Corporate Governance | Compensation for Directors and Executive Officers

Compensation Paid to Directors and Executive Officers

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  Number of People(1) Fixed Compensation Performance-Linked Compensation Total
Base Salary(2)(3) Cash Bonuses Notional Stock Unit(4) Restricted
Stock Unit(4)
Directors
(Outside Directors)
13
(10)
389
(217)
116
(-)
221
(-)

(-)
726
(217)
Executive Officers 8 598 1,206 2,412 241 4,457
Total 21 987 1,322 2,633 241 5,183

(Notes)

  1. The number of people includes 1 Director who retired in June 2023, and 2 Directors who were appointed in June 2023. There were 11 Directors and 8 Executive Officers as of March 31, 2024. Compensation to Directors who were concurrently serving as Executive Officers is included in that of Executive Officers.
  2. Includes other compensation (commuter pass allowance) of ¥268 thousand.
  3. In addition to base salary of Executive Officers, ¥16 million of corporate housing costs, such as housing allowance and related tax adjustments, were provided.
  4. Deferred compensation granted during and prior to the fiscal year ended March 31, 2024 is recognized as expense in the financial statements for the fiscal year ended March 31, 2024. Furthermore, the expenses related to the Long-term Incentive Plan, which was approved for implementation at the Compensation Committee on March 29, 2024, will be recognized for the performance evaluation period starting from the fiscal year ended March 2025 and are not included in the figures mentioned above.
  5. Subsidiaries of the Company paid ¥76 million to Outside Directors as compensation, etc. for their directorship at those subsidiaries for the fiscal year ended March 31, 2024.

Matters Relating to Performance-Linked Compensation

Calculation Method of the Performance-Linked Compensation

Performance Indicator to Be Used for Calculation of the Performance-Linked Compensation

Quantitative Elements

In order to ensure alignment with Nomura Group's management vision and business strategy, we select key performance indicators such as ROE and performance metrics that form the basis for its calculation. Additionally, we choose stock price-related indicators to promote alignment of interests with shareholders.

* Please scroll horizontally to look at table below.

Type of Elements Item Actual for the fiscal year ended March 31, 2024
Profit and Loss Net revenue 1,562 billions of yen
Revenue Cost Coverage Ratio(1) 82.5%
Income Before Income Taxes 274 billions of yen
Per Share Information EPS 52.69 yen
Capital Efficiency ROE 5.1%
Shareholder Returns Total Shareholder Return("TSR")(2) 196.3%

(Notes)

  1. Ratio calculated by dividing Total non-interest expenses by Net revenue
  2. The value obtained by dividing the total of stock price fluctuations and dividends in the current business year by the stock price at the end of the previous business year.

Qualitative Elements

To promote enhancement of Nomura Group's corporate value and the realization of a sustainable society, we have selected strategic management, as well as initiatives related to community, talent, and DEI, as evaluation criteria.

Matters Relating to Stock Based Compensation and Non-Monetary Compensation

Outline of Current Stock Based Compensation Awards.

The outline of current Stock Based Compensation Awards is as follows.

Type of Award Key Features
Restricted Stock Units ("RSUs")
  • Introduced as the main form of Deferred Compensation since the fiscal year ended March 31, 2018.
  • Settled in the Company's common stock.
  • Graded vesting period is set as three years in principle.
Notional Stock Units ("NSUs")
  • Linked to the price of the Company's common stock Cash-settled in local currency.
  • Graded vesting period is set as three years in principle.
Performance Share Units ("PSUs")
  • Introduced as the Long Term Incentive Plan since the fiscal year ended March 31, 2024.
  • The number of shares to be awarded will be determined by depended on the degree of achievement of the performance targets of the three fiscal years.
  • Performance evaluation period is set as more than three years in principle.

Stock Based Compensation as Non-Monetary Compensation

The company sets half of the amount of the Yearly Bonus of the Directors and Executive Officers as Deferred Compensation. In principle, RSU that falls under the Non-Monetary Compensation is used for payment of the amount. Furthermore, the company have introduced PSU as a long-term incentive plan during the fiscal year ended March 31, 2024.

Introduction of PSU

The company has decided, at a meeting of the Compensation Committee held on March 29, 2024, to introduce Performance-based Share Units (Performance Share Unit: PSU) as a long-term incentive plan. The purpose of introducing PSU is to enhance NHI's corporate value over the medium to long term and strengthen alignment of interests with shareholders.

Under NHI's PSU program, the base number of shares to be granted is initially determined based on NHI's performance and other factors each fiscal year. Following the performance period, the number of shares to be awarded will vary from 0% to 150% of the base number of shares depending on the degree of achievement of the performance targets for the three fiscal years. The settlement of the PSUs will be primarily in treasury stock.

The performance indicators used in the evaluation are ROE and TSR. Please refer to the following for details.

Performance Indicators Selected as Basis of Calculation

In order to enhance NHI's corporate value over the medium to long term and to align NHI's interests with those of its shareholders, a combination of ROE (average value over the performance evaluation period) and TSR (absolute value over the performance evaluation period) will be the basis to calculate the award amount.

Calculation Method for the Base Number of Shares and the Number of Shares to Be Granted

1) Calculation method for the base number of shares:
The base number of shares shall be calculated by dividing the amount determined with reference to the performance and qualitative evaluation of the target fiscal year, as well as competitor benchmarking by the price of NHI common stock at the time of grant.

2) Calculation method for the number of shares to be granted:
After the end of the performance evaluation period, the number of shares to be granted will be calculated in accordance with the following method.

a) Performance Evaluation Indicators and Grant Ratio

* Please scroll horizontally to look at table below.

Performance
Indicators
Composition Ratio Change in the Grant Ratio Evaluation Method
ROE 50% 0%~150% Calculated based on the actual (average) values for the three-year performance evaluation period
TSR 50% 0%~150% Calculated based on the actual value (absolute value) during the three-year performance evaluation period

The calculation methods for ROE and TSR, which form the basis for performance evaluation, are as follows:

<ROE>
If the actual value (average value) for the performance evaluation period of 3 years reaches the management goal of 8% set by Nomura Group, a certain number of benchmark shares will be granted. However, if the actual value does not exceed either the lowest value of the past 3 business years, including the grant year, or 3%, no grant will occur. Additionally, if the actual value reaches 5%, 50% of the benchmark shares will be granted, and if it exceeds 12%, 150% of the benchmark shares will be granted.

<TSR>
If the actual value (absolute value) for the performance evaluation period of 3 years reaches 125%, a certain number of benchmark shares will be granted. On the other hand, if the actual value is 100% or below, no grant will occur. Furthermore, if the actual value exceeds 150%, 150% of the benchmark shares will be granted. The calculation process of the actual value is as follows:
3-Year TSR = (Closing Stock Price (B) + Total Dividends during the performance evaluation period) / Initial Stock Price (A)
A: Initial Stock Price (Average closing price one month before the start of the performance evaluation period)
B: Final Stock Price (Average closing price one month before the end of the performance evaluation period)

b) Calculation method for the number of shares to be paid:
The number of shares to be granted is calculated by multiplying the base number of shares by the weighted average of the grant ratio based on ROE and the grant ratio based on TSR. The base number of shares for the PSU for the fiscal year ended March 31, 2024 has been calculated as 782,100 shares, and the number of shares when applying a payout rate of 150% is 1,173,200 shares.

Calculation method for the number of shares to be paid:

c) Performance evaluation period and payment schedule:
The performance evaluation period shall be three years from the fiscal year in which the base number of PSUs is determined. After the performance evaluation period has concluded, the evaluation shall be finalized and the stock compensation based on PSUs shall be paid.

Performance evaluation period and payment schedule:

Delivery Method

The shares awarded at the end of the performance period will be primarily issued from treasury stock.

Effect of Payment of Stock Based Compensation as Deferred Compensation

By providing equity-linked compensation as deferred compensation, the economic value of the compensation is linked to the stock price of Nomura, and a certain vesting period is set.

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 three or more years.

Matters Relating to Individual Directors and Executive Officers' Compensation Determined by Compensation Committee

Method of Determining Compensation Policies

As the Company is organized under the Committee System, the Compensation Committee has set the "Compensation Policy of Nomura Group" and "Compensation Policy for Directors and Executive Officers of Nomura Holdings, Inc." The Compensation Committee reviews and updates these policies.

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 Nomura Holdings, Inc. ("NHI"). This policy is referred to as the "Basic Policy" and is as follows.

Compensation Governance

As a company with three Board Committees, as defined under Japanese corporate law, NHI has established an independent statutory Compensation 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 an individual appointed by the chairman, taking into account financial and risk management perspectives. The HRC determines above matters with support from respective remuneration committees in each region.

The HRC establishes the Compensation Recovery Policy of NHI to comply with, among others, the U.S. Securities Exchange Act of 1934, as amended, and determines matters with respect to compensation of covered officers who are statutory officers of NHI under Japanese law, and is responsible for the management, operation, interpretation and administration of such.

Compensation Policies and Practices for Nomura Group's Talent

We recognize that our employees are key in pursuing our Purpose, which is "We aspire to create a better world by harnessing the power of financial 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 aim 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 sound and 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 used for determining compensation by considering both financial and non-financial risks underlying 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.

Policy for Statutory Officers

Compensation of Directors and Executive Officers is divided into fixed compensation and performance-linked compensation, with fixed compensation consisting of base salary and performance-linked compensation consisting of an annual bonus and long-term incentive plans. In order to provide incentives for the improvement of medium to long-term corporate value and to align the interests of shareholders, a portion of the compensation is paid through stock-based compensation awards with specified deferral periods.

<Composition of Compensation for Directors and Executives>

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Fixed Compensation Performance-Linked Compensation
Base salary Annual Bonuses Long-term Incentive Plan

Fixed Compensation

  • Base salary is paid in cash and determined based on factors such as professional background, career history, responsibilities and compensation standards of related business fields.

Performance-Linked Compensation

  • With respect to the Group CEO, given the overall responsibility of business execution of the Nomura Group, the basic amount of the performance-linked compensation is calculated based on the level of achievement in actual value(s) against the target value(s) of key performance indicator(s) and performance metrics that form the basis for their calculation. In addition, qualitative evaluation competitor benchmarking is also reflected when determining final annual bonus amount.
  • With respect to Directors and other Executive Officers, the amount of annual bonus is determined with the annual bonus of Group CEO as standard baseline, taking into consideration roles and responsibilities, local remuneration regulations and compensation levels in each jurisdiction etc., in addition to a qualitative evaluation of individual performance.
  • Audit Committee members and Outside Directors are not bonus-eligible in order to maintain and ensure their independence from business execution.

a) Annual Bonuses

  • In principle, certain portion of any annual bonus payment should be deferred.

b) Long-term Incentive Plan

  • Payments under long-term incentive plans are made when a certain degree of achievements are accomplished.
  • Payments are made in stock-based compensation awards.

When granting compensation, 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").

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