Notice regarding revision of executive compensation

Fujitsu Limited

Tokyo, April 28, 2022

Fujitsu announced that it has made a resolution at its Board of Directors meeting held today to revise the remuneration of executives. This measure aims to secure excellent talent able to lead Fujitsu toward the realization of its Purpose “to make the world more sustainable by building trust in society through innovation,” link performance better with shareholder value, and establish a highly transparent remuneration system. The revisions included “Revisions to the performance-based stock compensation plan (Performance Share, hereinafter “performance-based stock compensation"),” which will be subject to approval during the 122nd Annual Shareholders’ Meeting scheduled for June 27, 2022.

1. Revision of evaluation indicators for bonuses and performance-based stock compensation for Executive Directors

Fujitsu’s executive compensation consists of bonuses which are compensation linked to short-term business performance and “performance-based stock compensation,” which is a medium- to long-term incentive that emphasizes the connection to shareholder value.
Fujitsu has selected revenue and operating profit of the consolidated financial results as indicators for bonuses and performance-based stock compensation, setting these as management target indicators for each type of compensation. However, in order to provide Executive Directors with an even greater incentive to achieve their performance targets, Fujitsu has decided to add “non-financial indicators” to the evaluation indicators for bonuses, and “EPS (Earnings per Share)” to the evaluation indicators for performance-based stock compensation beginning in fiscal 2022.

(1) Changes in bonuses payment methods

Fujitsu will add the following evaluation indicators:

Fujitsu non-financial indicators:

• Employee Engagement⁽¹⁾
• Customer NPS ®⁽²⁾
• DX Promotion Indices⁽³⁾

Third party indicators:

• DJSI (Dow Jones Sustainability Index)⁽⁴⁾ & CDP Climate Change⁽⁵⁾

To calculate payments, Fujitsu will determine in advance a base amount in accordance with the Executive Directors’ duties and responsibilities and multiply this amount with the degree of achievement of the performance targets for the current fiscal year for consolidated sales revenue and consolidated operating income, the degree of increase in employee engagement, customer NPS ®, and DX promotion indices from the previous fiscal year, as well as the degree of inclusion in a third-party evaluation concerning ESG, by a coefficient corresponding to the highest evaluation acquisition.

(2) Changes in performance-based stock compensation plan

Fujitsu will add "EPS" (Fujitsu’s management target financial indicator) to the evaluation indicators for performance-based stock compensation. To calculate the payment of the performance-based stock compensation at the end of the performance evaluation period, Fujitsu will determine in advance the base number of shares in accordance with duties and responsibilities of Executive Directors and multiply it with the number of shares for each fiscal year which is calculated by multiplying the financial indicators (consolidated sales revenue, consolidated operating income, and EPS) by a coefficient corresponding to the degree of achievement of performance targets during the performance evaluation period (three years).

2. Change in the payment method for performance-based stock compensation plan

In fiscal 2017, Fujitsu introduced a performance-based stock compensation plan. Under this plan, monetary compensation claims comparable to market value of allocated shares are provided to the Executive Directors. The Executive Directors invest these monetary compensation claims in allocated shares to acquire Fujitsu’s shares.
Fujitsu considered the applicable person’s tax obligation arising from compensation paid under this plan and changed the payment method for compensations starting fiscal 2022, and applicable persons will receive a part of the payment in cash equivalent to tax payment funds and the remaining amount in monetary compensation claims for allocation of Fujitsu shares.

3. Changes in the process for determining individual compensation for directors

Decision-making authority for the individual remuneration of directors (the amount of remuneration to be paid according to the indicators used for evaluation and the degree of achievement of targets) currently rests with the Representative Director/CEO, who can determine renumerations within a certain range defined under the decision-making policy of the Board of Directors, given the approval of the Compensation Committee. This process is based on the idea that the Representative as Chief Executive Officer (CEO) of business operations, shall make decisions based on his own ideas.
However, Fujitsu has decided to transfer this authority to the Board of Directors starting fiscal 2022 to ensure a higher level of objectivity, transparency and fairness in the remuneration determination process.

• [1]
  Employee Engagement :
  An indicator of employees' willingness and attachment to work and contribute voluntarily and independently, in sympathy with the direction of the company and purpose.
• [2]
  Customer NPS ® :
  “Customer Net Promoter Score.” An index that measures customer loyalty (the degree to which a customer is trusted or attached to a company, product, or service) in order to understand the improvement or deepening of customer experience and customer experience (CX).
• [3]
  DX promotion indices :
  An index established by the Japanese Ministry of Economy, Trade and Industry to share awareness of the current situation and issues of senior management, business divisions, DX divisions, IT divisions and other relevant parties in order to promote corporate digital management reforms and provide opportunities for awareness that lead to the next action.
• [4]
  DJSI :
  Dow Jones Sustainability Index. Global ESG Investment Index.
• [5]
  CDP Climate Change :
  The CDP, an international non-profit organization, investigates and evaluates efforts to address climate change at the request of investors, etc., and publishes the results.

Related Links

• Notice Related to Revisions to Performance-based Stock Compensation Plan (Performance Share) (Timely Disclosure Data, April 28, 2022)
• Basic Approach to Corporate Governance

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