The difference between Toyota and so many other companies is obvious in many ways. One of the stark differences is how executives are paid. Toyota’s belief in a strong management system contrasts with the self worship many USA executives practice. How the executives pay themselves illustrates this very well.
Even with a proposed 19% pay boost the top 21 executives at Toyota would get a combined US$14.9 million in the proposal for this year.
Toyota Plans 19% Boost in Director Pay After Record Profit
After recording an unprecedented 1.82 trillion yen profit last fiscal year, Toyota forecast this month that net income will slip 2.4 percent in the year ending March 31. The company predicts deliveries to increase in every major region except Japan, where the nation’s first sales-tax increase in 17 years is expected to temper demand.
Toyota has proposed raising its year-end dividend to 100 yen a share, or 165 yen for the full year.
The deadly disease of extremely excessive executive pay has been doing more and more damage every year in the USA. Toyota has avoided the pitfall shared by so many self-centered USA CEOs. The 19% raise does possibly indicate that Toyota is slipping (they also received a 19% increase last year). But they have a long way to go before executive pay becomes a serious problem at Toyota.
The 21 Toyota executives together don’t get paid what CEOs at companies in the USA that make as much as Toyota does (few companies are as successful as Toyota). Many senior executives that are not CEOs in companies in the USA make much more that all 21 Toyota executives together. Europe has largely adopted the massively overpaid practices for senior executives from the USA. Most European companies lag behind the abuse of USA executives, but the European companies use the excuse of the USA to grab ever increasing amounts from corporate treasuries. In do so they adopt similar reckless management practices in order to justify taking so much.
For now, executive pay (and with it all the management distortions caused by massively unjust pay packages for executives cause within companies) is a big competitive advantage for Toyota. Not all USA companies allow executives to loot the company, for example, Costco continues to pay executives and staff fairly and does very well. But many USA companies are being torn apart by executives seeking and taking hugely unjust pay packages.
Total pay for union workers at Toyota will increase 8.2% on average from last year (I think this is pay for Japanese union workers, though I am not sure about that). This was also the same amount as the increase was in 2014. This seems an unlikely coincidence, it seems intentional. If you see data like this from a process it often indicated an artificial cap exists (or there are restraining forces on the process that make data points beyond certain limits very unlikely).
If you have seen lower figures for pay increases for Toyota workers, that was for the regular pay level which did not go up much. Toyota has a very large profit sharing plan. Profit sharing payments to union workers were over 6 months of regular pay. The main increase in pay for employees was in profit sharing. The “profit sharing” payments are negotiated so it isn’t exactly like what you may think of as profit sharing but it is essentially what those payments are it seems to me.
Related: Toyota Post Record Profit and Splits $15 million in Pay and Bonus for top 21 Executives (2014) – CEOs Plundering Corporate Coffers – Too often, executive compensation in the U.S. is ridiculously out of line with performance – Warren Buffett (2006 – it is even worse today) – No Excessive Senior Executive Pay at Toyota (2007) – Honda’s 36 board members, included the CEO, were paid $13 million in 2008
Executive PayWatch 2015: CEO Pay Continues to Skyrocket
In 2013 the average S&P 500 CEO only took pay equal to 331 other workers.
If you can’t find someone to lead your company that is delighted to do it for less than a king’s ransom you have big problems in your leadership you need to address.
It is one of the best companies in the world, it is in the treatment of its workers who have very clear pre-sold for the long-term welfare of its employees. Since Toyota Spain are still promoting development opportunities and professional growth for all. Thus, in 2011, 42% of women working in Toyota (35% of total employees) had the opportunity to shift in order to have a new professional experience. In addition, 8% of middle management positions are held by women. This is just a ejemple of Spain and other countries have the same conditions for their employees.
The problem with headline-grabbing bonuses and salaries is that highlight the rewards of individuals. Dan Pink argues in the book, The Puzzle of Motivation, this “contingent motivator” approach used to reward those only works when there is a line of sight between what that person has done and the reward itself.
Can we always link individual executive goal achievement to company results? Firms which can’t and have excessive pay inequality, in my experience, suffer from a lot of negative HR outcomes. Higher staff turnover, more industrial actions, disillusionment and the like. Perhaps the starting points should be honesty? How much value does each party add to the other? Also have a view beyond salary to question how leaders help individuals to meet their personal and company goals.