JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki and Kosuke Hamaguchi, Nagashima Ohno & Tsunematsu
If a company issues its stock or stock options to its directors as compensation, it also needs to obtain the approval of a shareholder meet - ing on the maximum number of such stock or stock options to be issued and other prescribed details. In the case of a company with an audit and supervisory committee, the compensation of audit and supervisory members must be deter - mined separately from other directors, and the allocation of compensation among audit and supervisory members is determined based upon their discussion unless a shareholder meeting resolves otherwise or the articles of incorpora - tion 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 other committees or its independent out - side directors constitute a majority of its board of directors, seek involvement of and advice from an independent compensation 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 independ - ence regarding the composition of the compen - sation committee and its authority and roles. The Corporate Governance Code also consid - ers that listed companies should reflect mid- to long-term business results and potential risks in
determining the compensation of the manage - ment and recommends that the proportion of management compensation linked to mid- to long-term results and the balance of cash and stock paid as compensation, respectively, be set appropriately. Compensation to Statutory Auditors Compensation to statutory auditors must also be approved by a shareholder meeting unless it is provided 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 compensa - tion approved by a shareholder meeting or pro - A listed company must disclose the compensa - tion 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 outside 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. vided by the articles of incorporation. 4.11 Disclosure of Payments to Directors/Officers Further, a listed company is required to disclose its basic policy, if any, on the determination of the compensation of each director, statutory auditor and other officer. Unless the specific amount of compensation for each director is stated in the articles of incorporation or approved at a share - holder meeting (which is a rare case in practice), the policy as to how to determine the specific
475 CHAMBERS.COM
Powered by FlippingBook