Japan Airlines' CEO pays himself less than the pilots, takes the bus to work
cbsnews.com
cbsnews.com
What I got instead was a story about what seems to be a brilliant boss. He lowered his own salary along with everybody else's. He's accessible. He actually rides his planes and lets people know he's the CEO of the airline.
In short, he is accessible to both his customers and employees. In the startup world this probably isn't that uncommon -- when you have a staff of four or twenty, accessibility is easy to get. Wikipedia lists Japan Air as having over 30,000 employees.
This is impressive to me, however, it's worth pointing out that despite this practicality and accessibility, the article linked was written in 2009, and Japan Air filed for Chapter 11 bankruptcy last year.
That is quite damaging for a company of such degree and the family of all those employees.
I think the lesson here is that it's important to be close to your employees, regardless of how rich you _can_ be.
Not saying you have to choose, of course. But being competent at management doesn't require you to be loved by all your employees.
Airlines have been having a rough time in recent years. Against a background of people bashing them on environmental grounds and promoting alternative modes of transport, often hypocritically, they have seen major costs such as fuel going way up, their market suffering because a lot of air travel is a luxury that people aren't so willing to pay for in a depressed economy, and in many cases significant staffing problems due partly to the same economic conditions.
We can't say whether Japan Air failed because of its CEO's apparently folksy style of management. For all we know, it would have gone to the wall two years earlier if he'd been claiming millions and not so aware of what was really happening from his customers' and staff's points of view.
Without reference to this particular CEO, since I don't know him from Adam, much has been made of Japanese CEOs being compensated modestly and it is mostly an accounting fiction. For example, the CEO at a particular Japanese company might not be able to afford a dhh-style automobile, but if he desires to drive one, one will be made available for him from the corporate fleet. He lives, like many of his employees, in company housing, but his company-provided housing is decidedly not in the dorms with the 22 year old trainees. He will, like many of his employees, spend the majority of his meals working officially or unofficially on company business, and most of these will end up on the expense account of either his firm or one of his business partners'. etc, etc
Compare it to being President: you may be cash-poor by the standards of the rich, but that is not a meaningful barrier to desired consumption.
Speaking of which: I recently filed my taxes in Japan. The Japanese equivalent of the Schedule C (small business tax return form) has, like the Schedule C, an entry for meals & entertainment. Mine read 0 yen. A helpful person informed me that that was anomalously low, and that, wink wink, the routine practice is to claim that the company paid for every meal because, wink wink, we all know how being a salaryman works.
Honestly though, I'm MUCH more impressed with the accessibility -- knocked down the walls of his office, eats lunch in the regular cafeteria, etc. I know very little of Japanese culture, but he at least gives the impression that it's sincere, and as I mentioned, my initial expectation was quite cynical.
Offtopic (bearing in mind my Japan-ignorance), having an excess of meals and entertainment on your business tax returns is an invitation to be audited here in the states. You might want to speak with someone who can give you legal advice without winking. ;-)
Now I understand why CEO pay got so high so quickly: corporate job security plumneting. It corresponded with the rise of CEOs bouncing from one company to another and being executives for hire.
If you know you're set for life as an executive of a company, who needs a huge amount of personal wealth? But if you could be cut loose from your comfortable SVP gig due to circumstances beyond your control, you have a much greater need to be personally really comfortable. The company's not going to pay your country club dues for the rest of your life, after all.
I can't believe I didn't understand this before, but then I suppose I don't think about the realities of being a senior executive at a huge company.
The unfortunate part about this is that replacing cultural security with individual economic security almost always introduces inefficiencies. In this case, giving big company execs the incentives of a founder or entrepreneur doesn't give them the attitude of one.
One commands respect, while the other sounds powerful and possibly evokes stereotypes of evil, rich guys.
I mean, there's no hiding it if you're a top executive at a big company, but putting the other title first gives off a certain impression to most normal folk. No?
Japan Air filed for Chapter 11 bankruptcy last year.
Richard Branson, the owner of Virgin, walked up from the front of the plane and surprised me by asking if he could sit in the empty seat next to me and chat for a few minutes about my experience with Virgin Atlantic and how it could be improved.
I got the impression that he was genuinely interested in listening to my feedback and that he cared passionately about his airline. It made a huge impression on me and set the standard by which I have judged senior executives ever since.
Back in 2002 I sent them a letter because I was frustrated with the kiosks at the Virgin Mega Stores and suggested some improvements (you'd scan the barcode on a CD and it'd pull up a 30-second samples of songs on the album that you could listen to. Good idea in concept, but the implementation was horrible.)
I got a letter back several weeks later saying my feedback had been passed on to the appropriate parties and they'd get in touch.
A couple weeks later I got a phone call (!) from the VP of Product of the Virgin Mega Stores thanking me for my feedback and explaining that he knew the kiosks were sub-par, but their hands were tied by licensing arrangements.
I can't begin to explain how impressed I was that
a) Branson's address was on the Virgin website,
b) his office responded by mail to my letter,
c) they passed on my feedback to the relevant party, and
d) the relevant person himself called me to explain the situation and thank me for caring enough to write
I was pretty damn impressed by the experience, and Virgin has been a great example of a company that focuses on great products, and customer and employee happiness as I build my company.
http://www.jal.co.jp/en/other/info2010_0831.html http://www.reuters.com/article/2010/12/27/jal-idUSSGE6BQ08C2...
The only books I can find seem to either be of the "teach Westerners how to do business in Japan" variety (not my interest), or very specialist academic books and paper anthologies on narrow aspects.
A book like "The Toyota Way" or "Product Development for the Lean Enterprise" I'd recommend to understand Lean (which isn't pervasive in Japan, but of course is known to have originated in a couple of automakers).
I have been here since years now, but I still struggle with this. Even after reading many books on japan and studying various cultural background of Asia.
There's also a lot of drawbacks. The management by consensus, hammering the nail that sticks out, the lack of willingness to deal with real problems, putting cultural norms before economic logic -- these are all major issues with Japan that are partly responsible for why they have been stuck in an economic malaise for the last 20 years.
I like his attitude more than those bank executives that got bailed out and paid themselves multi millions at the same time.
What you're implying is that we should have top-down wage controls (i.e. a command economy) or bottom-up wage controls (i.e. collusion). The first is an idea which is seductive, but historically a failure. The second is illegal under our current rules and should remain illegal lest you want every department store to collude to pay their workers minimum wage + 1 cent.
The skill set of completely fabricating what you and the company can accomplish, getting other people to believe it, accepting a "modest" salary of 10% of this fairy tale, deflecting all blame for anything that goes wrong, and looting the company in your severance package (because you would do the same for your good old boys on the board), most surely does translate to just about any industry.
However founders don't work 24/7 for the reason of cash primarily. I do work to show my talent, to create great work, perhaps even change the world for better. Can't do it for nothing as I need some cash for living, but you get the idea.
If it's the former, the airline should hire a new CEO.
If it's the latter, it's a petty pretense aimed at petty people. And a self-respecting "ordinary" person who has a sense of the value of her time would consider it a slap in her face if her boss doesn't see fit to apply the same sorts of standards to his time.
"The ugly truth is that your boss is probably overpaid--and it's for your benefit, not his. Why? It might be because he isn't being paid for the work he does but, rather, to inspire you. In other words, we work our socks off in underpaying jobs in the hope that one day we'll win the rat race and become overpaid fat cats ourselves. Economists call this 'tournament theory.'"
http://www.forbes.com/2006/05/20/executive-compensation-tour...
On the other hand, in my previous job the boss paid us As much as he could afford to ($17/hr, not bad for retail) and in his life was by no means rich at all. He drives a beat up car and wears second hand clothing. We all respected him so much and felt much more motivated to do well, and also felt like we were an actual part of his company and took it personally how well the company was doing. In my position now, and my colleagues agree, we feel totally cut off from the company and have no interest in how well a collection does (I work in fashion.)
Basically I feel like this theory only works if the CEO is overpaid and the workers are fairly paid. But in the end I think feeling part of a team is better for the company than feeling like you are in a tournament.
I would also like to add that 90k is hardly embarrassingly low. That is quite a comfortable wage that many people will never see in their life.
A tech startup analogy is: a company issues an IPO or gets acquired.
You know it's a fairly rare event, and it may not happen to you, but you believe it's possible, so you're motivated to keep going.
link: http://blogs.berkeley.edu/2010/09/30/wealth-and-an-american-...
When the airline does not make the expected revenue, by numbers, they end up having to borrow money and pay out a sum that ends up being over 100%.
Collective bargaining rules.
Hence the ever bankrupt airline industry.
not JAL's main competitor - ANA.
Forest Gump made so much of a loss the writer refused to do a sequel since he didn't want them to lose money
But that's nothing compared to universal selling the DVD rights to spiderman for $1 to universal so that Stan lee didn't get a cut.
In short, there's a limit to most people's tolerance for inequality in pay, especially in the face of it being mostly decoupled from performance. The question is whether there that matters, and what the consequence is.
BUT the article says he is paid less than the ''pilots''. Flying a plane is not necessarily a dangerous job, but is has risk, requires skill (with reasonable initial investment in training etc.) and comes with a ''personal and immediate responsibility for a number of lives''.
So when you balance the job descriptions; who should get paid more?
Nonetheless, its a good idea to appreciate people's value with good pay.
When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. - Francisco D'Acconia