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Iwata on payroll, company bonuses during a rough financial period
First I would like to explain about the directors’ compensation as I recognize that there is a partial misunderstanding. As you can see (in the slide), this is the total compensation for all the directors. The 72nd fiscal year is the most recent fiscal year ended in March 2012. The 71st fiscal year is the previous year and the 70th fiscal year is the year before that. Financial results for the 70th fiscal year were good. Accordingly, the variable compensation was a significant amount and the total directors’ compensation was larger. Total compensation to all the directors for the 72nd fiscal year was 302 million yen, which is 439 million yen lower than the total of 741 million yen for the 71st fiscal year. The main reason for the reduction is, since the full year operating income result was in the red, the performance-based variable compensation, which is what is defined as the directors’ bonus, is not payable at all at the end of June this year. So, if I can refer to the premise of the question that as much as 300 million yen of directors’ bonuses are paid to the board of directors, I would have to say that it is not the case. Of course, we have no intention to say we put up with this financial result because we did not receive any bonus. In this situation, it is our intention to firmly direct our company to the path it should follow and we will continue to make every effort to be able to say, “Our financial result was revitalized this way” when we report the financial results next year. In addition, there is a portion of fixed compensation (to directors). At the time of the first quarter financial results announcement, for the fiscal year ended March 2012, at the end of July last year, when we announced the significant price reduction of the Nintendo 3DS and then financial forecasts for the fiscal year were revised downward significantly, we also announced that, for the fixed compensation, a 50% cut would be made for the president, a 30% cut for the other representative directors and a 20% for the other directors. With respect to Nintendo’s way of thinking about directors’ compensation, in the 67th Annual General Meeting of Shareholders, it was approved that compensation payable to directors consists of fixed compensation of up to 500 million yen per year and performance-based variable compensation of up to the amount of 0.2% of the consolidated operating income of the fiscal year. This variable compensation is directly linked to the operating income, as I mentioned earlier, so no amount is payable for the fiscal year ended March 2012 based on the computation. Fixed compensation to each director, within 500 million yen per year, is determined by the board of directors based on his duty position and the contribution he has made in previous years. Specifically for the last fiscal year ended in March 2012, as I just mentioned, fixed compensation to directors was also reduced. As a result, the total amount was 302 million yen, which is 99 million yen lower than the previous year. For your information, during the period of April 2011 through March 2012, reduction of fixed compensation was made in August 2011 and after then. Therefore, the compensation reduction was effective for the eight months out of a 12-month period. Taking the current business environment into consideration, the fixed compensation reduction is determined to continue for this current fiscal year. As a result, the compensation reduction is applicable throughout the fiscal year starting from April 2012. We would like to tell you that this means a further fixed compensation reduction. Meanwhile, we were asked a question about whether there are any directors whose annual compensation was more than 100 million yen last year. In case you ask the same question, I would like to say that there is no one who receives annual compensation of 100 million yen or over now. The only director who was applicable in that respect last year was Satoru Iwata and my total annual compensation for the fiscal year ended March 2012 was 45 million yen. This is the whole compensation since Nintendo abolished the retirement benefit system (for directors and auditors) at the 65th Annual General Meeting of Shareholders and does not have non-cash compensation such as stock options for directors and auditors.
Another point raised in the question was “Does Nintendo pay bonuses to its employees in this situation?” For our employees, they have their own lives, and the bonus to our employees was not drastically raised when our financial performance was very good and when Nintendo could pay a large sum of dividends to our shareholders. The video game business is known for the characteristic that it is pretty hard to forecast a sales outcome before the subject product is actually launched in the market. If employees cannot work comfortably due to a concern for the fluctuations of their compensation condition in accordance with such ups and downs, we cannot create a working environment where they can steadily create unique, out-of-box products because although these products may be called revolutionary later on after being widely accepted in the world, they are more likely to be criticized as crazy ideas in the beginning. In order to create such a product steadily, it’s our policy not to place our employees in a situation where they have to be excessively influenced by our immediate financial performance. Even when our financial performance was improving, we did not raise their bonuses drastically and, by the same token, we do not reduce the bonus immediately when our financial performance is in a downturn. Nonetheless, since we were experiencing a severe loss situation on a full-year basis, in terms of bonuses to employees, we don’t think what we have done before can be applied to the current situation as a pre-owned right for the employees. Therefore, we made reductions to employees’ bonuses to some extent. We are not indulging our employees. Thank you for your understanding. - Satoru Iwata
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Another point raised in the question was “Does Nintendo pay bonuses to its employees in this situation?” For our employees, they have their own lives, and the bonus to our employees was not drastically raised when our financial performance was very good and when Nintendo could pay a large sum of dividends to our shareholders. The video game business is known for the characteristic that it is pretty hard to forecast a sales outcome before the subject product is actually launched in the market. If employees cannot work comfortably due to a concern for the fluctuations of their compensation condition in accordance with such ups and downs, we cannot create a working environment where they can steadily create unique, out-of-box products because although these products may be called revolutionary later on after being widely accepted in the world, they are more likely to be criticized as crazy ideas in the beginning. In order to create such a product steadily, it’s our policy not to place our employees in a situation where they have to be excessively influenced by our immediate financial performance. Even when our financial performance was improving, we did not raise their bonuses drastically and, by the same token, we do not reduce the bonus immediately when our financial performance is in a downturn. Nonetheless, since we were experiencing a severe loss situation on a full-year basis, in terms of bonuses to employees, we don’t think what we have done before can be applied to the current situation as a pre-owned right for the employees. Therefore, we made reductions to employees’ bonuses to some extent. We are not indulging our employees. Thank you for your understanding. - Satoru Iwata
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