Advantest's executive compensation system consists of fixed compensation (monetary), performance-linked bonuses (monetary), and stock compensation (non-monetary). The executive compensation system is proposed by the Nomination and Compensation Committee to the Board of Directors, and is decided and implemented after a resolution by the Board of Directors and approval by the General Meeting of Shareholders.
Basic Concept of the Executive Compensation System
The basic concept of the executive compensation system is as follows.
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1.Establish a compensation mix and level that attracts international human resources who can support our global business development
In order to continue growing in the semiconductor industry, which is complex and swiftly-evolving on a global level, we will appoint talented human resources from all over the world and compensate them according to global standards. -
2.Well-balanced bonuses linked to performance
Given that Advantest's business performance fluctuates, we will reward the contribution of officers when business performance is good, and reduce the burden on our company when business performance is declining. -
3.Stock compensation that encourages executives to share the shareholder perspective and promotes a medium/long-term perspective on management
We combine restricted stock compensation (RS), which encourages executives to pursue the medium/long-term corporate value improvement that shareholders desire, and performance share unit compensation (PSU), which encourages the achievement of medium-term management goals that lead to the improvement of corporate value.
Compensation Structure
Based on the above concept, we partially revised the executive compensation system in June 2025.
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Executive Officers:
We revised the standard model by changing the benchmarking companies and comparing compensation levels with peer groups. To further enhance incentives, we also adjusted the compensation structure by increasing the proportion of stock-based compensation (restricted stock and performance-linked stock compensation). -
Outside Directors and Audit and Supervisory Committee Members:
To further promote value sharing with shareholders and respond to rising compensation levels for Outside Directors and Audit and Supervisory Committee members, we revised the compensation structure by increasing both the amount and proportion of restricted stock compensation.
| Monetary compensation | Stock compensation | ||||
|---|---|---|---|---|---|
| Fixed compensation | Performance-linked bonuses | Restricted stock compensation | Performance Share Unit compensation | ||
| Business Executives | Group CEO | 1 | 1 | 1 | 3 |
| Group COO | 1 | 1 | 1 | 1 | |
| Senior Executive Officer | 1 | 1 | 0.5～0.75 | 0.5～0.75 | |
| Executive Officer | 1 | 1 | 0.5 | 0.5 | |
| Non-business Executives | Chairman of the Board | 1 | - | 1 | - |
| Audit & Supervisory Committee Member | 1 | - | Up to one-third of total compensation | - | |
| Outside Directors (excluding Audit & Supervisory Committee Members) |
1 | - | Up to one-third of total compensation | - | |
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*Guideline for the standard amount
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*Executive officers who are also directors will be compensated separately as directors.
Visualization of compensation for the Group CEO
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*Apart from this, there is a redistribution adjustment (30%) of performance-linked bonuses based on individual evaluation
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*Considering compensation levels in U.S. and European markets as well as among peer groups, we will implement flexible regional adjustments to fixed compensation and stock compensation.
Fixed Compensation
Fixed Compensation (cash compensation) for the Directors and Executive Officers shall be set at an appropriate level according to individual duties and responsibilities, and will be paid monthly, with reference to external objective data.
Performance-linked Bonuses
Performance-linked bonuses are short-term incentives for the results of a single year, and are paid once a year after the performance of the Advantest Group for the relevant business year is confirmed. The distribution according to performance indicators and individual evaluations is as follows:
| Performance indicators |
The KPI is net income. Target amounts will be set by referring to the net income targets of the single-year business plan and Mid-term Management Plan. The Company will pay the standard amount when the target values are achieved, but the amount paid will fluctuate from 0% to 200% of the standard amount depending on whether actual results undershoot or exceed the target values.
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| Individual evaluation |
Up to 30% of the total amount of performance-linked bonuses for executive officers is redistributed based on individual evaluations conducted by the Group CEO. Evaluation and redistribution proposals are discussed and approved by the Nomination and Compensation Committee and reported to the Board of Directors. In principle, the Group CEO's performance-linked bonus is calculated based on the results of performance indicators, but if the Board of Directors deems it necessary and clearly states their reasoning, it may be increased or decreased. |
Stock Compensation
Advantest will grant restricted stock (RS) and performance-based stock remuneration (PSU) with the intention of incentivizing the pursuit of medium- to long-term enhancement of corporate value in alignment with shareholder priorities.
For directors who do not serve as Executive Officers, Outside Directors, and directors who are Audit and Supervisory Committee members, Advantest will grant restricted stock (RS), which incentivizes the pursuit of medium- to long-term corporate value improvement, which is also beneficial to shareholders.
Restricted Stock compensation (RS)
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As a general rule, for residents in Japan, holding is obligatory during the term of office, and transfer restrictions will be lifted when an officer retires and for nonresidents in Japan, establish a transfer restriction period of 3 to 5 years.
Performance Share Unit compensation (PSU)
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Based on the achievements of the mid-term management targets (KPIs) over a three-year period, shares will be granted in accordance with the points awarded, which will fluctuate between 60 to 140% of the standard units.
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The KPIs are the following three items, and the weight of each item is as follows.
Primary Indicator EPS The standard value is 80% of the payment rate. It fluctuates within a range of +/-30 points, with a minimum of 50% and a maximum of 110%. Secondary Indicator Relative Total Shareholders Return (r-TSR) Relative Total Shareholder Return (r-TSR) compared to the Nikkei Semiconductor Stock Index* is used as an indicator. The standard value is 10% of the payment rate. It fluctuates within a range of +/-5 points, with a minimum of 5% and a maximum of 15%. -
*The Nikkei Semiconductor Stock Index is the copyrighted work of Nikkei Inc.
Sustainability Achievement levels of five KPIs related to the environment and human capital, selected from the sub-strategies of the Mid-Term Management Plan will be used as indicators. The standard value is 10% of the payment rate. It fluctuates within a range of +/-5 points, with a minimum of 5% and a maximum of 15%. -
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After the end of the Mid-term Management Plan period, a lump-sum delivery of three years' worth of shares will be delivered with the number of shares varying according to the level of achievement.
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Appointments during the term of the Mid-term Management Plan will be prorated for the term and additional rights will be granted.
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Retirements during the term of the Mid-term Management Plan will be prorated over the term and paid as standard performance.
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Recruit & Retention Program
Depending on the human resource market conditions in each region and industry, additional compensation may be granted for the purpose of securing managers or those with expertise. In principle, adjustments in the level of compensation among regions shall be made by means of fixed compensation (monetary compensation) and stock compensation, while securing specific candidates shall be made by means of stock compensation. Stock-based compensation will be in the form of RSs or PSUs, but restrictions on the transfer of RSs under this section will be set for a period of at least three years.
Compensation Reduction and Clawback
Advantest may reduce future compensation or claw back past compensation by resolution of the Board of Directors in the event of certain circumstances, such as violation of relevant laws and regulations or internal rules, or material restatement due to errors discovered in the consolidated financial statements.
Stock ownership guidelines
Advantest recommends that Executive Officers hold Advantest's shares (including RS/RSUs) as follows. Advantest will set the criteria for the amount and the number of shares based on the amount of base compensation and the stock price at the start of the Mid-term Management Plan, and one of them shall be satisfied with a grace period of five years until the achievement of the criteria.
| Group CEO | 4 years of base compensation |
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| Executive officers other than the Group CEO | 2 years of base compensation |