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Corporate Governance

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Compensation Policy and the Amount of Compensation

(Source: Corporate Governance Report (July 6, 2023))

Compensation Policy

The Compensation Committee establishes compensation policy for the compensation of each Director and/or Executive Officer as follows:
Since the main responsibility of Directors is to supervise the execution of the overall Group’s business and to increase corporate value, “Compensation for Directors” is determined at an adequate level to secure highly competent personnel and ensure effective work of the supervisory function, and increasing corporate value from a medium-to long-term perspective.
Since the responsibility of Executive Officers is to increase corporate value in their capacity as executives responsible for companies or divisions within the Group, “Compensation for Executive Officers” is divided into the fixed compensation and the performance-linked compensation, and deter-mined at an adequate level to secure highly competent personnel and ensure the effectiveness of their compensation package as an incentive to improve business performance.

a. Compensation for Directors

Directors are paid the Base salary (fixed amount) and the Committee Allowance (fixed amount) in accordance with the scope of their responsibilities. If multiple committees concurrently serve, the applicable Committee Allowances will be added up and paid. Directors who concurrently hold offices as an Executive Officer are paid only the compensation for Executive Officers specified in b. below and not paid compensation for Directors.
The Base Salary and the Committee Allowance are paid by cash and shares of the Company at a prescribed rate.
When traveling to attend a Meeting of the Board of Directors, Executive Session of the Board, or a Committee held in a non-resident country, the Attendance Allowance is paid according to the actual travel record.
With regard to compensation paid by stock that is paid in the form of the Company’s stock, mechanisms such as restricted stocks with transfer restrictions until retirement.

b. Compensation for Executive Officers

Compensation for Executive Officers consists of Base salary (fixed amount), determined according to rank, and performance-linked compensation.
Performance-linked compensation is determined in accordance with the performance of the Company as a whole and managed business and Medium-to Long-Term Management Indicators under the charge of the Executive Officers during the fiscal year.
The Base Salary and the Performance-linked compensation are paid by cash and shares of the Company at a prescribed rate.
With regard to compensation paid by stock that is paid in the form of the Company’s stock, mechanisms such as restricted stocks with transfer restrictions until retirement are used to secure effectiveness as an incentive for medium- to long-term improvement of business performance.

＜Performance-linked Compensation＞

Performance-linked compensation is a monetary compensation claim to determine the total amount to be paid in such a way as to function as an incentive to increase our corporate value, and to allocate a certain percentage in accordance with the position as a monetary compensation claim. The monetary compensation claim is invested in kind by the Company as an investment property. In addition to having the executive officers hold our common stock, the remaining percentage of the total amount paid is paid in cash.

Performance-linked compensation is set at a minimum of ¥0, and payment amounts will change due to the degree of achievement of certain performance targets, at a level that takes into account the payment results at peer companies.

The following table shows the methods used to determine the indicators and amounts related to performance-linked compensation.

Total amount paid	＝	(a)	Short-term incentive compensation
	＋	(b)	Long-term incentive compensation

Method of determining (a)

The amount in (a) is determined by adding or subtracting an amount ranging from the individual assessment of +/-25% to the amount calculated by multiplying the multiplication rate by position based on (i) the degree of achievement of the current fiscal year's EBITDA against our managerial accounting objectives and (ii) the degree of achievement of the current fiscal year's ROIC against our managerial accounting objectives, respectively, by the level of the amount by position.
With regard to (i) EBITDA, for executive officers in charge of individual business divisions, the amount is calculated by adding up half of the amount calculated based on indicators for the company as a whole and the business division for which he or she is responsible, and for other executive officers, the amount is calculated based on indicators for the company as a whole. With regard to (ii) ROIC, for all executive officers, the amount is calculated based on indicators for the company as a whole.

Method of determining (b)

The amount in (b) is calculated by multiplying the multiplication rate by position according to the results of relative TSR (total shareholder return) for 3 years by the monetary level for each position. The 3-year relative TSR calculation method is as follows:

3-year relative TSR

＝

our 3-year TSR

－

3-year capitalization-weighted average TSR of the peer group

The peer group consist of 11 companies that are similar to our business lineup and company size etc. Evaluation indicators were selected from the viewpoint of contributing to awareness of the enhancement of long-term corporate value and shareholder value.

Our 3-year TSR is calculated as follows:

Total shareholder return

＝

(((1 + R(c))×P(c)/P(o))－1)×100

R(c)

＝

(1＋D(1)/P(1))×(1＋D(2)/P(2))×(1＋D(3)/P(3))×(Omission)×(1＋D(n)/P(n))－1

D(1)	＝	First dividend amount in each performance period
D(2)	＝	Second dividend amount in each performance period
D(3)	＝	Third dividend in each performance period
(Omission)
D(n)	＝	Dividend amount at the n times in each performance period
P(1)	＝	Stock price on the ex-dividend date of the first dividend in the first year of each performance period
P(2)	＝	Stock price on the ex-dividend date of the second dividend in the first year of each performance period
P(3)	＝	Stock price on the ex-dividend date of the first dividend in the second year of each performance period
P(n)	＝	Stock price on the ex-dividend date of the dividend at n times in each performance period
P(c)	＝	Stock price at the end of each calculation period
P(o)	＝	Stock price at the beginning of each calculation period

The ratio of stocks and cash paid for performance-linked compensation are 60% for stocks and 40% for cash (same ratio from Vice President to President and CEO). However, due to rounding, there may not be an exact match.
The percentage of compensation paid, (other than performance-linked compensation) and performance-linked compensation, is not determined in advance and is subject to fluctuation based on performance results in the above decision-making method. Accordingly, the Company has not established a policy regarding the determination of such compensation.

c. Compensation standards

Compensation standards are determined at suitable levels as a global company, with the aim of securing highly competent management personnel suitable for managing Toshiba which is entering a period of change. The compensation standards of other listed companies and payroll and benefits are considered when determining the Company’s compensation standards of management.

Compensation pertaining to the above is set as follows:

Director	Base salary + Committee Allowance + Allowance for travel to non-resident countries
Executive officer	Base salary + Performance-linked compensation (shares and cash)

(Source: Translation of the 184th Annual Securities Report)

Targets and Results for Incentive Compensation Indicators for the Latest Fiscal Year

Short-term Incentive Compensation

Targets and results for short-term incentive compensation indicators for the latest fiscal year are as follows.
The targets are based on the FY2021 figures planned in the Toshiba Next Plan. In addition, individual assessment are decided by the Compensation Committee, comprehensively considering non-financial evaluations such as management initiatives and special contributions.

Evaluation type	Indicator of performance	Evaluation Percentage	Targets		Results
Shor-term incentive compensation	Operating income	50%	Company as a whole	240.0 billion yen	Company as a whole	158.9 billion yen
	Operating income	50%	Managed business	Managerial accounting targets	Managed business	Managerial accounting actual results
	Operating cash flow	50%	Company as a whole	205.0 billion yen	Company as a whole	249.2 billion yen
	Operating cash flow	50%	Managed business	Managerial accounting targets	Managed business	Managerial accounting actual results

Long-term Incentive Compensation

The index of long-term incentive compensation is a relative evaluation of the Company’s TSR performance against that of its peer groups over 3 years. There are no targeted figures for a relative evaluation of the Company’s TSR performance over 3 years.

The results of indicators related to the long-term incentive compensation, for which payment amounts have been fixed for the latest fiscal year, are as follows:

Evaluation type	Indicator of performance	Calculation period	Results
Long-term incentive compensation	3-year relative TSR	FY2019 － FY2021	The Company’s 3-year TSR	42.22%
Long-term incentive compensation	3-year relative TSR	FY2019 － FY2021	Market capitalization weighted average TSR of peers over 3 years	90.66%

* The formula shown in the Compensation Policy part is used to calculate performance-linked compensation under the executive officer compensation system. The peer group consists of 7 domestic and overseas companies with an average market capitalization of at least ¥1 billion for companies that are similar to our business portfolio or listed on the First Section of the Tokyo Stock Exchange, considering the perspective of shareholders.

Details of Non-monetary Compensation

The Company grants its Executive Officers stock compensation as fixed compensation and stock compensation as performance-linked compensation In order to share values with shareholders, and to effectively incentivize to maximize mid- to long-term corporate value. Some Directors of the Company (Chairman, Director and Outside Directors) are granted stock compensation as fixed compensation. The Company will issue new shares or dispose of treasury stock under this system in exchange for making the person who are eligible for stock compensation invest in kind the monetary compensation claims provided by the Company as investment assets.

When issuing new shares or disposing of treasury stocks, the Company enters into share allotment agreements with grantees (excluding those who have already retired at the time when the shares are granted (hereinafter referred to as retirees)) that provide for restrictions on the transfer of our granted shares.
In addition, while no transfer restrictions are included in the allotment agreements that the Company concludes with the retirees, if it is subsequently found that certain events occurred during the prescribed period, such as violations of laws or regulations by retirees, and where the Company deems it appropriate, the retirees shall immediately return the said stock to the Company, without compensation.

Total Amount of Compensation by Officer Category, Total Amount of Compensation by Type, and the Number of Eligible Officers

Category	Number of eligible officers	Total amount of Compensation (millions of yen)	Fixed compensation (millions of yen)		Performance-linked compensation (millions of yen)
			By cash	By stock	By cash				By stock
					Short-term incentive compensation	Long-term incentive compensation			Short- term incentive compensation	Long-term incentive compensation
					Calculation period: FY2022	Calculation period: FY2020 – FY2022	Calculation period: FY2021 – FY2023	Calculation period: FY2022 – FY2024	Calculation period: FY2022	Calculation period: FY2020 – FY2022	Calculation period: FY2021 – FY2023	Calculation period: FY2022 – FY2024
Directors	13	380	284	96	-	-	-	-	-	-	-	-
[Among them, Outside Directors]	[10]	[367]	[274]	[93]	-	-	-	-	-	-	-	-
Executive Officers	19	1,593	633	171	40	93	145	37	60	140	218	56

Note:
1. The total amount of compensation includes Directors’ compensation amount from April 2022 to the time of retirement at the conclusion of the Ordinary General Meeting of Shareholders held on June 28, 2022, and Executive Officers’ compensation amount from April 2022 to the time of their retirement or resignation by the end of March 2023.
2. The fixed compensation of Directors includes one-time compensation paid as temporary compensation for the duties of outside directors.
3. The compensation of management who have served as both Directors and Executive Officers in the latest fiscal year is described separately in the compensation for Directors and the compensation for Executive Officers.
4. Compensation for Executive Officers who have served as Directors of subsidiaries in the latest fiscal year is included in their compensation for Executive Officers.
5. Of the compensation amount shown in the above table, the Fixed Compensation, Short-term incentive compensation (FY2022) and Long-term incentive compensation (FY2020-2022) are fixed amounts.
6. Of the compensation amount shown in the above table, both Long-term incentive compensation (FY2021-2023) and the Long-term incentive compensation (FY2022-2024) will be determined based on the 3-year TSR of our company and the peer group at the end of the calculation period. So, they are not fixed at this time and are the provision for expenses related to the long-term incentive compensation reasonably expected as of the end of March 2023 as the amount to be treated as FY2022 expenses out of the expected payment amount. Therefore, there is a possibility that some or all of the amounts shown in the table above may not actually be paid as long-term incentive compensation (FY2021-2023) and long-term incentive compensation (FY2022-2024).

Total Amount of Consolidated Compensation for Each Officer

a) Officers Whose Total Amount of Consolidated Compensation Exceeds 100 million yen just for this Fiscal Year’s Fixed Payment Amount

Name	Category of Directors/Executive Officers	Category of companies	Compensation for this fiscal year (million yen)			Total amount of consolidated compensation (million yen)
Name	Category of Directors/Executive Officers	Category of companies	Fixed payment amount for this fiscal year	Recorded Expenses for payment from next fiscal year onwards (Estimated expenses in this fiscal year)	Compensation for this fiscal year Subtotal	Total amount of consolidated compensation (million yen)
Taro Shimada	Executive Officer	Submitted Company	228	140	368	368
Goro Yanase	Director	Submitted Company	3	-	3	180
Goro Yanase	Executive Officer	Submitted Company	121	56	177	180

Amount of Consolidated Compensation by Type in the above Table

Name	Category of directors/ Executive Officers	Category of companies	Amount of consolidated compensation by type (million yen)*1
			Fixed payment amount for this fiscal year				Recorded Expense for payment from next fiscal year onwards (Estimated expenses in this fiscal year)			Non-monetary Compensation, among left types (2,3)
			Fixed compensation	Performance-linked compensation		Fixed payment amount for this fiscal year subtotal	Performance-linked compensation		Estimated expenses in this fiscal year subtotal
				Short-term incentive compensation	Long-term incentive compensation		Long-term incentive compensation
				Calculation period: FY2022	Calculation period: FY2020 – FY2022		Calculation period: FY2021 – FY2023	Calculation period: FY2022 – FY2024
Taro Shimada	Executive Officer	Submitted Company	130	22	76	228	118	22	140	177 (142)
Goro Yanase	Director	Submitted Company	3	-	-	3	-	-	-	2 (-)
Goro Yanase	Executive Officer	Submitted Company	82	9	30	121	46	10	56	73 (57)

b) Officers Whose Total Amount of Consolidated Compensation Exceeds 100 million yen for the combination with the Amount for Fixed Payment for this Fiscal Year and the Amount of Recorded Expenses for Payment from Next Fiscal Year Onwards (Estimated Expenses in this Fiscal Year)

Name	Category of Directors/Executive Officers	Category of companies	Compensation for this fiscal year (million yen)			Total amount of consolidated compensation (million yen) (incl. estimated expenses in this fiscal year and difference from recorded expenses for compensation disclosed in the past years)
Name	Category of Directors/Executive Officers	Category of companies	Fixed payment amount for this fiscal year	Recorded Expenses for payment from next fiscal year onwards (Estimated expenses in this fiscal year)	Compensation for this fiscal year Subtotal
Masayoshi Hirata	Executive Officer	Submitted Company	89	31	120	120
Takayuki Konno	Executive Officer	Submitted Company	9	3	12	120
Takayuki Konno	Director	Toshiba Infrastructure Systems & Solutions Corporation	80	28	108	120
Hiroyuki Sato	Executive Officer	Submitted Company	8	3	11	116
Hiroyuki Sato	Director	Toshiba Electronic Devices & Storage Corporation	77	28	105	116

Amount of Consolidated Compensation by Type in the above Table

Name	Category of directors/ Executive Officers	Category of companies	Amount of consolidated compensation by type (million yen)*1
			Fixed payment amount for this fiscal year				Recorded Expense for payment from next fiscal year onwards (Estimated expenses in this fiscal year)			Non-monetary Compensation, among left types (2,3)
			Fixed compensation	Performance-linked compensation		Fixed payment amount for this fiscal year subtotal	Performance-linked compensation		Estimated expenses in this fiscal year subtotal
				Short-term incentive compensation	Long-term incentive compensation		Long-term incentive compensation
				Calculation period: FY2022	Calculation period: FY2020 – FY2022		Calculation period: FY2021 – FY2023	Calculation period: FY2022 – FY2024
Masayoshi Hirata	Executive Officer	Submitted Company	65	8	16	89	24	7	31	46 (33)
Takayuki Konno	Executive Officer	Submitted Company	6	1	2	9	2	1	3	5 (3)
Takayuki Konno	Director	Toshiba Infrastructure Systems & Solutions Corporation	59	7	14	80	21	7	28	41 (29)
Hiroyuki Sato	Executive Officer	Submitted Company	6	0	2	8	2	1	3	4 (3)
Hiroyuki Sato	Director	Toshiba Electronic Devices & Storage Corporation	59	4	14	77	21	7	28	39 (28)

Note:
1. The * marked notes are as follows.
- *1. The Company and its subsidiaries do not pay retirement benefits to the officers listed in the table, so the column for retirement benefits is not shown in the above table.
- *2. “Non-monetary Compensation” refers to stock compensation.
- *3. The figures in parentheses in “Non-monetary Compensation” are performance-linked compensation among stock compensation.
2. Among the compensation amount in the above table, the Fixed compensation, Short-term incentive compensation (FY2021-2023) and Long-term incentive compensation (FY2020-2022) are fixed payment amount.
3. Of the compensation amount shown in the above table, both Long-term incentive compensation (FY2021-2023) and the Long-term incentive compensation (FY2022-2024) will be determined based on the 3-year TSR of our company and the peer group at the end of the calculation period. So, they are not fixed at this time and are the provision for expenses related to the long-term incentive compensation reasonably expected as of the end of March 2023 as the amount to be treated as FY2022 expenses out of the expected payment amount. Therefore, there is a possibility that some or all of the amounts shown in the table above may not actually be paid as long-term incentive compensation (FY2021-2023) and long-term incentive compensation (FY2022-2024).

The name of the person who has the authority to make decisions on the policy on the determination of the amount of compensation, etc. for officers or the method for calculating such amount, and the contents of such authority and the scope of discretion

Since we are a company with three committees, it is the compensation committee that has the authority to decide on the amount of compensation, etc. for our officers or the policy for determining the method of calculating such amount, and the contents of authority and scope of discretion are matters stipulated in Article 404-3, 409, and Article 417-1 and-3 of the Companies Act, matters related to the operation of the compensation committee, etc. The Compensation Committee is composed of about 5 Outside Directors.

Activities of the Compensation Committee in the current fiscal year

Activities of the Compensation Committee in the current fiscal year are as follows.

Based on the FY2021 performance evaluation, the committee deliberated on the payment of performance-linked compensation to Executive Officers and others.
The committee deliberated on the revision to the Compensation Policy and to the Regulation of Compensation for Officers.
The committee deliberated on the details of individual compensation received by Directors and Executive Officers from July 2022 onward.
The committee deliberated on the temporary compensation for Directors.
The committee deliberated on the compensation system for Directors and Executive Officers.

This Web site contains projections of business results, statements regarding business plans and other forward-looking statements. This information is based on certain assumptions, such as the economic environment, business policies and other factors, as of the date when each document was posted. Actual results may differ significantly from the estimates listed here.