Nomura, MUFG and SMFG announce employee stock (option) plans

Three financial heavyweights announced new employee stock schemes for the new fiscal year starting April 1.

Nomura

Nomura has decided to introduce performance-based share units (PSUs) as a long-term incentive plan. The purpose of introducing PSUs is to enhance Nomura’s corporate value over the medium to long term and strengthen alignment of interests with shareholders.

Under Nomura’s PSU program, the base number of shares to be granted is initially determined based on Nomura’s performance and other factors each fiscal year. Following the performance period, the number of shares to be awarded will vary from 0% to 150% of the base number of shares depending on the degree of achievement of the performance targets for the three fiscal years. The settlement of the PSUs will be primarily in treasury stock.

The performance indicators used in the evaluation are Return on Equity (“ROE”) and Total Shareholder Return (“TSR”).

Calculation Method

• The base number of shares shall be calculated by dividing the amount determined with reference to the performance and qualitative evaluation of the target fiscal year, as well as competitor benchmarking by the price of Nomura common stock at the time of grant.
• After the end of the performance evaluation period, the number of shares to be granted will becalculated in accordance with the following method.

• The number of shares to be granted is calculated by multiplying the base number of shares by the weighted average of the grant ratio based on ROE and the grant ratio based on TSR.

• The performance evaluation period shall be three years from the fiscal year following the fiscal year in which the base number of PSUs is determined. After the performance evaluation period has concluded, the evaluation shall be finalized and the stock compensation based on PSUs shall be paid.

MUFG

MUFG has decided to introduce a share-based compensation plan using the ESOP trust structure as a stock incentive plan for employees in management positions who satisfy certain requirements at three MUFG subsidiaries (MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ Morgan Stanley Securities (“Covered Companies”).

Objectives of the Plan

• Defining its purpose as being “Committed to empowering a brighter future,” MUFG positions human capital as one of the most important types of capital and aims to become a global financial group capable of contributing to society and its customers by empowering each employee to play an active role and thrive.
• To realize this vision, MUFG’s human capital management is centered around strengthening business competitiveness and fostering a culture of taking on challenges and transformation. In order to enhance the well-being of MUFG’s employees and achieve sustainable growth for both individuals and the organization, MUFG has decided to introduce the Plan, setting its sights on reinforcing the virtuous cycle of increasing MUFG’s corporate value and human capital management, and improving employee engagement and retention.

Overview of the Plan

• The Plan adopts a scheme called an employee stock ownership plan (the “ESOP Trust”). The ESOP Trust, similar to performance share plans or restricted stock plans prevalent in the U.S., would be a stock incentive plan under which MUFG shares and money equivalent to the liquidation value of MUFG shares are delivered or paid to Eligible Employees who satisfy certain requirements based on predetermined share-based compensation plan rules.
• The Plan is expected to enable the Eligible Employees to benefit financially from MUFG’s growth by holding shares in the company, to encourage each employee to strive to improve corporate value and ROE from a medium- to long-term perspective by better demonstrating their leadership. In addition, making the Eligible Employees shareholders is expected to increase their job satisfaction and pride in working for MUFG, as well as boosting retention by diversifying their incentives.

Plan Mechanics

SMFG

SMFG announced the introduction of a share-based compensation plan for employees.

Objectives of the Plan

• In addition to changes in business management and the business environment, employee values have become more diverse. In line with this change, the relationship between companies and employees is shifting from one of mutual dependence to one of choosing and being chosen.
• Given such circumstances, SMBC established the “SMBC Group Talent Policy” in April 2023, because the company needs to materialize both its management strategy and the aspirations of its employees.
• As “What SMBC Group wants employees to be” is stipulated in the SMBC Group Talent Policy, it is important that diverse employees and management take on the challenge together and further strengthen their commitment to enhancing SMBC’s corporate value over the medium-to-long term in order to provide added value to its customers and society as a global solutions provider.
• In order to realize the above, as “Employee Value Proposition” is stipulated in the SMBC Group Talent Policy, SMBC introduces the Plan as part of its human capital investment as the company needs to provide compensation linked to its corporate value for employees’ commitment and contributions, so that employees can feel the rewards of their contribution to SMBC Group.

Overview of the Plan

• The Plan is an incentive scheme that establishes an ESOP trust which is funded by cash contributed by SMBC (via SMFG). The common shares of SMFG acquired by the ESOP Trust will be granted to SMBC employees upon their retirement based on the number of points earned by each employee.
• According to the rules of the share-based compensation plan for employees established by SMBC’s Board of Directors, the number of points granted to employees is linked to their grade and the business performance of SMFG.
• In this system, the compensation is linked to SMFG share price over the medium-to-long-term, so that employees are incentivized to enhance the corporate value of the SMBC Group over the medium-to-long term.
• The Plan will be implemented initially for some general managers in SMBC. However, SMBC is planning to introduce the Plan to other SMBC Group companies to foster a sense of unity among SMBC Group companies or to expand the scope of the system in SMBC.

Plan Mechanics

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