A little humility in the aftermath of corporate crisis is a capital idea. Just ask Toyota (NYSE: TM), which is responsibly shrinking executives' paychecks and bonuses after its safety recall debacle earlier this year.
The New York Times has reported that at its annual meeting, Toyota announced 10% pay cuts to its top brass; some executives, including Toyota President Akio Toyoda, will also pass up bonuses. Toyoda also expressed remorse at the meeting, stating, "I would like to apologize once again for all the worries we have caused our shareholders." Toyoda has even publicly wept over the matter at times, although at least one investor suggested that he dry up the waterworks a bit.
The article pointed out that the $15.95 million in compensation for Toyota's entire board is $1.5 million less than a single American U.S. automaker's CEO (Ford's (NYSE: F) Alan Mulally) makes. It's also the lowest compensation Toyota's board has received in 10 years.
Apparently, Japanese managers acknowledge what American managements don't seem to comprehend: Executive pay that vastly outpaces workers' salaries erodes a company's sense of unified teamwork.
Remorse and personal responsibility in times of crisis are rare phenomena lately; plenty of corporate leaders could stand to take cues from Toyota. BP's (NYSE: BP) Tony Hayward, in particular, has shown a striking lack of empathy regarding the dire situation in the Gulf in far too many press reports.
Meanwhile, even though our own government bailed out U.S. financial companies, the top brass at companies such as AIG (NYSE: AIG) and Goldman Sachs (NYSE: GS) displayed a marked lack of humility (or pay cuts). These executives' hubris doesn't just anger the rank and file; it upsets everyone, since taxpayers have found themselves on the hook for Wall Street's grand-scale mistakes.
I'm not sure I'd demand CEO crying jags in all cases. (OK, maybe some.) But executives could definitely display more humility, not to mention the greater sense of accountability displayed by pay and bonus cuts, the next time corporate America goes off the rails.
