Sony Corp. (6758), reeling from Japan’s biggest earthquake and the second-largest online data breach in U.S. history, cut its pay for Chairman Howard Stringer and his likely successor after posting a third straight annual loss.
Stringer’s salary and bonuses fell 15 percent to 345 million yen ($4.3 million) for the 12 months ended March 31 from 408 million yen a year earlier, Tokyo-based Sony said in filings to the government. Sony also pared compensation for Stringer’s top lieutenant and possible successor Executive Deputy President Kazuo Hirai to 101 million yen, excluding stock options, from 110 million yen in the prior period.
Stringer told shareholders today online services will continue to be a main source of growth for Sony even after hacker attacks crippled its PlayStation Network. The company, losing ground to Apple Inc. and Samsung Electronics Co., last month reported its widest annual net loss in 16 years and forecast the March 11 earthquake and the online attacks will erode about $2 billion from operating profit this fiscal year.
Sony has had execution problems that it is still struggling to resolve, Yasuo Nakane, an analyst with Deutsche Bank in Toyko, said in a research note today.
The company’s divisions are moving too slowly to address competition in tablet computers, televisions and networked products, including smartphones, said Nakane, who has a “buy” rating on the shares.
‘Slower’ Than Peers
“Inter-segment coordination has not translated into the speedy development of unique products, or greater earnings, as Sony has been slower than its peers to launch new products,” Nakane wrote.
Stringer, a Welsh-born U.S. citizen who joined Sony in 1997, was made chairman and chief executive officer in 2005 and oversaw the loss of more than 37 percent of Sony’s market value over the six years ended March 31. The 69-year-old executive was also granted 500,000 shares as stock options last year, unchanged from the prior period, according to the documents.
Shares of Sony rose 0.3 percent to 2,038 yen at the 3 p.m. close of trading in Tokyo, paring the stock’s decline since the day before Japan’s March 11 natural disaster to 29 percent.
Stringer said Sony will strengthen network security and seek to regain customer trust after hackers forced the company to shut down its online entertainment services in April.
Sony fully resumed the PlayStation Network service and its Qriocity entertainment network in the U.S. and Europe earlier this month, after suspending it for more than five weeks. As many as 90 percent of PlayStation Network users have come back since services were restored, Stringer said today.
The maker of the PlayStation 3 game consoles last month estimated the cyber attacks that may have resulted in the theft of data on more than 100 million accounts will cost about 14 billion yen this fiscal year.
Japan’s biggest exporter of consumer electronics will probably return to net income of 80 billion yen in the year ending March 31, Sony forecast May 26. The net loss was 260 billion yen in the year ended March 31, the widest in 16 years.
Sony had earlier this month proposed an 11 percent cut in salary and bonuses for board members and corporate executive officers in the year ended in March, according to an invitation for the annual shareholders meeting posted on its website.
The pay cuts might smooth investor and consumer concerns that executives didn’t take the security breaches seriously, said Paul Hodgson, a spokesman for GovernanceMetrics International, a New York-based governance consultant and rating service.
“This might be a reflection of Sony’s desire to say ‘we’re taking a hit for this ourselves, and feel the pain as well as our shareholders and customers,’” Hodgson said.
Sony and other Japanese companies for the first time last year were required to report executive compensation packages exceeding 100 million yen.
Stringer in March named the 50-year-old Hirai to oversee all of Sony’s consumer electronics -- from PlayStation game consoles to Bravia televisions and Cyber-shot cameras -- as part of the company’s plans to marry its content with hardware.
The promotion will test the games chief’s ability to carry out Stringer’s vision to integrate Sony’s TVs and computers with content from the entertainment businesses. After the Walkman’s domination of portable players in the 1980s, Sony lost against Apple with the iPod, failed to fend off Samsung in TVs, while Nintendo Co. took the lead in video-game consoles.
Sony, which generates almost 70 percent of revenue outside Japan, is also struggling to contain the erosion of profitability by the yen’s appreciation, which Vice Chairman Ryoji Chubachi has described as a “body blow.” The Japanese currency has strengthened 10.6 percent against the dollar in the past 12 months hurting exporters’ earnings from overseas sales.
Chubachi was paid 123 million yen excluding stock options in the last fiscal year, down from 148 million yen in the previous year, according to the filings.
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