Cultural Environments

Compare the zero compensation received by Mr. Kazuo Inamori as the CEO of Japan Airlines (throughout his tenure), to the $65.6 million payout received by Bob Iger in 2018 as the CEO of Disney, as well as other well-paid American CEOs, what type of cultural forces could have driven these individuals to make such decisions, as well as their social groups to accept such behaviors? (e.g. religion, social norm, cultural beliefs, please be more specific)

From my interpretation, monks of any religion dedicate their lives to serving others (and, in some beliefs, god). They are to live non-luxurious lifestyles. These are some of the overarching principles of being a monk. Mr. Kazuo Inamori spent the time between building his second billion-dollar business and becoming CEO of Japan Airlines as a Buddhist monk. Considering that 1/3 of the Japanese population is Buddhist, the belief in serving others exists in the culture. Pair this with about 2/3 of the population being of Shinto faith, a religion that believes humans are fundamentally good, and we can understand a trend in Japanese culture.

The beginning of Mr. Kazuo Inamori's philosophy statement at Japan Airlines is, "This is your company, and its goal is to make all of you happy." He further explains that if you have happy and empowered employees, you improve customer service and the bottom line. This approach to a company's vision worked for Japan Airlines, and I theorize the reason is the construct of the Japanese culture.

Meanwhile, we do not have a large population of Buddhists in the U.S., but we have economist and Nobel laureate Milton Friedman. He shared that returning value to the shareholder is the primary responsibility of businesses, further suggesting that "greed is good." Abigail Disney would argue that greed is ok, to an extent, but not once it is so out of hand that the middle class cannot continue to pay for the goods and services offered by the wealthy. Our American culture is grounded in freedom and the ability to pursue opportunities. I would go so far as to say it was brainwashed into me during my educational experiences leading up to undergrad. There is much bravado surrounding capitalism, even among those who are hurt by extreme capitalism- which is what I call excessive executive pay. Eventually, I believe, there will be a boiling point to this excessive pay, and we will alter course, but in a reactionary manner. It will not be proactive. And why? The executive boards who approve these high compensation packages are either executives themselves or aspire to become an executive soon. A stand against excessive pay is not only hurting their ability to generate wealth, but it is also un-American. Funny.

Related Topic:

Coming off of answering the previous question, I realized I wanted to discuss more on executive pay. This topic transcends into business and politics and lends to many ethical and socio-economical questions.

A direct result of rising executive pay is a more significant inequality gap. During the early stages of the covid pandemic, we saw several companies earn decreasing profits, causing a reduction in headcount yet raising their executive's compensation. During this time, we must acknowledge that executive responsibility and the need for leadership were likely, at an all-time high. There is a case to be made for increasing executive pay. However, these pay increases emphatically contribute to wealth inequality, especially when paired with simultaneous company layoffs. I believe the increasing inequity gap poses a threat to the long-term viability of the United States. We have seen what autocracy looks like in Russia. I am not sharing that we will get to that point. I am an optimist. However, we are presently moving in that direction.

But is government regulation of executive pay appropriate?

Yes, it is, but it will be decades before any significant policy changes occur. Imagine mirroring the path environmental sustainability regulations took- no real progress until we face critical mass. And even then, where are we now? I hypothesize that our country will better understand and safeguard against the inequality gap in the future, and one component of that safeguarding is an executive pay cap.