What are some of the differences between a Japanese CEO and an American CEO?

American CEOs get paid more, have more power, make decisions faster, are more ruthless and care more about pleasing stockholders than customers. Japanese CEOs are bureaucrats. Bad news is often kept from them by middle management and then after it blows open, they spend most of their time bowing and apologizing at news conferences before retiring to take a cushy job as an adviser.

On the other hand, I wonder what it would be like to work for a progressive Japanese CEO like Rakuten boss Mikitani.

Frungy-US CEO's rarely head two completely separate companies, unless they are subsidiaries or related in some way. I also take issue with your comment about Japanese CEOs taking responsibility. Japan's business culture is designed to diffuse responsibility. The middle-top-down business structure allows CEOs to avoid blame by saying it wasn't his idea since the idea came from middle management.

A Japanese CEO gets to where he is by virtue of....age. Nothing else.

Frungy-Me thinks one should avoid broad sweeping generalizations is you want to debate a halfway intelligent person or they tend to lose interest.

An American CEO doesn't say "We will carefully consider your proposal," when he means to say, "We will feed your proposal to a goat."

In short, American CEO's are performance oriented and emphasize supervisory style, decision making and control. On the other hand Japanese CEO's are perfectionist and more concerned with the communication process, interdepartmental relations, and paternalistic approach. However they also have a different culture and management system as a by-product of culture which manifest a unique characteristic in both countries.

Salary.

Why compare a japanese CEO with an American CEO; there are other countries out there in addition to the USA.

Speed - both in innovating and adapting to change

Frungy Aug. 21, 2013 - 05:38PM JST Salary - Japanese CEOs earn lower salaries, because they understand from experience their part in the total process of the organisation. U.S. CEOs seem to believe that they do the work of a thousand engineers in one day... which is idiotic, but then intelligence isn't a requirement for CEOs.

In the U.S., this reflects the fact that nobody really knows how to judge a CEO’s worth. Since the executive is hired by a board of directors that’s theoretically accountable to a company’s shareholders, it seems like CEO pay should have something to do with stock price. But nobody wants a CEO to focus exclusively on short-term stock issues and ignore the firm’s long-term strategic position. And even if you do focus on share prices, what’s the relevant issue? Absolute return? Returns relative to the market as a whole? Returns relative to the sector?

American CEOs do not bow.

I have a good suggestion for the next question:

What are some of the differences between Japanese girls and French girls?

For Japanese CEO's, the problem of capital market is related to that of labor market. Typical Japanese worker is employed for life and his salary increases by age. So his productivity is higher than his salary in the younger age, and lower in the older days. In other words, he "saves" his salary to the company in the younger age and "draw the deposit" when he is old. There is a fundamental problem is the Japanese industrial structure. All these problems stem from the long-term relation between managers and workers, suppliers and makers, which was efficient when Japan was growing steadily and the future was always better and brighter. The long-term relation became inefficient and fragile.

@badman wrote: Me thinks one should avoid broad sweeping generalizations is you want to debate a halfway intelligent person or they tend to lose interest.

@frungy wrote: Methinks that you had no actual counter-argument so you posted this snarky reply.

I have a question, a serious and honest question, everyone likes a good debate, but you want to take the discussion to a totally different level, if anyone says anything about the US and in favor, NO matter what it is, you always have something nasty or snarky to say and I wonder why? Just keep it civil. Sad to say, but NOT everyone is going to agree with you on everything, that's just life. Nothing wrong with that. If you want a good debate, try not to put people down that disagree with you.

Age - Japanese CEOs tend to be older, U.S. CEOs younger.

Knowledge - A Japanese CEO has worked his way up through the company, worked in every division and knows the people and company inside out. A U.S. CEO has no idea who anyone is more than one level below them and most often has little or no idea what the business does or how it does it.

Focus - Mostly Japanese CEOs are CEOs of one company, and devote a full day to focusing on that company. U.S. CEOs are often CEOs of multiple companies and are just figureheads who rubber stamp decisions.

Salary - Japanese CEOs earn lower salaries, because they understand from experience their part in the total process of the organisation. U.S. CEOs seem to believe that they do the work of a thousand engineers in one day... which is idiotic, but then intelligence isn't a requirement for CEOs.

Involvement - Japanese CEOs, despite their reputation, are actually accessible to most employees quite easily. U.S. CEOs are virtually impossible to access except on "PR" visits to departments.

Responsibility - Japanese CEOs have real responsibilities. If something goes wrong they often resign as a sign that the company is sorry. U.S. CEOs delegate responsibility to the lowest ranked person around (regardless of whether the person was even involved) and then vote themselves a raise.

badmanAug. 21, 2013 - 08:27PM JST Frungy-US CEO's rarely head two completely separate companies, unless they are subsidiaries or related in some way.

So you admit I was right about U.S. CEOs heading up two separate companies... drawing two salaries (plus often sitting on the board of several other companies and drawing board fees from those companies too)... and all the while claiming to add sufficient value on their own that it justifies their bloated salaries.

I also take issue with your comment about Japanese CEOs taking responsibility. Japan's business culture is designed to diffuse responsibility. The middle-top-down business structure allows CEOs to avoid blame by saying it wasn't his idea since the idea came from middle management.

Take as much issue as you like, however the fact remains that when there is a serious error the CEO in Japanese companies tends to step forward, take all the blame and take the largest share of the penalty (they normally resign). Of course it doesn't stop there. Generally bonuses are cancelled for all employees, and some or all employees may take a salary cut for a time as a sign of taking responsibility for their part in the error.

Contrast this with U.S. CEOs who normally delegate the blame downwards, firing the lowest ranked person they can find, placing all the blame on that individual, and accepting none for themselves or the company. When they do resign they almost always have to be "bought out" by the board, i.e. accepting a large cash settlement (golden parachute) in exchange for vacating their position ... and even then they normally don't accept any responsibility for the error.

The grading system that resulted in CEOs commanding the huge salaries they have today was premised on responsibility increasing as rank increased, and belonged to an era when the slogan "closest to the top, closest to the door" applied. Now that logic doesn't apply in most Western companies, but the salaries remain. In fact it has become even more ridiculous, with most HR departments having a careful salary grading system that suddenly cuts off at the top management.... since the top management vote themselves whatever salary they like.

American CEO - its not what you know, its who you know.....regardless of age and experience.

Japanese CEO - Everybody gets to know! Age and experience do matters!

Get it?

sfjp330Aug. 22, 2013 - 03:31AM JST In the U.S., this reflects the fact that nobody really knows how to judge a CEO’s worth. Since the executive is hired by a board of directors that’s theoretically accountable to a company’s shareholders, it seems like CEO pay should have something to do with stock price. But nobody wants a CEO to focus exclusively on short-term stock issues and ignore the firm’s long-term strategic position. And even if you do focus on share prices, what’s the relevant issue? Absolute return? Returns relative to the market as a whole? Returns relative to the sector?

Thanks for the comment sfjp330. Okay, let me take your post point by point:

Since the executive is hired by a board of directors that’s theoretically accountable to a company’s shareholders, it seems like CEO pay should have something to do with stock price.

Technically all employees are hired by the company, from the CEO down, and everyone in the company is accountable to the shareholders (unless its a sole proprietorship in which case everyone is hired by the owner and is accountable to the owner). The idea that one person (the CEO) is responsible for all variation in stock price is a bit of a slap in the face for all the people who work very hard to make the company operate.

Its an old error, the idea that a "Good King" will make the kingdom prosperous... whereas we actually know that it was far more important that the "peasants" followed good crop growing procedures, that there was a free exchange of ideas, that the weather was good, etc. This tendency to focus on a single individual is a natural human failing, and you can see it in many situations. In truth figureheads rarely have much impact. We blame Hitler for WW2, but in truth if Hitler had been hit by a falling grand piano someone very similar would have stepped into his place with very similar results.

As a result linking CEO pay to stock price is no more appropriate than linking your salary to stock price. Perhaps your bonus might be linked to stock price, but then you'd also be expected to take a salary cut when the stock price dropped (something that U.S. CEOs do not do, but that is known to happen in Japanese companies).

But nobody wants a CEO to focus exclusively on short-term stock issues and ignore the firm’s long-term strategic position.

Again this is an error in thinking. There is no CEO out there who is an expert on strategic HRM, strategic finance, tax law trends, market trends, strategic production technology, etc... As a result the CEO's job is to listen to his top managers from each area, consider their positions and try to choose the best path forward from what he's been told. If the CEO has bad advice then he makes bad decisions. If the top managers advising him have bad information from their subordinates then likewise there are bad decisions. Companies are not one man, and CEOs are not supermen capable of remaining up to date on all the trends in every area. I'm not saying that they're stupid, there are some very smart and capable CEOs out there who keep informed on a wide variety of areas and know that their job isn't to be an expert, but rather to be an "expert generalist" (i.e. someone who knows just enough to spot when they're being lied or misled and who has an excellent general knowledge).

For the most part though, looking at U.S. CEOs there's a strong trend towards appointing people with a financial background, which leads to number-centered management (quantitative management) rather than holistic management (management that considers all the angles). Quantitative management's big failing is that it tends to focus on the "now" (what you have figures for) rather than "then", and leads to precisely the problem you highlighted, namely that U.S. CEOs often cut jobs, etc, to increase stock price immediately rather than considering that they might need those workers again in 3 months.

There are experts out there who's entire field of study is pay and how people should be paid, and all of them agree that CEO pay is a very, very bad joke. It is a result of a set of human cognitive biases that most people lack the self-awareness to step back from and say, "Hey, this is nonsense.".

Just pause to think for a moment, if there was no CEO what would happen to a company? Yes, it might react a little more slowly and there would be more bickering between senior managers from various departments over which areas should receive priority for resources, but in the end they'd sort themselves out and develop a method for resolving disagreements - it might not be the best method and some departments might "gang up" on less popular departments, but that's no worse than the current situation, since I've known many Western CEOs who automatically side with the finance department on any issue since they share a similar background and they simply don't understand production and other issues. The CEO's job is quite simply to mediate. You could outsource the CEO's job to any of a thousand different mediation companies and get the same result for a tiny fraction of the current cost.

Now let's consider what would happen if you removed a quantity of employees equal to the CEO's salary. The company would be crippled.

Does that put the issue of CEO remuneration in context? Its a simple cost-benefit vs next best alternative analysis. U.S. CEOs are overpaid and they're paid using the wrong metrics. Its as simple as that.

badmanAug. 22, 2013 - 09:46AM JST Frungy-Me thinks one should avoid broad sweeping generalizations is you want to debate a halfway intelligent person or they tend to lose interest.

Methinks that you had no actual counter-argument so you posted this snarky reply.

The topic, "Japanese CEO" vs "American CEO" is a sweeping generalization in itself. We're talking about trends here, and as such generalizations are entirely appropriate to answering the question as asked. What were you expecting, that I quote a thousand examples (and even then it wouldn't be a representative sample since there are about 2.5 million companies in Japan... a thousand examples would only give a confidence interval of about 3)? Don't be so utterly ridiculous.