Hitachi Amends Executive Compensation System, Further Strengthening Links Between Corporate Value and Compensation

Hitachi, Ltd. (TSE: 6501) is promoting a modal change toward global growth, as part of efforts to “Support people’s quality of life with data and technology that fosters a sustainable society” as laid out in Mid-term Management Plan 2024 (MMP 2024). Hitachi announced today that it has amended the executive compensation system to further accelerate growth as a global company, and to further strengthen links between increases in corporate value and compensation.

With regard to employee compensation as well, Hitachi has introduced a framework in which individual targets are linked to the company’s targets, and compensation is determined according to the achievement of those targets. The management targets put forward in MMP 2024 are applied as evaluation indexes when deciding compensation for individual employees. Moving forward, Hitachi will cultivate a growth mindset among both executives and employees and strive to achieve global growth as One Hitachi.

1. Amendments to the Executive Compensation System

(1) Goal of Amendments to the Executive Compensation System

At a meeting of the Compensation Committee, Hitachi discussed the executive compensation system to enable continued growth over the next ten years, through a modal change toward growth in MMP 2024. A decision was made to amend the executive compensation system, in order to establish a system that can secure competitive superiority over global companies, ensure effective Pay-for-Performance that rewards contributions to growth and innovations, and increase corporate value by strengthening sustainable management.

(2) Outline of the Amended Executive Compensation System

i) Overview of Executive Compensation

Compensation for Hitachi’s executive officers(1) comprises basic remuneration (fixed pay), and two forms of variable pay: short-term incentive compensation (STI) and medium- and long-term incentive compensation (LTI). With the recent amendment, specifically, the ratio of compensation for President & CEO, which in the past was 1 : 1 : 1, has been changed to 1 : 1.2 : 2, increasing the ratio of variable pay with a focus on LTI, which takes the form of stock compensation, and the compensations ratios for other executives have also been set based on this ratio.

ii) STI

With the Amendments, new KPIs have been added for the evaluation of performance achievements, including the management targets put forward in MMP 2024 such as Lumada business revenues. The new system will strengthen the link between STI and MMP 2024, and by striving to achieve stretched performance targets, offer greater rewards for contributions to growth and innovation. Up to now, sustainability targets have been used as one index for individual evaluations, being reflected in STIs, but in the new system, sustainability evaluations will be deemed as separate, and will account for a larger ratio of STI compensation, as a means of promoting more evolved sustainability management.

iii) LTI

Hitachi introduced restricted stock compensation as an LTI(2) in order to promote management based on a medium-to-long-term perspective and to provide incentives for sustainable corporate value enhancement by further encouraging the management team to share values with shareholders through the holding of shares during their term of office.

With regard to stock price condition, the new amendment adds comparisons of TSR growth rate with global competitors as one of the KPIs. Restricted stock is granted in amounts equivalent to 0- 200% of the standard number of shares, in accordance with results as compared to TSR growth rates and TOPIX growth rates, and with results as compared to stock price growth rates for global competitor comparison companies stipulated by the Compensation Committee. Furthermore, when return on invested capital (ROIC) and sustainability targets are achieved at the end of fiscal year 2024, which is the final year of MMP 2024, additional shares are granted for that year in amounts equivalent to 10% of the standard amount in each case. This further strengthens the commitment to increasing corporate value and achieving the targets of MMP 2024.

2. Compensation for Employees

In fiscal year 2014, Hitachi introduced Global Performance Management (GPM), which links company, divisional, and individual targets, as a form of common global HR management. In this system, the targets of the company’s highest-ranking executives are at the top, and each organization sets targets tied into those of higher-level organizations. Individual employees set personal targets linked to the targets of the organization that they are affiliated with, and they are evaluated based on their degree of achievement. In this way, compensation for individual employees is linked to increased corporate value for Hitachi as a whole.

Employees’ bonus evaluation indexes are also set based on management indexes laid out in MMP 2024. This way, the link between bonuses and indexes of MMP 2024 such as Lumada business revenues will be strengthened in the same way as executives, and by encouraging employees to aim for stretched performance targets, the compensation will offer greater rewards for contributions to growth and innovations.

Through these activities, Hitachi, which strives to enhance human capital, provides individuals with incentive to achieve the company’s targets, thereby linking the growth of individual employees with the growth of the company as a whole.

(1) Compensation for non-Japanese executives is stipulated separately, taking into account factors such as compensation levels in benchmark HR markets.
(2) Restricted stock compensation units will be granted to non-Japanese executive as LTI.

About Hitachi, Ltd.

Hitachi drives Social Innovation Business, creating a sustainable society with data and technology. We will solve customers’ and society’s challenges with Lumada solutions leveraging IT, OT (Operational Technology) and products, under the business structure of Digital Systems & Services, Green Energy & Mobility, Connective Industries and Automotive Systems. Driven by green, digital, and innovation, we aim for growth through collaboration with our customers. The company’s consolidated revenues for fiscal year 2021 (ended March 31, 2022) totaled 10,264.6 billion yen ($84,136 million USD), with 853 consolidated subsidiaries and approximately 370,000 employees worldwide. For more information on Hitachi, please visit the company’s website at

Topic: Press release summary

Hong Kong – Compensation levels for work injuries and occupational diseases to increase from April 13

Compensation levels for work injuries and occupational diseases to increase from April 13


     The Labour Department (LD) today (March 17) announced that the levels of compensation for employees injured at work or suffering from prescribed occupational diseases under the Employees’ Compensation Ordinance (ECO) or family members of deceased employees, persons suffering from pneumoconiosis or mesothelioma or family members of persons who die as a result of these diseases, and persons suffering from occupational deafness will be increased on April 13.

     The Legislative Council on March 15 passed three resolutions to increase the levels of 18 compensation items under the ECO, the Pneumoconiosis and Mesothelioma (Compensation) Ordinance (PMCO), and the Occupational Deafness (Compensation) Ordinance (ODCO). The amendments were gazetted today and will become effective on April 13.

     “Under the established mechanism, the levels of compensation under the ECO, the PMCO and the ODCO are adjusted every two years where appropriate. Adjustments for most compensation items, if required, are normally made in the light of the wage movement as reflected by the Nominal Wage Index or the price movement as reflected by the Consumer Price Index (A) during the relevant period, whereas the levels of some compensation items are adjusted after taking into account other relevant factors,” a spokesman for the LD said.

     As a result of the adjustments this time, the levels of 18 compensation items under the three Ordinances will be increased by 2.18 per cent to 19.05 per cent (see details in the Appendix).

     “The increased levels of compensation will enhance the protection for employees injured at work or sufferers of occupational diseases as well as family members of deceased employees or persons who die of work injuries or occupational diseases,” the spokesman added. 

Status Note on GST compensation released to States/UTs

At the time of introduction of GST, the Constitution amendment provided that the Parliament, by law shall provide compensation to States for a period of five years for loss of revenue due to introduction of GST. Accordingly, the GST Compensation to States Act was legislated which provides for release of compensation against 14% year-on-year growth over revenues in 2015-16 from taxes subsumed in GST. This compensation cess is credited to the compensation fund and as per the Act, all compensation is paid out of the fund. Presently, cess is levied on items like pan masala, tobacco, coal and cars.

Compensation of about ₹ 49,000 crore has been released for 2017-18 from the fund, which increased to ₹ 83,000 crore for 2018-19 and further to ₹ 1.65 lakh crore in 2019-20. For these three years, almost ₹ 3 lakh crore compensation was released to States. However, the compensation requirement increased substantially during 2020-21 due to impact of covid on revenues. To ensure that States have adequate and timely resources to combat covid and related issues, Centre borrowed ₹ 1.1 lakh crore in 2020-21 and ₹ 1.59 lakh crore in 2021-22 and passed it on to States on a back-to-back basis. During 2021-22, Centre ensured that release of this amount of ₹ 1.59 lakh crore was front loaded to ensure that States have adequate resources in the earlier part of the year.

Taking into account this loan, ₹ 2.78 lakh crore of compensation has been released to States for the year 2020-21 itself and nothing is pending for the year. Including the assistance released on back-to-back basis, ₹ 7.35 lakh crore has been released to States till now and, currently, only for the year 2021-22, compensation of ₹78,704 crore is pending due to inadequate balance in the fund, which is equivalent to compensation of four months.

Normally, compensation for ten months of April-January of any financial year is released during that year and the compensation of February-March is released only in the next financial year. As explained earlier, compensation of eight out of ten months of 2021-22 has already been released to States. The pending amount will also be released as and when amount from cess accrues in the compensation fund.


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Got unemployment compensation during 2020? Wait to file your federal income tax return

According to Michael Gray, CPA, “Sometimes Congress passes legislation that’s retroactive. This change relates to millions of taxpayers who received unemployment compensation during 2020 and who are dutifully submitting their federal income tax returns. They should wait this year until a new exclusion can be processed.”

While many are excited to receive another federal government stimulus check, those who received unemployment compensation during 2020 should be aware of a tax break in the American Rescue Plan Act of 2021, COVID-19 relief legislation passed in Congress on March 10.

If a taxpayer (same threshold for a single or joint return) has adjusted gross income of less than $150,000, up to $10,200 of unemployment compensation received is excluded from federal taxable income. This exclusion only applies for unemployment compensation received during 2020.

It will probably take at least a week or two for the tax return preparation software providers to incorporate this change in their software. The IRS also has to update its efile processing system to recognize this change.

Unless the IRS changes the April 15 filing date, there is only a little over a month left for this year’s tax filing season. If necessary, you can file for an automatic extension of time to file using IRS Form 4868.

So, if you received unemployment compensation during 2020 and qualify for the exclusion, wait to file your federal income tax return until it can be processed. If necessary, file for an extension of time to file using Form 4868.

What if you already filed your 2020 federal income tax return and you qualified for the exclusion? You can claim the exclusion using the federal amended income tax return form, Form 1040X. You might want to get help from a tax professional for this.

Here is a link to the text of American Rescue Plan Act 2021, H.R. 1319. The unemployment compensation exclusion is at Section 9042.