Japan Airlines' CEO pays himself less than the pilots, takes the bus to work

http://www.cbsnews.com/stories/2009/01/28/eveningnews/main4761136.shtml

by petsos • 15 years ago

232 67 15 years ago

mbateman• 15 years ago

While a lot of what he does is admirable, I find it reprehensible that he pays himself so little (assuming he's not compensated in some other way). Either he is actually worth that little, or he's pretending to be worth less to make people feel better.

If it's the former, the airline should hire a new CEO.

If it's the latter, it's a petty pretense aimed at petty people. And a self-respecting "ordinary" person who has a sense of the value of her time would consider it a slap in her face if her boss doesn't see fit to apply the same sorts of standards to his time.

Luc• 15 years ago

That's all very good and well, but since you gave your opinion freely and without compensation, it is therefore worth nothing.

dpapathanasiou3• 15 years ago

He's also going against a basic economic motivator:

"The ugly truth is that your boss is probably overpaid--and it's for your benefit, not his. Why? It might be because he isn't being paid for the work he does but, rather, to inspire you. In other words, we work our socks off in underpaying jobs in the hope that one day we'll win the rat race and become overpaid fat cats ourselves. Economists call this 'tournament theory.'"

http://www.forbes.com/2006/05/20/executive-compensation-tour...

Nobido• 15 years ago

I've heard this theory again and again and as someone who works in a (non-tech) industry where it is the norm for people at the bottom to work very hard for very little,while the bosses travel the world and live in huge beautiful homes, this does NOT seem to be the case in reality. Myself and my colleagues find it hard not to become bitter about it and to stay motivated to work hard. I only graduated 6 months ago but about half of my class has already become so discouraged by this system that they are thinking about - or already have- switched careers.

On the other hand, in my previous job the boss paid us As much as he could afford to ($17/hr, not bad for retail) and in his life was by no means rich at all. He drives a beat up car and wears second hand clothing. We all respected him so much and felt much more motivated to do well, and also felt like we were an actual part of his company and took it personally how well the company was doing. In my position now, and my colleagues agree, we feel totally cut off from the company and have no interest in how well a collection does (I work in fashion.)

Basically I feel like this theory only works if the CEO is overpaid and the workers are fairly paid. But in the end I think feeling part of a team is better for the company than feeling like you are in a tournament.

I would also like to add that 90k is hardly embarrassingly low. That is quite a comfortable wage that many people will never see in their life.

HaloZero• 15 years ago

I would still prefer not to be in a company that ran economic motivation in this way even if it did encourage my employees. It seems like a bad company culture to be in.

maxxxxx2• 15 years ago

This theory is one of the most self-serving (for overpaid executives) arguments I have ever heard.

bmelton3• 15 years ago

Japan Air's profits haven't been amazing, and in fact, they filed for Chapter 11 in January 2010. I presume (with no actual knowledge) that if the airline were doing very well, he would pay himself significantly more. However, in a world where banks in America have to be bailed out while their CEOs give themselves raises, this is, I think, the preferred way to go.

kjhghj3• 15 years ago

Every airline is always under chap11 - it's standard operating procedure. It's like Hollywood claiming all the blockbusters make a loss

parasubvert2• 15 years ago

There was an old Peter Drucker adage that the top executive should only be at a 20-to-1 compensation ratio from top executives to entry level positions. In the U.S., this is now around 260-to-1. (http://thedx.org/2011/02/turning-up-the-heat-on-ceo-pay/)

In short, there's a limit to most people's tolerance for inequality in pay, especially in the face of it being mostly decoupled from performance. The question is whether there that matters, and what the consequence is.

gambler• 15 years ago

Maybe he just understand the concept of "enough", something many CEOs fail to grasp. $90/k is a decent salary, at least in US. What if he simply believes in his company and wants to put more money in developing it, rather than let it stockpile in some Swiss account? Does that decrease his "worth" as a leader? I don't think so.

ErrantX• 15 years ago

Well... he is the boss so, yes, at the top of the responsibility ladder.

BUT the article says he is paid less than the ''pilots''. Flying a plane is not necessarily a dangerous job, but is has risk, requires skill (with reasonable initial investment in training etc.) and comes with a ''personal and immediate responsibility for a number of lives''.

So when you balance the job descriptions; who should get paid more?

_delirium• 15 years ago

Has anyone written a good book on Japanese corporate/management/business culture? I hear a lot of tidbits about it, both good and bad, mentioned in recurring news articles like this one. They're intriguing enough that I'd like to read something deeper and well-researched, but I can't seem to find anything that looks like a good overview book.

The only books I can find seem to either be of the "teach Westerners how to do business in Japan" variety (not my interest), or very specialist academic books and paper anthologies on narrow aspects.

dpapathanasiou3• 15 years ago

"A Primer for Japanese Business Success" by Masami Atarashi is probably meant to be the former type of book, but it was refreshingly free of stereotypes and "it's a Japanese thing--you won't understand" attitude.

parasubvert2• 15 years ago

As I mentioned in a reply below, Japanese business culture (the good side of it, anyway) was heavily influenced by Peter Drucker in the 60s, and carried it forward decades, long after he became a sort of side show in the U.S.-business-mogul ratrace. For example: http://www.economist.com/node/16481583

A book like "The Toyota Way" or "Product Development for the Lean Enterprise" I'd recommend to understand Lean (which isn't pervasive in Japan, but of course is known to have originated in a couple of automakers).

xiaoma• 15 years ago

Some of Peter Drucker's famous books about business and management dealt with Japan extensively.

Bjoern2• 15 years ago

I wonder if a book can really capture the dynamics and differences which they have here in Japan. Depending on the company the "rules" can vary greatly.

I have been here since years now, but I still struggle with this. Even after reading many books on japan and studying various cultural background of Asia.

gregpilling• 15 years ago

You could look for Deming's books. He was the guy who went to Japan in the 50's to teach better manufacturing methods. http://en.wikipedia.org/wiki/W._Edwards_Deming

forkandwait• 15 years ago

"The Toyota Way" is decent and interesting, about half manufacturing but half culture.

jakarta• 15 years ago

I don't think you should take much stock in Japanese business culture. While there are some great aspects 'toyota way'/continuous improvement...

There's also a lot of drawbacks. The management by consensus, hammering the nail that sticks out, the lack of willingness to deal with real problems, putting cultural norms before economic logic -- these are all major issues with Japan that are partly responsible for why they have been stuck in an economic malaise for the last 20 years.

dpatru• 15 years ago

I think it's Jim Collins's book Good to Great that says that managers that perform at a high level for a long time are recognizable by the fact that they remain modest while their business units make great results.

bmelton3• 15 years ago

I expected to read this as another '$1 a year salary' story, wherein the CEO was still _actually_ rich, but only brought in a meager 'salary', owing the rest to dividends.

What I got instead was a story about what seems to be a brilliant boss. He lowered his own salary along with everybody else's. He's accessible. He actually rides his planes and lets people know he's the CEO of the airline.

In short, he is accessible to both his customers and employees. In the startup world this probably isn't that uncommon -- when you have a staff of four or twenty, accessibility is easy to get. Wikipedia lists Japan Air as having over 30,000 employees.

This is impressive to me, however, it's worth pointing out that despite this practicality and accessibility, the article linked was written in 2009, and Japan Air filed for Chapter 11 bankruptcy last year.

link2009• 15 years ago

I see your point and I agree with you. Look over the article describing the bankruptcy announcement, it states that "Some 15,600 jobs are expected to be cut."

That is quite damaging for a company of such degree and the family of all those employees.

I think the lesson here is that it's important to be close to your employees, regardless of how rich you _can_ be.

ryanwaggoner2• 15 years ago

Actually, I think the message is that it's more important to be competent than nice. Most of those laid off would have probably preferred an overpaid, aloof manager who kept the company afloat.

Not saying you have to choose, of course. But being competent at management doesn't require you to be loved by all your employees.

patio112• 15 years ago

I expected to read this as another '$1 a year salary' story, wherein the CEO was still _actually_ rich, but only brought in a meager 'salary', owing the rest to dividends.

Without reference to this particular CEO, since I don't know him from Adam, much has been made of Japanese CEOs being compensated modestly and it is mostly an accounting fiction. For example, the CEO at a particular Japanese company might not be able to afford a dhh-style automobile, but if he desires to drive one, one will be made available for him from the corporate fleet. He lives, like many of his employees, in company housing, but his company-provided housing is decidedly not in the dorms with the 22 year old trainees. He will, like many of his employees, spend the majority of his meals working officially or unofficially on company business, and most of these will end up on the expense account of either his firm or one of his business partners'. etc, etc

Compare it to being President: you may be cash-poor by the standards of the rich, but that is not a meaningful barrier to desired consumption.

Speaking of which: I recently filed my taxes in Japan. The Japanese equivalent of the Schedule C (small business tax return form) has, like the Schedule C, an entry for meals & entertainment. Mine read 0 yen. A helpful person informed me that that was anomalously low, and that, wink wink, the routine practice is to claim that the company paid for every meal because, wink wink, we all know how being a salaryman works.

bmelton3• 15 years ago

I don't get the sense of that, though it may well be the case. Specifically, as they referenced that he takes the bus to work, wears suits off the rack, etc.

Honestly though, I'm MUCH more impressed with the accessibility -- knocked down the walls of his office, eats lunch in the regular cafeteria, etc. I know very little of Japanese culture, but he at least gives the impression that it's sincere, and as I mentioned, my initial expectation was quite cynical.

Offtopic (bearing in mind my Japan-ignorance), having an excess of meals and entertainment on your business tax returns is an invitation to be audited here in the states. You might want to speak with someone who can give you legal advice without winking. ;-)

jshen• 15 years ago

Isn't it different than here where a CEO gets a golden parachute even when they drive the company into the ground? Here the CEO doesn't have to remain at the company to have the perks.

zach• 15 years ago

So the difference is merely in career security, I guess.

Now I understand why CEO pay got so high so quickly: corporate job security plumneting. It corresponded with the rise of CEOs bouncing from one company to another and being executives for hire.

If you know you're set for life as an executive of a company, who needs a huge amount of personal wealth? But if you could be cut loose from your comfortable SVP gig due to circumstances beyond your control, you have a much greater need to be personally really comfortable. The company's not going to pay your country club dues for the rest of your life, after all.

I can't believe I didn't understand this before, but then I suppose I don't think about the realities of being a senior executive at a huge company.

The unfortunate part about this is that replacing cultural security with individual economic security almost always introduces inefficiencies. In this case, giving big company execs the incentives of a founder or entrepreneur doesn't give them the attitude of one.

defen• 15 years ago

It's my understanding that the status of being CEO of such a large company also has enormous non-monetary rewards in Japan.

TimothyBurgess• 15 years ago

Regardless of whether or not life's necessities are provided for the CEO(s) outside of their salary, the fact that he is taking a relatively massive, honorable paycut remains... which frees up a hefty sum of money every year, allowing workers to keep their jobs and support their families. Even if it's a small handful of workers or just one... it is a very honorable thing to do and should not be cheapened in any way. I wish every other CEO or person in a position of power/wealth would follow suit.

avar• 15 years ago

    Japan Air filed for Chapter 11 bankruptcy last year.

A Japanese Airline filed for bankruptcy under the bankruptcy laws of the United States?

bradly• 15 years ago

In Japan I believe it is called "Corporate Rehabilitation", but it is very similar to U.S.'s chapter 11 status.

jaxonrice• 15 years ago

This story reminds me of an experience I had on a Virgin Atlantic flight between London and LA in 1999. I was flying economy class and was one of the few passengers on the flight who was awake at 4am.

Richard Branson, the owner of Virgin, walked up from the front of the plane and surprised me by asking if he could sit in the empty seat next to me and chat for a few minutes about my experience with Virgin Atlantic and how it could be improved.

I got the impression that he was genuinely interested in listening to my feedback and that he cared passionately about his airline. It made a huge impression on me and set the standard by which I have judged senior executives ever since.

kareemm• 15 years ago

Branson encourages people to write his head office with feedback.

Back in 2002 I sent them a letter because I was frustrated with the kiosks at the Virgin Mega Stores and suggested some improvements (you'd scan the barcode on a CD and it'd pull up a 30-second samples of songs on the album that you could listen to. Good idea in concept, but the implementation was horrible.)

I got a letter back several weeks later saying my feedback had been passed on to the appropriate parties and they'd get in touch.

A couple weeks later I got a phone call (!) from the VP of Product of the Virgin Mega Stores thanking me for my feedback and explaining that he knew the kiosks were sub-par, but their hands were tied by licensing arrangements.

I can't begin to explain how impressed I was that

a) Branson's address was on the Virgin website,

b) his office responded by mail to my letter,

c) they passed on my feedback to the relevant party, and

d) the relevant person himself called me to explain the situation and thank me for caring enough to write

I was pretty damn impressed by the experience, and Virgin has been a great example of a company that focuses on great products, and customer and employee happiness as I build my company.

valjavec2• 15 years ago

Keep in mind that JAL is under chapter 11 bankruptcy, so it's not like JAL is full of cash.

I like his attitude more than those bank executives that got bailed out and paid themselves multi millions at the same time.

mgkimsal2• 15 years ago

but of course, you have to understand - they have to pay those guys millions, because how else would they attract the top talent? you know, that talent that led to untold numbers of wealth being systematically destroyed? You don't just find talent like that working for, say, $500k. You gotta pay millions to get talent that capable.

bane2• 15 years ago

yeah, because they'd go work for the other investors who are making money hand over fist...you know...the other Wall Street...because there are so many and their skill set and salary requirements translates so well to other industries.

valjavec2• 15 years ago

I agree that majority of managers are attracted by large sums of cash and other perks and were probably even more just a few years ago, but not all. JAL's CEO cut his own wage (from article it seems like that only his wife didn't like idea too much;) ), he's Japanese and I don't know their culture and values good enough to understand if that's normal or not for them.

However founders don't work 24/7 for the reason of cash primarily. I do work to show my talent, to create great work, perhaps even change the world for better. Can't do it for nothing as I need some cash for living, but you get the idea.

lwhi• 15 years ago

Cynically, I reckon this kind of behaviour is about manipulating morale, tax and dividends. I applaud his actions - but I'd be very surprised if he wouldn't have benefited from any increase in company profitability.

Bjoern2• 15 years ago

Didn't Nishimatsu (JAL CEO) resign from his post?

aboyeji• 15 years ago

Not to be negative but he might be doing it to avoid income taxes. So many silicon valley CEO's do that. The real questions are what is compensation + stock options. The article does not provide that information.

Nonetheless, its a good idea to appreciate people's value with good pay.

When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. - Francisco D'Acconia

WorkingDead• 15 years ago

They canceled the common share in December and gave the company away to the top executives in a private stock offering. These are not the benevolent capitalists you are looking for.

http://www.jal.co.jp/en/other/info2010_0831.html http://www.reuters.com/article/2010/12/27/jal-idUSSGE6BQ08C2...

njharman• 15 years ago

But how many times did he get a taxpayer funded bailout / corporate wellfare? The real value of the american CEOs isnt that the run profitable business, it's that they get other peope to pay for their fuck ups.

maxxxxx2• 15 years ago

In the US he would get a boatload of money as retention bonus to stay on.

dev_jim• 15 years ago

There's no nobility in poverty anymore.

sunchild• 15 years ago

JAL is my favorite airline. If I can, I always fly JAL. Sounds like bad ad copy, bu† it's true.

Japan Airlines' CEO pays himself less than the pilots, takes the bus to work

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