinafter referred to as the “Allotment Agreement”) shall be determined by the Company’s Board of Directors.
|Eligible persons||Members of the Board of the Company (excluding non-executive Members of the Board and Outside Members of the Board)|
|Total amount of share-based compensation||Up to 200 millionyen per year|
|Amount of share-based compensation for each Member of the Board||Determined each year considering factors such as the Company’s business results and the responsibilities and performance of the Member of the Board|
|Class of shares to be allotted and method of allotment||Issue or disposal of shares of common stock (those with restrictions on transfer under the Allotment Agreement)|
|Total number of shares to be allotted||Up to a total of 100,000 shares per year to Eligible Members of the Board|
|Amount to be paid in||Determined by the Board of Directors of the Company based on the closing price of shares of common stock of the Company on the Tokyo Stock Exchange on the business day immediately preceding the date of each resolution of the Board of Directors, within a range that is not particularly advantageous to Eligible Members of the Board|
|Transfer restriction period||During the period predetermined by the Board of Directors of the Company, ranging from three (3) years to 30 years from the allotment date under the Allotment Agreement, Eligible Members of the Board must not dispose of the shares of the Company’s common stock by transferring or creating a security right on the shares of the Company’s common stock allotted by the Allotment Agreement or other measures.|
|Condition 1 for removal of transfer restrictions||The restrictions will be removed upon the expiration of the transfer restriction period. However, the restrictions will be removed also in the event that the Eligible Member of the Board leaves the position due to expiry of his/her term of office, his/her death or other justifiable reasons.|
|Condition 2 for removal of transfer restrictions||If a proposal for restructuring, etc. of the Company, such as a merger agreement whereby the Company will be the disappearing party to the merger, or a share exchange agreement or a share transfer plan whereby the Company will become a wholly owned subsidiary of another party, is approved at the Company’s General Meeting of Shareholders (or by the Company’s Board of Directors if such organizational restructuring, etc. does not require approval of the Company’s General Meeting of Shareholders) during the transfer restriction period, the Company shall remove, based on the resolution of the Company’s Board of Directors, the transfer restriction of the allotted shares at a date prior to the effective date of such organizational restructuring, etc. The number of such allotted shares subject to removal of the transfer restriction shall be reasonably determined in light of the period from the date of the start of the transfer restriction period to the date of approval of such organizational restructuring, etc.|
|Acquisition by the Company without consideration||The Company will be able to acquire all allotted shares without consideration in the event of violations of laws and regulations or other reasons specified by the Company’s Board of Directors during the transfer restriction period.|
Subject to the approval of proposal revision of the amount of compensation payable to Members of the Board and introduction of the restricted shares compensation plan as originally proposed, the Company will apply the same Restricted Share-based Compensation System to Executive Vice Presidents and Senior Executive Officers who are not Members of the Board.
Under the Company’s new compensation system for Members of the Board, compensation for Members of the Board (excluding non-executive Members of the Board and Outside Members of the Board) will consist of “basic compensation (fixed amount),” “bonus (short-term incentive)” and “share-based compensation (medium- to long-term incentive).” The ratios of basic compensation, bonus and share-based compensation will be roughly 60%, 30% and 10%, respectively, if the amount of consolidated operating profit equals the reference amount.
The Company will monitor the impact of the introduction of share-based compensation and consider increasing the ratio of share-based compensation.
Non-executive Members of the Board and Outside Members of the Board will receive basic compensation (fixed amount) only.
About DENSO Corporation
DENSO is a $47.6 billion global mobility supplier that develops advanced technology and components for nearly every vehicle make and model on the road today. With manufacturing at its core, DENSO invests in its worldwide 200 facilities to produce thermal, powertrain, mobility, electrification, & electronic systems, to create jobs that directly change how the world moves. The company’s 170,000+ employees are paving the way to a mobility future that improves lives, eliminates traffic accidents, and preserves the environment. Globally headquartered in Kariya, Japan, DENSO spent 9.9 percent of its global consolidated sales on research and development in the fiscal year ending March 31, 2020. For more information about global DENSO, visit https://www.denso.com/global/en