Public and Private Firm Compensation Compared: Evidence from Japanese Tax Returns

26 Pages Posted: 13 Mar 2009 Last revised: 14 May 2014

J. Mark Ramseyer

Harvard Law School

Minoru Nakazato

University of Tokyo - Faculty of Law

Eric Bennett Rasmusen

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Date Written: February 1, 2009

Abstract

Most studies of executive compensation focus on publicly traded companies. The high levels of compensation there are often attributed to agency slack due to ownership by diffused shareholders. If so, pay at private companies more closely held should be much lower. Governments in the United States and elsewhere do not require the pay of executives in private companies to be publicly disclosed, but until 2004 the tax office of Japan published the name and tax liability of any individual paying over about $100,000 in tax. We match this tax data with rosters of some 1,400 presidents of public and 4,100 presidents of private corporations. We find that public and private company presidents have similar incomes. Both groups earn incomes that rise with the size and profitability of the firm, but the presidents' incomes are more sensitive to profitability at public firms than at private ones. In Japan, at least, public firms pay their presidents no more than private firms do, and tie that compensation more closely to observable performance benchmarks.

JEL Classification: D24, G30, G34, J31, J33, J44, K23, L84

Suggested Citation

Ramseyer, J. Mark and Nakazato, Minoru and Rasmusen, Eric Bennett, Public and Private Firm Compensation Compared: Evidence from Japanese Tax Returns (February 1, 2009). Harvard Law and Economics Discussion Paper No. 628. Available at SSRN: https://ssrn.com/abstract=1358572 or http://dx.doi.org/10.2139/ssrn.1358572

J. Mark Ramseyer (Contact Author)

Harvard Law School ( email )

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Minoru Nakazato

University of Tokyo - Faculty of Law ( email )

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Tokyo, 113
Japan

Eric Bennett Rasmusen

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

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