Analysis: Executive salaries of Japan's big three

Gasgoo.com (Shanghai) - According to statistics compiled by Gasgoo.com (Chinese), Toyota sold the most automobiles out of any Japanese manufacturer last year, followed by Nissan and Honda. The three manufacturers sold 8.42 million, 4.09 million and 3.55 million vehicles respectively. As far as CEOs and presidents' salaries are concerned, Nissan is far ahead of the others.

Executive salaries of Japan's big three

During the 2010 fiscal year (April 2010 to March 2011), Carlos Ghosn's salary last year was 982 million yen ($12.54m), seven times more than his counterparts Toyoda Akio and Ito Takanobu from Toyota and Honda, who earned 136 million yen ($1.74m) and 130 million yen ($1.66m), respectively. Mr. Toyoda's compensation included an additional 24 million yen ($306,501) performance bonus.

During the 2009 fiscal year (April 2009 to March 2010), Mr. Ghosn's salary was 891 million yen ($9.48m), while Mr. Ito earned 115 million yen ($1.22m). Meanwhile, the salary Mr. Toyoda, who took over the role of Toyota president during its economic crisis, was under 100 million yen.

Japanese laws stipulate that executives of publicly-traded companies earning over 100 million yen per year are required to make their salaries public. Toyota has four executives whose salaries are over 100 million yen, including Chairman Cho Fujio (132m yen, $1.69m) and President of Toyota Motor North America Yoshimi Inaba (124m yen, $1.58m).

Aside from the large gap between their leaders' earnings, the salary differences between Nissan and the other two companies is also quite large. According to Bloomberg News, the average salaries for high-level Toyota executives during the 2010 fiscal year was 41 million yen ($523,606) plus 130 million yen ($166,022) in performance bonuses. Honda's average executive-level salaries was 31 million yen ($395,897) plus 15 million yen ($191,563). Meanwhile, among the nine Nissan executives surveyed, the average salary was 186.4 million yen ($2.38m).

Comparison with other CEOs' salaries

Mr. Ghosn's salary is not only the highest among Japanese automobile manufacturers, but is also higher than other foreign executives in the country. His salary is also consider high when compared to automakers from across the world, with only the heads of Ford and VW earning more at $26.5 million and $12.9 million respectively. Mr. Ghosn's salary was higher than the CEOs of Daimler, BMW, Fiat, PSA and GM, and much higher than the amount he earned in his capacity as head of Renault ($1.66m).

Although the salaries of the heads of Toyota and Honda were much higher than those of Chinese CEOs, they were still far less than their counterparts at Daimler, BMW, Fiat, PSA and GM earned in the 2010 fiscal year.

Simple analysis of Nissan's executive level salaries

According to official sources, Nissan's salary standards for high-level executives are made after checking with HR firm Towers Watson & Co. According to statistics from the firm, the average salaries for CEOs last year were $15.3 million. Mr. Ghosn's salary of $11.46 million is clearly far under that level.

Do Nissan's salary levels mean that their employees are more effective than their Japanese rivals? Nissan seems to think so, with Mr. Ghosn saying that his company possesses the most talented staff capable of having the best performance. Nissan's global sales in 2010 exceeded 4 million vehicles, an increase of 21.5 percent from the previous yea, far ahead of the industry average of 5.8 percent, as well as Toyota and Honda's growth rates of 7.8 percent and 4.8 percent, respectively.

The ratio of Nissan's returns to profits was 6.1 percent, far higher than Toyota's 2.5 percent but slightly lower than Honda's 6.4 percent. Clearly the natural disasters in Japan have had a clear impact on the three manufacturers. The returns for Toyota, Honda and Nissan so far this year are far under 2010 levels. However, Nissan expects that it will do better than its rivals Toyota and Honda, anticipating to earn 460 billion yen ($5.87b) compared to 300 billion yen ($3.83b) and 200 billion yen ($2.55b), respectively. Nissan also expects its global market share to reach 8 percent by the 2016 fiscal year, as well as attaining a return to profit ratio of 8 percent. In order to fulfill these goals, the manufacturer will need to expand its business in China and other developing markets.

In order to boost its strong market performance, Nissan believes that it is important to compensate its multicultural staff with competitive salaries. Nissan owns 44 percent of Renault. Meanwhile, 44 percent of the French automobile maker's stock is owned by non-Japanese nationals. 43 of the manufacturer's top-level staff are not Japanese, including Brazilian, Portuguese, English, French, Dutch, American, Indian, German, Italian, Spanish, Canadian and South African nationals. Meanwhile, four members of Nissan's nine-person executive committee staff are non-Japanese. Mr. Ghosn said that there is no enterprise with a managerial team as multicultural as Nissan's.