Controversy Surrounds Daikin’s $4.3 Billion Special Achievement Reward for 89-Year-Old Chairman

Noriyuki Inoue (89), Chairman of the Board of Directors of Daikin Industries, a leading air conditioning manufacturer, will retire at the shareholders’ meeting held on June 27. At the same time, the payment of a large sum of 4.3 billion yen as a special achievement reward is causing a stir.

Chairman Inoue is considered the father of the company’s resurgence, having significantly advanced Daikin over the 30 years since he became president in 1994. Indeed, sales have soared from about 380 billion yen in fiscal 1994 to about 4.4 trillion yen in fiscal 2023. His management skills and achievements are commendable, having propelled Daikin to become the world’s top air conditioning manufacturer in terms of sales.

In the “Notice of Convocation of the Annual General Meeting of Shareholders,” which the company disclosed to shareholders, reasons for the decision to pay the special achievement reward and its amount include implementation of successive reforms and outstanding management strategies. It is said that a Special Achievement Reward Review Committee, composed of outside directors, was established in July 2019 and decided after nine deliberations.

However, an employee murmurs.

“The improvement in performance over the 30 years was not solely due to Chairman Inoue’s efforts but also due to the hard work of many retired executives and senior employees. Since Chairman Inoue was revered as an Emperor and a charismatic figure within the company, there might have been some sycophancy from those around him.”

Yoshihiko Miyauchi (88), who served as the top executive at Orix for 33 years, also received a 4.4 billion yen reward upon his retirement, which became a topic of discussion. However, Miyauchi was one of the founding members.

“Daikin originally introduced a performance-linked compensation system for executives and abolished the retirement bonus system for executives in 2003. In other words, performance is reflected in the compensation annually, so there is considerable doubt as to whether this huge special achievement reward is justified. Incidentally, Chairman Inoue received 456 million yen in compensation for the fiscal year ending March 2023,” said a former employee.

An economic journalist comments,

“There is a lot of media coverage praising Inoue’s management skills, but not everything is positive. For example, the issue of PFOA (a type of organic fluorine compound) detected around the Yodogawa Plant is still unresolved.

Also, in 2011, he promoted his close aide, Masanori Togawa, to president, and in 2016, he appointed his eldest son as the youngest full-time executive. These personnel decisions were criticized as Inoue’s privatization of the company.”

When asked about the basis for the amount of 4.3 billion yen, the company responded as follows:

“We refrain from giving details, but the Special Achievement Reward Review Committee judged it appropriate to present a special achievement reward in light of the remarkable increase in corporate value.”

Inoue is expected to remain with the company as Honorary Chairman after the shareholders’ meeting.

From the July 5 and 12, 2024 issue of FRIDAY