Takeda Pharmaceutical Company Limited announced that the meeting of the Board of Directors resolved to continue the long-term incentive plan (“LTI”) for members of the Board of Directors, which has been adopted since fiscal 2016(*1).
1. Outline of the LTI
(1) Whereas the Company has introduced the LTI for Directors of the Company since fiscal 2016. Specifically, (1) for Directors who are not members of the Audit and Supervisory Committee (excl. External Directors and Directors residing overseas) (“Directors Eligible for Performance-linked Compensation”), the highly transparent and objective compensation system for Directors that is closely linked to company performance has been adopted in order to improve the Company’s mid- and long-term performance as well as raise awareness of the need to help increase the Company’s value, and on the other hand, (2) for Directors who are members of the Audit and Supervisory Committee and External Directors (“Directors Not Eligible for Performance-linked Compensation”), the highly transparent and objective compensation system for Directors that is not linked to company performance has been adopted, in order to ensure that their compensation is within the appropriate scope in consideration of the role to be fulfilled by them, and to thereby further promote their awareness of sharing common interest with the shareholders, while ensuring their audit/supervisory functions for the Company’s management(*2).
(2) The LTI utilizes a mechanism called a Board Incentive Plan Trust (“BIP Trust”) under which the BIP Trust shall be established (including the cases where the Trust period of BIP Trust already established in the previous year is extended to allow the said BIP Trust to be continued; the same shall apply hereinafter) for Directors who are not members of the Audit and Supervisory Committee (excluding Directors residing overseas who are not External Directors) and Directors who are members of the Audit and Supervisory Committee (BIP Trust associated with Directors who are not members of the Audit and Supervisory Committee shall be referred to as the “NSV (Non-Supervisory) Trust” and those who are as the “SV (Supervisory) Trust” hereinafter.)
The NSV Trust in fiscal 2018 is formed by partially revising the existing BIP Trust, which was established as a long-term incentive plan (“old LTI”) for Directors (excl. External Directors and Directors residing overseas) of a then Company with Board of Company Auditors in 2015, according to the content of the LTI to include an extension of the Trust term thereof and additional entrustment of money thereto, so that the said BIP Trust can be continued. Also, the SV Trust in fiscal 2018 is formed by allowing the SV Trust already established in fiscal 2016 to be continued and by adding additional entrustment of money into the said SV Trust.
(3) The BIP Trust is an incentive plan for Directors based on the Performance Share system and Restricted Stock system. The Company shares that are acquired by the BIP Trust and the amount of money equivalent to Company shares converted into cash (“Company Shares, etc.”) will be vested or paid (“vested, etc.”) to (1) Directors Eligible for Performance-linked Compensation based on the achievement of performance goals, etc. (*3) at a set time along with dividends from Company shares. (2) For Directors Not Eligible for Performance-linked Compensation, the Company shares shall be vested, etc., at the time of resignation, a set amount regardless of the achievement of performance goals, etc. along with dividends from Company shares in light of securing proper and objective audit/supervisory function on the validity of execution.
(*1) The compensation for Directors who are not members of the Audit and Supervisory Committee (excluding External Directors) consists of “Base Compensation,” “Bonus,” and “Performance-linked stock compensation.” The compensation for Directors who are members of the Audit and Supervisory Committee and External Directors consists of “Base Compensation” and “Non-Performance-linked stock compensation.”
(*2) The Company has established the Compensation Committee with an External Director as its Chairperson, to serve as an advisory organization for the Board of Directors to ensure the appropriateness of Directors’ compensation, etc. and the transparency in the decision-making process thereof. The continuation of this LTI has been deliberated at the Compensation Committee, prior to the resolution by the Board of Directors. The evaluation of the achievement of performance goals, etc. will be discussed at the Compensation Committee, and deliberated and determined at the Board of Directors.
(*3) Performance goals are linked with mid- to long-term performance indicators, and adopt targets involving the achievement, etc. of transparent and objective indicators such as consolidated revenue, free cash flow, EPS, and R&D target, etc.
