CEO compensation – a cross cultural perspective

Posted on February 11, 2009. Filed under: American culture, business, cross cultural | Tags: , , , , , , , |

Everybody knows that executive compensation in America is out of control. What is it about American culture that allowed it to get to this point? (I’m thinking greed.)  How does US CEO compensation compare to CEOs in other cultures?

The US and UK have the highest rates of CEO compensation, which includes base salary, insentives, perks, bonuses, and the like. It is important to differentiate between compensation and salary, to see the real money being spent on a single individual. For example, Apple CEO, Steve Jobs stated in 2006 that he would only take a $1 annual salary. His total compensation package that year? Well over half a billion dollars.

The median European executive earns just 40% as much as his equivalent in America. Europeans are also more likely to tie pay incentives to performance, with French, German and British firms paying the most.  

Pay descrepencies across cultures are enormous.  For example, Japanese executives earn about 11 times as much as the average worker. The American executive? 475 times as much. I was surprised to find that Japan had the lowest pay discrepancy, since it is a rigidly hierarchical culture. However, Japan is also a collectivist culture, and the concept of face is extremely important. (It’s easy to be greedy if you don’t care about face). If your company doesn’t do well, that reflects on you. The boss, who is at the top of the hierarchy, is a role model and example for his workers to follow.

Check out this facinating video about the president and CEO of Japan Airlines.  When the company was in financial trouble, he cut every one of his perks and took a  pay cut, saying he “wanted to share the pain” with his workers.

Could you ever imagine a US CEO saying that??



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