JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki, Kosuke Hamaguchi and Akira Komatsu, Nagashima Ohno & Tsunematsu
meeting resolves otherwise or the articles of incorpo - ration provide differently. In the case of a company with nominating and other committees, a compensation committee determines the compensation of each director and executive officer. Principles Under the Corporate Governance Code The Corporate Governance Code recommends that a listed company, unless it has nominating and oth - er committees or its independent outside directors constitute a majority of its board of directors, seek involvement of and advice from an independent com - pensation committee regarding the compensation of its directors. In particular, a listed company on the Prime Market is encouraged to ensure that a majority of such compensation committee’s members consists of independent outside directors and disclose, among other things, the view on the independence regarding the composition of the compensation committee and its authority and roles. Compensation to Statutory Auditors Compensation to statutory auditors must also be approved by a shareholder meeting unless it is pro - vided in the articles of incorporation. If a company has two or more statutory auditors, compensation of each statutory auditor may be determined based on their discussions, within the maximum aggregate amount of compensation approved by a shareholder meeting or provided by the articles of incorporation. Disclosure of Payments to Directors/Officers A listed company must disclose the compensation of its directors, statutory auditors and other officers in its business report. Such disclosure is required with respect to the total amount of the compensation on a position-by-position basis along with the number of persons appointed to each position, if and to the extent that the amount of the compensation of each individual is not disclosed. Where a company has out - side directors/statutory auditors, the total amount of the compensation paid to them and the number of such outside directors/statutory auditors must also be disclosed.
Further, a listed company is required to disclose its basic policy, if any, on the determination of the com - pensation of each director, statutory auditor and other officer. Unless the specific amount of compensation for each director is stated in the articles of incorpora - tion or approved at a shareholder meeting (which is a rare case in practice), the policy as to how to deter - mine the specific amount of compensation of each director also needs to be disclosed. If the compensa - tion is linked to performance, the KPIs used for the calculation of the amount of such compensation, the reasons for choosing such KPIs or other prescribed details must also be disclosed. Furthermore, a listed company is required to disclose the compensation of individual directors, statutory auditors and other officers in its annual securities report under the FIEA if the amount of such individual compensation is JPY100 million or more. In the case of a closely held company, while there is no such disclosure requirement, its financial state - ments may have to make available the total amount of compensation paid to its directors, statutory auditors and other officers. Shareholders, through their ownership of shares, have equity interests in a joint stock company. The basic and primary rights of shareholders are: • the right to receive dividends; • the voting right at shareholder meetings; and • the right to receive residual assets upon the liqui - dation of the company. Shares are issued only upon the full payment of the issuance price by a shareholder; accordingly, there exists no obligation of shareholders to make an additional investment/payment in their capacity as shareholders. Additionally, unlike in some other juris - dictions, it is generally construed that a controlling shareholder does not owe any fiduciary duty in rela - tion to the operation of the company. 4. Shareholders 4.1 Companies and Shareholders
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