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Japan Inc's pay disclosure in spotlight after Ghosn's arrest

30 Comments
By Junko Horiuchi

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Pay people what they are worth, I guarantee you Ghosn brought in and saved 1000 times his salary over 20 years.

9 ( +14 / -5 )

Nothing is free. Why does anyone think that turning a company around is free?

4 ( +9 / -5 )

Ghosn's role is over at Nissan. Merger of Nissan to Renault is not beneficial to Nissan. It is natural that they dragged down Ghosn who is trying to put Nissan under Renault.

-13 ( +3 / -16 )

The major fundamental difference in running a large corporation between the West and Japan is this. It is the very rare Japanese CEO that stands out.... People like Softbank's Son, and Sony's Morita, rarely ever get to the top of a company unless they found the company themselves. Which is the case with the above two. The rest of Japan's CEO's only ever get to the top by navigating the complex corporate, highly political, web. They need to be able to figure out how to keep the trust of most of the top executives to the point that those execs would feel secure that if this guy gets to the top.... things will not change. Many of these guys start out just like any other college kid.... I want to make a name for myself but along the way they see good, hard working, smart guys with great ideas, get pounded into the pavement because they rocked the boat. So why does Japan continue to do pretty well despite this? They inherently are extremely good at devising ways to protect their turf. The turf being the domestic market. Oh yeah.... and they're also in debt to the tune of $11 Trillion. Every time things start to turn too far down.... the government steps in to support industry.

19 ( +20 / -1 )

This article simply highlights another reason why Japan is in steady decline, common knowledge to most posters here as we see it daily in our lives as we are out & about.

True there are hints at possible changes/adjustments but nothing remotely significant ever seems to happen

11 ( +13 / -2 )

Interesting what this article leaves out. Both the French government and Renault shareholders thought Ghosn was being paid too much. He was forced to take at 30% pay cut to get his contract extended.

Carlos Ghosn Takes Sharp Pay Cut to Stay at Renault

The French economic minister said Ghosn’s total pay cut was 30%; move comes after the government criticized his pay package

https://www.wsj.com/articles/carlos-ghosn-takes-sharp-pay-cut-to-stay-at-renault-1518792794

Interesting too that there is no mention whatsoever of movements in both the UK and other European countries to put limits on executive compensation.

Shareholders revolt over executive pay packets

https://www.thetimes.co.uk/article/shareholders-revolt-over-executive-pay-packets-wxgg8n7ph

The rest of Japan's CEO's only ever get to the top by navigating the complex corporate, highly political, web.

Most US/UK/German CEOs are corporate bureaucrats who have been in the same company for their entire career. They are entrepreneurs only in terms of company politics.

7 ( +7 / -0 )

shareholders to set the total amount of executive remuneration but has been interpreted as giving representative directors the sole discretion to decide how the total is shared out.

By keeping very tight financial limits was how he was able to lead for so long, it kept Saikawa in his place, but the Prosecutors misinterpreted this as greed, so now you have Saikawa, and the World has lost Carlos Ghosn, which is a shame indeed, because they forget how international is the car business, this will hurt American,English and French plants.

1 ( +4 / -3 )

"I'm really afraid that this incident will discourage excellent talents globally who have a passion to come to Japan and be part of Japanese corporations and make Japan successful," Nakanishi, an automobile industry analyst, said.

Well, you should be very afraid indeed. I'd be discouraged too if I were a high ranking exec and I look at this whole mess with Nissan. I'd quite frankly turn my back to Japan and never look back. They don't deserve foreign talent. Let foreign talent go elsewhere where they're treated more humanely.

2 ( +3 / -1 )

"In Japan...when it comes to remuneration, many companies focus on in-house fairness between employees and executives, who have often built up their careers in the same company," 

This in-house inward thinking also leads to many cases of the blind leading the blind, often towards a cliff. You want to get the top one percent of the top one percent performers to come take a look at what could be done in Japan, then you have to pay. Super performers aren’t collectivists.

6 ( +8 / -2 )

I can't believe their still sticking with their weird rhetoric wording...

No one reports their earnings, that's the job of accountants and the CFO, he SIGNED his job CONTRACT from the BEGINNING.

7 ( +8 / -1 )

What WSJ is saying about Saikawa :

https://www.wsj.com/articles/at-a-troubled-nissan-hiroto-saikawa-takes-the-wheel-11546171203?mod=cx_immersive&cx_navSource=cx_immersive&cx_tag=contextual&cx_artPos=1#cxrecs_s

0 ( +0 / -0 )

I know for a fact there is nothing transparent about Japan Inc’s operations. It is run on brown paper bags and under the table deals. Price fixing, mates’ deals and padding company profits is standard practice. It’s been like this for getting on half a century.

I believe Ghosn is guilty of financial misconduct, but he is being singled out. I’m sure many Japanese CEOs are cleaning out their offices and bank accounts in the hope they don’t get busted too.

2 ( +5 / -3 )

One issue with the vaunted overseas Compensation Committees with outside members is that they don't work very well. Members sit on each others' Compensation Committee, and no-one votes down a pay rise or salary proposal, for fear that the same will be done to them later. Not dissimilar to Japan Inc's corporate share cross-holdings.

7 ( +7 / -0 )

If Mr Ghosn were such a miscreant as the media keep painting him then surely there would be charges and a trial but instead there is, it seems, endless detention........,,,,

0 ( +3 / -3 )

About 10 years ago I read in Newsweek or Time Magazine that the highest paid in a Japanese and German company is on average about 10-11 times paid more than the lowest paid. In a US company this number is 256 times! I am strongly convinced that this number should be regulated by laws, and not the minimum wage. If your SOB boss makes 256 times more than you, that means you are a very-very naive slave. That is why Japanese and German companies being much fairer than US ones produce high quality Toyota, Honda, Nissan, Mercedes, BMW, Audi. The need of such a law is one of the most important laws we need now. Unfortunately very few understand that...

1 ( +3 / -2 )

The problem with laws that restrict the amount of compensation disparity is that some countries will not have those laws, which will immediately place them in higher contention than companies without those laws. Quality management will go to the countries that do not restrict their compensation.

The idea is sound, but the majority of G8 countries would have to implement it somewhat simultaneously for it to work.

1 ( +2 / -1 )

Looking at the other end of the payscale minimum wages ( and increasing taxes on food )

gives you the red lantern among G8-sorry7.

With all the govt debt challenging global corps......

0 ( +0 / -0 )

So the Chairman job then ?

It gives you a house in Rio, deferred pension payments and ten billion yen a year, hmmmm I'll think about it.

0 ( +0 / -0 )

For Ghosn it wasn't about the money he was COO, CFO,CEO etc of three companies, he would have delegated all the day to day packages .

Sure, France renegotiated 30%, but they didn't bring in the "Prosecutors", its the method rather than the outcome which is at question here.

1 ( +2 / -1 )

One elephant in the room of neo-liberal, corporate capitalism is that there is not necessarily a high correlation between CEO pay and performance. https://www.wsj.com/articles/ceo-pay-and-performance-dont-match-up-1526299200

Even before the Lehman Shock and Housing Market crisis, I remember hearing about a Harvard study saying the average CEO pay for American companies was roughly 400 times greater than the pay of the average employee ... and long before that, there was plenty of evidence showing that cronyism, nepotism, luck, the will of god (prosperity theology?), mandates from heaven etc. justified an elite ruling class and its excesess ... industrial revolution and before.

With the current Corporate industrial-capitalist paradigm, when profits are rolling in, neo-liberal policies, incentive bonuses, and cronyism-nepotism are all part of the pro-capitalist agenda.

But when losses, excesses, and mistakes are not effectively out-sourced and the company goes into the red, the low paid workers that actually do the work are laid off by the thousands, unions busted or co-opted by corporate interests, and the CEOs take a bonus for having to do the dirty work of making the company attractive to shareholders. This is also when those same CEOs change into their 'socialist masks' and go to the government, hat in hand, and ask for tax funded bail-outs.

Capitalist, as long as they are raking it in, socialist when not ... either way, mere management is not the same is leadership, and it is a false analogy to compare CEO superstars and their compensation package with the super-performance of a top world athlete.

2 ( +2 / -0 )

The problem with laws that restrict the amount of compensation disparity is that some countries will not have those laws, which will immediately place them in higher contention than companies without those laws. Quality management will go to the countries that do not restrict their compensation.

This is the logic executives want followed, but there are huge holes in that.

First is the very idea that executive talent is a commodity worth pursuing to the astronomical levels seen in the US. There isn’t much evidence to back that up, a company with a CEO getting paid 20 million a year is no more likely to do better than one with a CEO making 1 million a year. Likewise Japan has managed to become one of the wealthiest countries in the world without a system for showering wealth on top management.

Second its erroneous to assume that “quality” management will go to wherever country they can get the highest compensation. Managers are humans and compensation is just one of many variables that determine where they choose to work. Its not irrelevant, but its not determinative in most cases: few American CEOs would want to work in Japan even if they could earn more here for example.

Third, excessive executive compensation imposes a deadweight loss on companies (and by extension the wider economy) which makes them less rather than more competetive since they are basically wasting shareholder money.

Fourth, its not just the amount of pay but how it is structured. American execs get most of it in stock plans which causes them to focus on share price rather than long term planning. Japanese execs get most of it in salary and bonuses which encourages long term planning.

3 ( +3 / -0 )

the very idea that executive talent is a commodity worth pursuing to the astronomical levels seen in the US. There isn’t much evidence to back that up, a company with a CEO getting paid 20 million a year is no more likely to do better than one with a CEO making 1 million a year.

While you may be correct, that doesn't change the fact that the perception of how things are is the opposite of what you state. And perception unfortunately matters more than reality a lot of the time. If the people doing the hiring, and the people doing the work, may be doing so in a flawed system, but the fact that the system is flawed doesn't change the fact that it's the system. In other words, if the people doing the hiring, and the people getting hired, all think that US levels of compensation are what is required, then regardless of whether that is factually true or not, this is how hiring will be done.

its erroneous to assume that “quality” management will go to wherever country they can get the highest compensation. Managers are humans and compensation is just one of many variables that determine where they choose to work.

I agree with you for the most part.

However, if one country is suddenly able to pull all the 'talent', due to offering better compensation packages, then enough of the talent will go to that country to likely make it a more appealing place to live.

Third, excessive executive compensation imposes a deadweight loss on companies (and by extension the wider economy) which makes them less rather than more competetive since they are basically wasting shareholder money.

Again, while this is true, if it's a burden shared by all companies, then it just becomes a cost of doing business.

Fourth, its not just the amount of pay but how it is structured. American execs get most of it in stock plans which causes them to focus on share price rather than long term planning.

Most executives are not going to look at just the pay, but rather the whole package.

1 ( +2 / -1 )

Hmmm, so electric or hybrid what do people think ?

Was Ghosn even on the right track as Chairman of Nissan ?

Maybe Saikawa is right.

-3 ( +0 / -3 )

While you may be correct, that doesn't change the fact that the perception of how things are is the opposite of what you state. And perception unfortunately matters more than reality a lot of the time. If the people doing the hiring, and the people doing the work, may be doing so in a flawed system, but the fact that the system is flawed doesn't change the fact that it's the system. In other words, if the people doing the hiring, and the people getting hired, all think that US levels of compensation are what is required, then regardless of whether that is factually true or not, this is how hiring will be done.

Thankfully not everyone thinks US style compensation is necessary: its still rare in Japan and a lot of other countries inpart because people realize that it is pure BS.

Also, just because the dominant form of thinking says something is good obviously doesn’t preclude us from pointing out that in reality it is not.

However, if one country is suddenly able to pull all the 'talent', due to offering better compensation packages, then enough of the talent will go to that country to likely make it a more appealing place to live.

But the underlying question is whether or not that country is better off for it, and There isn’t much evidence to suggest that it is. The effects of executive talent on corporate performance are negligible beyond a certain point: in most cases a team of competent but modestly paid execs will perform just as well as an all star team of jet setting execs paid obscene amounts, and the company with the former will have performed better since they didn’t throw money away on excessive executive pay.

Ghosn is an exception in that he did perform a key role in turning Nissan around which would justify what he was paid, at least during the restructuring. But that is an exceptional case. Toyota got to be the number one auto maker in the world without ever paying its top execs more than a fraction of what Ford, GM, etc execs get paid.

1 ( +1 / -0 )

Also, just because the dominant form of thinking says something is good obviously doesn’t preclude us from pointing out that in reality it is not.

I agree. And I'm not a fan of the current system either, I would like to see it change. But I'm pointing out the issue we have to get past if we are going to change it, because the interesting thing about the free market (and international employment is in a way the freest market) is that the perception ends up being the reality. Reality comes second to that. So a paradigm change has to happen independently of borders.

1 ( +3 / -2 )

Has anyone seen Ghosn ? Perhaps he's dead and that's why they're continually renewing his custody until they figure out what to do next .... ?

-2 ( +0 / -2 )

He was paid $10 million in 2016? There are "executives" over here who have been paid over half a billion dollars in a year. It is not what makes the US great, it is what holds us back from being better. A corporate bean counter who floats to the top of the pool is not worth in excess of $600 million in one year.

0 ( +0 / -0 )

(sigh), I wish I could edit, post-hoc.

Regarding the elephant-thingy about CEO compensation, looking at humans as more or less hierarchically biased social primates — particularly once they expand beyond family units or small communities into herding or swarming populations — whether justified by Confucian ethics or Horatio Alger /Ayn Rand inspired mythology — 'meritocracy' is just one of many tools used as either a carrot or a stick for the majority of people.

The Carlos Ghosns, Wall Street Robber Barons, and a sitting U.S. president I won't mention by name ... do not apply the same standards of meritocracy to themselves, and neither are they subject to the same standards of the rule of law.

Those who get to the top, if not by cronyism and nepotism, are self-entitled through 'dark triad' personality traits — https://en.wikipedia.org/wiki/Dark_triad. Neither social norms nor legal statutes apply to them. Norms, laws, the media, public education ... these are mostly tools to keep the status quo, or further the oligarchy's self interests.

If anyone watched NHK BS's late night New Year's documentaries, big money interests fueled and ignited the previous century's two world wars ... and is a foreshadowing of Einstein's quote 'I know not with what weapons WW III will be fought, but WW IV will be fought with sticks and stones.'

0 ( +0 / -0 )

Ghosn was paid higher before the 2009 disclosure law. But after the disclosure law, they didn't want to appear paying so much money compared to other Japanese. So they cut Ghosn's official salary, but unofficially other compensation that would amount to his previous salary

And that's how this mess started - they just couldn't be honest about themselves

0 ( +1 / -1 )

Saikawa might be right.... but keeping a person in jail for a financial crime and trying to force that person to sign a confession, is that necessary? With a financial crime.... especially one that involves not paying taxes... that should be between Japan's Taxation Bureau and Ghosn.... why would Nissan finger the guy? That and that alone, along with the timing of when Nissan did it, is tantamount to a conspiracy against Ghosn by Nissan. I've never seen any company accuse its own employee of tax evasion.

0 ( +0 / -0 )

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