Japanese Corporations American Corporations Vary

Japanese Corporations

American corporations vary in numerous and varied degrees from corporations of other countries. For example, in Japan, the government limits the highest wages a corporate officer may receive based as a multiple of what the lowest wage earner in the corporation receives. At one point, the highest paid employee of a Japanese corporation could receive only sixty (60) times the wage of the lowest paid employee of the corporation.

Is this a wise regulation, or does this somehow limit the competitiveness of Japanese corporations?

Many economists in the U.S. (and particularly those who are or may become CEOs and their lobbyists) contend that the Japanese system of CEO wage caps is a source of economic decline in Japan. In fact in one document touting a recent legislative bill allowing the development of a minimum (rather than a maximum) cap on CEO wages in the U.S. contends that it should be established that the U.S. CEO must receive 800 times the average (not lowest paid) worker in the company. The article goes on to say that Japan's economy is in decline and not as robust as the U.S. economy (arguable) as a result of wage caps that make it so the CEO can only receive 11 times the average paid employee. (Motley Crew Staff NP) it would seem immature to assume that the rate of pay of COEs is so influential on overall economy, as there are many additional factors that demand consideration. It is clear however that the Japanese system is in need of reform, as the standard wage traditions, that include many pervious aspects of wage equity history may be in some ways holding back the economy, yet it is also important to note that they could be argued to increase the overall quality of life. (Okuda 1) the basic responsibility of organizations to provide reasonable equity of pay is essential to corporate social responsibility. That being said Japan may need to increase the percentage of payment for CEOs based on the fact that globalization will change the competitive needs of companies. Raising such percentages to rate such as are being proposed in the U.S. (800 x average) is however ridiculous and indicative of an overarching extreme gap between the poorest and the richest people in the world. It could also be argued that currently, the U.S. economy is not doing so hot either, despite the fact that CEO compensation has increased exponentially over the last 10 years. (Gabaix & Landier) b. Do you think that Japanese corporations in general may be less competitive in the world's marketplace than American corporations because of these re-numeration (wage) restrictions?

It is plausible that there are some competition issues that can be addressed by decreasing the re-numeration restrictions of CEOs in Japan. The general idea in economic circles is that Japan needs to reform these re-numerations to fall somewhere in the middle, between U.S. And Current Japanese percentages. (Okuda) Some economists also feel that a standardized and reasonable system of re numeration should be employed across the global economy. (Gabaix & Landier) Furthermore, it is also important to note that in a recent study on CEO payment vs. market profit Japan was almost equal to the comparable nations, in the nation's larger corporations. (Gabaix & Landier 22) it is worth asking if all these other nations are also lagging behind in their economic growth because of this profit-based compensation, or because of CEO re-numerations, as some claim Japan is. It would also be interesting to ask if the CEOs and their lobbyists are using a lagging economy as an excuse to further widen the CEO compensation gap, rather than as a tactic to improve the economy.

c. What about the common scenario in which a board of directors in a major corporation chooses to provide bonuses and/or raises to corporate executive officers despite the corporation failing to have a profitable year?