Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records

Minoru Nakazato, John Ramseyer and Eric Rasmusen ()
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Minoru Nakazato: University of Tokyo Law Faculty

No 2008-17, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: Most studies of executive compensation have data on pay but not total income. Because exchange-listed Japanese firms (unlike exchange-listed U.S. firms) need not disclose executive compensation figures in their securities filings, most studies on Japan lack even good data on pay. Through 2004, however, the Japanese tax office disclosed the tax liabilities of the 73,000 Japanese with the highest incomes. We obtained this data, and match the high-tax list against the list of CEOs of the firms listed on Section 1 of the Tokyo Stock Exchange. We thus estimate salaries and risk exposure in a new way. We confirm survey and anecdotal evidence that Japanese executives earn less than American -- about one-fifth the pay, adjusting for firm size and outside income. Tobit regressions show that pay in Japan depends heavily on firm size (a .22 elasticity) and on accounting profitability, but not on stock returns. Additionally, family-owned firms and those with large lead shareholders pay less to employee CEOs not in the family or with large shareholdings, as do firms whose directors have less tenure on the board.

Date: 2008-01
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Related works:
Journal Article: Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records (2011)
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