[Japan] Firms link CEO compensation to long-term performance

According to new research, Japanese companies are increasingly introducing performance-linked stock compensation for CEOs, uplifting what was previously the lowest level of top executive pay among major advanced economies, The Japan Times reports.

Willis Towers Watson surveyed 594 companies in the US, UK, France, Germany and Japan with revenue of at least ¥1 trillion. According to its findings, released on August 17, the median figure for Japan’s CEO compensation rose 34 per cent to ¥270 million ($1.8 million) in fiscal 2022 from a year earlier. 

The increase is largely attributable to a rise in the ratio of long-term incentives, Willis Towers Watson said.

The trend reveals that Japanese corporations - historically more reliant on fixed remuneration not linked to business performance - are catching up with Western companies amid growing expectations that management will share further interests with shareholders, the global insurance provider said. 

There is, however, some way to go: the increased figure remains significantly behind the median figure of ¥1.7 billion in the US and ¥780 million in the UK, according to the survey.

Willis Towers Watson said ratios of basic remuneration, annual incentives and long-term incentives among Japanese executives were about equal in the 2022 fiscal year. By contrast, US executives reportedly made 71 per cent of their pay through long-term incentives.

Source: The Japan Times

According to new research, Japanese companies are increasingly introducing performance-linked stock compensation for CEOs, uplifting what was previously the lowest level of top executive pay among major advanced economies, The Japan Times reports.

Willis Towers Watson surveyed 594 companies in the US, UK, France, Germany and Japan with revenue of at least ¥1 trillion. According to its findings, released on August 17, the median figure for Japan’s CEO compensation rose 34 per cent to ¥270 million ($1.8 million) in fiscal 2022 from a year earlier. 

The increase is largely attributable to a rise in the ratio of long-term incentives, Willis Towers Watson said.

The trend reveals that Japanese corporations - historically more reliant on fixed remuneration not linked to business performance - are catching up with Western companies amid growing expectations that management will share further interests with shareholders, the global insurance provider said. 

There is, however, some way to go: the increased figure remains significantly behind the median figure of ¥1.7 billion in the US and ¥780 million in the UK, according to the survey.

Willis Towers Watson said ratios of basic remuneration, annual incentives and long-term incentives among Japanese executives were about equal in the 2022 fiscal year. By contrast, US executives reportedly made 71 per cent of their pay through long-term incentives.

Source: The Japan Times