【Annual base salary】

The annual base salary of Outside Directors shall be determined based on the roles and responsibilities of Outside Directors at the Company, after referring to objective benchmark data of domestic companies. The annual base salary of Internal Directors who do not concurrently serve as Executive Officers shall be determined on an individual basis, depending on whether they are full-time or part-time, the nature of their duties, and the roles and responsibilities and other relevant factors of Internal Directors.
The annual base salary of Executive Officers shall be determined individually, based on the roles and responsibilities, experience, difficulty of securing personnel, and other relevant factors of each Executive Officer, after referring to objective benchmark data of domestic and foreign companies of similar business scale in view of the importance of attracting management talent from a variety of industries globally to realize LIXIL’s Purpose.

【Performance-linked compensation】

The primary purpose of performance-linked compensation is to strongly motivate Executive Officers and reward them fairly and equitably based on their performance. The calculation formula, the weighting of performance target items and the payout curve have been revised since the Fiscal Year ended March 2027.

• To encourage Executive Officers to work together to achieve single-year management goals and to ensure that they are fairly and equitably rewarded in accordance with their performance results, performance-linked compensation is calculated using company-wide performance targets as the basis for calculating the payout rate. In addition, to support sustainable growth and value creation, if initiatives that do not immediately appear in single-year financial figures but are expected to lead to future enhancement of corporate value produce particularly strong results, a personal performance-based incentive shall be added.
  Performance-linked compensation = Base amount of performance-linked compensation × Payout rate according to business target achievement rate + Personal performance-based incentive
• The base amount of performance-linked compensation shall be determined individually as a certain percentage of annual base salary, based on the roles and responsibilities and other relevant factors of each Executive Officer, after referring to objective benchmark data of domestic and foreign companies of similar business scale.
• The business target achievement rate shall be set by calculating the ratio of the actual figures disclosed in the annual securities report versus the forecast figures disclosed in the flash reports 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 its respective weight within the total business target, and then aggregated.
• Business target items (weighting) are core earnings (50%), profit attributable to owners of the parent (30%) and ROIC (20%).
• The payout rate according to business target achievement rate is shown in the chart below.

【Stock-linked compensation】

The Company has implemented stock-linked compensation in order to encourage Directors and Executive Officers to deepen their shared interests with shareholders and work toward enhancing corporate value over the medium- to long-term.

【Stock-linked compensation I: Restricted Stock Compensation Plan】

This plan applies to Directors and Executive Officers. For non-residents of Japan, the Phantom Stock Plan shall be applied.

• In principle, the Company allots restricted stocks to officers within two months of the appointment date.
• The number of restricted stocks allotted to Directors shall be the number calculated by dividing the base amount, which is set based on the roles and responsibilities and other relevant factors of the Director, by the average closing price of the Company’s stock for the 30 business days preceding the appointment date.
• The number of restricted stocks allotted to each Executive Officer shall be the number calculated by dividing the base amount, which is calculated by multiplying the annual base salary by the coefficient that is set individually as a certain percentage of annual base salary according to the roles and responsibilities and other relevant factors of each Executive Officer, by the average closing price of the Company’s stock for the 30 business days preceding the appointment date, after referring to objective benchmark data of domestic and foreign companies of similar business scale.
• The transfer restriction period is from the allotment date until the officer retires from any position as Director or Executive Officer of the Company.

【Stock-linked compensation II: Phantom Stock Plan】

This plan applies to Executive Officers.

• In principle, the Company grants phantom stocks to Executive Officers on the first day of each fiscal year.
• The number of phantom stocks shall be the number calculated by dividing the base amount, which is calculated by multiplying the annual base salary by the coefficient that is set individually as a certain percentage of annual base salary according to the roles and responsibilities and other relevant factors of each Executive Officer, by the average closing price of the Company’s stock for the 30 business days preceding the grant date, after referring to objective benchmark data of domestic and foreign companies of similar business scale.
• Since the Company shall pay the amount calculated by multiplying the average closing price of the Company’s stock for the 30 business days preceding the vesting date by the number of phantom stocks after the holding period (three years) has passed, the compensation amount increases or decreases in accordance with changes in the Company’s stock price.

【Stock Ownership Guidelines】

Executive Officers shall strive to hold the Company’s shares with a value at least equivalent to the multiples of their annual base salary set forth below during their tenure:
Representative Executive Officers: Three times the amount of the annual base salary; other Executive Officers: One time the amount of the annual base salary

【Malus and Clawback provisions】

With regard to performance-linked compensation and stock-linked compensation, in the event of material accounting misstatements by the Company, or if the Board of Directors determines that a material violation of duties or internal regulations has occurred on the part of the relevant officer, the Committee may decide to reduce or extinguish pre-vested compensation or request the repayment of compensation already vested.