Rakuten, Inc. (the “Company”) announces that at the meeting of the Board of Directors held today, it resolved to issue the following Share Options as stock options to Executive Officers and Employees of the Company and Directors, Executive Officers and employees of the Company’s subsidiaries on May 1, 2019, pursuant to “Issuance of Share Options as Stock Options to Directors, Executive Officers and Employees of the Company and its subsidiaries”, approved at the 22nd Annual General Shareholders’ Meeting held on March 28, 2019.
1. Reason for Issuing Share Options on Especially Favorable Conditions
Since the value of the Share Options is linked with the Company’s stock price, delivering the Share Options as part of a performance-linked compensation package to the executives and employees of the Group will allow executives and employees of the Group to share the gains of shareholders when stock prices rise and feel shareholders’ losses when stock prices fall, thus enhancing their motivation to achieve higher performance and higher stock prices.
In addition, the exercise period of a portion of the Share Options will commence on the date on which one year has passed from the issuance of the Share Options, while the proportion of the Share Options, which may be exercised, will increase gradually in stages until the date prior to the date on which four years have passed from the issuance, with the rest of the Share Options becoming exercisable thereafter. By making the Share Options exercisable in stages in this way, it will be possible to exercise the Share Options on the date on which one year has passed from the issuance of the Share Options. This will offer an attractive compensation package to prospective recruits to the Group, especially in countries and regions where the competition for talented human resources is intense. On the other hand, by making a portion of the Share Options exercisable gradually in stages until the date prior to the date on which four years have passed from the issuance, it will be possible to further raise the incentive of the Group towards higher performance and higher stock prices in the long-term, and retain existing talented staff.
The Company intends to implement stock option plans for executives and employees of the Group in order to continuously enhance the Group’s corporate and shareholder value, by recruiting and retaining talented staff and by raising the motivation of executives and employees of the Group towards higher performance.
[Determination Methods and Main Features of the Group’s Compensation System]
In determination of the total amount of compensation, including the granting of Share Options, several factors are taken into account, such as the degree to which the Group’s operating profit targets were achieved; the business performance of each Group company, business segment or division; and the personnel evaluation of each individual.
As a general rule, the Group has designed its compensation system so that as an individual’s rank and responsibility increases, the portion of their total compensation comprised of performance-based bonuses (based on individual, Group Company, business unit or department performance) and Share Options (that are linked to stock prices) also increases. Nevertheless, a major feature of the Group’s compensation system is that it delivers Share Options to a wide range of personnel starting with first-year employees with relatively low ranks and small roles up to Directors. This reflects the Group’s belief that making the majority of the executives and employees of the Group potential shareholders will further raise the awareness of each of the executives and employees of the Group towards enhancing corporate and shareholder values. Additionally, this is expected to reinforce the sense of unity among all executives and employees of the Group, which is thought to be an indispensable element in expanding and fostering the Rakuten Ecosystem both in Japan and abroad.