Management

Announcement on changes to director and executive officer remuneration

—Increase in performance-based compensation ratio and use of ESG indices—

April 5, 2024

Kobe Steel, Ltd.

Kobe Steel, Ltd. announces that it has revised its remuneration system for directors, excluding independent directors and directors who are Audit & Supervisory Committee members, and executive officers (hereinafter collectively referred to as “executives”), effective April 1, as follows.

According to this revision, proposals to revise the payment limit equivalent to the maximum amount of performance-based compensation, as well as the maximum amount to be contributed as funds for acquiring the Company’s shares to the Board Benefit Trust (BBT) will be submitted to the General Meeting of Shareholders scheduled for June.

Details of the revision to executive remuneration

The Company's executive remuneration consists of basic remuneration, performance-based compensation, and medium- to long-term incentive compensation (hereinafter referred to as “stock compensation”). Among them, performance-based compensation and stock compensation will be revised as follows.

1. Increase in performance-based compensation ratio

The ratio of performance-based compensation to basic compensation will be increased as follows in order to increase incentives for executives to improve business performance.

Position	Ratio of each compensation category (Basic : Performance-based : Medium- to long-term incentive)
Position	Current	After revision
President, CEO and representative director	100：30：30	100：60：30
Executive vice president and representative director	100：30：30	100：50：30
Director and executive officer	100：25：25	100：40：25

The percentages in the above table represent the case where performance-based compensation and stock compensation are paid at 100%.
The percentages for director and executive officer are based on a standard remuneration rank.

In addition, we will reduce the amount of basic remuneration for specific positions, taking into account the balance with similar-sized companies based on survey data on executive remuneration levels from external specialized organizations.

2. Use of ESG indices

We will use ESG indices as a non-financial metric for executive remuneration. This will allow executives to actively pursue solutions to various ESG issues, including taking on the challenge of realizing carbon neutrality, in an effort to enhance our Group's corporate value over the medium to long term.

ESG indices will be used to determine payment coefficients for stock compensation, with the aim of sharing the interest in corporate value improvement with shareholders.

Specifically, we will use major global ESG rating agencies’ indices as a metric to evaluate all aspects of E (environmental), S (social), and G (governance) in a comprehensive and objective manner.

ESG rating agencies	Indices	Base value^*	Reference: Our company’s latest scores
CDP	Climate change scores	A	A-
FTSE	ESG scores	3.9 or higher	4.2
MSCI	ESG ratings	AAA	AA

* When the base values are met, the payment coefficients reach their maximum.

Reference: Our Company’s remuneration framework for directors and executive officers

Classification of Remuneration

Category		Description
Basic remuneration		Fixed amount will be paid in cash according to position and compensation rank.
Performance-based compensation	Portion linked to division performance	The payment amount will be determined by multiplying the standard pay amount for each position and remuneration rank by a coefficient ranging from 0 to 200% based on the performance management indicators^* for the company and each business division. Payment will be made in one lump sum after the fiscal year has ended. *The base value of the performance management indicator for fiscal 2021–2023 is an ROIC of 5%, which is defined as a business management indicator under the medium-term management plan.
Performance-based compensation	Portion linked to individual evaluation	The payment amount will be determined by multiplying the basic remuneration for each position and remuneration rank by a coefficient ranging from -5 to 5%, which is determined by comprehensively taking into account individual performance and the status of ESG-related initiatives. Payment will be made in one lump sum after the fiscal year has ended.
Stock compensation	The total of following points will be granted each year. The Company’s shares will be provided on a fixed date every three years according to the cumulative number of points granted. Portion linked to profit of the term The number of points granted in a single year is determined by multiplying the base points for each position and remuneration rank by a coefficient ranging from 0 to 80% according to profit attributable to owners of parent and the status of dividend payment. Portion linked to ESG ratings The number of points granted in a single year is determined by multiplying the base points for each position and remuneration rank by a coefficient ranging from 0 to 40% based on ESG-related indices, such as CDP Climate Change Scores, FTSE Russel’s ESG Scores, and MSCI ESG Ratings.

Percentage of each compensation category

The percentages in the above graph represent the case where performance-based compensation and stock compensation are paid at 100%.
In addition to the above figures, performance-based compensation that reflects individual evaluations will be paid in the range of –5 to 5% of basic compensation.

(Note) The information on this web site is presented "as is." Product availability, organization, and other content may differ from the time the information was originally posted. Changes may take place without notice.

Page top