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  • September 2017
  • Revision of the Report titled “Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management”

Revision of the Report titled “Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management”

The Ministry of Economy, Trade and Industry (METI) has been engaging in the enhancement of corporate governance to encourage Japanese companies to make quick and bold decisions aiming to improve their profitability, earning power, and mid- to long-term corporate value. As one of these efforts, in April 2017, METI prepared and publicized a report titled “Guidebook for Introducing Incentive Plans as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management,” aiming to encourage companies to introduce incentive plans targeting companies’ board members to contribute to improving mid- to long-term corporate value.

METI hereby announces that it has revised the guidebook. The revised version newly includes: the explanation of the provisions, enforced on October 1, 2017, of the Revised Corporation Tax Act, e.g., transfer-restricted shares; and the updated Q&A section of the guidebook to reflect new interpretations fixed after the enforcement of the Revised Corporation Tax Act in April 2017.

Outline of the guidebook and key points of the revision

1)Outline of board members’ compensation to encourage proactive business management

The revised guidebook explains the policy significance for promoting the introduction of incentive compensation into compensation systems for board members, the outline of special arrangements under the FY2017 Tax System Reform, and other topics.

2)Q&A concerning stock-based or performance-based compensation system

In light of the revision of the FY2017 tax systems, the revised guidebook explains key points of the Tax Reform by category so as to provide companies with references in considering the introduction of a stock-based or performance-based compensation system. The revised guidebook also includes: the explanation of the sections concerning transfer-restricted shares and other provisions, enforced on October 1, 2017, of the FY2017 revision of tax laws; and the updated Q&A section concerning the new interpretations fixed after the enforcement of the revision of the FY2017 tax systems.

3)Example of a bill on compensation proposed to a shareholder meeting

The revised guidebook also shows an example of a bill on compensation proposed to a shareholder meeting, a document required to be presented to board members in introducing a stock-based compensation system. It also newly includes an example of a bill on compensation proposed to a shareholder meeting concerning transfer-restricted shares as well as an example of a bill on compensation proposed to a shareholder meeting concerning a stock-based compensation system in which the compensation is allocated to board members after finishing his/her management duty position.

Note:The example of a bill on compensation proposed to a shareholder meeting concerning transfer-restricted shares is a result of updating the corresponding sections of the previous guidebook in line with the revision of the FY2016 tax systems.

4)Example of a transfer-restricted share grant agreement

The revised guidebook shows an example of an agreement concluded between a company and board members concerning the grant agreements for transfer-restricted shares.
Note: This example is a result of updating the corresponding sections of the previous guidebook formulated in line with the revision of the FY2016 tax systems.

5)Example of rules for stock-based compensation

The revised guidebook newly explains an example of rules for stock-based compensation that companies should stipulate in introducing a stock-based compensation system in which the compensation is allocated to board members after finishing his/her management duty position.

6)Related laws and regulations

The revised guidebook also describes the provisions of acts, cabinet orders, ministerial orders and cabinet office orders related to the Corporation Tax Act, the Income Tax Act and the Financial Instruments and Exchange Act after the revision of the FY2017 tax systems.

Release date

September 29, 2017

Division in Charge

Corporate System Division, Economic and Industrial Policy Bureau

Related website

Ministry of Economy, Trade and Industry1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan Tel: +81-(0)3-3501-1511
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