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- METI Revises the "Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members' Remuneration to Promote Proactive Business Management"
METI Revises the "Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members' Remuneration to Promote Proactive Business Management"
June 7, 2021
The Ministry of Economy, Trade and Industry (METI) continues to update and publish the "Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members' Remuneration to Promote Proactive Business Management," with the aim of encouraging companies to introduce incentive plans targeting their board members in order to contribute to improving their mid- to long-term corporate value. METI hereby announces that it has revised the guidebook, focusing mainly on the sections related to board members' remuneration in the revised Companies Act brought into force in March 2021 (hereinafter referred to as the "Revised Companies Act").
1. Background
METI has been engaging in the enhancement of corporate governance to encourage Japanese companies to make quick and bold decisions, with the aim of improving their profitability, earning power, and mid- to long-term corporate value. As one of these efforts, in April 2017, METI published a report titled "Guidebook for Introducing Incentive Plans for Sustainable Corporate Growth as Board Members' Remuneration to Promote Proactive Business Management," with the aim of encouraging companies to introduce incentive plans targeting their board members, in order to contribute to improving their mid- to long-term corporate value. Since then, it has been revising the guidebook in line with revisions to laws, regulations, and other provisions.
2. Outline of the guidebook and the key points in this revision
I. Outline of board members’ remuneration to encourage proactive business management
This section of the revised guidebook explains the policy significance of promoting the introduction of incentive plans into remuneration systems for board members, gives an outline of special arrangements under the Tax System Reform from FY2017 onward, and some other topics. This revision has mainly updated the information regarding a free issue of new shares without contribution, which has been approved pursuant to the Revised Companies Act.
II. Q&A concerning stock-based or performance-based remuneration systems
This section explains topics including the key points for each category as a reference for companies considering introducing a stock-based or performance-based compensation system. The main revised points are as follows, and mainly focus on sections related to the Revised Companies Act and revisions to Ministry of Justice Ordinances, etc. in light of the revisions it contains:
- Revisions associated with the approval of a free issue of new shares under Revised Companies Act (definition and naming of stock-based remuneration plans, Q2-1, Q6-2, Q9 to Q11, Q40, Q45, Q48, Q50, and Q74 in this Q&A)
- Procedures in accordance with the Companies Act regarding stock-based remuneration (Q6-3 to 4, Q8, Q39, and Q75)
- Handling of accounting and taxes regarding stock-based remuneration (Q16 to Q17, Q19 to Q21, Q23, Q26 to Q27, Q30, Q44-1 to 2, Q49-1 to 2, and Q55)
III. Examples of bills on remuneration proposed at shareholder meetings
This section shows an examples of bills on remuneration proposed at shareholder meetings when introducing a stock-based remuneration system for board members. This section has been revised as follows: the existing examples of bills on remuneration proposed at shareholder meetings have been updated, and additional examples of bills have been included that relate to specific transfer-restricted shares and to stock-based remuneration of a type that is granted to board members after terminating their positions. The changes have been made on the premise that a free issue of new shares will be authorized in light of the Revised Companies Act.
IV. Example of transfer-restricted share allotment agreements
This section shows an example of agreements concluded between companies and their board members for granting specific transfer-restricted shares. A new example of transfer-restricted share allotment agreements has been added with the existing examples updated. The changes have been made on the premise that a free issue of new shares will be authorized in light of the Revised Companies Act.
V. Examples of rules for stock-based remuneration
This section shows an example of rules for stock-based remuneration that companies should stipulate when introducing a stock-based remuneration system in which the remuneration is granted to board members after terminating their positions. A new example of rules for stock-based remuneration has been added with the existing examples updated. The changes have been made on the premise that a free issue of new shares will be authorized in light of the Revised Companies Act.
VI. Related laws and regulations
This section includes the provisions of acts, cabinet orders, ministerial orders and cabinet office ordinances related to the Corporation Tax Act, the Income Tax Act, and the Financial Instruments and Exchange Act. It has been updated in light of the latest revisions.
Related material
Division in Charge
Corporate System Division, Economic and Industrial Policy Bureau