Japanese regulators recently announced that Japanese companies must
disclose the salaries of executives who make more than 100 million yen,
which is equivalent to 1.1 million dollars. Surprisingly, only 300 executives
at Japan's nearly 4,000 companies met the baseline requirement. And
those who did weren't far over the limit. At Toyota, for example, the
chairman draws $1.5 million and the CEO does not even make the $1.1
million required for public disclosure. That's tiny in comparison with
the salaries of top U.S. executives. In 2009, the CEOs of
Hewlett-Packard, Best Buy, and FedEx made
$51.9 million, $49.3 million, and $44.5
million respectively. Why are Japanese executives paid so little, and American executives so much? What are the lessons of this?
Stifle Japan's Global Competition BusinessWeek's Jason Clenfield warns, "A
drawback of Japan's low pay is that it's harder to recruit abroad
because junior executives overseas can end up with higher salaries than
their peers--or bosses--at headquarters. ... The bottom line: Japan's CEOs
earn far less than Americans or Europeans. The pay gap could be a
problem as Japanese companies expand abroad."
Culture Dictates Business The Washington Post's Ezra Klein sighs, "It's a
reminder that CEOs aren't just paid what the market will bear, they're
paid what the culture will accept."
- Actually, Salaries Aren't
So Different The Atlantic's Megan McArdle explains
that tax law means it's easier for Japanese executives to pad their
expensive accounts, which is just an alternate form of payment. "In
general, you can assume that companies will compensate their executives
in whichever manner is a) most tax favored and b) makes the headline
number as small as possible--not just to avoid the beady eye of the
regulators, but also to grease things past the shareholders. The
American tax code is not very good at collecting money from
corporations, but it is very good at getting companies to change
expenditures into more tax-advantaged forms, which is why the once
legendary American expense accounts became, by the nineties, rather
meager by international standards."
- U.S. Companies Should
Outsource CEO Labor Liberal blogger Matthew
Yglesias gets tongue-in-cheek. "I assume that if this was an article
about how some Chinese factory workers do essentially the same job as
some American factory workers, but they do it for much less money, the
bottom line would be about all the efficiencies that can be reaped
through outsourcing production to Asia. And to me the bottom line seems
to be the same. Toyota is a much larger and dare I say more successful
firm than Ford, whose CEO appears to be making over $20 million a year.
Surely there's some senior person over there who speaks English and
would be willing to do Alan Mulally's job for Carlos Ghosn money, right?
CEO pay in China also
seems to be quite low."
- Blame the Boards of Directors Commenter Bloix at Ezra Klein's blog suggests, "Here we have
supine boards of directors voting for whatever the CEO
wants in exchange for corporate welfare for the board members.
That doesn't happen in Japan because corporations are owned in large
part by banks, which exercise real control, and not by shareholders, who
don't. So this isn't about culture. It's about the structure of
ownership and the failure of the American model to provide adequate
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