CEO pay in Japan takes long-term view for shareholders

There is good news for CEOs of Japan’s biggest businesses, with executive pay for the top bosses rising an average of 33% in fiscal year 2022.

While this figure may seem eye-watering, it actually reflects a growing need for Japanese compensation to catch up with many advanced economies. 

Let’s put this into context. While Japan’s CEO compensation rose to a median of US$1.8 million, media CEO pay in the UK is three times that at US$5.4 million. Better (or worse) still, in the US that figure rockets to US$11.7 million.

That’s according to the latest research from global consultancy Willis Towers Watson (WTW) which suggests a rise in long-term incentives for Japan’s CEOs who have traditionally relied more upon fixed pay rather than performance-related pay.

Japan executive pay plays catch-up with western companies

Now Japanese firms are playing catch-up with their western counterparts as top management are expected to focus more on shareholders. In fiscal 2022, Japanese bosses had an even split of basic remuneration, annual incentives and long-term incentives. 

Long-term incentives rose to 32% from 26%. US executives, meanwhile, had 71% of their pay via long-term incentives.

“It is necessary to determine not only the level of stock compensation, but also the conditions for linking it to performance and setting the level of difficulty,” said Yuki Sato, a consultant at WTW. 

Sato cited the example of Hitachi, which adjusted compensation based on the company's stock price performance versus that of overseas competitors.

Toyota Motor also adopted European-style measures, with Chairman Akio Toyoda’s pay increasing 46% on the previous year.

While Japan’s executive pay showed the biggest rise, it still lags behind the US, UK, Germany, and France.

WTW surveyed 594 companies in those countries with revenue of  ¥1 trillion (US$6.9 billion).

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