CEO Compensation: Cultural Differences between the U.S. and Japan

Essay by larsonz_812University, Master'sA-, March 2005

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CEO Compensation: Cultural Differences between U.S. and Japan

Every business is influenced by the culture of the nation in which it is conducted. Policies and procedures are common among companies in nations that have similar cultures. When the cultures of two particular nations vary, the same will be true for the way in which the companies of those nations operate a business. This is evident in the comparison of the U.S. and Japan. The CEO compensation packages and their amounts vary greatly between each country. Some of the cultural aspects that influence this difference are individualism and collectivism.

Individualist cultures foster independence and individual achievement. Collectivist cultures foster interdependence and group success. Individualism also associates with egalitarian relationships with flexibility in roles, while collectivism associates with stable, hierarchical roles (Greenfield). The collectivist cultures place more emphasis on ascribed group memberships such as race and national origin (Daniels 54). These cultural differences are easy to see between the U.S.

and Japan.

The U.S. is dominated by the individualistic culture. It is a "melting pot" of different ethnic groups and nationalities. This mix reinforces the concept of an individualistic society because people tend to separate themselves due to the diversity. The separation builds more independence which influences individuals to strive for personal achievements. This is visible in U.S. companies where employees attempt to be separated from the rest of the workforce so they may gain additional benefits. The same is true for the CEO of many companies.

The individualistic culture has influenced them to take large compensation packages compared to other nations. Sometimes, these compensation packages remain high even when the company itself is not doing so well. The CEOs are generally focused more on short-term, "bottom-line" results, meaning that they want to make more money in less time. They may lack...