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CEO pay in Japan

I can't decide whether the right introduction to this post is "I'm moving to Japan" or "I'm not moving to Japan."

On June 30 securities regulators began requiring Japanese companies to disclose pay for executives making more than 100 million yen ($1.1 million). ... Although pay for Japanese executives has more than doubled in the past decade, the government says, fewer than 300 people at Japan's 3,813 public companies earned enough in 2009 to require disclosure.

The chairman of Toyota makes $1.5 million. The CEO of Toyota makes less than $1.1 million. So does everyone at Panasonic. More here. It's a reminder that CEOs aren't just paid what the market will bear, they're paid what the culture will accept.

Update: Megan McArdle complicates the picture.

By Ezra Klein  |  July 6, 2010; 10:36 AM ET
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Free-market fundamentalist take: The vehicle acceleration problems at Toyota in 2009 happened due to the weak incentive structure at the top of the organization . . .

I will also proceed to ignore the growth of Toyota's market share over the past 15 years relative to firms with more richly compensated senior executives.

Posted by: JPRS | July 6, 2010 11:02 AM | Report abuse

Interesting thing one to me is that *all* public companies here have to reveal executive compensation.

Another interesting thing is that many of the large Japanese companies still have significant family ownership, so a Toyoda family member is likely to already be a significant shareholder in Toyota, as well as having a long term interest in the company.

It's actually the price that the shareholders will bear, not just the market. I have noticed fewer of the big CEO stealing maneuvers that used to grab headlines.

If look at a company turning $90B in profit, like Exxon-Mobil, you won't notice the $27M paid to the CEO, who has been with the company for 35 years.

As shareholders, and most of us are in some of these big companies, we should be looking for leaders with longer term interests in the company, not people looking to get the stock to jump so they can dump it. It's that sort of challenge, where the long term shareholders are in competition with the short term holders of the securities for the direction of large public companies, that is getting worse. A lot of the ridiculous investment advice that is focused on getting people to buy index funds has the effect of reducing the role of the long term shareholder. When even larger portions of your company are held by ETFs and index funds that buy and sell with the market direction, as opposed to anything you are doing or not doing, it's hard to make arguments for doing a lot of the good things you may want do.

Posted by: staticvars | July 6, 2010 11:11 AM | Report abuse

"CEOs aren't just paid what the market will bear, they're paid what the culture will accept."

This is a misunderstanding of corporate governance and pay.

In the US, corporations pretend that there is a market in a service called corporate leadership, which (like the ability to hit home runs) is so rare and valuable that the market to supply it produces astronomical salaries.

But there is no such ability and the trading around of CEO's does not result in better corporate performance.

The truth is that corporate leadership is not fungible. Real corporate leadership takes decades of hard work within a single company. A good CEO knows his company its business and has deep loyalty and credibility with the executive staff.

But there is no market in such in-house leadership. That, and not culture, is the reason that Japanese CEO's make the salaries they make.

There is no market in the US either. 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 corporate ownership and the failure of the American model to provide adequate corporate governance.

Posted by: Bloix | July 6, 2010 11:34 AM | Report abuse

I've got to say, I love the title. There are certainly pros and cons to a society where unseemly wealth is just that - unseemly. On one hand our free market and high demand has allowed American business to lead the global economy; on the other, greed and overpay in the corporate world have let to a misguided sense of responsibility and even corruption.

I've posted about this very phenomenon in American companies on my blog, Specifically, the possibility of a corporate salary cap: ( and the ridiculous risks our companies take in the pursuit of profit (

Ezra, your articles are always interesting and informative. It's refreshing to read pieces like these and to know that there are CEOs in the world whose goals include more than the amassing of enormous wealth.

Posted by: zach6 | July 6, 2010 11:42 AM | Report abuse

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