Thursday, June 21, 2007

Taking responsibility

"Nissan's Ghosn agrees to skip bonus as profits fall", reports Bloomberg.

Nissan just lost the no 1 spot in Japan to Honda, and its net profit took a dip for the first time in seven years.

CEO Carlos Ghosn is therefore not taking his bonus. "It is a symbolic way of taking responsibility," said Yoshihito Okimura, an asset manager with the Chiba-Gin asset management company.

Considering that most stories related to CEO compensations are about how grossly overpaid they are, this is certainly a refreshing change.

In India we aren't likely to see such gestures anytime soon. With a booming economy managers will take responsibility, if anything, for rising profits. And demand their share in the form of a bonus/ increment etc.

However, the idea of 'taking responsibility' I feel is still relevant. Even if a company is doing well overall, individual managers and employees may not be contributing their bit. Yet they expect equality when it comes to sharing the spoils from the gravy train.

Performance appraisals, for example, have become something of a joke. Take the example of employee X who receives feedback that he/ she has not been upto the mark and therefore gets a lower increment than the peer group.

Assuming there is no politics or backstabbing involved and this a 'fair' evaluation, does said employee take the feedback constructively? Does he vow to do better next time? Uh huh, but there is no next time. Because the hunt for a new job is well under way already...

Employers find a gun is being held to their heads. Salaries are inching upwards every 3-6 months. You have to pay more simply to keep people with you - performance is a secondary issue. Yes performers get more, but even non-performers get more than they deserve.

There is simply no choice.

In this context the message sent out by Ghosn is a meaningful one. Take responsibility - for both results and failures. That's what 'leadership' is about, at the collective level. And that's what 'character' boils down to, for each individual.

Otherwise it's all mere jargon.


  1. My sincere salute to mr. Carlos Ghosn CEO of Nissan. Its an Managerial Lesson to the world. Instead of Blaming he has owed to moral Responsibility and has shown the world. He should also work towards the Upliftment of Nissan. Well, this will going to be Example of Japanese Management.

    Well Written Rashmi..

  2. nicely written :)

  3. Very well written. Japanese management practices have been inspiring when it comes to such situations.

  4. awesome post.
    I will keep this logic in mind,always.

  5. This comment has been removed by the author.

  6. Very True Rashmi,

    In India because of the recent booming economy, people often fail to realise what they actually deserve, but sooner or later everybody has to face the reality.

  7. Ghosn has been a pioneer of sorts. heading two companies - one Jap and one European and then integrating these two is no joke !

    On more than one occassion he has proved that he leads from the front. I guess this is one !

  8. Rashmi,
    very eloquent!
    As a rep of the employer am always at gun point, like you mentioned, without a choice to reward the non-performers as well.
    and I agree with Kavi, one more instance of Ghosn's leadership!our politicians and managers should learn instead of yapping against each other!

  9. I appreciate also salute to MR. CARLOS GHOSN CEO of Nissan. It a good lesson to be learnt for all organistaion in the Mangenerial system. Today what is happening that is, in many business oraganisation no one dare to come and accept their wrong attitude. wheter the loss is incurred by the CEO of the managerial department but they balme to other no to himself . This is the way how one take a responsibility. He has a dare and one day he will be uplifted to top position of the business and management - its my wish. Wish him a Best Regards FO HIS FUTURE AND SHINE A SUN

  10. I agree with the comments & the responsibility should come from the top - not from the bottom :)

    Further, when the market is booming we will have all of them trying to grab their part of the pie.

    I am from IT background and talking about "rewarding performance" does not get any where since most of Indian IT cos., have Service models - that is they need body count to increase revenues. Well, how different is it from a factory where they needed more & more workers to produce more?

  11. Hey, good to see you blogging more frequently :)

  12. well...being an erstwhile s/w pro i cant agree more with your article..
    in fact during my last appraisal cycle last year, i myself told mey Proj Director that i didnt really deserve the appraisal least not the entire amt.. n he was kinda shocked as if i was some 10-15 yr old employee with loads of work-ex n was d sole reason y d co was running...
    n till dat time i wasn't even disclosed 2 d client...i was a silent team member...

    well i hope in this competetive world..we arnt diggin our own graves by resorting to such practices

  13. Anonymous5:16 PM

    Nicely written.....

    But I have one question pertaining to the employee are lower down the order and not in top positions.
    How does one determine the right compensation for himself\herself? Largely it comes down to peer comparison and people ask for more. If a person is feels that he is getting paid enough, then he can show up hand for not performing, otherwise can't and he moves on.

    Moreover performance comes with alignment of employee to organistion. How many companies in India take the pain of creating the alignment in company and make the employee feel valued, especially in the service based business model.
    Simply ask any employee what there company wants to be and what are they doing on individual and team they work with to achieve that and we have dumb faces as answers. The onus is on corporates to create ownership in employees, make them a valued partner in the business.

    Any thoughts..??

  14. It is important to take responsibility at the middle level where the managers are in touch with development. That is where responsibility is an issue else merely changing the top management makes little sense.

  15. Sorry to nitpick. "Nissan lost No 1 spot to Honda?" The ET article that you quote is mistaken. They may have meant No 2 spot. Toyota has been No 1 for a long time, and is probably bigger than Honda and Nissan combined. Also, I doubt that Bloomberg will make such a mistake. You only link to ET article.

  16. Ms Bansal, you are absolutely right. If you are slipping down, blame should be taken. Responsibility is the reason you are getting that fat packet. If you are not up to the mark, you deserve downgradding. I hope few people follow the example of Mr. Carlos Ghosn, (few of our politicians should read this.)

  17. Brave post, Ms Bansal, unless you have shifted wholly to a voluntary/part time worker model :)

    But as someone here said, it is a problem for an employee to figure out his/her worth, when people around them seem to be getting more for less. As a professional employer, namely a salary taking head of a firm, I do feel the pressure at both ends. Since my board practically has to be jolted to think about me, even as I spend virtually half of my time taking care of employee issues now. Makes me feel like a guy I know, who recruited a junior at a salary higher than his own, in the hope that his own salary would see a correction automatically, which did happen:)

    I guess the only way out is to keep striving to establish processes that work for a time, even with 'weaker' hands on board, to tackle sudden disruptions.

  18. I agree.. most of the corporates blindly adopt business practices from competitors and peers to their corporation. Unless they do that, we will see such erosion in service oriented companies.

    Well, if any one can dig any good links about attrition in product vs service based companies, that would help us move ahead.

  19. I beg to differ on your view that this practice is absent in India. In fact it is quite prevalent in the new companies in the private sector. More often than not the employees have their bonuses linked to the companies performance. So if the company does not perform they automatically lose their bonus. This quite the norm these days.

  20. Anonymous7:53 PM

    Excellent insight!One cannot explain about employees turnover better than this.Like you written,in most of the organization non-performers also getting increment and if the management point-outs their inefficiency by not giving any incentives,they're getting ready to switch over.We should appreciate Mr.Carlos for his act..
    PVC Windows Diss

  21. Well you might also want to look into how the performance evaluations are actually conducted. The performance evaluations are a joke many a times. At least at the entry level and a little above. Go to a typical software biggie -long work hrs (2 AM) , many single - recent grads exploited, not so great and non-transparent evaluations?. Hell yeah!! they are gonna look for a new job in a growing economy.

    Disclaimer: I don't work for IT.

  22. French bosses have biggest salaries
    July 28, 2007

    HALF of the top 20 highest-paid corporate executives in Europe last year were running French companies, a survey has found, and despite headlines about fat cat pay among British bosses, just two were from Britain.

    The region's highest-paid boss was Carlos Ghosn, chief executive of Renault, according to research by Board-Ex published in US magazine Fortune. He took home $US45.5 million ($52 million) last year thanks to a mammoth $US43 million worth of share options.

    The pay packet of Mr Ghosn, who was born in Brazil but grew up in France, was seven times higher than in the previous year. The figure does not include the cash he receives as boss of Nissan. Renault bought a controlling stake in Nissan eight years ago, with Mr Ghosn becoming the first foreigner to take charge of a major Japanese company.

    In second spot last year was Paris-born Jean-Paul Agon, chief executive of L'Oreal. Mr Agon was paid $19.3 million. Alessandro Profumo, chief executive of Italian bank UniCredit, was third with $US18.1 million.

    Arun Sarin, chief executive of Vodafone, came fourth, collecting $US15.2 million. The only other British boss in the top 20 last year was Fred Goodwin of the Royal Bank of Scotland. He came in at number 16 with a pay package of $US7.8 million.

    The survey, which looked at Fortune Global 500 companies, did not take account of long-term incentive plans widely used in Britain.

    Guardian News & Media

  23. Toyota Boosts Executives' Bonuses on Record Earnings (Update1)

    By Kae Inoue and Tetsuya Komatsu

    June 22 (Bloomberg) -- Toyota Motor Corp., the world's biggest automaker by market value, will increase the total amount of executives' bonuses by 33 percent for the year ended in March after the company posted record earnings.

    The automaker will pay a total of 970.5 million yen ($7.8 million) in bonuses to its top 32 executives, including President Katsuaki Watanabe, for the previous fiscal year, it said at its shareholders' meeting.

    Toyota's higher bonuses for management contrasts with rival Nissan Motor Co., which scrapped bonuses for its top executives after missing its earnings target. Toyota posted record profits and sales in the year ended March buoyed by strong demand for its fuel-efficient vehicles, especially in the U.S.

    ``Toyota's executives deserve the increases in payment after what they have achieved,'' said Yasuhiro Matsumoto, a senior analyst at Shinsei Securities Co. in Tokyo. ``By global standard, the amount they are getting is low.''

    Toyota's 32 top executives and auditors received 1.5 billion yen in salaries in the 12 months ended March. Nissan paid its top nine executives, including Chief Executive Officer Carlos Ghosn, 2.52 billion yen in salaries.

    In comparison, General Motors Corp. Chief Executive Officer Rick Wagoner's total compensation for last year was $10.2 million, the company said in a U.S. regulatory filing in April.

    Toyota surpassed GM in first quarter sales of cars and trucks, threatening GM's 76-year reign as the world's biggest automaker.

    Toyota shareholders approved eight items on the agenda, including electing North American President Jim Press as the first non-Japanese member of the management board.

    Toyota shares fell 0.7 percent to 7,670 yen at 12:38 p.m. in Tokyo.

    To contact the reporters on this story: Kae Inoue in Nagoya at Tetsuya Komatsu in Tokyo at

  24. Europe's fattest cats
    A heavy reliance on stock options to compensate executives puts the French at the top of Fortune's highest-paid list.
    By Peter Gumbel, Fortune
    July 26 2007: 9:06 AM EDT

    (Fortune Magazine) -- This year, Fortune's list of the highest-paid corporate leaders in Europe reads like a Who's Who of le tout Paris, with French executives taking ten of the 20 top spots, including first and second place. Carlos Ghosn, CEO of French automaker Renault, easily topped the list with $45.5 million (which doesn't include the millions he gets for also running Japan's Nissan (Charts), whose principal owner is Renault). That was more than seven times the size of his 2005 package and more than double that of the second-place CEO, Jean-Paul Agon of L'Oréal (Charts), with $19.3 million.

    But the dominance of the French - who far outnumber the three Italians, two Britons and two Swiss on the list - could end next year if French President Nicolas Sarkozy, who has called for "restoring morality to economic life," gets his way. Within days of the election, his government proposed legislation to curb golden parachutes and outsized stock options. The new law would link farewell bonuses to performance targets and potentially restrict the granting of stock options.

    Highest paid: Carlos Ghosn, with $45.5 million

    FORTUNE 500
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    The French loom large on our list in part because French companies rely on stock options as a critical component of executive compensation. Other European companies have moved to link compensation to long-term performance.

    Fortune's list is compiled by Board-Ex, a British research firm, which calculated total direct compensation for 2006 using salaries, bonuses, options and other perks reported by companies on last year's Fortune Global 500 list. Long-term incentive plans (LTIPs) and other performance-based remuneration are not included because they're difficult to value. Also, differing national disclosure rules and practices make cross-border comparisons open to dispute.

    Overall, the top 20 earned 59 percent more in 2006 than in 2005, and Ghosn's package, boosted by options worth $43 million, accounted for almost all of that increase. His windfall came despite a lackluster year at Renault. Ghosn continues to enjoy a good reputation, but France's press and politicians have hammered other executives who received big payouts for mediocre performance. One of the biggest whipping boys was Noël Forgeard, who took away $11 million when he lost his job as co-chief executive of EADS, the parent of Airbus.

    Belinda Hudson of Mercer's executive-compensation practice in London says that continental European countries are playing catch-up with Britain, where fat-cat pay scandals in the 1990s led to greater transparency. France, by comparison, remains wedded to stock options for tax and other reasons, and companies don't face the same institutional-investor pressure. Jean Lambrechts, who heads executive compensation for Hewitt Associates in Paris, says that LTIPs are making some inroads but that old habits die hard and "the process is going to take time."

    One company that has changed is French insurer AXA (Charts). Its chairman, Henri de Castries, has announced that he'll forgo his stock-option grant this year. De Castries is No. 7 on the list, with compensation of $12.1 million; options accounted for $7.6 million of that. If his Parisian peers follow suit, next year's list may be much less French.

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