🇺🇸 Why are US local executives paid more than Japanese expatriates? — A story of wages that look 'unfair' but are actually rational

"Why are local US managers paid more than expatriates from Japan?"

If you are involved with a Japanese company that has overseas operations, this is a question you have likely heard at least once.
The compensation level for locally hired VPs and Directors is clearly higher than that of expatriates who were highly regarded as section or department managers at the Japanese headquarters and were sent to the US with high expectations.
This structure has become the 'norm' in many Japanese companies.

In conclusion, this is neither unfair nor abnormal.
Rather, it is the result of a wage structure that is extremely American and extremely rational.



The principle of US wages is 'Role × Market Value'

Wages in Japanese companies are still tied to the 'person'.
Seniority, years of service, and internal evaluations—in other words, internal standards are the main focus.

On the other hand, wages in the US are tied to the 'position'.
How much can that role be bought for in the external market?
This is everything.

For example,
• VPs with business responsibility
• Directors managing organizations of hundreds of people
• Local CEOs with P/L responsibility

Roles like these are in high demand, whether in Silicon Valley or New York.
Compensation is driven up by the market.

As a result,

"Japanese standards and US standards coexist within the same company"

a distortion is created.


The salary of Japanese expatriates is actually an 'extension of Japanese standards'

The salary of many Japanese expatriates consists of the following:
• Basic salary at the Japanese headquarters
• Overseas assignment allowance
• Housing and education subsidies
• Tax equalization

At first glance, it seems generous.
But this is an extension of the Japanese system, not a valuation based on the US market.

In other words,
• Japanese expatriates: Compensation based on internal evaluation
• US local executives: Compensation based on market evaluation

The design philosophy is different to begin with.


The misconception that 'Japanese people are superior'

Within Japanese companies, there is still an unconscious assumption.

"The final decision-maker is Japanese"
"Locals are assistants"

But in the US, it is the opposite.
• Local management are the 'parties responsible for the business' who are well-versed in the market, laws, talent, and culture
• Expatriates are the 'governance roles' who connect the intentions of headquarters
The quality of responsibility is different.
In the US,

"Those with heavier responsibilities get paid more"

That is all there is to it.

Another problem Japanese companies face

Actually, this structure also creates another distortion.



• Japanese expatriates easily become 'subordinates of high-paid locals'

• Decision-making authority becomes ambiguous
• The 'face of headquarters' and the 'reality of the local site' collide
As a result,
expatriates are confined to being 'coordinators',
and a situation arises where they are distanced from business decision-making.

This is not so much a wage problem as it is a problem of authority design.

The essence of the problem is not 'wages'
The question can be rephrased as follows:

Why do Japanese companies continue to staff business leaders fighting in the US market as an extension of headquarters HR?

The wage gap is merely a symptom.



The essence lies in:

• Inward-looking design of HR systems

• The mindset of continuing to treat overseas operations as 'special'
• Lack of genuine commitment to local management
This is where it lies.

In conclusion
The reason US local management is highly paid is not because:
• They are greedy
• They look down on Japanese people
It is because the market values them that way.

Unless Japanese companies face this reality,



• Expatriates will not be rewarded

• Locals will not act with sincerity
• Global management will become hollow
Wages are a mirror that reflects philosophy.

Japanese companies have not yet fully digested this fact, which is repeatedly confronted in the US.