Corporate Governance | Compensation for Directors and Executive Officers
Compensation Paid to Directors and Executive Officers
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(Millions of Yen)
Compensation*4 (Millions of Yen)
(Deferred Compensation)*5 (Millions of Yen)
(Millions of Yen)
- The number of people includes 1 Executive Officer who was appointed in October 2022. There were 10 Directors and 8 Executive Officers as of March 31, 2023. Compensation to Directors who were concurrently serving as Executive Officers is included in that of Executive Officers.
- Base Salary of ¥871 million includes other compensation (commuter pass allowance) of ¥252 thousand.
- In addition to base salary of Executive Officers, ¥16 million of corporate housing costs, such as housing allowance and related tax adjustments, were provided.
- Out of the Yearly Bonus, amounts to be paid in cash after the Fiscal Year close are shown.
- Deferred compensation (such as RSU and stock options) granted during and prior to the fiscal year ended March 31, 2023 is recognized as expense in the financial statements for the fiscal year ended March 31, 2023.
- Subsidiaries of the Company paid ¥68 million to Outside Directors as compensation, etc. for their directorship at those subsidiaries for the fiscal year ended March 31, 2023.
Matters Relating to Performance-Linked Compensation
- Yearly Bonus as Performance-Linked Compensation
Among the compensations for the Directors and the Executive Officers which is composed of the Base Salary, the Yearly Bonus and the Long-term Incentive Plan, the Company sets the Yearly Bonus as the PerformanceLinked Compensation. In relation to the Yearly Bonus, in principal, half of the amount of the Yearly Bonus of the Directors and Executive Officers is paid in cash and the remainder amount is paid by Nomura's shares in multiple years - installments as Deferred Compensation the following year after the Fiscal Year onwards.
Performance Indicator to be used for calculation of the Yearly Bonus
The Nomura Group elects the Return On Equity ("ROE"), which is set out as the most important performance indicator for the Nomura Group, as the performance indicator to be used for calculating a basis for determination of the Yearly Bonuses for the Directors and Executive Officers. The reason of the election of ROE is to align with the management vision and the business strategy of the Nomura Group.
Calculation method of the Yearly Bonus
<Outline of calculation method>
In calculating the Yearly Bonus for the Directors and the Executive Officers, a different calculation method is applied depending on the position.<Specific calculation method by position>
- With respect to the President and the Group CEO, given the overall responsibility of business execution of the Nomura Group, the basic amount of the Yearly Bonus is calculated based on the level of achievement in actual value against the target value regarding ROE. In addition, Total Compensation ("TC"), including the Base Salary and the Annual Bonus, is determined by considering, as needed, qualitative evaluation competitor benchmarking etc. by the Compensation Committee.
- With respect to the Directors and the Executive Officers, their Annual Bonus and TC are determined based on the ones of the Group CEO, reflecting individual roles and responsibilities, respective jurisdiction's regulations and compensation level etc. in addition to the qualitative elements.
- With respect to the chairman of the Board of Directors, it is treated in the same matter as the Executive Officers.
<Actual value regarding the performance indicator used for the calculation of the Yearly Bonus>
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Performance Indicator Target Value Actual Value for The Fiscal Year ROE 8.0% 3.1%
Yearly Bonus of Director of the audit committee member and Outside Directors
With respect to the Director of the audit committee member is paid in cash only, to exclude equity-linkage of its compensation, so as to keep its independency from business execution. Also, Outside Directors are out of the scope of the Yearly Bonus.
Matters Relating to Non-Monetary Compensation
- Deferred Compensation (equity-linked compensation)
The Company sets half of the amount of the Yearly Bonus of the Directors and Executive Officers. In principle, equity-linked compensation (Restricted Stock Unit ("RSU"), Notional Stock Unit ("NSU") ) that falls under the Non-Monetary Compensation is used for payment of the amount.
Outline of current Deferred Compensation Awards
The outline of current Deferred Compensation Awards is as follows.
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Type of Award Key Features RSU awards
- Settled in Nomura's common stock.
- Graded vesting period is set as three years in principle.
- It is introduced as the Deferred Compensation since the fiscal year ended March 31, 2018.
- In principle, it has been granted in May every year.
- Linked to the price of Nomura's common stock and cash-settled.
- Same as RSU awards, graded vesting period is set as three years in principle.
- Following the introduction of RSU as a principle vehicle in the fiscal year ended March31, 2018, NSU awards are less commonly used in Nomura.
- Same as RSU awards, in principle, it has been granted in May every year.
As stated above, RSU awards have been introduced as a principle vehicle from the fiscal year ended as of March 31, 2018 and replaced with stock acquisition rights and other awards.
Effect of payment of deferred compensation as equity-related compensation
By providing deferred compensation as equity-linked compensation, the economic value of the compensation is linked to the stock price of Nomura, and a certain vesting period is set.
- Alignment of interests with shareholders.
- Medium-term incentives* and retention by providing an opportunity for the economic value of Deferred Compensation at the time of grant to be increased by a rise in shares during a period of time from grant to vesting.
- Promotion of cross-divisional collaboration and cooperation by providing a common goal of increasing corporate value over the medium to long term.
In line with the introduction of RSU, among the equity-linked compensation, as the principal vehicle for Deferred Compensation, in principle, Nomura's common stock will be paid instead of cash over the threeyear deferral period from the fiscal year following the fiscal year in which the deferred compensation was granted. Since the number of shares to be paid is determined based on the Nomura's share price at the time of grant, the increase in Nomura's share price will increase the economic value of Deferred Compensation at the time of vest. Since the increase in share prices reflects the increase in corporate value, alignment of interest with that of shareholders, in addition to medium-term incentive effects for the Directors and Executive Officers, will be achieved.
Clawback prescribed in Deferred Compensation
Any voluntary resignation, material modification of the financial statements, material breach of Nomura's internal policies and regulations etc.are subject to forfeiture, reduction or clawback (Conclusion of individual contracts including "clawback clause").Due to these benefits, the active use of Deferred Compensation is also recommended by regulators in the key jurisdictions in which we operate.
With respect to Deferred Compensation in Nomura, a deferral period is generally three or more years from the following fiscal year or later. This is in line with the "Principles for Sound Compensation Practices" issued by the Financial Stability Board which recommends, among other things, a deferral period of there or more years.
Matters Relating to Individual Directors and Executive Officers' Compensation Determined by Compensation Committee
The "Compensation Policy of Nomura Group" and the "Compensation Policy for Directors and Executive Officers of NHI" are provided below. Regarding the "Compensation Policy for Employees", please refer to Compensation for Employees.
- Method of Determining Compensation Policies
As a company with three Board Committees, as defined under Japanese corporate law, Nomura Holdings, Inc. ("NHI") has established an independent statutory Compensation Committee. The Compensation Committee has set the "Compensation Policy of Nomura Group" and "Compensation Policy for Directors and Executive Officers of NHI."
Compensation Policy of Nomura Group
The "Compensation Policy of Nomura Group" is as follows:
Nomura Group has established compensation policy for Nomura Group officers and employees, including directors and executive officers of NHI. This policy is referred to as the "Basic Policy" and is as follows.
As a company with three Board Committees, as defined under Japanese corporate law, NHI has established an independent statutory Compensation Committee. A majority of the Committee which comprises primarily Outside Directors as members. The Committee has established both our Basic Policy and our Compensation Policy for Statutory Officers, based on which compensation for Directors and Executive Officers of NHI is determined.
With respect to the relevant policies and total compensation for our officers and employees other than NHI's Statutory Officers, decisions regarding employment and remuneration matters are delegated to our "Human Resources Committee" ("HRC") by the Executive Management Board of NHI. The HRC is chaired by the Group CEO and at a minimum, composed of the Chief Finance Officer and Chief Risk Management Officer. The HRC determines above matters with support from respective remuneration committees in each region.
The Committee shall establish the Compensation Recovery Policy of NHI to comply with, among others, the U.S. Securities Exchange Act of 1934, as amended and shall determine matters with respect to compensation of covered officers who are statutory officers of NHI under Japanese law, and the HRC shall be responsible for the management, operation, interpretation and administration of such policy.
Compensation Policies and Practices for Nomura Group's Talent
We believe our employees are our key assets in contributing to society, as in line with our mission of "We help to enrich society through our expertise in capital markets".
Compensation for Nomura Group's Talent is designed to support achieving sustainable corporate growth, increasing corporate value over the medium and long-term and maintaining sound and effective risk management, while contributing to the interest of our shareholders. In addition, to ensure that we attract, retain, motivate and develop talent, the level and structure of remuneration takes into account the roles and responsibilities of individuals as well as the market pay levels in Japan and overseas, and in line with any relevant laws and regulatory expectations.
1) Sustainable corporate growth and increasing corporate value over the medium and long-term
Our employee compensation policies aims to reinforce our corporate philosophy, to promote healthy corporate culture and behavior in line with our "Code of Conduct" and to align to our commitment to Environmental, Social and Governance ("ESG") considerations.
Based on a pay-for-performance principle, our employee compensation programs are designed to be competitive in the market and aligned to our strategic objectives and the goal of sustainable growth and increasing corporate value over the medium and long-term.
2) Sound and effective risk management
We seek to maintain sound and effective risk management with an appropriate risk appetite. We update performance measurement metrics and indicators which referred to determining compensation by considering both financial and non-financial risks underlying with each business. Qualitative factors such as conduct, compliance, professional ethics and corporate philosophy are also considered in determining the final amount of remuneration provided to each officer and employee, which may include a reduction in compensation as a result of disciplinary actions.
In addition, when granting compensation, it shall be specified that in the event of a material revision of financial statements or a material violation of applicable laws and regulations or Nomura Group rules and policies, compensation may be subject to reduction, suspension, forfeiture of rights, cancellation, offset by other compensation, or re-payment (so-called "clawback").
3) Alignment of interests with shareholders
Certain of our officers and employees' remuneration package includes stock-based compensation awards linked to share price of NHI with an appropriate deferral period applied, in order to align with shareholders' interests.
Approval and Revision of the Basic Policy
The approval, amendment or repeal of the Basic Policy are governed by our Compensation Committee of NHI.
Compensation Policy for Directors and Executive Officers of NHI
"Compensation Policy for Directors and Executive Officers of NHI (the "Policy for Statutory Officers") " is as follows.
The compensation of our Statutory Officers consists of base salaries, annual cash bonuses and long-term incentive plans.
1) Base salary
- Base salary is determined based on factors such as professional background, career history, responsibilities and market compensation levels for similar roles at our competitors.
- With respect to our Executive Officers, a portion of base salary may be paid in deterred stock-based compensation awards with appropriate vesting periods to align with the medium to long-term interests of our shareholders.
2) Annual bonuses
- Annual bonuses of Directors and Executive Officers are determined considering both quantitative and qualitative factors. Quantitative factors include financial group and divisional performance. Qualitative factors include the achievement of individual goals and individual contribution.
- In principle, a certain portion of annual bonus payment are deferred.
- With respect to the Group CEO, given the overall group responsibilities for business execution, the basic amount of the annual bonus is calculated based on the level of achievement against KPI(s). In addition, competitor benchmarking is considered when determining final annual bonus amount.
- With respect to Statutory Officers other than the Group CEO, the annual bonus amount is determined in the same way as the CEO annual bonus, namely using a standard baseline and considering factors such as specific roles and responsibilities of individual, relevant local remuneration regulations and compensation levels in each jurisdiction, and individual performance.
- Audit Committee members and Outside Directors are not eligible to receive a bonus in order to maintain their independence from business execution.
- Mid-term Incentive Plan
In principle, a certain portion of annual bonus may be granted through deferred stock-based compensation awards with appropriate vesting periods to align with the medium-term interests of shareholders.
3) Long-term Incentive Plan
- Long-term incentive plans may be awarded to Directors and Executive Officers, depending on factors such as their individual responsibilities, and performance.
- Payments under long-term incentive plans are made when a certain level of achievements are accomplished. Payments are made in stock-based awards with appropriate vesting periods to align with the long-term interests of our shareholders.
When granting compensation, it shall be specified that in the event of voluntary resignation, a material revision of financial statements or a material violation of applicable laws and regulations or Nomura Group rules and policies, compensation of Directors and Executive Officers may be subject to reduction, suspension, forfeiture of rights, cancellation, offset by other compensation, or re-payment (so-called "clawback").