I expected to read this as another '$1 a year salary' story, wherein the CEO was still _actually_ rich, but only brought in a meager 'salary', owing the rest to dividends.
Without reference to this particular CEO, since I don't know him from Adam, much has been made of Japanese CEOs being compensated modestly and it is mostly an accounting fiction. For example, the CEO at a particular Japanese company might not be able to afford a dhh-style automobile, but if he desires to drive one, one will be made available for him from the corporate fleet. He lives, like many of his employees, in company housing, but his company-provided housing is decidedly not in the dorms with the 22 year old trainees. He will, like many of his employees, spend the majority of his meals working officially or unofficially on company business, and most of these will end up on the expense account of either his firm or one of his business partners'. etc, etc
Compare it to being President: you may be cash-poor by the standards of the rich, but that is not a meaningful barrier to desired consumption.
Speaking of which: I recently filed my taxes in Japan. The Japanese equivalent of the Schedule C (small business tax return form) has, like the Schedule C, an entry for meals & entertainment. Mine read 0 yen. A helpful person informed me that that was anomalously low, and that, wink wink, the routine practice is to claim that the company paid for every meal because, wink wink, we all know how being a salaryman works.
So the difference is merely in career security, I guess.
Now I understand why CEO pay got so high so quickly: corporate job security plumneting. It corresponded with the rise of CEOs bouncing from one company to another and being executives for hire.
If you know you're set for life as an executive of a company, who needs a huge amount of personal wealth? But if you could be cut loose from your comfortable SVP gig due to circumstances beyond your control, you have a much greater need to be personally really comfortable. The company's not going to pay your country club dues for the rest of your life, after all.
I can't believe I didn't understand this before, but then I suppose I don't think about the realities of being a senior executive at a huge company.
The unfortunate part about this is that replacing cultural security with individual economic security almost always introduces inefficiencies. In this case, giving big company execs the incentives of a founder or entrepreneur doesn't give them the attitude of one.
A good place to look is professional athletes where careers are very short on average and the amount of money they earn seems absurd. I think in football I heard something like average pro career being 6 months. It's no wonder the contracts are frontloaded/bonus based. In a sport like hockey where salary is guaranteed no matter what, you don't see the same bonus but frontloading occurs on really long contracts to circumvent salary caps. Back to CEOs, it just looks like rational behavior given average job length and amount of money needed to maintain a lifestyle.
I don't get the sense of that, though it may well be the case. Specifically, as they referenced that he takes the bus to work, wears suits off the rack, etc.
Honestly though, I'm MUCH more impressed with the accessibility -- knocked down the walls of his office, eats lunch in the regular cafeteria, etc. I know very little of Japanese culture, but he at least gives the impression that it's sincere, and as I mentioned, my initial expectation was quite cynical.
Offtopic (bearing in mind my Japan-ignorance), having an excess of meals and entertainment on your business tax returns is an invitation to be audited here in the states. You might want to speak with someone who can give you legal advice without winking. ;-)
I totally understand the bit about it being an audit flag in the US. In Japan, it is apparently considered routine practice, in the same fashion that the IRS would never question a business deduction for a subscription to the Wall Street Journal. (I edited out the identity of the person giving the helpful suggestion shortly after posting. Suffice it to say she speaks from a position of authority on the matter.)
Isn't it different than here where a CEO gets a golden parachute even when they drive the company into the ground? Here the CEO doesn't have to remain at the company to have the perks.
There are other professions that bring more status than CEO in Japan.. one of the former Toyota heads emphasized his status as a professor in a renowned university over his being a top executive.
I imagine most would. Even here (US), "professor of _ at Harvard" sounds more respectable than "top executive," including "top executive of Toyota" in certain circles (like to most of the public).
One commands respect, while the other sounds powerful and possibly evokes stereotypes of evil, rich guys.
I mean, there's no hiding it if you're a top executive at a big company, but putting the other title first gives off a certain impression to most normal folk. No?
Regardless of whether or not life's necessities are provided for the CEO(s) outside of their salary, the fact that he is taking a relatively massive, honorable paycut remains... which frees up a hefty sum of money every year, allowing workers to keep their jobs and support their families. Even if it's a small handful of workers or just one... it is a very honorable thing to do and should not be cheapened in any way. I wish every other CEO or person in a position of power/wealth would follow suit.
Without reference to this particular CEO, since I don't know him from Adam, much has been made of Japanese CEOs being compensated modestly and it is mostly an accounting fiction. For example, the CEO at a particular Japanese company might not be able to afford a dhh-style automobile, but if he desires to drive one, one will be made available for him from the corporate fleet. He lives, like many of his employees, in company housing, but his company-provided housing is decidedly not in the dorms with the 22 year old trainees. He will, like many of his employees, spend the majority of his meals working officially or unofficially on company business, and most of these will end up on the expense account of either his firm or one of his business partners'. etc, etc
Compare it to being President: you may be cash-poor by the standards of the rich, but that is not a meaningful barrier to desired consumption.
Speaking of which: I recently filed my taxes in Japan. The Japanese equivalent of the Schedule C (small business tax return form) has, like the Schedule C, an entry for meals & entertainment. Mine read 0 yen. A helpful person informed me that that was anomalously low, and that, wink wink, the routine practice is to claim that the company paid for every meal because, wink wink, we all know how being a salaryman works.