Japan’s CEO Aren’t Greedy Villains

In Japan, more CEOs share the pain of tough times – USATODAY.com

The USA Today, whether they're trying or not, is doing a good job recently of highlighting issues at least somewhat related to Toyota and the Deming philosophy.

While Merrill Lynch's John Thain was splurging on a $1.2 million office makeover and Lehman Bros.' Richard Fuld was drawing a $22 million bonus, the president of Japan Airlines was riding the bus to work, eating in the company cafeteria and cutting his salary to $98,000.

“I wanted to share the pain with my colleagues,” JAL President Haruka Nishimatsu, 61, says by e-mail. Nishimatsu had just imposed an early-retirement program that ended the careers of “many staff of my generation.”

Japanese-style executive modesty is looking good again for the first time in two decades, thanks to the avaricious antics of American CEOs who lived large as their firms hurtled toward oblivion.

Wait, JAL isn't going to lose their “best and brightest” by having such low executive pay? You mean executives would work for the pride and joy of leading others and building a great company? They aren't greed mongers who have to be given huge bonuses just to get their interest? Dr. Deming would be proud of the Japanese executives pride in their work.

Japanese CEOs get paid less:

Japanese CEO pay never reached stratospheric heights. According to the consultancy Towers Perrin, CEOs of big Japanese companies earned an average $809,000 in 2003 — chump change compared with the $11.4 million raked in by their average U.S. counterpart. The figures, the latest comparison available for U.S. and Japanese executives, include base salary, annual bonuses and long-term incentive packages.

And we get yet another professor highlighting how compensation schemes and short-term incentives helped bring down the economy (as previously blogged about here):

Moreover, argues management professor Gangaram Singh of San Diego State University, U.S. compensation packages, heavily weighted toward stock options, encouraged CEOs to focus on short-term gains in earnings and stock prices, rather than on the long-term health of their firms. “Greed and short-term orientation have gotten us into this situation,” he says. “Short-term goals can bring all types of deviant behavior.”

Dr. Deming preached that leaders and companies had to focus on the long term. That's the first principle, also, of the Toyota Way.

In the name of fair and balanced, critics also point out that Japanese companies are, generally, about half as profitable as U.S. companies. So maybe neither system is perfect, but we can strive for balance. The article also points that Japanese leaders tend to rise within the company, which makes it harder for them to look long-time co-workers in the eye to take a HUGE compensation package. A “cowboy” who is brought in from the outside (Robert Nardelli, anyone?) might not share that same sense of belonging and responsibility.

The article also highlights some downsides in the Japanese system – that it can be hard for insiders to change directions for the company and that leaders might be too risk averse.

But after an era where banking executives, in particular, weren't anything close to risk averse, maybe a period of fearing risk doesn't sound too bad.

It's an interesting comparison, at the least. What are your thoughts on this? As a lean thinker, I'm not in love with all things Japanese. I've never been to Japan and it's not correct to say that Lean is strictly a Japanese business system. The issues of executive compensation are just one component of what you might consider a Lean management system, right?

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