There was an amazing interview on CNN recently with Haruka Nishimatsu, the CEO of JAL, Japan Airlines. The interview could have been a primer on how to be an ethical CEO who cares about his people and his company more than he cares about his own compensation. According to the report, when JAL slashed jobs and asked older employees to retire early, Nishimatsu cut every single one of his corporate perks, and then for three years running slashed his own pay. In 2007, he made about $90,000 U.S., less than what his pilots earn. In Japan, says Nishimatsu, there’s less of a pay gap between the top and the bottom. “We in Japan learned during the bubble economy that businesses who pursue money first fail. The business world has lost sight of this basic tenet of business ethics.”
The report also details Nishmatsu’s daily routine: “After his morning commute on the city bus, Haruka Nishimatsu heads into the office and gets busy at his desk with the rest of his Japan Airlines coworkers. At lunch, he lines up in the cafeteria and hopes lunch doesn’t get too cold as he waits to pay. Not exactly the glamorous life you’d expect from the CEO of one of the world’s top ten international airlines. ‘Is it so strange?’, asks Nishimatsu.”
Now, consider Glenn Tilton, CEO of United Airlines. Tilton’s total compensation package is the highest in the airlines industry. In 2006, Tilton’s compensation alone exceeded $39.7 million ($38 million in stock and options) in a year the company emerged from bankruptcy and employees were forced to accept painful cuts. In 2007 Tilton was rewarded with $10.3 million and United has an additional plan called the “2008 Incentive Compensation Plan” to again lavishly reward failed decision making. Tilton’s compensation seem pretty excessive in light of his company’s poor performance and the impact of extreme inequity on the morale of the workforce.
Consider this too: Until recently, soaring oil prices were the alleged reason United decided to impose a $15 fee to check your first bag and a $25 fee to check a second bag on domestic flights. Even though oil prices have come back down, United’s baggage fees remain because they are boosting the airline’s dismal finances and moving customers to “a la carte” pricing — passengers pay for the services they use, whether it’s a sandwich bought on board, a checked bag or assistance from a telephone reservationist. United has said it expects to collect $275 million annually from the first- and second-bag fees.
As United Airlines is losing money, cutting their services, and asking you, the flying public, to pay for standard services, or a fee for 5 inches of leg room, Tilton is raking in a seriously inflated compensation package based on a poor performance record. Aside from the basic ethical and moral issues that this raises, on a deeper level think about what this does to morale at United Airlines. I mean, really, who would you rather work for: Nishimatsu or Tilton? Or better yet, who would respect more and work harder for?
The fact that Nishimatsu makes less than his employees is significant. That he takes the bus to work, has a simple office, eats lunch with his employees in the cafeteria, and has cut everyone of his executive perks is really significant. He’s one of them. He cares more about his employees than he does about money. How many CEO’s can say that? He’s also not a top down kind of manager. In his 2008 Greeting on the JAL website, Nishmatsu said:
Strengthening workplaces is not something that can be done entirely from the top down. Currently, an employee-proposed and led initiative called “JAL Tomorrow” is being carried out in order to create a vision for JAL’s future. By the end of fiscal 2007, Group employees had submitted 11,596 proposals and comments concerning the kind of company they want JAL to become, the kind of airline they want to work for. I was very surprised by the number of responses. It is fantastic that employees created their own initiative to help JAL become a company that will be more trusted by customers. The management team and I will continue to support this initiative in every way possible.
Compare that to United performance statistics since Tilton took over as CEO of United in 2002. Here are some stats from the US Department of Transportation’s Air Travel Consumer Report:
- Capping their steady decline, United tied US Airways in calendar year 2006 for the highest number of complaints per passengers flown (1.36 per 100,000 system-wide enplanements).
- In the category of customer service problems, which the DOT defines as “rude or unhelpful employees, inadequate meals or cabin service, treatment of delayed passengers“, United holds the distinction of being the worst among the top-10 US carriers for 2004, 9th place in 2003 (Continental took 10th), tied America West for 9th place in 2002 (American took 10th).
And Tilton’s pilots aren’t in love with him either. This year, they went on an all out offensive to remove him from his position. Their main complaint: His excessive compensation package in light of his poor performance. They’ve started a website called Glenn Tilton Must Go. And this was the message they flew around United’s Chicago headquarters this past Labor Day:
Hmmm, not so great for United and Tilton. Nishimatsu is, in my mind, what a true leader should be. Inspiring, caring, fair, and most important, ethical. I’d work for him tomorrow.
Not to be on too big of a Japan vs. U.S. kick these days, but what do Japanese companies understand that American companies don’t? Last month I wrote about Toyota and their commitment to their employees. Now this interview with the JAL CEO surfaces a similar sentiment. If more executives would show more respect and caring for their employees and their companies like Nishimatsu has, maybe they wouldn’t be in the bad shape they’re in today.
If you missed the interview, here’s the complete video: