Kato, Takao, and Kubo, Katsuyuki-CEO compensation and firm performance in Japan: Evidence from new panel data on individual CEO pay Prior studies on Japanese executive compensation have been constrained by the lack of longitudinal data on individual CEO pay. Using unique 10-year panel data on individual CEO's salary and bonus of Japanese firms from 1986 to 1995, we present the first estimates on pay-performance relations for Japanese CEO compensation. Specifically we find consistently that Japanese CEO's cash compensation is sensitive to firm performance (especially accounting measures), and that the "semi-elasticity" of CEO's cash compensation with respect to ROA is 1.3 to 1.4, which is in general agreement with prior estimates elsewhere. As such, our estimates do not support that Japanese corporate governance is unusually defunct with regard to the significance and size of the sensitivity of CEO compensation to accounting profitability. On the other hand, to be consistent with the literature on Japanese corporate governance that tends to downplay the role of shareholders and stress the role of banks and employees, we find that stock market performance tends to play a less important role in the determination of Japanese CEO compensation. Finally, we find that the bonus system makes CEO compensation more responsive to firm performance in Japan. The finding is in contrast to the literature on compensation for regular employees in Japan which often argues that bonus is a disguised base

Purpose -This study sets out to explore questions such as: "Does mission statement matter? If so, in what ways?" Using data on mission statements of 128 large Japanese firms, the paper aims to show that corporate mission has a significant impact on corporate policies that determine employment, board, and financial structures. Design/methodology/approach -The paper provides evidence that strong-mission firms are more likely to retain incumbent employees, promote managers from within firms, and have less debt and a higher percentage of interlocking shareholdings than weak-mission firms. Findings -The evidence supports the view that strong-mission firms value their organizational capital and thus tend to adopt policies to preserve it. It also confirms that corporate mission and its embedded policies contribute to better corporate performance. The paper suggests that the effect of explicit corporate mission and its implementation has practical impacts in corporate policies and business outcomes.Research limitations/implications -The sample is based on firms from Japan. The criteria used to discriminate between strong mission and weak mission firms need further refinement with more rigorous sub-dimensions. In the Japanese context the percentage of inside directors is an important indication of internally promoted managers -one might argue that a measure of external pressures (e.g. law, codes, investors, etc.) might be a better one. The small number of cases and the richness of statements need a richer qualitative analysis in the future. Practical implications -The empirical results provide helpful insight on the organizational behavior of Japanese firms during the long economic downturn from the 1990s to 2000s in Japan and an insight on what to do in view of the challenges facing Japanese firms. Originality/value -The paper presents a model that clarifies the role of mission statement. The extensive literature review includes a diverse set of papers on the role of mission statement. The empirical results suggest how strong Japanese corporate mission, expressed in mission statements, might have impact on corporate outcomes through the formation and utilization of Monozukuri.

The purpose of this paper is to analyse whether companies'"way to pay their director" matters or not. Firstly, we fail to find a positive relationship between the performance-pay sensitivity and company performance. Thus, these results do not support our hypothesis that those companies that intensify the performance-pay sensitivity are more likely to improve their performance. In addition, this research fails to find a positive relationship between the change of pay policy and performance. These results are consistent with previous studies that directors' pay is not designed to motivate directors to work toward shareholders' value. Copyright Blackwell Publishing Ltd 2005.

Kaplan (1994) concludes that the relationship between top pay and stock performance in Japan is similar to that in the USA. Using a new and comprehensive data set that includes presidents’ stock and their stock option holdings, this study estimates the sensitivity of Japanese presidents’ wealth to shareholder wealth in the period 1977–2000. Contrary to the commonly held belief that Japanese corporate governance is becoming more like that in the USA, the results show that pay–performance sensitivity actually decreased substantially after 1990. In 2000, Japanese presidents received $US22,100 when stock returns increased from −2.1% to 14.8%.

The tournament model has the feature that executive compensation depends on the wages paid to workers at lower levels of the corporate hierarchy. The agency model shows that compensation based on firm performance is a means by which incentives can be provided to executives once a promotion tournament has been resolved. In this paper, we combine aspects of both models and show that the existence of an outsider who monitors the firm's activities will lower the sensitivity of pay to firm performance for top executives and reduce the importance of tournament-based incentives. Using panel data for 56 Japanese electronics firms, we find support for the notion that bank-appointed Board members help monitor top executives and that tournament considerations are a particularly important feature of executive compensation in Japan.