CEO Compensation in Japan: Why So Different to the U.S.?

Luyao Pan and Xianming Zhou
Journal of Financial and Quantitative Analysis (2018)

In March 2010, Japanese regulators implemented the country’s first legislation concerning the disclosure of director compensation for named individuals. Using the first publicly available data for Japanese executives, we document direct evidence on the level, structure, and mechanisms of CEO compensation in Japan and perform a matched sample comparison between Japan and the U.S. In contrast to the finding of recent studies showing that international differentials in CEO pay have largely disappeared since the mid-2000s, our results show strikingly large differences between the Japanese and American systems that are difficult to explain by differences in conventional incentive contracts.