About Toyoda Gosei

Value Creation Story

Value Creation Strategy

Foundation of Value Creation

Data

Executive Compensation
Directors’ compensation consists of monthly fixedcompensation and performance-based compensationin the form of cash bonuses (short-term incentive) andstock-based compensation (long-term incentive) basedon the idea that directors should be appropriately
incentivized to pursue sustained growth in Toyoda Gosei’svalue. Directors’ compensation is split roughly 70:20:10
among monthly compensation, cash bonuses, and stockbased compensation, respectively.
Monthly compensation is set at a fixed amount thatreflects the recipient’s job responsibilities and experience
as well as compensation levels at other companies. Cashbonuses are based primarily on fiscal yearly consolidated
operating profit. Secondary variables that factor into theirdetermination include the degree to which fiscal yearlyplans are attained, employees’ bonus levels, bonus levels
at other companies, medium- to long-term earnings,
previously paid bonus amounts, and contributions to ESG
management. Stock-based compensation is intended as
an incentive to pursue sustained growth in Toyoda Gosei’svalue. It is paid in the form of restricted stock to promote
greater sharing of value with shareholders.
Director Compensation Scheme
FixedCompensation

Through June 2020
Monthly compensation
Capped at ¥60 million/monthUp to¥720 million annualized()

Short-termLong-term

Performance-based compensation

Cash bonuses[Amount approved at annual
Shareholders’ Meetings]

80%

20%

Directors’ aggregate annual cash compensation (monthlycompensation plus bonuses) is capped at ¥650 million(outside directors’ share of which is capped at ¥65 million).
Directors’ aggregate annual restricted stock-based
compensation is capped at ¥100 million (outside directors
are not eligible for restricted stock-based compensation).
All three compensation caps were approved at the annual
Shareholders’ Meeting on June 12, 2020.
Outside directors and Audit & Supervisory Board
members receive only fixed monthly compensation
because their role is to oversee and audit managementfrom an independent vantage point.
Individual directors’ compensation is set in accord withthe above policies following a fair and transparent review/
reporting process by the majority-independent Executive
Compensation Committee, established in 2019.
At Executive Compensation Committee meetings, outside
directors have made suggestions about further enlarging
the incentive element of director compensation by, e.g.,
adjusting compensation to reflect the extent of directors’
respective environmental contributions.
Total Compensation for Each Officer Class,Total by Each Type of Compensation, and Numberof Officers Receiving the Compensation
Total Amount by Type of Compensation

From July 2020
Monthly
compensation

Cash bonuses

Restricted
stock-based
compensation

70%

Officer Class

Number(Millions of yen)
Total Executive
Fixed
Performance-based Non-cash of Subject
Compensation Compensation compensation Compensation
Officers(Millions of yen) Monthly
Stock-based (People)
Cash bonuses
compensation

20%10%Directors(excluding outsidedirectors)
Audit & Supervisory
Board members(excluding outsidemembers)
Outside officers

Compensation

325

222742867676——

27070——

7* Bonuses are provisions for FY2022.

Internal Audits, Audit & Supervisory Board Members’ Audits, and Accounting Audits
We have set up the Audit Division to handle internal
audits. With the aims of achieving business objectives
and preventing misconduct and mistakes, internal
audits are conducted across the overall business(including audits of functional departments) based onan internal auditing plan approved by management atthe beginning of each term.
The results of internal audits are reported tomanagement, and audited departments are given
recommendations for improvements based on the audit
results. The effectiveness of internal audits is increased
by checking their improvement plans and results.
Each Audit & Supervisory Board member follows theauditing policy and audit plan established by the Audit& Supervisory Board when investigating the Companyand subsidiaries. They attend the meetings of importantdeliberative bodies and committees including theBoard of Directors, General Managers’ Council, andManagement Council, listen to reports on businessfrom directors and others, inspect financial statements
and other important documents, and conduct on-site
audits of offices and subsidiaries to audit theperformance of duties by directors from theperspectives of ensuring legality and appropriateness,
protecting assets and rights, and preventing loss.
Moreover, a special department has been establishedto assist the auditors’ audits.
The certified public accountants who performed theFY2022 accounting audit of Toyoda Gosei were Satoko
Nakatani and Kosaku Kawahara ofPricewaterhouseCoopers Aarata LLC.
Audit & Supervisory Board members, internal auditing
department personnel, and accounting auditors
regularly meet to confirm their respective auditing
systems, auditing policy, auditing plans, implementation
status, and audit results. They cooperate in performing
efficient and effective audits, contacting each other as
needed to exchange ideas and share information.

T OYODA GOSEI REP OR T 20 2377