CEO of Japan Airlines receives $90,000 that's right $90,000

[Ichingcarpenter]

JAL is one of the worlds top 10 airlines.

What's more, he doesn't receive any executive perks. In fact, he lines up in the staff canteen with his fellow workers for lunch each day and even catches a bus to work.

JAL was going through some very tough times in 2007 when Nishimatsu was appointed CEO. Jobs were cut. People were asked to take early retirement. As he commented "The employees who took early retirement are the same age as me. I thought I should share the pain with them. So I changed my salary." Now that's really "walking the talk".

By comparison, CEOs of large U.S. corporations averaged $10.8 million in total compensation in 2006, more than 364 times the pay of the average U.S. worker, according to the latest survey by United for a Fair Economy.

In 2007, the CEO of a Standard & Poor's 500 company received, on average, $14.2 million in total compensation, according to The Corporate Library, a corporate governance research firm. The median compensation package received was $8.8 million.


Like all troubled airlines JAL had to restructure its operations by trimming costs, cutting jobs and asking older employees to retire early. Difficult and painful decisions for any CEO. In this case, Mr. Nishimatsu made the conscious decision to go beyond just “understanding” what his employees were experiencing to actually “feeling” and “living” what they were going through. So, he dramatically trimmed the costs associated with his own Executive office, eliminated ALL his company perks, and cut his salary to $90,000, less than what JAL pilots earn. Now that’s ABT leadership by example!

Then, when asked why he did it, rather than provide a self congratulatory answer, his response was eloquently simple, profound and revealing.

“The employees that were asked to retire early are the same generation as me. I thought I should share their pain with them”


It's been reported that Peter Drucker, the doyen of management philosophy and practice, once suggested to his students that "CEO salaries should be a maximum of 20 times the salary of the lowest paid worker".

How would this work in practice?

Any good pay scheme should have four components:

1. Base salary. Needs to be in line with industry standards, appropriate to the role and to be seen as "fair and equitable" both within and external to the organisation.

This should be the major component of the package. For CEOs, it would be limited to 20 times the rate of the lowest paid worker within the organisation.

2. Share of company profits. Needs to be calculated on net profit prior to distribution to shareholders.

This should be the second highest component of the salary package for CEOs and senior executives. Once again, it would be limited to 20 times the share of profit received by the lowest paid worker (Yes, that's right, everyone should share in the profits). Profit share would be approved by shareholders through their reps, the Board.

3. Team performance rewards. Based on a pre-determined set of criteria and relative to the top team's performance.

This should be the third ranked level of salary package component. Limited to 20 times the bonus reward for the lowest paid organisational team performance. Up to a maximum of 20% of average individual profit share (as in point 2).

4. Individual performance reward. Based on the achievement of pre-set goals.

This should be the least component of salary package. Limited to 20% of base salary.

What gets rewarded, gets done. This approach to remuneration, rewards; teamwork, a sense of community, a drive for performance, and above all a sense of "we are in this together" – all stakeholders working for the betterment (and rewards) of the organisation.



Wow. Couldn’t every company and business, large or small, benefit and thrive based on this kind of Asset-Based Thinking?

http://www.management-issues.com/2008/11/21/opinion/20-is-the-magic-number.asp
http://assetbasedthinking.com/blog/2008/11/21/abt-ceo-in-action-haruka-nishimatsu-jal/

[OhioChick]

1. K&R

:kick:

[Bonobo]

2. A far more equal society than America. nt

[ColbertWatcher]

3. That's how a CEO earns respect. I am so glad to kick and rec this! Thank you for posting this! n/t

[DoctorMyEyes]

7. That's why I work for Jim Sinegal

About five years ago, after many bad experiences with my former employers I sat down and asked myself what company would I not mind laboring to enrich? Where could I earn a living and still sleep well at night?

Costco Wholesale! I work for Costco, I couldn't be happier and couldn't admire our CEO more.

[BrklynLiberal]

4. K & R

[Ichingcarpenter]

5. I like the rule of 20 with the stipulations and additions

that the writer advocates.

Minimum wage in California is $8.00 a hour= 40 hours X 8= $320 a week =
20 x $8.00 is $160 a hour = $6,400 a week

[deadmessengers]

8. There are a few problems with that.

First, CEOs don't make an hourly wage.

Second, the lowest paid worker in any company tends to be part-time.

Third, I have a lot of trouble believing that the CEO of a well-run and profitable company is only bringing $320,000/year in value to the organization. I have very little trouble believing that a guy with no marketable skills whatsoever, pushing a broom or shopping carts in a grocery store for example, only brings $8.00 in value to the company he works for.

I believe that CEO compensation is MASSIVELY screwed up, but that just seems excessively low.

[Ichingcarpenter]

9. So you ignore #2, #3 and #4 compensations

Plus poo pa the lowly worker and marginalize salary vs hourly wage
as an impossible monetary equivalence whereas the comparison is has
been on the books for years. In the 70's CEOs made 30 times as much.

The 20 rule + 1-4 gets the CEOs up to the figure.

[AdHocSolver]

13. Profitability is no indicator that a company is well run.

For many companies for which I worked over the years, many of them were profitable in spite of having managers who ranged from incompetent to downright stupid.

For example, this one very profitable company hired a new mid-level manager for the department for which I had been recently hired. The first six months of his hiring, through mismanagement and ineptitude, he added a half-million dollars or more in costs, mostly labor costs.

To redeem himself to upper management, he cancelled several ongoing projects begun by his predecessor and reduced employment by at least fifty percent. So, all the work done on those projects was dumped down the drain, and all of the money spent over the previous year on the projects was also dumped down the drain.

Naturally, his costs for the next quarter were significantly reduced since he had fewer people in his department. Management overlooked his bungling. In fact, he was given a big bonus for reducing costs that quarter.

Another project in the same department was so badly managed it was a year past due date and way over budget. However, the company was making money in other departments so that overall the company showed a profit, even though they were dumping money down the drain at a record pace.

I saw this kind of situation over and over again. At another company I worked at, the managers were fighting turf wars, even using tactics to undermine each others work, in spite of the cost to the company. That company was also making money, but not as much as they would have if they had worked together for the common good.

Now we see a lot of CEO's "bringing value to their companies" by flying in their corporate jets to Washington to demand bailout money from the taxpayers to cover their mistakes.

[lonestarnot]

6. limited to 10 x share of profit received by the lowest paid worker sounds good to me!

[sarcasmo]

10. This is more like it, 20 percent of the base salary should be the max, Kick and Nom.

[crispini]

11. K&R

[crispini]

12. K&R

[Joe Chi Minh]

14. Considering what a small country it is, yet possessing the second biggest economy on the planet, it

doesn't seem to have done too badly does it?

[4_TN_TITANS]

15. Great idea...

but not gonna happen with our corporate owned Congress. Reminds me of the fake NYT with the front page article "Maximum Wage Law Passed".