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

43 Pages Posted: 24 Jul 2011

See all articles by Minoru Nakazato

Minoru Nakazato

University of Tokyo - Faculty of Law

J. Mark Ramseyer

Harvard Law School

Multiple version iconThere are 2 versions of this paper

Date Written: Fall 2011

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 in 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.

Suggested Citation

Nakazato, Minoru and Ramseyer, J. Mark, Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records (Fall 2011). Journal of Economics & Management Strategy, Vol. 20, Issue 3, pp. 843-885, 2011, Available at SSRN: https://ssrn.com/abstract=1893384 or http://dx.doi.org/10.1111/j.1530-9134.2011.00307.x

Minoru Nakazato (Contact Author)

University of Tokyo - Faculty of Law ( email )

7-3-1 Hongo Bunkyo-Ku
Tokyo, 113
Japan

J. Mark Ramseyer

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-496-4878 (Phone)
617-496-6118 (Fax)

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