2025.5.22
Aligning Incentives for Sustainable Growth — Results from Our Survey on Equity-Based Compensation
At Cadira Capital Management, our investment management team conducts post-IR meeting surveys with the companies we engage with. In addition to general feedback on the meeting, we include questions on timely and relevant topics for corporate management. For the January–March 2025 quarter, the focus was on equity-based compensation.
The aggregated survey results are compiled on a quarterly basis and shared via email with participating companies.
In this quarter, we shared the results with 215 companies. The combined market capitalization of these companies at the end of March 2025 totaled ¥366 trillion. For reference, in the previous quarter, the number of recipients was 189, with a combined market capitalization of ¥329 trillion as of December 2024.
Below is the email content shared with participating companies:
Survey Results: Equity-Based Compensation
This quarter, we asked two key questions related to equity-based compensation: (1) the roles to which such compensation is granted, and (2) the reasons for its implementation. The results indicate that many companies have adopted equity compensation primarily for executive-level roles, with the aim of enhancing shareholder alignment and motivation.
● Eligible Roles for Equity Compensation
Directors: 88.5%
Officers (excluding directors): 57.7%
Selected employees: 26.9%
All employees: 7.7%
Not implemented: 3.8%
(26 companies, 48 responses total)
● Primary Objectives for Implementing Equity Compensation
Fostering shareholder mindset: 46.2%
Enhancing motivation: 34.6%
Securing top talent: 15.4%
Increasing base compensation: 0%
Stabilizing shareholder base: 0%
Other: 3.8%
(26 companies responded)
Approximately 90% of responding companies indicated they have implemented equity-based compensation. According to a 2023 Keidanren report (*1), only about 60% of all listed companies in Japan had adopted such compensation at that time. While our sample may not be fully representative of the broader market, the results suggest that equity-based compensation is becoming a standard practice in Japanese corporate management.
*1 https://www.keidanren.or.jp/policy/2024/002_honbun.pdf
Notably, nearly half of respondents cited “fostering a shareholder mindset” as the primary rationale. Equity grants can encourage officers and employees to focus on long-term value creation. This mindset may help shift attention away from short-term cost-cutting, unnecessary asset holdings, or investments not tied to future cash flows—ultimately contributing to overall corporate value enhancement.
Combined with motivations like “enhancing motivation” and “securing top talent,” which together accounted for another 50% of responses, it is clear that equity compensation is increasingly viewed as a way to strengthen employee engagement. In an era where human capital is a key source of competitive advantage, this trend warrants attention.
Through our ongoing dialogues with corporate executives and IR officers, we are seeing a growing awareness of investor perspectives and market expectations. This year marks the 10th anniversary of Japan’s Corporate Governance Code, and it appears that many of its principles have begun to take root at the individual level. As this awareness deepens, we believe it will lead to organizational improvement and, in turn, higher corporate value—a trend we intend to continue monitoring.
Additional Survey Results
● Did this IR meeting address topics of importance to your company?
Yes: 100% (Previous: 100%)
No: 0.0% (Previous: 0.0%)
Not sure: 0.0% (Previous: 7.7%)
● Which of the following topics discussed in the meeting were important for your company? (multiple responses allowed)
Medium- to long-term strategy: 69.2% (Previous: 80.6%)
Sustainability: 53.8% (Previous: 64.5%)
Business details: 38.5% (Previous: 51.6%)
Corporate philosophy: 11.5% (Previous: 29.0%)
Financial information: 15.4% (Previous: 16.1%)
Other: 19.2% (Previous: 12.9%)
● Who might be available to attend the next meeting with Cadira? (multiple responses allowed)
IR officer: 92.3% (Previous: 90.3%)
Sustainability officer: 42.3% (Previous: 41.9%)
Executive officer: 53.8% (Previous: 61.3%)
CEO/President: 26.9% (Previous: 5.8%)
Business unit head: 11.5% (Previous: 3.2%)
Outside director: 7.7% (Previous: 3.2%)
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