Japanese CEOs and Leadership
I saw this article on Saturday and it reminded me to go ahead and blog about a few other articles I've seen about Japanese CEOs lately. The big news about Toyota is that they formally posted a loss for the financial year (this was anticipated a while back). Toyota is also anticipating losing MORE money this year. Overexpansion and other poor decisions are haunting Toyota, it can't be all blamed on the global financial crisis. Toyota's President said:
“We were lacking in the scope and speed of dealing with various problems and issues, and for that I am sorry,” Mr. Watanabe said, adding that the global economy won't recover soon.
When do you ever hear a Western CEO say “sorry” or “we were lacking”?? I don't recall hearing words like this from executives at AIG, Countrywide, Fannie Mae, etc. etc.
Note: After writing this, I discovered there's a post on that same “sorry” comment with good comments at the Lean Six Sigma Academy blog.
This USA Today article from April stood out to me because of the comparisons between American CEO excess and the austere leadership from Japan Airlines and their CEO taking less than $100k salary and eating in the regular employee cafeteria:
“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.”
It's great that Nishimatsu feels some sense of responsiblity and collegiality instead of just viewing the employees as underlings. The USA Today piece continues with some fun alliteration:
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.
“Avaricious antics” — good writing :-)
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 â€” 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.
Now beyond the attitude, there is some debate about whether the low pay is actually good for companies… are Japanese companies not attracting the “best and the brightest” as the American mantra about the need for high pay says?
But other experts say there's a reason the Japanese management model fell from favor after Japan entered a long economic slump at the beginning of the 1990s: Japanese compensation packages don't give CEOs much incentive to look out for shareholders â€” the people who own the firm. No wonder Japanese firms are typically about half as profitable as U.S. firms, according to the Japanese government.
“I emphatically don't think U.S. firms should adopt Japanese-style compensation plans,” says Brian Heywood, whose firm invests in Japanese companies. “In general, I do not believe that the current Japanese compensation system aligns management with shareholders effectively.”
But then again, Japanese CEOs aren't taking crazy short-term risks that end up blowing up on them (unless you consider Toyota's overexpansion….).
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.”
So we probably need some balance between the approaches? Anyway, check out the full piece (a long one by USA Today standards) and other examples and the comparison of American CEOs as “cowboys” and Japanese CEOs as “team players.”
Later in April, USA Today also published an amazing interview with a Japanese CEO who loudly criticized the American/Western management excesses. His interview provides some insight into a more holistic Eastern way of thinking that might be helpful in understanding a bit of how Toyota leaders think.
We need to seek profits supported by sound ethics and a strong sense of morality. From the Eastern viewpoint, profits should be pursued for the good of society, and not only for one's self. There is the principle of “enough is enough,” that one's greed should be contained. There might be slight differences in how we interpret these concepts depending on our cultural or religious background, but I think the free-market economy will move in a better direction if people were to share such values.
Inamori gave a great answer when asked about high CEO pay:
Sounds like you are a critic of high CEO compensation. Doesn't their pay reflect free-market forces?
A: A lot of Americans use that rationale. But there are only a handful of exceptional athletes who attract tens of thousands of fans, thus creating enormous revenue for the team. A star player who possesses that rare talent should receive an appropriately higher salary. It is the same for an actor who stars in a blockbuster film. It is different for the CEO of a company. Profits are created by the hard work and collaboration of the workers and other levels of management. For the top echelon to receive such high compensation, as if they alone were responsible for the profits, is unreasonable. We should possess the consideration and humility to provide all employees who work for the company with an appropriate share of the gains. That is lacking in today's capitalism or free-market economy, and its absence is responsible for the growing disparity, discrimination and injustice in society.
Which type of boss (better to say “leader”) would you rather work for? Inamori or someone like Jack Welch or Bob Nardelli?