Seven & i directors are almost 1,000 times more than employees!　How much does everyone know about “executive compensation” in a typical company?

Seven & i’s directors are 77 billion 323.2 million yen…the “second highest in history” since the start of the disclosure system!

While wage hikes have become a social concern in recent years, we wonder about the compensation paid to the presidents and other executives of companies that are well known to everyone. Among the private companies that we usually see, there are actually a great many companies that pay large amounts of compensation to their executives. Some executives earn a thousand times the average annual salary of their employees in a single year.

Let’s take a look at who is making how much at which companies.

The most recent executive who earned 7.732 billion yen in executive compensation was Joseph Michael DePinto, director (senior managing executive officer) of Seven & i Holdings (HD). Seven & i Holdings has under its umbrella 7-Eleven, the largest convenience store chain in Japan. The company made headlines when it was reported that a major Canadian company in the same industry had approached it with a proposal to acquire the company.

This amount of executive compensation is the second highest in history since the disclosure system began, according to research firm Tokyo Shoko Research. It is also 945 times higher than the average annual salary of ¥8.18 million for employees of Seven & i HD. Executive compensation for depintment directors has almost doubled over the previous year, likely due to the strong performance of the North American business they are in charge of.

The umbrella organization for Japanese corporations is the Keidanren (Japan Business Federation). Its former chairman (in office from 2006 to 2010) and current honorary chairman, Canon Inc. chairman and president Fujio Mitarai, earns 551 million yen in executive compensation.

Some companies have high compensation for both employees and executives. According to a survey by Tokyo Shoko Research, M&A Capital Partners, a merger and acquisition (M&A) brokerage firm, is the top company in terms of annual employee salary for the 10th consecutive year, with 24.78 million yen (31.613 million yen the previous year). According to the company’s website, the number of employees is rather small, at 299 on a consolidated basis. According to Tokyo Shoko Research, President Satoru Nakamura’s executive compensation is 1.264 billion yen, 51 times the annual salary of an employee.

Directors at listed companies who receive more than ¥100 million in compensation are disclosed in their annual securities reports. Seven & i Holdings and Canon Inc. reported their fiscal year end in February and December, respectively, but Tokyo Shoko Research compiled a ranking of executive compensation based on the securities reports of listed companies for the fiscal year ended March 31, 2012. The leader in this ranking is SoftBank Group’s Director Rene Haas, who earned 3.458 billion yen. Next in line was Kenichiro Yoshida, Chairman and CEO (Chief Executive Officer) of the Sony Group, who earned 2.339 billion yen.

Third in this ranking was Christoph Weber, President and CEO of Takeda Pharmaceutical Company, a major pharmaceutical company, with 2.082 billion yen. Andrew Plump, director in charge of the company’s Global Research & Development division, is No. 10 on the ranking with 1.154 billion yen,

Executive Compensation Over ¥100 million 13 executive compensation and 47 for over 500 million yen! The number of executives whose remuneration exceeded 1 billion yen was 13!

In this ranking of executive compensation, there were 13 executives whose compensation exceeded 1 billion yen. Toyota Motor Corporation Chairman Akio Toyoda is one of them, earning 1.622 billion yen. If we broaden the scope to include executives paid 500 million yen or more, there are 47 executives in this ranking.

Which listed companies in the fiscal year ended March 31, 2012 had the largest number of executives earning 100 million yen or more in executive compensation? In order of rank, Hitachi, Ltd. had 34 executives, Sumitomo Mitsui Financial Group had 17, Itochu Corporation had 14, Mitsubishi UFJ Financial Group had 14, and Daiwa Securities Group Inc. had 10.

For example, at Hitachi, Ltd., former Executive Vice President Claudio Fakin, who retired at the end of June, received 906 million yen, while Executive Vice President Alistair Dormer received 878 million yen and President and CEO Keiji Kojima received 607 million yen.

ITOCHU Corporation, a major general trading company, also has a number of highly compensated executives. Chairman and CEO Masahiro Okafuji earned 1.003 billion yen, President and COO Keita Ishii earned 729 million yen, Vice President Hiroyuki Tokoume earned 580 million yen, and there are two other executives who earned more than 500 million yen.

Yoshihiro Sakata of the Information Department of the Information Division of Tokyo Shoko Research Institute, who compiled the data, believes that many executives in the major manufacturing, financial, and real estate industries receive high executive compensation. In general, such companies also have high levels of annual compensation for their employees.

What is the significance of disclosing high executive compensation? Mr. Sakata points out, “By disclosing executive compensation, we can confirm its appropriateness. He says that as corporate performance has improved, executive compensation has also risen. Sakata speaks of the faces that appear at the top of the executive compensation rankings of listed companies as follows: “Every year, people who should be getting paid are getting paid.

The people who should be getting paid every year are getting paid, and the lineup of executives does not change significantly. As corporate activities become more globalized and companies hire talented foreign personnel, they have to raise executive compensation in order to secure human resources and prevent people from changing jobs.

Surprisingly cheap?　Softbank Chairman and President Son is paid 100 million yen, Rakuten Chairman and President Mikitani is paid 190 million yen… and the reason is

Tokyo Shoko Research also looked into the compensation of executives of listed companies whose fiscal years end on March 31, such as Seven & i Holdings, as well as executives of companies whose fiscal years end on March 31 but did not rank high on the list. Let us take a look at the executive compensation of well-known executives.

For example, Noboru Yamada, chairman, president, and CEO of Yamada Holdings, which owns Yamada Denki, earned 436 million yen; Tadashi Yanai, chairman and president of Fast Retailing, which operates UNIQLO, earned 400 million yen; and Hiroshi Mikitani, chairman and president of Rakuten Group, earned 190 million yen. Yoshitaka Kitao, chairman and president of SBI Holdings, a financial conglomerate that owns banks, securities firms, and other financial institutions, received 301 million yen, and Kentaro Kawabe, chairman of LINE Yahoo!

Masayoshi Son, Chairman and President of SoftBank Group, the parent company of LINE Yahoo, received 100 million yen. Although they are top executives of the same Softbank Group, their executive compensation alone is inexpensive compared to the more than 3.4 billion yen paid to the aforementioned director Rene Haas.

Former Representative Director Jun Fujimoto of Universal Entertainment, a pachislot and pachinko manufacturer, received 576 million yen in executive compensation.

Regarding executive compensation, Mr. Sakata points out, “In the past few years or so, performance-linked compensation in Europe and the United States has been introduced, and non-monetary compensation such as stock has become a major factor. Executive compensation is not limited to cash, but also includes non-monetary compensation such as stock options.

Stock options are rights that allow employees and executives to purchase the company’s stock at a set price. When the company’s stock price rises as a result of improved corporate performance, the difference between the purchase and sale price of the company’s stock becomes large enough to generate enormous profits when the company’s stock is purchased and sold through the exercise of stock options. The non-monetary compensation of stock options also encourages them to try to improve their performance.

Many of those who receive high executive compensation at listed companies have a high percentage of such non-monetary compensation. According to Mr. Sakata, for example, of the 190 million yen in executive compensation for Rakuten Group Chairman and President Mikitani, only 10 million yen is base compensation, and the rest is stock options.

Furthermore, executives who are founders or come from the founding family may hold a large number of the company’s shares, from which they can expect to receive dividend income. When a company performs well and pays dividends, it pays them back to you,” says Mr. Sakata. For example, Chairman and CEO Son of Softbank Group and Chairman Toyoda of Toyota Motor Corp., dividends from their own shares are expected to be huge, so executive compensation is not the only source of their total income.

Some executives of major companies concurrently serve as outside directors of other companies, and when their remuneration is added up, the total amount of remuneration for executives swells even further.

The disparity in executive compensation is also widening…. The president of a company with more than 3,000 employees is paid 8,602,000 yen. million yen for presidents with a company size of 500 ～to 999 500 to 9999 employees: 422.5 million yen million yen for those with 500 to 9999 employees.

Although it is easy to focus only on the large amount of compensation paid to executives, “What is important for a company is how much it gives back to its employees. What is important for a company is how much it gives back to its employees,” says Mr. Sakata. Directors are just one of them. Large companies, such as those listed on the Tokyo Stock Exchange, are paying their executives high salaries in order to secure excellent human resources. On the other hand, small and medium-sized enterprises (SMEs) do not have the same leeway as large enterprises, and the gap in executive compensation between large and small companies is widening, according to Mr. Sakata.

What is the typical executive compensation? The National Personnel Authority (NPA) has published a “Survey of Executive Compensation (Salaries) in Private Companies.

The average amount for all sizes of companies is 51.96 million yen for the president, 63.91 million yen for the chairman, 20.86 million yen for the directors, and so on.

For companies with 3,000 or more employees, the president is paid 8.62 million yen, the chairman 9.35 million yen, and directors 29.9 million yen. For companies with 500 to 999 employees, the president is 42.25 million yen, the chairman is 56.36 million yen, and the directors are 18.36 million yen.

This data released in February of this year was compiled from a survey of full-time directors’ annual compensation (salary) in ’22, as well as compensation (salary) and annual bonuses for December of the same year, targeting major companies nationwide.

The reason why the compensation of the chairman of the board of directors is higher than that of the president is probably due to the fact that in many cases, such as family-run businesses, the chairman of the board of directors holds more real power than the president, even after stepping down as president and assuming the role of chairman.

According to a survey by the IRS, the average salary of salaried employees is 4.58 million yen per year, and the average age is 47.0 years old. In the private sector in general, the level of executive compensation is several to ten times that of employees. The figures reflect the responsibility and hard work of management, and are probably about the same.