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  5. 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"

March 31, 2023

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 for 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 addition of Q&A sections concerning cases where companies introduce stock-based remuneration for their employees in line with the information provided in the link_icon"Practical Guidelines for Corporate Governance Systems (CGS Guidelines) ” revised in July 2022.

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 for 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 promote proactive business management

This section of the revised guidebook explains the significance of the policy to promote 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 covers other topics. In line with the revision of the CGS Guidelines, the revision of the guidebook has mainly updated the sections corresponding to those in the revised CGS Guidelines.

Ⅱ. Q&A concerning stock-based or performance-based remuneration systems

This section provides explanations, such as the key points for each category as a reference for companies considering the introduction of a stock-based or performance-based remuneration system. In line with the revision of the CGS Guidelines, this revision of the guidebook has newly added the following explanations of points of consideration and other information for companies considering the introduction of a stock-based remuneration system for employees who are candidate board members. Highlights of the main revised sections are as follows:

Ⅲ. Examples of bills on remuneration proposed at shareholder meetings

This section shows examples of bills on remuneration proposed at shareholder meetings, which are necessary for companies when introducing a stock-based remuneration system for board members.

Ⅳ. Examples of transfer-restricted share allotment agreements

This section shows examples of agreements concluded between companies and their board members for granting specific transfer-restricted shares. In line with the revision of the CGS Guidelines, the revision of the guidebook added examples of transfer-restricted share allotment agreements for companies when issuing shares to employees.

Ⅴ. Examples of rules for stock-based remuneration

This section shows examples of rules for stock-based remuneration that companies must stipulate when introducing a stock-based remuneration system in which the remuneration is granted to board members after terminating their contracts. In line with the revision of the CGS Guidelines, the revision of the guidebook added examples of rules for stock-based remuneration for companies when issuing shares to employees.

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 of these provisions.

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Divisions in Charge

Southwest Asia Office, Trade Policy Bureau

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