The Upshot

Businessweek report: Japanese CEOs are dangerously underpaid

The Upshot

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According to Bloomberg Businessweek, Japan's economy is so backward and depraved that it pays its CEO overlords only 16 times what the average worker makes. Experts theorize that Japan's "lost decade" in the 1980s deprived it of the key economic insight that paying CEOs 319 times what line workers make, as the United States now does, is the key to a sustainable economy.

Last month, Japanese regulators began requiring publicly traded firms to disclose salaries in excess of $1.1 million, and fewer than 300 people from Japan's 3,800 public companies earned enough last year to trigger disclosure, Businessweek reports. That's a striking contrast to the United States, where average CEO pay at the top 3,000 companies is $3.5 million.

How do these Japanese CEOs survive on the measly $500,000 a year they make on average? Modestly, Businessweek is told:

"With wealth still considered unseemly in Japan, there's little pressure for salaries to rise. 'My house is small, but I'm happy,' says Yukio Sakamoto, CEO of Elpida Memory, Japan's largest semiconductor maker, whose pay was under the reporting threshold. 'I commute by train every day and have never had a problem.'"

Because ostentatious consumption is nothing to be afraid of here in the States, the Japanese tradition of comparatively austere executive pay can cause a problem: "A drawback of Japan's low pay is that it's harder to recruit abroad because junior executives overseas can end up with higher salaries than their peers — or bosses — at headquarters," Businessweek notes. In other words, Japan is hampered from competing more robustly in the global economy because its firms don't devote enough of their profits to the personal enrichment of their senior executives. Clearly they need to heed the American example, which has been finely tuned over decades to offer just the right incentives to the people who run our companies.

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