Officer Remuneration

Chugai has designed its remuneration plan for directors and Audit & Supervisory Board members to attract outstanding people and appropriately motivate them in order to continuously increase the Chugai Group’s corporate value.

As part of this plan, we target marketcompetitive levels of remuneration. Executive director remuneration is determined by benchmarking levels against a group of major Japanese corporations and other domestic pharmaceutical companies. Specifically, the Board of Directors decides remuneration levels annually after deliberation by the Compensation Committee based on the results of a survey by an external expert organization and other factors.

In order to further clarify the link between remuneration and the Company’s business performance and shareholder value, and to raise directors’ ambition and motivate them to improve performance, executive director remuneration consists of bonuses paid according to performance and other factors in each fiscal year as a short-term incentive and restricted stock compensation linked to medium- and long-term performance (tenure-based and performance-based) as a long-term incentive, in addition to fixed regular compensation. Remuneration of non-executive directors, including outside directors, and Audit & Supervisory Board members consists solely of fixed regular compensation. The guideline for the composition of CEO remuneration is 35 percent regular compensation, 30 percent bonuses and 35 percent restricted stock compensation, and the composition for other executive directors is determined in consideration of duties and other factors.

Bonuses, which are a short-term incentive, are determined by multiplying the base amount set according to individual positions, by the evaluation coefficient based on comprehensive evaluation consisted of the level of the target achievement of company-wide performance and individual performance in the respective fiscal years based on the announced forecasts. For restricted stock compensation granted as a long-term incentive, 50 percent is tenure-based restricted stock with a transfer restriction period of three to five years, and 50 percent is performance-based restricted stock. The number of shares to be granted is determined by dividing the standard amount set for each position by the closing price of the Company’s shares on the day before the resolution for their allotment by the Board of Directors. The transfer restriction shall be removed at the expiration of the transfer restriction period for the shares granted, provided that the recipient has held the position of director of the Company continuously during the transfer restriction period. For performance-based restricted stock, the number of shares for which the transfer restriction shall be removed is additionally based on the result of a comparison between the total shareholder returns of domestic pharmaceutical companies and total shareholder returns of the Company.

Officer remuneration is determined by resolution of the Board of Directors for directors and following deliberation by the Audit & Supervisory Board members for Audit & Supervisory Board members, both within the total amounts approved at the General Meeting of Shareholders. The Compensation Committee, which consists of three or more external members appointed by the Board of Directors, including at least one independent outside director, deliberates on remuneration of individual directors to ensure the transparency and objectivity of the determination process.

A resolution was passed in the 98th Annual General Meeting of Shareholders held in March 2009 to abolish the retirement benefits system for directors. A resolution was passed in the 95th Annual General Meeting of Shareholders held in March 2006 to abolish the retirement benefits system for outside directors and Audit & Supervisory Board members (including outside members).

At the 106th Annual General Meeting of Shareholders held on March 23, 2017, a resolution was passed to newly introduce restricted stock in place of the current stock options for executive directors of the Company. The aggregate amount of such compensation shall not exceed ¥345 million on top of the aforementioned fixed regular compensation and bonuses.

System for Remuneration of Directors and Audit & Supervisory Board Members
Type of remuneration Eligible officers Payment criteria Payment method
Executive
directors
Non-executive directors
(including outside directors)
Audit & Supervisory Board members
Fixed Regular Compensation Regular compensation Paid according to positionand other factors Monthly (Cash)
Performance-Based Remuneration Bonuses Paid according to performancein each fiscal year Yearly (Cash)
Long-term incentive (Stock-based compensation) Tenure-based restricted stock Paid according to fixed length of service Yearly (Common stock)
Performance-based restricted stock Paid according to performance over fixed period in addition to above Yearly (Common stock)
Criteria for Performance-Based Remuneration and the Method to Determine Its Amount
Type of Remuneration Indicators and evaluation methods
Bonuses
  • Comprehensive evaluation is based on degree of achievement of factors including Core operating profit, revenues, R&D performance, and company-wide tasks in the relevant fiscal year.
  • After deliberation by the Compensation Committee, the amount paid is determined by the Board of Directors within a range of 0% to 200% of the standard amount.
Restricted Stock Compensation Tenure-based
  • Continuous service during the transfer restriction period
Performance-based
  • Determination of the number of shares for which transfer restrictions are to be removed is based on the result of a comparison between the total shareholder returns of domestic pharmaceutical companies and total shareholder returns of the Company, in addition to the condition of continuous service.
  • Evaluation period for total shareholder returns is three fiscal years.
  • Removal of transfer restrictions is within a range of 0% to 100% of allotted shares.
Amount of Remuneration Paid to Directors and Audit & Supervisory Board Members (2020)
Position Total remuneration, etc. (Millions of yen) Total amount by type of remuneration, etc. (Millions of yen) Number ofeligible officers
Regular compensation Bonuses Restricted stock compensation
Tenure-based Performance-based
Directors (Excluding Outside Directors) 458 199 121 55 84 4
Outside Directors 41 41 4
Total 499 361 138 8
Audit & Supervisory Board Members (Excluding Outside Audit & Supervisory Board Members) 63 63 2
Outside Audit & SupervisoryBoard Members 36 36 4
Total 99 99 6
  • 1. Amounts are rounded to the nearest million yen.
  • 2. The table above includes two directors and one Audit & Supervisory Board member who retired during 2020.
  • 3. The amounts of “restricted stock compensation (tenure-based and performance-based)” shown in the table above are the amounts that were posted as expenses for the fiscal year under review as each respective restricted stock compensation.
Amount of Remuneration Paid to Representative Directors (2020)
Name Total consolidated remuneration, etc., by type (Millions of yen) Consolidated remuneration total (Millions of yen)
Regular compensation Bonuses Restricted stock compensation
Tenure-based Performance-based
Tatsuro Kosaka 71 72 26 41 210
Motoo Ueno 58 21 15 25 119
Dr. Osamu Okuda 40 27 8 9 84
  • 1. Amounts are rounded to the nearest million yen.
  • 2. Total amount of remuneration, etc. for Representative Directors is listed.
  • 3. Other than the representative directors in the table above, no director or Audit & Supervisory Board member received total remuneration of more than ¥100 million.
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Corporate Governance

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