Continuing with my summary of the Nikkei Business cover story dissecting the 20 mysteries of Japanese executive pay in the 2nd September issue, here are mysteries 6-10 and a highlight from 11-20:
6. Low pay and low expectations of outside directors. 75% of Japan’s external directors earn less than Y10m ($100K). According to a survey by Proned, US listed companies have on average 11 directors, of whom 9 are external. UK companies have on average 10 directors, of whom 7 are external. In Japan by contrast, on the audit board, which has on average 8 directors, the average number of external directors does not even reach 1. Japanese external directors still seem to be decorative in function.
7. 13 people at FANUC earning more than $1m – despite the fact that there are only 5300 employees, only 2% of Toyota, which has only 3 executives earning more than $1m. Seiuemon Inaba, the founder and honorary chairman, still going strong at 83 years of age, defends this by saying it does not seem too much to him, and reflects good profit performance. The workload is very heavy for FANUC’s executives, and apparently the high salaries are also seen as compensation for having to live in the sticks in Yamanashi Prefecture, where FANUC is based.
8. Undisclosed special perks – there are plenty of advisors and other retired executives with roles which come with an office, a secretary and other perks. TEPCO had a large number of former civil servants in such roles.
9. Industry sectors which spurn high salaries – include services, construction, warehousing and logistics. The biggest payers are mining, transportation machinery, electricity/gas utilities and chemicals/pharmaceuticals.
10. Gap between senior managing director (senmu) and managing director (joumu) pay is much greater in larger companies. Not quite sure what the mystery here is – senmu and joumu positions are specific to Japanese companies – the second and third ranks below president.
Mysteries11-20 include – what exactly is an executive officer (shikko yakuin in Japanese) – a system introduced by Sony in 1997 and adopted by many other Japanese companies, to shrink down the main board but still give some kind of voting rights, without director pay, to executive officers.
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