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- METI Revises the “Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management”
METI Revises the “Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management”
March 8, 2019
The Ministry of Economy, Trade and Industry (METI) continues to prepare and publicize the “Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management,” aiming to encourage companies to introduce incentive plans targeting companies’ management to contribute to improving mid- to long-term corporate value. Since almost two years have passed from the publication of the previous guidebook, METI revised the guidebook, mainly the Q&A section about which METI received many inquiries from the public.
1. Background
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 for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management,” aiming to encourage companies to introduce incentive plans targeting companies’ management to contribute to improving mid- to long-term corporate value. Since then, it has been revising the guidebook in line with the revision of laws and regulations and other provisions.
2. Key points of the revised guidebook
METI revised “II. Q&A concerning stock-based or performance-based compensation system,” mainly the items about which METI received many inquiries from companies, in particular. METI mainly revised the following three points:
- Details of tax processing of trust targeting board members’ stock-based compensation (e.g., Q16);
- Details of processing for giving phantom stocks, which is equivalent to stock-based compensation as the final compensation notified in advance, to a board member who is not a resident of Japan (Q18); and
- Details of processing of deductible expenses concerning performance-based compensation in a case where part of such compensation is not given to a certain board member because of his/her sickness or misconduct (Q73).
Along with this, METI updated information in “I. Outline of board members’ compensation to encourage proactive business management” in line with the revision and update of the Future Investment Strategy 2017, the Future Investment Strategy 2018, the Practical Guidelines for Corporate Governance Systems (CGS Guidelines) and other policies.
Outline of the revised guidebook
I. Outline of board members’ compensation to encourage proactive business management
This section 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.
II. Q&A concerning stock-based or performance-based compensation system
This section explains key points by category as a reference for companies in studying the introduction of a stock-based or performance-based compensation systems and other topics.
III. Example of a bill on compensation proposed to a shareholder meeting
This section 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.
VI. Example of a transfer-restricted share grant agreement
This section shows an example of an agreement concluded between a company and board members concerning grant agreements for transfer-restricted shares.
V. Example of rules for stock-based compensation
This section shows 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 a board member after finishing his/her management duty position.
VI. Related laws and regulations
This section 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.
Appendix
- Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management (March 2019 version, in Japanese)(PDF:3,700KB)
- Reference: The Q&A section of the Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management (March 2019 version with strike-throughs showing the differences from the September 2019 version, in Japanese)(PDF:1,315KB)
Division in Charge
Corporate System Division, Economic and Industrial Policy Bureau
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