The Promise of CEO Outsourcing

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"The Promise of CEO Outsourcing"

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Via Ezra Klein, a fascinating Business Week piece about how new CEO pay disclosure rules in Japan have revealed that Japanese executives are merely fancy lawyer rich and not world-crushing American CEO rich:

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. “They have to make a special case for hiring a VP who’s making more than the president,” says Motohiro Morishima, a professor of human resources at Hitotsubashi University. At Takeda Pharmaceutical in Osaka, the CEO takes home $2.5 million—half as much as the U.S. sales chief. [...]

Nissan’s Ghosn, Japan’s top-paid CEO, took home $10 million in 2009. Over at Toyota Motor, meanwhile, Chairman Fujio Cho earned $1.5 million. CEO Akio Toyoda wasn’t among the four executives who received more than $1.1 million (though as the founder’s grandson, he owns about $160 million in company shares). Sony’s Stringer, Japan’s second-highest-paid executive, made $9.1 million. At rival Panasonic, nobody earned enough to require disclosure under the new rules.

An editorial remark appended to the end of the piece says:

The bottom line: Japan’s CEOs earn far less than Americans or Europeans. The pay gap could be a problem as Japanese companies expand abroad.

I assume that if this was an article about how some Chinese factory workers do essentially the same job as some American factory workers, but they do it for much less money, the bottom line would be about all the efficiencies that can be reaped through outsourcing production to Asia. And to me the bottom line seems to be the same. Toyota is a much larger and dare I say more successful firm than Ford, whose CEO appears to be making over $20 million a year. Surely there’s some senior person over there who speaks English and would be willing to do Alan Mulally’s job for Carlos Ghosn money, right? CEO pay in China also seems to be quite low.

Even within the West, if you look at the CEO’s of the major oil companies the French guy running the French company makes much less than the American and British executives running the other firms. Presumably Chevron could save some money by importing a French CEO, but the magic of class solidarity seems to largely prevent such moves.

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