Average CEO salary in Japan exceeds 200 million yen for the first time

International Business News  –  According to the 2021 Chief Executive Officer (CEO) Salary Survey released by consulting firm Willis Towers Watson (WTW), the per capita salary (median value) of CEOs in Japan exceeded the 200 million yen mark for the first time. Japanese companies have introduced performance-linked salary systems one after another, focusing on companies with good performance and increasing their salaries. However, the per capita salary of the United States, which ranked first, increased by 2% from the previous fiscal year to 1.6 billion yen, and there is still a large gap between Japan and the United States.

Willis Towers Watson surveyed about 500 companies with sales of more than 1 trillion yen in five major countries in Japan, the United States and Europe, and converted them into yen at the average exchange rate in 2021. Japan (75 companies were counted) was 203 million yen (about 10.15 million yuan), a year-on-year increase of 14%. Germany was up 20% year-on-year to 850 million yen, the UK was up 11% year-on-year to 690 million yen, and France was up 35% year-on-year to 610 million yen.

The previous record in Japan was 188 million yen in fiscal 2019. In terms of CEO compensation, the fixed base salary component accounted for 36%, down 6 percentage points from the 2020 survey results, while the annual sales bonus component linked to 1-year performance increased by 7 percentage points.

The company’s performance in 2021 recovered quickly from the new crown epidemic, and the net profit of the 2021 fiscal year (as of March 2022) of the Topix Prime-listed companies hit a four-year record. Taking advantage of the opportunity of corporate governance reform in Japan, there are more and more companies that determine compensation based on performance and stock price. Coupled with good performance, this is clearly reflected in compensation.

For example, Sony Group, whose operating profit in fiscal year 2021 (as of March 2022) has reached a record high, the salary of Chairman and President Kenichiro Yoshida increased by 50% year-on-year to 1.88 billion yen, of which 90% is performance-linked compensation and stock income.

Willis Towers Watson’s Yuki Sato believes: “The improvement of performance-related compensation implemented by Japanese companies has played a practical role, and performance-based pay has played a role.”

Against the background of the international competition for management talents, CEO compensation in Japan has continued to increase, from 150 million yen in 2017, an increase of more than 30% in five years. However, the gap with Europe and the United States is still very large, with a difference of 3 to 8 times. The salary of US Apple CEO Tim Cook in 2021 is about 98.7 million US dollars (about 10.83 billion yen at the average exchange rate in 2021), and JPMorgan Chase Group CEO Jamie Dimon is 9.26 billion yen (according to 2021 ) average exchange rate conversion).

The widening gap between Japan and Europe and the United States is mainly due to the different proportions of performance-related compensation. The United States accounted for 91% of the performance-linked part, and the United Kingdom accounted for 78%. According to the basic salary, Japan is 74 million yen, and the United States is only 141 million yen.

There are also reasons why European and American companies are leading in terms of profitability. According to Willis Towers Watson, the return on equity (ROE, median) of Japanese companies will be 9.8% in 2021, behind the United States (19.3%) and Germany (12.1%). Willis Towers Watson’s Sato pointed out: “In order to narrow the pay gap with European and American companies, (Japan) needs to improve corporate value from multiple perspectives. In addition to financial performance, it also needs to invest in human capital and strengthen corporate governance.”