Having examined the lack of correlation between company performance and executive pay in Japan as mystery #1, the Nikkei Business cover story then goes on to detail the other 19 mysteries of Japanese executive pay.
2. Ultimately, the President sets the pay of the board directors, and it is mainly by sticking a finger in the air, based on personal likes and dislikes rather than performance, and keeping it in line with what other companies in the same industry are paying.
3. The double standards for foreign executive pay. This past year, foreign directors have occupied the top 4 spots for executive pay – Carlos Ghosn of Nissan, Tadataka Yamada (a Japanese American), Deborah Dunsire and Frank Morich of Takeda Pharma. Deborah Dunsire is no longer with Takeda, having joined when it took over Millennium. The Takeda trio earned more than Takeda’s President Yasuchika Hasegawa. Similarly, at Eisai, Lonnel Coats, head of the Americas region, earns more than Haruo Naito, the President. The Nikkei notes this has a lot to do with mobility of executives in the West compared to the tendency of Japanese execs to stay put, as well as a greater performance based component to pay.
4. Giving up salary when something goes wrong. For example. the President of TEPCO has taken a pay cut quite a few times since the Fukushima disaster, but apparently this is decided by the executives themselves rather than any remuneration committee, and does not seem to have any process behind it, and indeed the mistakes continue. TEPCO has a history of executive pay cuts, dating back way before 2011. It seems to be purely about PR value.
5. Huge golden parachutes even when there are losses. Executive pensions used to be seen as part of severance remuneration in many Japanese companies – to be paid to the family even if the executive died. It was more to do with length of service than performance. This has changed considerably but there is still a lack of transparency about pay for departing executives. For example, when Masaharu Matsushita retired as Chairman of Panasonic in 2012, he was apparently paid around $15m despite several quarters of losses.
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