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  5. 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”

May 31, 2019

The Ministry of Economy, Trade and Industry (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’ management to contribute to improving mid- to long-term corporate value. METI hereby announces that it has revised the guidebook in light of the FY2019 Tax System Reform.

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 systems,” in light of the FY2019 Tax System Reform. METI mainly revised the following two points.

Along with this, METI updated information shown in the “Outline of board members’ compensation to encourage proactive business management” section and the related laws and regulations and improved the descriptions therefor in line with the FY2019 Tax System Reform.

Reference:

Outline of the revised guidebook

I. Outline of board members’ compensation to encourage proactive business management
This section of the revised guidebook explains the policy significance in promoting the introduction of incentive compensation into compensation systems for board members, the outline of special arrangements under the FY2019 Tax System Reform, and other topics.

II. Q&A concerning stock-based or performance-based compensation systems
This section explains key points by category as a reference for companies in studying introduction of a stock-based or performance-based compensation system 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.

IV. 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 board members after terminating their management duty positions.

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.

Division in Charge

Corporate System Division, Economic and Industrial Policy Bureau

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