Governance

The Group will establish effective governance frameworks to ensure the transparency, objectivity, and fairness of the management of the companies and earn society’s trust everywhere it operates. The Board of Directors recognizes fiduciary responsibilities to all stakeholders, including shareholders and investors, and supervises the Group’s overall management by taking responsibility for the Company’s sustainable growth and maximization of mid- to long-term shareholder value (MSV) through the appropriate exercise its authority.

Remuneration and Other Matters Concerning Directors and Executive Officers

Policy for Determining Compensation for Directors and Executive Officers

Independent Directors constitute a majority of the Compensation Committee and its Chairperson is an Independent Director. In addition, the Committee is composed solely of Non-Executive Directors, ensuring its independence from the executive team. The Compensation Committee determines the level and composition of compensation for Directors and Executive Officers. It also monitors decisions on compensation for key management personnel of partner companies based on reports from the Co-Presidents. In determining compensation levels and composition, the Committee collects and analyzes objective information, including social trends, benchmarking against other companies and market compensation levels. In accordance with the Compensation Philosophy and the Design Policies for the Compensation of the Representative Executive Officers & Co-Presidents established by the Compensation Committee, the Committee conducts fair and transparent deliberations and makes decisions.

— Compensation Philosophy —

Overarching Principle

To establish a transparent and well-understood compensation framework and, through individual compensation determined under that framework, to continuously provide appropriate motivation and incentives to key management personnel in pursuit of Maximization of Shareholder Value (MSV).

Guiding Principles

To attract and retain outstanding management talent capable of advancing MSV.

To provide sustained motivation that encourages management talent to perform at the highest level, even in a changing environment.

To function effectively in a manner suited to the current state of business development, the maturity of the organizational structure, the Company’s values and the communities in which it operates.

— Design Policies for the Compensation of the Representative Executive Officers & Co-Presidents —

Compensation linked to MSV

Total compensation commensurate with the performance of the Representative Executive Officers & Co-Presidents

A compensation structure that encourages appropriate and decisive risk-taking

Composition of Compensation for Directors and Executive Officers

Composition of Directors’ Compensation

Compensation for Directors who do not concurrently serve as Executive Officers (Independent Directors) consists of Job-based Compensation and allowances for committee memberships and other roles. Taking into account social circumstances, benchmarking against other companies and market compensation levels, the Company determines compensation at levels that enable it to attract and retain outstanding management talent capable of appropriately monitoring the management of the globally expanding Nippon Paint Group.

Composition of Compensation for the Representative Executive Officers & Co-Presidents

Compensation for the Co-Presidents takes into account compensation levels and structures in their home countries, continuity with prior compensation and benchmarking against other companies. Through dialogue with the Co-Presidents and ongoing communication with key management personnel of partner companies, the Compensation Committee comprehensively evaluates performance from both financial and non-financial perspectives and redetermines the total compensation for the following fiscal year from zero each year.

Composition of Executive Officers’ Compensation

Compensation for Executive Officers, excluding the Representative Executive Officers & Co-Presidents, consists of Job-based Compensation, Performance-linked Compensation and Long-term Incentives. The Compensation Committee determines the amounts of Performance-linked Compensation and Long-term Incentives based on evaluations by the Co-Presidents. Performance-linked Compensation is determined through a comprehensive assessment that incorporates non-financial as well as financial performance, providing appropriate incentives through flexible and fair evaluations in a rapidly changing business environment. Long-term Incentives are cash compensation determined through a comprehensive assessment of longer-term sustainability, contributions to the overall optimization of the Group and expectations for future contributions. They are paid in thirds for each fiscal year over a three-year period.

For details of the process for designing compensation for Directors and Executive Officers and the composition of such compensation, please refer to the Annual Securities Report .

For details of executive compensation and other matters, please refer to Executive Compensation.