The third most popular topic of discussion these days — after layoffs, of course, and unscrupulous money managers that create near-worthless portfolios for their investors — is out-of-control executive compensation.
It seems that the subject may finally receive some attention from legislators (in some cases, at least); the non-business community is now, like TV viewers in the movie Network, "mad as hell, and not going to take it anymore." Most executives doubtless feel their years in the trenches entitle them to a multi-million dollar salary.
One can, however, look to Asia for a somewhat different model.
BusinessWeek examines the situation in Japan, where top-level earners (at the top 100 firms) take home an average of $1.5 million a year. That's a tiny amount compared to the custom in the States, where execs at $10 billion American companies reap nine times that salary package on average. (Even the typical $6.6 million doled out in Europe seems relatively reasonable compared to the U.S. figure.)
And strangely, a smaller compensation package leads executives there to take more responsibility, not less. (Of course, the unique Japanese culture and corporate structure has something to do with it as well.) Japan's CEO's are more likely to resign or take a pay cut (along with workers) when the company's profits falter; Sony and Honda have both recently reduced compensation for its leaders and/or board members. Toyota , currently facing the prospect of possible layoffs, was in a similar situation in 1950. Then-president Kiichiro Toyoda explained the dire situation to his workers, and 1,600 of them volunteered to be laid off to keep the company going; to show his solidarity with the employees, Toyoda tendered his resignation. (That was the last time Toyota laid off workers.)
Yet the BusinessWeek piece suggests that Japanese company heads are underpaid and unaccountable. Or perhaps, it just hints that such a scheme can't be duplicated here. According to a Barclays Global Investors analyst, "If they're not paid enough, they feel that they can't be blamed for bad performance. As investors, we want a system where they're sufficiently paid but also take full responsibility for what they've done."
But when was the last time a CEO of a major U.S. company offered a sincere mea culpa, one that wasn't forced out of him by the media? And since when has "taking responsibility" involved redecorating while the ship is sinking? Speak with frankness on fiscal matters, and exhibit moral integrity: These should be the new (if obvious?) must-qualities for executives looking to advance to the next level.
Just think of it as a good way to stand out.
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Todd Obolsky is a writer in Vault’s news and commentary unit. He has covered a wide range of industries (including consumer products, government and non-profit, retail, advertising, internet, energy and publishing) and manages Vault’s Layoff Tracker. He holds a BS in Mathematics from Bucknell University and a MBA with a market research focus from City University of New York’s Baruch College.
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