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Business trends

Japan sees 50% surge in companies paying executives with shares

Over 800 corporations align fortunes of top brass with shareholders

For the first time in Japan, more companies have paid executives directly with shares than stock options.   © Reuters

TOKYO -- More Japanese companies are using stocks as part of executive pay, seeking to shift management's focus to strategies that will increased share prices over the long term.

As of the end of June, more than 800 companies, or about 20% of all listed companies, use the system that employs actual shares, according to Nomura Securities. The number has increased almost 50% in the last year.

Satellite communications company Sky Perfect JSAT Holdings announced plans last month to pay executives with stocks. The company said the move was taken with the aim of "granting directors with an incentive for continuously improving the corporate value of the company, as well as promoting the further sharing of value with shareholders."

According to Nomura Securities, 811 companies have adopted the compensation method as of last month, increasing 46% compared with a year ago.

When using the method, companies either must issue new shares or use existing shares to pay executives. Executives are not able to sell the shares for a certain period of time. The system is seen as a way to encourage long-term corporate management to increase share price.

In the past, companies tended to use stock options as a compensation system which gives executives the right to buy the company's stock at a discounted price during a certain time frame.

Paying executives with shares is a common practice in other parts of the world, including in the U.S. and Europe. In Japan, SoftBank Group and Japan Tobacco International, as well as real estate company Mitsui Fudosan, have shifted to the method this year.

More than half, or 51%, of Japanese companies' stock compensation plans use this method, exceeding those that use stock options for the first time.

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