Stringer, Ghosn to Reveal Pay as Japan Increases Disclosure
Sony Corp. CEO and President Sir Howard Stringer speaks during the 2010 International Consumer Electronics Show (CES) in Las Vegas. Photographer: Daniel Acker/Bloomberg
Nissan Motor CEO Carlos Ghosn speaks at the Detroit Economic Club. Photographer: Jeff Kowalsky/Bloomberg
Sony Corp.’s Howard Stringer and Nissan Motor Co.’s Carlos Ghosn may be among executives in Japan to reveal their salaries for the first time this month as companies increase transparency.
Publicly traded companies will need to provide the names of executives earning at least 100 million yen ($1.1 million) and a breakdown of their compensation packages, including stock options, bonuses and retirement payouts under new corporate disclosure rules.
The Financial Services Agency is requiring all listed Japanese companies to provide the information for the past fiscal year in filings to the Ministry of Finance. Salary levels will give shareholders another measure of the company’s performance, said Takeshi Komatsu, a lawyer specializing in corporate governance at Mori Hamada & Matsumoto in Tokyo.
“Investors will be able to hold executives accountable for their remuneration by comparing it to the firm’s performance,” Komatsu said.
The move may also accelerate a shift to performance-related pay from a Japanese tradition of basing compensation on seniority. Nomura Holdings Inc. Chief Executive Officer Kenichi Watanabe and nine of his executives received average compensation of 145 million yen for the 12 months ended March 31, more than triple the 41.5 million yen a year earlier, according to a financial report sent to shareholders.
Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein received $9.8 million in total compensation last year.
‘Incentive to Perform’
Among Japan’s listed companies, 1.4 percent of executives and 8.3 percent of presidents were paid more than 100 million yen, PricewaterhouseCoopers LLP said in an April report. Companies have been reporting executive compensation on a voluntary basis often providing average salaries.
“The disclosure will prompt companies to make sure they are paying executives in a way that gives them an incentive to perform,” said Kengo Nishiyama, a Tokyo-based strategist at Nomura Securities Co. “Management will need to perform better to justify their pay and their positions.”
Stringer and Ghosn are likely to have packages worth several hundred million yen, Masatoshi Kikuchi, Tokyo-based equity strategist at Bank of America Corp.’s Merrill Lynch & Co., wrote in a May 25 report.
“The decision-making behind compensation packages has remained murky,” Kikuchi said. “For the sake of clarifying management’s incentive, the disclosure of individual compensation is welcomed.”
Sony, Nissan
Sony will release compensation details on June 28, said spokeswoman Mami Imada. Nissan will release its pay report after a shareholder meeting on June 23, spokesman Mitsuru Yonekawa said. Both companies declined to identify any of the executives that will be included in the filings to the Ministry of Finance.
Sony paid an average of 148.3 million yen, excluding stock options, to eight executives last fiscal year, according to company data released before the introduction of the new rules.
Nissan proposed paying the top 12 directors, including Ghosn, an average of 141 million yen in salary, not including stock options. By comparison, Toyota Motor Corp.’s 38 directors got an average of 37.5 million yen.
“Investors will be able to directly compare companies, such as Nissan and Toyota, to assess whether the level of compensation is appropriate,” said Naohisa Fukutani, a partner at merger advisory firm GCA Savvian Group Corp.
The new rules could lead some Japan companies to setting executive pay just below 100 million yen to avoid disclosure, said James Hawrylak, head of Asian operations for U.S. proxy adviser Glass Lewis & Co.
“We are not as concerned with the absolute yen amount of the compensation as we are with the rationale behind the compensation policy in terms of the link between pay and performance,” Hawrylak said.
To contact the reporters on this story: Eijiro Ueno in Tokyo at e.ueno@bloomberg.net; Go Onomitsu in Tokyo at gonomitsu@bloomberg.net.
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