Executive Compensation

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Compensation Committee (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/Executive Officers are important for achieving the LIXIL Core Philosophy “The Group's superior products and services contribute to improving people's comfort and lifestyles” 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 in principle.

■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.

Annual Base Salary(83%) Stock-linked compensation(17%)

When an Outside Director serves as the chair of the board of directors, chairperson of the committee or concurrently serves as a corporate auditor of LIXIL Corporation, the allowance for such duties will be paid. In addition, compensation for Internal Directors is decided individually depending on whether they are full-time or part-time, and the content of their duty and responsibility, etc.

■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, rewarding Executive Officers fairly and equitably in accordance with the results of such efforts, and ensuring that the trust and reputation of shareholders and other stakeholders are properly reflected in their compensation.

【Executive Vice President and above】

Annual Base Salary(40%) Performance-linked compensation(30%) Stock-linked compensation(30%)

【Senior Managing Director and above】

Annual Base Salary(57%) Performance-linked compensation(29%) Stock-linked compensation(14%)

The above diagram is a model case, and individual compensation may differ from the model case, considering each individual duty, performance, experience, and priority of attracting and retaining personnel etc.

Compensation system overview

【Annual Base Salary】

Annual Base Salary for Directors and Executive Officers shall be determined based on the 50 percentiles of the compensation in a group of Japanese Companies with sales of JPY 1 trillion to 2 trillion, in the data from external specialized agencies, taking into consideration the 25 percentiles to 75 percentiles of the above data. For the Directors and Executive Officers who live abroad, the data in each country shall be referred. For Executive Officers, the amount of compensation can be outside of the above range, since it is determined considering each individual duty, performance, experience, and priority of attracting and retaining personnel, etc.

【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.
Furthermore, ROIC, which is a key management indicator for the entire Company, is included in the performance target items in order to strongly motivate the improvement of capital efficiency.

Performance-linked Compensation = Base amount of Performance-linked compensation × Payout rate according to achievement of performance targets
  • The Base amount of Performance-linked compensation shall be determined by multiplying the Annual Base Salary by a coefficient set for each position.
  • The payout rate according to the achievement level of performance targets is shown in the chart below.
Payout rate and Achieving rate of business targets

【Stock-linked compensation】

The company has been applying the stock-linked monetary compensation (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 personnel from around the globe that will contribute to further raising corporate value by standardizing global executives’ compensation in the Group.
The Company grants the Phantom Stock to Executive Officers on the first day of each business year, and to Directors on the day of each the annual general shareholders’ meeting.
The number of the Phantom Stock allotted to each Director/Executive Officer shall be the number calculated by dividing the granted amount which is calculated by multiplies Annual Base Salary by the coefficient based on the rank of each Director/Executive Officer, by the Company’s stock price.
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 granted shall be paid.
With the above mechanism, Directors and Executive Officers are encouraged to act with an awareness of the impact on the Company’s stock price, similar to the Restricted Stock etc.

Grant date⇒Holding Period⇒Vesting date

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

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

The following is the contents for the fiscal year ended March 2020.

Officers classification Total amount of the compensation
(Millions of yen)
Total amount of the compensation by compensation system (Millions of yen) Number of officers receiving
Annual Base Salary Performance-linked
compensation
Stock-linked
compensation
Restricted Stock Others
Directors
(excluding Outside
Directors)
192 90 - 10 92 - 6
Executive Officers 1,290 539 426 156 50 119 13
Outside Directors 154 134 - 14 6 - 13
Tota 1,636 763 426 180 148 119 32

Explanatory notes

  • The above amounts are based on JGAAP.

  • The total compensation shown above consists of both the compensation paid by the Company and the compensation paid by the Company's subsidiaries. The amount paid by the Company was 1,118 million yen (346 million yen for 19 directors and 772 million yen for 8 Executive Officers).

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

The following is the contents for the fiscal year ended March 2020.

Name Officers classification Company name Total amount of the compensation
(Millions of yen)
Total amount of the compensation by compensation system (Millions of yen)
Annual Base Salary Performance-linked
compensation
Stock-linked
compensation
Restricted Stock Others*1
Kinya Seto *2

Director LIXIL Group Corporation 84 9 - - 75 -
Executive Officer LIXIL Group Corporation 151 60 60 31 - -
Kazuhiko Ootsubo Executive Officer LIXIL Corporation 133 54 53 19 7 -
Sachio Matsumoto Executive Officer LIXIL Group Corporation 128 54 46 19 9 -
Hwa Jin Song Montesano Executive Officer LIXIL Group Corporation 172 56 34 7 3 72
Bijoy Mohan Executive Officer LIXIL Group Corporation 191 42 81 57 - 11
Director of LIXIL International Pte. Ltd LIXIL International Pte. Ltd 67 31 - - - 36

Explanatory notes

  • "Others" are social insurance premiums borne by the company and additional benefits such as income tax allowance and cos of living allowance for expatriates.

  • As compensation for duties during the period from April 1, 2019 to the Annual Shareholders’ Meeting held on June 25, 2019, the compensation as Director was paid, and thereafter, the compensation as an Executive Officer was paid.

Compensation committee overview

Compensation Committee is composed of members selected among Directors by a resolution of the Board of Directors Meeting after the Annual Shareholders’ Meeting. All members are Outside Directors from the fiscal year ended March 2020.
The Committee determines the policy regarding the compensation of Directors and Executive Officers and their individual compensation paid by the Company as consideration for their duties. From the fiscal year ended March 2020, the compensation of executives of overseas subsidiaries of the Company is managed by the Committee in order to enhance compensation governance of the entire Group.

For details of the compensation system and the committee, please refer to the securities report.

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