Japanese companies are increasingly introducing performance-linked stock compensation for their CEOs, boosting what’s been the lowest level of top executive pay among major advanced economies.
The median figure for Japan’s CEO compensation rose 34% to ¥270 million ($1.8 million) in fiscal 2022 from a year earlier, according to a survey released Thursday by Willis Towers Watson. That’s largely attributable to a rise in the ratio of long-term incentives, it said.
The trend shows Japanese corporations — who have historically relied more on fixed remuneration not linked to business performance — starting to catch up with western companies amid growing expectations that management will share further interests with shareholders, it said. Still, there’s a way to go: the figure still lags significantly behind the median figure of ¥1.7 billion in the U.S. and ¥780 million in the U.K., according to the survey.
The ratios of basic remuneration, annual incentives and long-term incentives among Japanese executives were roughly equal in the 2022 fiscal year, while U.S. executives made 71% of their pay through long-term incentives, the firm said.
Willis Towers Watson surveyed 594 companies in the U.S., U.K., France, Germany and Japan with revenue of at least ¥1 trillion.