Japan’s Mitsui O.S.K. ties worker bonuses to return on equity

TOKYO — Japanese marine shipping company Mitsui O.S.K. Lines will start linking employee bonuses to its return on equity, aiming to encourage workers to consider the perspective of investors.

Bonuses are currently negotiated by labor and management, with pretax profit as a basis. The switch to ROE as a benchmark will cover the roughly 1,700 workers at Mitsui O.S.K.’s head office starting in fiscal 2024.

Return on equity is a measure of how efficiently companies use investor money. Mitsui O.S.K.’s business plan running through fiscal 2035 targets ROE of 9% to 10%. The figure for fiscal 2023 is expected to come in at around 11%.

This benchmark will determine how many months of salary employees receive in their annual bonuses. A 10% ROE works out to an average of more than 5 million yen ($33,000) per employee. A rise to 15% would add about 1 million yen, while dropping below 10% would lower the total.

The framework applies to ROE figures between 0% and 20%, with values outside that range to be handled through negotiation to avoid pay fluctuating too widely.

Although corporate executives involved in decision-making increasingly have their compensation linked to shareholder value, companies rarely use such systems for rank-and-file employees.

Mitsui O.S.K. said the change aims to “incorporate management goals and stakeholder perspectives into how we think about bonuses, and align the goals of the company and individuals.”

Annual compensation at the shipper averaged 15.17 million yen at the end of fiscal 2023. The company agreed in this spring’s wage negotiations to raise monthly base pay by 92,400 yen, up from about 30,000 yen in 2023.

With rival Nippon Yusen lifting its own wages by 18%, Mitsui O.S.K. looks to use the bonuses to further boost its annual compensation and keep pay levels competitive.

souece : asia.nikkei