Corporate Governance

FANUC has always worked on enhancing corporate governance based on our Basic Principles of "Strict Preciseness and Transparency." As we proceed in separating our supervisory and executive functions, in order to further strengthen the supervisory functions of the Board of Directors and speed up management decisions, we transitioned to Company with an Audit and Supervisory Committee, that allows us to establish an Audit and Supervisory Committee consisting of the Directors who are Audit and Supervisory Committee Members and to expand the delegation of decision-making authority for business execution from the Board of Directors to Directors. Thus, we are further endeavoring to enhance corporate governance and increase corporate value.

In addition, FANUC has established the Nomination and Remuneration Committee, a majority of which comprises Independent Outside Directors, and is chaired by an Independent Outside Director. By increasing the objectivity and transparency of the appointment and evaluation of Directors, this committee ensures the strict preciseness and transparency of supervisory functions to management.

• As a company with an Audit and Supervisory Committee, we have separated the Board of Directors (supervisory function) from the management side (executive function) to maintain the independence of each.
• The ratio of Outside Directors and the diversity ratio of the Board of Directors are as follows.

• Three of the five Audit and Supervisory Committee Members are Outside Audit and Supervisory Committee Members, one of whom is a woman.
• We continue to periodically review the contents of the Board of Directors and the Audit & Supervisory Committee from the perspectives of whether the independence of the Board of Directors and management is maintained, whether the effects of diversity are evident, and whether discussions in the Board of Directors and the Audit & Supervisory Committee are active, and make improvements as necessary.

Nomination and Remuneration Committee

With respect to appointment and dismissal and remuneration, etc. of Directors, we have established the Nomination and Remuneration Committee, the majority of which is composed of Independent Outside Directors, and chaired by an Independent Outside Director, to secure the objectivity and transparency, etc. of procedures through consultations by this Committee.

Analysis and Evaluation of Board of Directors Effectiveness

1. Efforts to Improve Effectiveness

To ensure effective good governance, we adhere to our basic principles of Strict Preciseness and Transparency. We conduct an annual survey of directors to assess Board of Directors effectiveness, and establish opportunities for the exchange of such opinions in a timely manner. Furthermore, we maintain a system that incorporates directors’ opinions and evaluations in the Corporate Governance Guidelines when advisable, and put these results into practice.

2. Evaluation Methods

To evaluate Board of Directors effectiveness, in October, 2021 we conducted a questionnaire survey of all directors who are members of the Board of Directors. In order to increase transparency and evaluate effectiveness from rigorous and multifaceted perspectives, we employed an external organization to design the survey and to analyze and evaluate the results. The survey sought to determine whether the Board of Directors was able to function effectively when making important decisions and overseeing significant matters such as the composition of the Board of Directors, its operations, and management strategy, given our transition to a company guided by an Audit and Supervisory Committee in June 2021 and revision of the Corporate Governance Code.

3. Evaluation Results Summary

Our Board of Directors was highly praised for its diversity in terms of gender, nationality, work experience and other factors, and for its fostering an environment that encourages the free and open exchange of opinions and facilitates the examination of issues from multiple perspectives. On the other hand, the evaluation results pointed to a need for more comprehensive discussions on ways to further develop human resources, to further promote sustainable corporate growth. The FANUC Board of Directors will continue striving to improve its effectiveness.

Directors' Remuneration

(1) Matters concerning the Policy for Determining the Details of Remunerations for Individual Directors

The Company has established a policy for determining the details of remunerations for individual Directors (excluding the Directors who are Audit and Supervisory Committee Members; the same applies hereinafter in this paragraph) (hereinafter, “Policy”) in place as outlined below. (Resolved at a meeting of the Company's Board of Directors held on June 24, 2021)

• Fixed remunerations shall be determined according to the position of each Director.
• Performance-based remunerations shall be linked to the current net income attributable to the shareholders of the parent company as in the case of shareholder return in principle.
• Stock-based remuneration shall be provided as remuneration of restricted stock, taking various factors, such as the degree of contribution of the Director, into consideration in a comprehensive manner.
• Remuneration for Directors comprises fixed remuneration, performance-based remuneration and stock-based remuneration whose ratios shall be set considering his/her position, responsibility, performance, etc., in a comprehensive manner.
• Remuneration of Outside Directors shall comprise fixed remuneration only.

The Policy shall be determined by a resolution of the Board of Directors.

As for remunerations for the Directors who are Audit and Supervisory Committee Members, the amount of remuneration for the individual Directors who are Audit and Supervisory Committee Members shall be determined by consultation among the Directors who are Audit and Supervisory Committee Members.

(2) Matters concerning Resolution of Shareholders’ Meeting on Remunerations for the Directors

With respect to the aggregate amount of remunerations for the Directors (excluding the Directors who are the Audit and Supervisory Committee Members), it was approved at the 52nd Ordinary General Meeting of Shareholders held on June 24, 2021 that it shall be capped at the sum of (a) the fixed remuneration limit and (b) the performance-based remuneration limit specified below. Further, it was also approved that, in addition to (a) and (b), (c)stock-based remuneration may be provided to the Directors except for the Outside Directors.

• (a) Fixed remunerations of 800 million yen or less annually (including 100 million yen or less annually for the Outside Directors);
• (b) Performance-based remunerations of an amount equivalent to 0.7% or less of the current net income attributable to the shareholders of the parent company for the fiscal year immediately preceding the Meeting of Shareholders at which they are appointed or reappointed (but not exceeding an amount equivalent to three years of fixed remunerations);
• (c) The aggregate amount of monetary remuneration claims provided as stock-based remuneration (remuneration regarding restricted stock, etc.) shall be 350 million yen or less annually. Total number of such restricted stocks allotted for each fiscal year shall be capped at 28,000 shares.

As of the conclusion of the Ordinary General Meeting of Shareholders, the number of Directors (excluding the Directors who are the Audit and Supervisory Committee Members) is six (6), and it is three (3) excluding the Outside Directors.

As for the aggregate amount of remunerations for the Directors who are the Audit and Supervisory Committee Members, it was approved at the 52nd Ordinary General Meeting of Shareholders held on June 24, 2021 to be capped at 200 million yen annually.
As of the conclusion of the Ordinary General Meeting of Shareholders, the number of Directors who are Audit and Supervisory Committee Members is five (5).

(3) Matters concerning Determination on the Details of Remunerations for Individual Directors (excluding the Directors who are the Audit and Supervisory Committee Members)

When reviewing remuneration standards, the Company selects benchmark companies and also refers to remuneration standards that takes into consideration results of surveys conducted by external third-party professional organizations. The Board of Directors then determines the details of the amount of remunerations for the Directors (excluding the Directors who are the Audit and Supervisory Committee Members) after consultation with the Nomination and Remuneration Committee majority of which are independent Outside Directors and chaired by an Outside Director. Since the amounts of remunerations for individual Directors are determined through such procedures, the Board of Directors judges that their details are in line with the Policy.