Corporate Governance

Compensation for Executives

Basic Policy on Executive Compensation

The Company’s basic policies regarding remuneration for its Directors and Executive Officers are twofold: 1) to increase corporate performance and corporate value over the medium to long term to realize its Management Vision and 2) to establish a remuneration system and decision-making process that is transparent, rational, and fair so that the Company can fulfill its accountability to customers, society, the environment, shareholders, business partners, employees, and other stakeholders. Based on this policy, the Company’s executive compensation system is as follows.

出光興産, DFF Inc.

Compensation Standard

Compensation levels for Directors and Executive Officers shall be reviewed as appropriate in light of changes in the business environment and external survey data.

出光興産, DFF Inc.

Compensation Structure

The Company and Showa Shell merged on April 1, 2019. Starting in FY2019, the compensation structures for Directors (excluding Outside Directors) and Executive Officers will be based on new arrangements, with the emphasis being placed on contributing to the maximization of synergy creation, business portfolio rearrangement, and enhancement of initiatives for the environment, society and governance, which in turn, will lead to further improvement of corporate value. Compensation for these individuals will thus consist of (1) fixed compensation, (2) performance-based bonuses (shift from performance-linked monetary compensation (periodic equal pay) to performance-based bonuses for the purpose of clarifying the incentive structure), and (3) performance-linked stock compensation.

As the Company aims to ensure that the recipients share values in common with our shareholders and investors, the Company uses net income and consolidated operating income as indicators for determining the performance-based portion of compensation, believing that these indicators are appropriate in light of strengthening profitability and increasing the corporate value. In addition to using these consolidated financial results the Company has adopted indicators that reflect the accomplishments of each recipient in their efforts to address management issues in their respective areas of oversight. In particular, this portion for Representative Directors is designed to better reflect the Company’s non-financial accomplishments, including those associated with environmental, social and governance (ESG) issues. Weights allocated to each indicator are determined based on duties executed by each recipient.

Compensation for Outside Directors consists solely of fixed compensation from the perspective of objectively assessing the appropriateness of business execution and ensuring appropriate supervisory functions.In the course of determining compensation for Directors and Executive Officers, the Company also utilizes data obtained from a consulting firm that is independent from the Company to assess its appropriateness.

In addition, no specific limitations are set for the number of the Company shares that can be owned by Directors and Executive Officers.

Compensation Systems for Directors (excluding Outside Directors) and Executive Officers
Figure
  • * Stock compensation is granted only after the recipients have stepped down from their positions. To provide the recipients with medium- to long-term incentives, the value of stock compensation is designed to reflect fluctuations in stock prices during their terms in office.
出光興産, DFF Inc.

The Date of Resolution at the Shareholders General Meeting Concerning Remuneration, etc., for Executives and the Details of Such Resolution

At the 91st Ordinary General Meeting of Shareholders held on June 27, 2006, the amount of compensation for Directors and Audit & Supervisory Board Members was set at 1.2 billion yen or less per year for Directors and 120 million yen or less per year for Audit & Supervisory Board Members. At the time of the resolution, there were 12 Directors and five Audit & Supervisory Board Members.

At the 104th Ordinary General Meeting of Shareholders held on June 27, 2019, it was resolved that, in addition to the above compensation limits, the Company would contribute up to 1.9 billion yen in total to a trust established to support the performance-linked stock compensation system that grants the Company stock to Directors and other recipients based on their accomplishments during the last three consecutive fiscal years (provided, however, that with regard to a trust that commenced in FY2018, a total amount of 2.3 billion yen shall be contributed to support the system so it is able to reward recipients for their accomplishments during the four business years from FY2018 to FY2021). At the time of resolution, this system covered six Directors (excluding Outside Directors) and 31 Executive Officers (not concurrently serving as Directors).

Individual compensation for Directors is determined by the Board of Directors based on the recommendations of the Nomination and Compensation Advisory Committee, which is composed of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members. Individual compensation for Audit & Supervisory Board Members is determined through discussions between Audit & Supervisory Board Members. The Nomination and Compensation Advisory Committee met a total of 10 times in FY2019, including deliberation on executive compensation.

出光興産, DFF Inc.

Total Amount of Compensation, etc. by Executive Category

Total amount of compensation and other wages paid to Directors in FY2019, their breakdown by type and the number of recipients is as presented below.

Category People
(number)
Fixed
Compen-sation
(Million yen)
Performance-linked
compensation (Million yen)
Total
compen-sation
(1 million yen)
Cash
compen-sation
Stock
compen-sation
Directors (excluding Outside Directors) 8 460 14 - 475
Audit & Supervisory Board Members
(excluding Outside Audit & Supervisory Board Members)
2 58 - - 58
Outside Directors and Outside Audit & Supervisory Board Members 7 97 - - 97
Total 17 616 14 - 631
出光興産, DFF Inc.