As the Company is a company with a nomination committee, etc., the Compensation Committee (the “Committee”), comprised solely of Outside Directors, determines compensation policy for Directors and Executive Officers received from the Company as consideration for their duties and the individual compensation for Directors and Executive Officers.

The Committee manages the overall executive compensation as described below based on the belief that strong motivations for Executive Officers to achieve management goals and thorough corporate governance for all Directors and Executive Officers are important for achieving LIXIL's Purpose “Make better homes a reality for everyone everywhere” sustainably.

Compensation basic policies for Directors and Executive Officers

The Compensation for Directors and Executive Officers is determined in accordance with the following basic policies,

(a) Foster improvement of short-, medium-, long-term and sustainable business results and corporate value.
(b) Attract and retain the best talent who are necessary to foster business growth globally.
(c) Ensure a fair and reasonable decision process with regards to compensation that will provide accountability to shareholders, employees, and all stakeholders.
(d) Consider and discuss based on the economic and social situation, our business condition and objective indexes and advices of external specialized agencies at the Committee.
(e) Individual compensation shall be managed in consideration of each individual duty, performance, experience, and priority of attracting and retaining personnel etc.

Compensation System

Compensation structure for Directors who monitor and supervise the Company’s management, and for Executive Officers who are responsible for the performance of business, shall be separate. When a Director concurrently serves as an Executive Officer, the compensation system for the Executive Officers shall be applied.

■Directors’ Compensation system

The compensation system for Directors consists of Annual Base Salary and Stock-linked compensation as their acts are requested to contribute to increase the sustainable corporate value while they are monitoring and supervising the management during their statutory terms. In the event that an Outside Director assumes the role of chairperson of the Board of Directors’ Meeting or chairperson of a Committee, Chairperson Allowance shall be paid, taking into account the responsibilities and burdens of the Director.

The above chart shows the compensation mix (median value) of Outside Directors for the Fiscal Year ended March 2022. Stock-linked compensation indicates the amount granted, which is different from the actual amount paid.

■Executive Officers’ Compensation system

The compensation system for Executive Officers consists of Annual Base Salary, Performance-linked compensation and Stock-linked compensation, based on the policy of attracting and retaining talented human resources that are essential for accelerating business growth, providing strong motivation to achieve management goals and rewarding fairly and equitably in accordance with the results of such efforts and properly reflecting the trust and evaluation of shareholders and other stakeholders in the compensation. Regarding the details of the individual compensation for Executive Officers, the Committee determines the compensation level and compensation mix based on the role and responsibility, business performance, experience and difficulty of securing personnel, etc. of each Executive Officer, as well as the performance targets and ESG action targets, etc. for each of them. In particular, for Executive Officers who are expected to contribute significantly to improving corporate value from a medium- to long-term perspective, the Committee takes measures such as increasing the ratio of Stock-linked compensation to total compensation.

【President】

【Executive Vice President, "Fuku-Shacho"】

【Executive Vice President, "Senmu"】

Compensation system overview

【Annual Base Salary】

Annual Base Salary of Outside Directors shall be determined, based on the role of Outside Directors at the Company, while referring to the salary levels of the upper group among domestic companies as reference information in line with the purpose of the compensation basic policies.
Annual Base Salary of Executive Officers shall be determined individually, based on role and responsibility, business performance, experience and difficulty of securing personnel, etc., while referring to the compensation levels inside and outside Japan as reference information in line with the purpose of the compensation basic policies. As for the referenced compensation levels, the external specialized agencies’ data for each country is compared based on criteria such as revenue and market value mainly in Global Industry Classification Standard categories. The Company intends to eliminate as much as possible any differences in compensation based on the country of residence.

【Performance-linked compensation】

In order to encourage the Executive Officers to work together to achieve single-year management goals and to ensure that they are fairly equitably rewarded in accordance with the results of their performance, the calculation formula has been composed of only company-wide performance.

• The Base amount of Performance-linked compensation shall be determined individually as a certain percentage of the Annual Base Salary according to the role and responsibility, business performance, experience and difficulty of securing personnel, etc., of each Executive Officer in the evaluation period.
• Business targets achievement rates shall be set by calculating the ratio based on the actual figures disclosed in the Annual Securities Report versus the forecast figures disclosed in the summary financial statements or the like at the beginning of each period. If there is more than one business target, the achievement of each target is multiplied by the percentage of each target in the total performance target, and then aggregated. For the Fiscal Year ending March 2023, it shall be calculated based upon the achievement rates of return on invested capital (ROIC), core earnings, and net profit for the period belonging to the owners of the parent company (net income).
• The payout rate according to the achievement level of business targets is shown in the chart below.

(Claw back, etc.)
If the financial statements have been retroactively corrected due to a material accounting mistake or malpractice in the process of account settlement by the Company, the Committee shall conduct a review based on such event for revisions of Performance-linked compensation already paid and/or due to be paid in the future to the relevant Executive Officer, and can decide to request the return of Performance-linked compensation already paid to the Executive Officer and/or amend Performance-linked compensation to be paid. Furthermore, the Committee may adjust the method of calculating Performance-linked compensation after considering in a comprehensive manner the impact on earnings of events that occur during the calculation period.

【Stock-linked compensation】

The Company has been applying the Phantom Stock Plan since the fiscal year ended March 2020, with the aim of encouraging Directors and Executive Officers to monitor, supervise, manage and make management decisions for achieving the sustained improvement in the corporate value of the Company over the mid- to long-term as well as further promoting shared values between the Directors and Executive Officers and shareholders of the Company, and attracting and retaining talented human resources from around the globe by standardizing global officers’ compensation.
The Company grants the Phantom Stock to Directors on the day of each Annual Shareholders’ Meeting, and to Executive Officers on the first day of each business year.
The number of the Phantom Stock allotted to each Director and Executive Officer shall be the number calculated by dividing the granted amount, which is calculated by multiplies Annual Base Salary by the coefficient according to responsibilities, etc., of the eligible officer, by the Company’s stock price at the time of grant.
After the period from the grant date to the vesting date (the “Holding Period”) has passed, the amount calculated by multiplying the stock price at that time by the number of stocks held shall be paid.
As the above mechanism, the amount of compensation increases or decreases according to changes in the stock price similar to the Restricted Stock etc., and Directors and Executive Officers are encouraged to act with an awareness of the impact on the Company’s stock price.

Note: The average of closing price of the Company's stock for the previous 30 business days is applied at both grant and vesting.

Total amount of compensation by officer title, by type, and number of officers receiving

The following is the contents for the Fiscal Year ended March 2022.

Notes:

• Amounts based on Japan standard.

• The compensation amounts shown above include compensation paid by the Company’s subsidiaries, in addition to compensation paid by the Company. Of the above amounts, the amount paid by the Company is 1,046 million yen (149 million yen for the 8 Outside Directors and 897 million yen for the 8 Executive Officers).

• The amount of Annual Base Salary for Outside Directors includes the Chairperson Allowance.

• Regarding Performance-linked compensation and Stock-linked compensation, the amounts that should be recorded as expenses for the Fiscal Year ended March 2022 are stated.

• Cost-of-living allowances and income tax allowances, etc. were paid as Various allowances.

Compensation for the officers with total compensation of 100 million yen or more

The following is the contents for the Fiscal Year ended March 2022.

Notes:

• Amounts based on Japan standard.

• Annual Base Salary is the amount paid as determined by the Compensation Committee.

• Performance-linked compensation is not the actual amount paid but the expensed amount calculated based on the target amount of Performance-linked compensation determined by the Compensation Committee with the business forecast as of March 31, 2022.

• Stock-linked compensation is not the actual amount paid but the expensed amount calculated based on the number of stocks granted as Phantom Stock, which is determined by the Compensation Committee, for the three fiscal years from the Fiscal Year ended March 2020 to the Fiscal Year ended March 2022. The expensed amount is calculated by adding up the following two items.
  
  1) The amount which is calculated by multiplying the number of stocks granted in the Fiscal Year ended March 2022 by the stock price at the end date of the Fiscal Year ended March 2022.
  
  2) The amount which is calculated by multiplying the total number of stocks granted for the Fiscal Year ended March 2020 and the Fiscal Year ended March 2021 by the difference of the stock prices between these fiscal years. (The difference value is a positive value if the stock price goes up, and a negative value if it goes down.)
  Since the stock price of the Company moved from 3,075 yen at the end date of the Fiscal Year ended March 2021 to 2,290 yen at the end date of the Fiscal Year ended March 2022, and thus the expensed amount for these two years was negative.

• Cost-of-living allowances and income tax allowances, etc. were paid as Various allowances.

For details of the exective compensation, please refer to the "Report for the 80th Fiscal Year".