Under the Financial Instruments and Exchange Act of Japan and related regulations, Sony is required to disclose the total remuneration paid by Sony Corporation to Directors and Corporate Executive Officers, as well as remuneration of any Director or Corporate Executive Officer who receives total aggregate annual remuneration exceeding 100 million yen from Sony Corporation and its consolidated subsidiaries in a fiscal year, on an individual basis. The following table and accompanying footnotes show the information on such matters that Sony Corporation has disclosed in its annual Securities Report for the fiscal year ended March 31, 2016 filed on June 17, 2016 with the Director General of the Kanto Local Finance Bureau of the Ministry of Finance in Japan.
(1) Total amounts of remuneration paid by Sony Corporation to Directors and Corporate Executive Officers
Fixed remuneration Remuneration linked to business results Phantom restricted stock plan Number of
persons
Amount (Yen in millions)
Number of persons
Amount (Yen in millions)
Number of persons
Amount (Yen in millions)
Directors 10 151 — — 1 32
(*) (***) (*****)
(Outside Directors) (9) (136) (—) (—) (1) (32)
Corporate Executive 8 470 6 534 — —
Officers (**) (****)
Total****** 18 621 6 534 1 32
* The number of persons does not include two Directors who concurrently serve as Corporate Executive Officers, because Sony Corporation does not pay any additional remuneration for services as Director to Directors who concurrently serve as Corporate Executive Officers.
** The number of persons includes two Corporate Executive Officers who resigned on the day of the Ordinary General Meeting of Shareholders held on June 23, 2015.
*** Sony Corporation does not pay remuneration linked to business results to Directors who do not concurrently serve as Corporate Executive Officers.
**** The Remuneration linked to business results includes the amount that was paid in June 2016. Eight Corporate Executive Officers waived their remuneration linked to business results for the fiscal year ended March 31, 2015.
***** The Phantom Restricted Stock Plan includes the amount that will be paid to a Director who resigned on the day of the Ordinary General Meeting of Shareholders held on June 17, 2016.
****** In addition to the above, during the fiscal year ended March 31, 2016, Sony Corporation recorded 397 million yen in expenses for Corporate Executive Officers, for Stock Acquisition Rights granted to Corporate Executive Officers during the fiscal year ended March 31, 2016 or in the past for stock option purposes.
(2) Amounts of remuneration paid by Sony Corporation and its subsidiaries to Directors and Corporate Executive
* The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the fiscal year ended March 31, 2016 was 1,331 yen and was estimated using the Black-Scholes option-pricing model with several assumptions. Refer to Note 17 of the consolidated financial statements for details. The weighted-average fair value per share does not indicate the actual value that would be realized by a Corporate Executive Officer upon the exercise of the above-mentioned stock acquisition rights. The actual value, if any, that is realized by a Corporate Executive Officer upon the exercise of any stock acquisition rights will depend on the extent to which the market value of Sony Corporation’s common stock (“Common Stock”) exceeds the exercise price of the stock acquisition rights on the date of exercise, and several other restrictions imposed on the exercise of the stock acquisition rights, including the period when a Corporate Executive Officer could exercise the stock acquisition rights. Accordingly, there is no assurance that the value realized or to be realized by a Corporate Executive Officer upon the exercise of the stock acquisition rights is or will be at or near the weighted-average fair value per share presented above. In addition, the above weighted-weighted-average fair value per share was calculated to recognize compensation expense for the fiscal year ended March 31, 2016 for accounting purposes and should not be regarded as any indication or prediction of Sony with respect to its future stock performance.
** As noted above, Sony Corporation does not pay any remuneration for services as Director to Directors who concurrently serve as Corporate Executive Officers.
*** Remuneration for Kazuo Hirai, Representative Corporate Executive Officer, is set in U.S. dollars. The reduction of his dollar-based remuneration has been in place since 2012. Apart from the remuneration contained in the above table, Sony also provided certain personal benefits and perquisites, including fringe benefits (and in some instances Sony paid the executive’s income taxes related to his perquisites), totaling 15 million yen to Kazuo Hirai, during the fiscal year ended March 31, 2016.
(3) Basic policy regarding remuneration for Directors and Corporate Executive Officers
The basic policy regarding remuneration for Directors and Corporate Executive Officers, as determined by the Compensation Committee, is as follows:
(a) Basic policy of Director remuneration
Taking into account that the primary duty of the Directors is to supervise the performance of business operations of Sony group as a whole and the fact that Sony Corporation is a global company, in order to improve such supervisory function of the Directors, the following two elements constitute the basic policy for the determination of the remuneration of Directors:
• attracting and retaining an adequate talent pool of Directors possessing the requisite abilities to excel in the global marketplace; and
• ensuring the effectiveness of the supervisory function of the Directors.
Based upon the above, the remuneration of Directors consists of the following two components:
• fixed remuneration; and
• the Phantom Restricted Stock Plan.
The schedule for the amount of each component and its percentage of total remuneration is determined in accordance with the basic policy above. Remuneration of Directors shall be at an appropriate level determined based upon research made by a third party regarding remuneration of directors of both domestic and foreign companies. No Director remuneration is paid to those Directors who concurrently serve as Corporate Executive Officers.
Regarding the Phantom Restricted Stock Plan, points fixed every year by the Compensation Committee shall be granted to Directors every year during his/her tenure, and at the time of resignation, the remuneration amount shall be calculated by multiplying Sony Corporation’s Common Stock price by the accumulated points.
The resigning Director shall purchase Sony Corporation’s Common Stock with this remuneration.
(b) Basic policy of Corporate Executive Officer remuneration
Taking into account that Corporate Executive Officers are key members of management responsible for executing the business operations of Sony, in order to further improve the business results of Sony Corporation, the following two elements shall constitute the basic policy for the determination of the remuneration of Corporate Executive Officers:
• attracting and retaining an adequate talent pool of Corporate Executive Officers possessing the requisite abilities to excel in the global marketplace; and
• providing effective incentives to improve business results on a short-, medium- and long-term basis.
Based upon the above, remuneration of Corporate Executive Officers shall consist of the following four components:
• fixed remuneration;
• remuneration linked to business results;
• remuneration linked to share price; and
• the Phantom Restricted Stock Plan.
The schedule for the amount of each component and its percentage of total remuneration shall be determined in accordance with the above basic policy with an emphasis on linking remuneration to business results and shareholder value. Remuneration of Corporate Executive Officers shall be at an appropriate level determined based upon research made by a third party regarding remuneration of management of both domestic and foreign companies.
Specifically, the amount of remuneration linked to business results shall be determined based upon consolidated business results of Sony Corporation, such as operating income and the level of achievement in respect of the business area(s) for which the relevant Corporate Executive Officer is responsible, and the amount paid to Corporate Executive Officers shall fluctuate within the range from 0 percent to 200 percent, in principle, of the base fixed remuneration amount.
Regarding the Phantom Restricted Stock Plan, points fixed every year by the Compensation Committee shall be granted to Corporate Executive Officers every year during his/her tenure in office, and, at the time of resignation, the remuneration amount shall be calculated by multiplying Sony Corporation’s Common Stock price by the accumulated points. The resigning Corporate Executive officer shall purchase Sony Corporation’s Common Stock with this remuneration.