Oct 7, 2009
Experiences, credentials, and compensation in the Japanese and U.S. mangerial labor markets: evidence from new micro data (Kato, T. and Rockel, M., 1992).
Kato, T. and Rockel, M. (1992). Experiences, credentials, and compensation in the Japanese and U.S. mangerial labor markets: evidence from new micro data.
A number of differences and similarities in the structure of executive compensation in Japan and the U.S. are presented.
> Introduction
Using a data set developed by the authors based on 599 Japanese and 506 U.S. corporations, the paper investigates “the determinants of chief executive compensation of Japanese and U.S. corporations.”
> Determinants of Executive Compensation
* Firm Performance and Executive Compensation: the Principal-Agent Theory:
Variable measuring shareholder return.
* Experiences, Credentials, and Executive Compensation: the Human Capital, the Signaling, and the Agency Theory
Variables measuring (1) time spent working for other firms (general human capital), (2) time spent as CEO (specific human capital), (3) time spent in the firm before promotion (specific human capital and signaling), (4) college education, (5) whether the highest degree is from Tokyo University and/or the law faculty of Tokyo University, (6) possession of a degree in economics or business, (7) possession of a degree/MBA from Harvard.
* Other Determinants of Executive Compensation
(1) the number of employees in the firm (company size)
> Conclusions
- Japanese corporations tend to penalize managers for changing jobs, whereas American firms reward it.
For both countries, positive relationships between
- tenure and earnings
- firm size and earnings
- possession of a degree (especially from a prestigious college) and time to promotion to CEO
- shorter time to promotion to CEO relates to higher earnings in Japan but not in the U.S.
- stronger relationship between firm performance and earnings in the U.S. than in Japan.
Kato, T. and Rockel, M. (1992). Experiences, credentials, and compensation in the Japanese and U.S. mangerial labor markets: evidence from new micro data. Journal of the Japanese and International Economies, Vol. 6, pp. 30-51.
