Social Salary Setting at Spiber
On a sunny afternoon in the fall of 2018, Kazuhide Sekiyama, Director and Representative
Executive Officer of Spiber Inc. (Spiber), gazed out of his office window in Tsuruoka City,
Yamagata Prefecture, in the northwestern region of Japan. As he took in the view of beautiful
mountains, he contemplated the employee compensation challenges faced by the 11-year-old
company.
Spiber made synthetic silk built from proteins mimicking the proteins found in spider silk, the
world's toughest known material by weight. Sekiyama and Junichi Sugahara, another Director
and Executive Officer at the company, established Spiber to create protein materials that would
eventually compete effectively with petrochemical-based materials widely used in apparel, auto
parts and airplane components, among many other applications. From the beginning, they
envisioned a team built on mutual respect and a common purpose. In Sekiyama's words, "There
are limited resources in the world, while demand is increasing. We are no longer going to be
able to rely on fossil fuels as a resource and we are going to have to deal with food shortages in
the future. Wars, terror, and various forms of conflicts around the world are all situations that
come about as a result of the inability of society to successfully share limited resources. We
need to come up with alternative systems, and my fundamental motivation for starting Spiber
was to create technology to help to switch to renewable resources.”
The executive team wanted the company's compensation system to match the organizations
values.” Thus, the company had implemented a unique salary-setting process designed to
inspire autonomy and responsibility among employees.
After receiving data on company-level and national-level salaries, each employee was given the
responsibility of setting their own salary, along with the responsibility of writing a report, known
as a "Reason Document," explaining the rationale behind the salary number. All employees
could review and comment on colleagues’ documents as they saw fit. Employees then had the
opportunity to revise their originally stated salaries up or down in response to colleagues’
feedback, but each employee retained the ultimate authority to choose their own salary.
The members of the executive team were excited about the "set your own salary" system, but
was it having the intended effect? Since the introduction of the system in 2014, the number of
employees Spiber had more than doubled in 2018, there were about 200 employees, and the
company was still expanding, with plans to open global offices. Even if the system worked for a
firm with 200 employees, would it work for a firm with 2000 employees?
Company Background
In 2007, Sekiyama completed his master s degree at Keio University, and Sugahara was a firstyear student. Both had studied bioinformatics and genomics under the guidance of Masaru
Tomita, the professor who headed Keio University's Institute for Advanced Biosciences. In 2004,
they had realized that their fields of study could be leveraged to mass-produce spider silk
proteins in a bioproduction process. Protein materials were versatile, customizable, and
environmentally friendly, and had the potential to partially supplant the metal, glass, and
petrochemical materials on which humanity relied. Spider silk, in particular, can be 340 times
tougher than high-tensile steel but more flexible than nylon. The co-founders incorporated
Spiber in September 2007, soon after they succeeded in making the first synthetic silk fiber
protein materials.
To develop Spiber's novel technology for creating synthetic spider silk, the company's scientists
first conducted research on various species of spiders. Through this work, they determined the
specific amino acid sequences that give spider silk its interesting properties. Once they
understood these molecular structures and the associated genetic materials, they proceeded in
two key stages: molecular design and gene synthesis. Molecular design was the creation of
artificial spider silk protein designs based on observations of real Spider Silk and educated
guesses regarding the protein profiles that would result in the strongest and most flexible
materials for commercial use. Gene synthesis involved inserting the genetic material associated
with the newly created artificial spider proteins into microbes that could produce high volumes
of the proteins. These microbes underwent a fermentation process - similar to the process by
which yeast is used to create beer — that generated a substance called a protein polymer,
which was then collected and spun into fibers or processed into materials like foams, films,
plastics, and more.
In general, the development of protein materials involved a great deal of trial and error. Some
proteins turned out to be too weak for commercial use, for example, while others were too
inflexible.
Spiber's experts believed that high development costs were the major reason why synthetic
protein materials had not been widely adopted. When the company was founded, there was no
single team in the world that had the ability to produce synthetic protein materials at industrial
scale. Thus, the company's initial goal was to develop its technology to improve production
quality, reduce costs, and become commercially competitive. Spiber developed a vertically
integrated approach, taking on all steps in the process from protein design to material
production, and was making progress toward its long-term target of reducing manufacturing
costs to less than 10 U.S. dollars per kilogram of material.
At the time, no commercialized process for the production of protein materials existed, and cost
estimates for such a process using conventional technologies ranged from hundreds to
thousands of U.S. dollars per kilogram.
Spiber's most successful creation was a proprietary protein material based on spider fibroin.
The company dubbed the material QMONOS™, pronounced like the Japanese word for "spider
web." In 2013, the company built a small pilot facility with an annual production capacity of
several tons per year of QMONOS™ to test techniques for high-volume production. The
company then began prototyping clothing products made out of QMONOS™. In 2015, the global
outdoor apparel conglomerate Goldwin, which owned the trademark rights to The North Face in
Japan and South Korea, announced the first edition of its Moon Parka, which used material
constructed from QMONOS™. This marked the world's first garment made with synthetic
protein materials produced using industrial manufacturing-line technology. There was growing
demand in the apparel market for sustainable materials that did not rely on petroleum-based
fibers, and Spiber was planning to expand the use of synthetic protein fibers in outdoor attire
and casual wear.
Another opportunity for Spiber was the auto parts market, where there was a need for light but
tough material to reduce car weight and improve safety. At the 2016 Paris Motor Show, the
luxury car brand Lexus announced the Kinetic Seat, which used Spiber's synthetic spider silk
material. Designed to reduce fatigue associated with long hours of driving, the seat
incorporated QMONOS™ into its fabrication because of the synthetic material's high shockabsorbing potential.
See Exhibit 1 for a timeline of key events in Spiber's history.
Business Challenges
In 2018, the central challenge that Spiber faced was how to reduce its production costs while
maintaining desirable properties for the final material produced. The company planned to
demonstrate the commercial viability of its products by bringing a new manufacturing plant into
operation.
Construction of a large production facility in Thailand was scheduled to start in July 2019.
Thailand was selected as the plant site for its large supply of biomass resources, notably sugar,
needed for the production process. Production would begin in 2021, and the plant was
expected to have the capacity to produce several hundred tons of proteins annually, a hundred
times more than the existing plant.
Once the production facility in Thailand proved its profitability, Spiber planned to license its
technology to select firms around the world.
A related challenge that Spiber faced was how to motivate its talented and ambitious
workforce.
The company created all of its technologies in-house and relied on vertically integrated research
and development, manufacturing, and sales functions. Earlier in the history of the company,
more than 80% of employees had research and development roles. In 2018, however,
approximately 50% of employees had such roles, and approximately 25% of employees had
production roles, with the remaining employees spread across business development,
communications, and corporate management roles. Spiber's executive team was committed to
attracting and retaining talented scientists, engineers, and marketing staff throughout the
organization, but the company had no revenue and only a small budget supported primarily by
equity capital and some government grants.
In addition, while the company had given stock options to employees in the past and was
planning to give stock options to employees in the near future, stock options were not included
in compensation packages as of 2018 because the company wanted to avoid diluting the
ownership stakes of equity holders as it sought external financing.
Part of the company's strategy for motivating its employees was to foster an employee-friendly
culture and a collaborative working environment. For example, scientists were given a large role
in determining the direction of the company's research efforts and were encouraged to take on
side projects of their own choosing. The company also held weekly meetings to update all
employees who wished to participate on key issues that the executive team was considering
and to give employees the opportunity to comment on important decisions in an "open forum"
environment. The company offered several personal development programs to employees,
including training in self-management and mindfulness. Of course, monetary compensation was
also a critical component of the company's motivational strategy.
The Original Compensation System
Prior to 2014, when the first version of the "set your own salary" system was implemented,
Spiber's executive team determined each employee’s salary. Twice per year, all employees were
required to submit an “Achievement and Abilities Report” that described their current duties,
their skills, and their achievements. The executive team assigned salaries based on these
documents and information collected during interviews with each employee. This process was
private – no employee was informed about the salary or achievements of any other employee.
As the company grew, many of Spiber's employees started to express frustration at the lack of
transparency in this compensation system. As Sekiyama explained, "Some employees felt like
they did not understand how their salary was being decided, while other employees felt like
their salary was being decided arbitrarily. As a result, employees across the company started
demanding clearer evaluation criteria."
Members of the executive team also started to express their own concerns about the salary
system.
Sugahara noted, "The initial compensation system required all executives to have a complete
understanding of each person's role to maintain fairness in the evaluation process. Once the
team grew to more than 50 employees, it became very difficult for each of the four people on
the executive team to truly understand all employees' tasks."
With these concerns in mind, the executive team began to contemplate how they could
redesign Spiber's compensation system. Sugahara described the evolution of his thinking:
I felt like it should have been possible to implement a fair evaluation system by using many
people's viewpoints, sort of like 360 feedback, which was what our initial salary system did. But
as employees noted their concerns, I started to have my own doubts.
I wondered whether fair evaluation was even possible. Could I really evaluate someone who
was much more knowledgeable in their field than I was? As long as these questions were tied to
salary, establishing a salary system that was capable of providing that sort of evaluation would
require a fairly hierarchical organizational structure, with department heads, section managers,
and so on. However, the other executives and I believed that if we wanted to maximize the
value created by the company, maintaining a flat as opposed to hierarchical mentality among all
members of Spiber was important.
To maintain a flat mentality, Spiber's executives introduced the compensation system that had
been in place for their own salaries to others in the company. Sugahara explained, "We had the
idea that the salary-determining process that executive officers had used since the foundation
of the company —self-determination -could be applied to all employees. After all, if we were
able to use it, we believed everyone else would be able to use it too."
Social Salary Setting
The New System
In 2014, Spiber introduced a new salary system. The system was first implemented on a trial
basis, but within a year, it was officially rolled out to all employees. The details of the system
varied somewhat over the years 2014 to 2018, but the central premise remained the same:
employees set their own salaries, and the company unconditionally accepted employees'
decisions. It was up to employees to select salaries in line with others' and consistent with fair
compensation for their roles.
In the initial version of the system, a six-month salary setting cycle would commence with each
employee publicly declaring their tentative salary number. These declarations were followed by
a month-long period during which each employee was required to have formal discussions
regarding their salary with at least five colleagues in order to “build consensus” before
submitting a final salary number.
In 2016, the growth in the number of employees meant that salary conversations were
becoming too burdensome of a time investment, so employees were no longer required to have
at least five salary conversations. Instead, each employee's tentative salary declaration was
accompanied by a "Reason Document" explaining the rationale for the preliminary salary
number. Reason Documents were publicly available to everyone in the organization, and anyone
could comment on any other employee's reasoning. The executive team created a
recommended template for Reason Documents in 2017.
By 2018, the salary setting system had evolved further to include two rounds of feedback per
salary setting cycle. The sharing of an employee's initial salary declaration and Reason
Document was followed by two weeks of consensus-building conversations with at least one
colleague of the employee's choosing and with anyone else who wished to provide feedback.
Employees then shared revised salary declarations and updated Reason Documents, which
recorded both feedback received during consensus-building conversations and responses to
that feedback. At this point, employees undertook another two weeks of consensus-building
conversations, after which they issued their final salary declarations. Employees had the option
but not the obligation to produce final Reason Documents to accompany their final salary
declarations.
Exhibit 2 shows the initial Reason Document and revised Reason Document for an example
employee in 2017. Exhibit 3 shows the distribution of salaries in July 2016, and Exhibit 4 shows
the evolution of average pay during the years 2015 to 2017.
Reasoning Behind the New System
Spiber's leaders believed that the new salary system would motivate employees while also
reinforcing the company's mission, vision, and values. The executive team wanted all employees
to feel that they played an important role in the overall organization, and it also wanted
employees to share in the responsibility of assessing the value they were creating for the
company in relation to the value they were claiming for themselves. Sekiyama explained:
The situation of society is that people from different backgrounds, values, and life stages need
to somehow successfully share the limited resources they have and find a way to survive in the
best way possible. Similarly, our company has limited resources, and everyone needs to share
the resources that we have and survive in the best way possible...How can we successfully share
our company resources at a small scale? If there is one source of decision making for how to
share limited resources for everyone - e.g., a manager deciding on behalf of everyone else-it is
not sustainable, and at some point, it is going to fail. In my view, like the cell's function in a body
or organism, each cell needs to sense the state of the larger organism, and flexibly change its
action depending on that state. It is the same in a business, where each individual needs to have
a bigger picture of the business situation.
Executives at Spiber also thought that the new salary system was more democratic than the old
system. As is the case at many Japanese companies, Spiber's old salary system featured
automatic compensation adjustments for employee needs, such as caregiving allowances and
commuting allowances. The old system also offered bonuses for achievements such as research
and development breakthroughs. Under the new system, there was no longer a formal structure
of adjustments and bonuses. Instead, it was up to each employee to present all relevant needs
and desires, and to translate these considerations into a salary number.
In Sekiyama's words, "Other than ability, there are endless criteria we can look at when
evaluating how much people should make: life stages, balance with other people in the
company, balance with other people in the Shonai region, balance with other companies
working in bio-fabrication, balance with each individual's market value. By giving over the
autonomy to employees to set their own salary, we are saying, 'Take into account as many
factors as possible when deciding on your salary.'
Employee Experiences with Social Salary Setting
Makoto Maehira, a Manager of Finance and Administration at Spiber, agreed that the social
salary setting process was more democratic than the old system because it helped employees
communicate their contributions that might not have been recognized previously. " An
important part of teamwork is sharing knowledge with others in the company — not just doing
the work that is in front of me," he said. "I started building internal communication systems that
facilitated better team function. I probably wouldn't have focused my energy on these solutions
otherwise, but in this system, it is possible to be rewarded for responsibilities that a boss or
peer might otherwise not see."
For some employees, the social salary setting process delivered compensation levels that most
colleagues in the company viewed as appropriate. Sunita Darbe, a researcher with a Ph.D. in
materials science from the United States, intentionally selected an unobjectionable salary for
herself: "I sort of put myself at what was a nice middle-of-the-road, uncontroversial salary. I
haven't talked to a lot of people about it given that it is in a nice middle-of-the-road kind of
place." Darbe described another employee whose salary was widely viewed as appropriate, in
this case because he was a high performer who deserved high pay: "We recently hired a
professional plant engineer, and I feel like people don't doubt that the guy is worth the money
we are paying him. He came from a high-up position at an established company and was really
experienced in what we need him to do, and it's an important job in the company."
Unfortunately, the social salary setting process did not always result in compensation levels that
colleagues deemed fair. In an internal survey conducted in May 2018, 61.3% of respondents
indicated that they felt there were members of Spiber who were not appropriately evaluating
their own salaries, and 55.2% reported that they felt inaccurate or inappropriate self-evaluation
was an issue with the system. Haruka Funayama, a protein analyst, explained the issue: "There
is a gap that has appeared between the amount that people have declared and the results that
they are producing. There are people who others think are not producing many results but
decide on a high salary, and there are people who produce a lot of results but declare a salary
that other people think is too low for them.
This causes frustration."
An example of an employee in the second category was Kato, a lab technician who changed
careers after a decade working at a large bank in Tsuruoka City and joined Spiber as an older
employee. She said: "I decided to take a new step in my career and join Spiber because the
company vision resonated strongly with me. I didn't consider the salary system to be such an
important point. However, the reality is that each time I have to consider my own salary
amount, there are several points of worry for me. Should I include my work experience and
previous salary in a different industry as factors in my salary declaration, or should I only
consider the level of experience that I am able to bring to my future activities? How much value
can I really bring to my current work? There are no other members [of Spiber] who do the same
work. Where can I look for a benchmark? … These points make the system difficult for me.
However, I do feel and appreciate that this system shows how the company really regards each
member as a human being.
Employees had many explanations for the lack of alignment between pay and perceived
contributions. Fahad Algosaibi, who was involved in marketing activities, pointed to the lack of
an agreed-upon set of standards by which contributions were judged: "Everyone is different,
comes from a different background, and although we are in a start-up, with likeminded people
with similar values, we are still applying different principles and ways of thought to ourselves.
So, when you take a step back and look at how people are evaluating or rewarding themselves,
they are rewarding themselves based on very different criteria... the system is not based on
objective, universal principles."
Darbe offered another reason for gaps between salaries and perceived value to the company:
"There are some people who are less skilled at advocating for their utility within the company,
which is a problem. There are a lot of people who don't make a case for their talents."
Others suggested that cultural factors played a role. Approximately 10% of Spiber's employees
were not Japanese, and Oliver Shafaat, a U.S.-educated researcher with a Ph.D. in biochemistry
and molecular biophysics, observed differences between Japanese employees and foreign-born
employees:
"Something that's difficult for me personally is a lot of Japanese people take fairly low salaries.
We are all paid better than the average in this area, but they definitely take lower salaries than I
think they are contributing." Yun-Hsiang Chang, a researcher with a master's degree in materials
science, noted,
"Because we have to talk to colleagues, I have noticed that Japanese people view themselves
lower.
They think if you want more, you have to work longer hours, and they view overtime as part of
your salary." Darbe added, "I think there are people who feel pressure not to take too much.
They think salary is a sacrifice they need to make for the company. It doesn't surprise me that
Japanese employees
Regardless of the source of discrepancies between pay and perceived contributions, employees
worried that fairness concerns could create negative emotions in the workplace. Algosaibi said,
"When someone is unhappy with someone else's [salary] decision, which is completely normal,
that sort of unhappiness...is directed at that individual directly. In a typical system, you might
have a manager deciding on behalf of a team, and negative feelings and discussions can be
directed toward that manager. [With social salary settingl, you have people harboring negative
feelings toward people on their own teams, toward people they work with...Although I don't
think our environment is particularly hostile, I felt like I could see it going in that direction
because of the salary system."
Some employees also worried that the social salary setting system reduced the amount of
performance feedback they received. Kunio Ozawa,
an information technology and system
administrator, described his frustration: "In the old system, the discussions about salary had
some meaning because they were tied to a formal performance review. In the conversations
about Reason Documents today, the feedback part is missing — we only focus our discussions
on salary...People are feeling uncomfortable or stressed about the salary setting process, and so
they do not want to discuss performance at the same time. People also really do not
understand how others are performing, given the diversity in roles and tasks at Spiber."
Furthermore, the social salary setting process was time-consuming, and because it was so costly
to engage fully in the process, some employees felt that their colleagues' dedication to the
process had gradually declined. In the words of Yusuke Ito, a molecular biology researcher,
"During the first six to twelve months, employees were thinking deeply about the system, but
then employees got tired of it and stopped thinking. Now, they are sticking to [the salary] they
have established for themselves."
The Executive Team's Reflections on Social Salary Setting
Having seen the social salary setting system operate for nearly four years, the members of the
executive team had noted employees' concerns but continued to believe that the system was
valuable.
According to Sugahara, "There is a certain percentage of people who do not agree with the
salary system. For some people, the salary declaration process is fraught with stress, but dealing
with stress and having the chance to practice this kind of decision making is a precious
opportunity for employees to grow." Sekiyama elaborated, "Gaining experience making difficult
decisions is the best way to grow as leaders. Sugahara and I were both given leadership
opportunities early on in our careers -11 years ago when we started Spiber... In the same way,
we need to quickly allow all the employees who work for us to gain experience in leadership
roles, and to try, and fail and learn. We see this compensation system as part of our broader
corporate plan to develop leaders."
The executive team also believed that the social salary setting system reduced compensation
costs while still inducing employees to work hard. Sekiyama explained:
Humans always want more than they should get. We compete for scarce resources in society,
and this is not different within a company. We hope that the compensation system teaches
employees the importance of transparency and trust between employees-to be a team player
and to put the success of the company first. The employees work very hard because they feel a
responsibility to the company.
Interestingly, on average, their salaries end up lower than the market level, and we are able to
attract talent from around the world, including the U.S.
While Spiber's leaders believed that the social salary setting system was the right system for
their company, they recognized that not everyone would be comfortable with it. Masataka Fujii,
a senior business development officer, noted, "If you are not someone who can think for
yourself, set your own goals, or figure out how you should be proceeding, then this company is
going to be difficult for you to work in... In this environment, some people may feel happy, but
for other people, it is a very severe environment because you have to define your work from a
management perspective, and you have to understand for yourself what you have to do. It's not
something you are given - you have to design your role and find harmony with team members
by settling issues yourself."
Finally, for some members of Spiber's executive team, social salary setting was simply the most
natural process for determining compensation. Sekiyama described his perspective: "The world
already has many people who decide their own compensation based on their contributions, so
in my mind, this system was neither new nor innovative. The goal was to place the responsibility
of deciding back in the hands of employees, rather than relying on someone else to take
responsibility for them. Rather than being a 'new system' I saw the salary system as a way of
returning to how things should have been all along."
The Road Ahead
With funding for the new manufacturing plant in Thailand set to be finalized in 2019, and with
plans for further global expansion rapidly taking shape, Spiber's executives had to decide how
the social salary setting system would evolve as the company grew. Sugahara admitted, "I hadn't
really thought about how to scale our salary setting system much because not so long ago we
were only 50 people, and one year ago, we were 150 people, and today, we are 200 people. At
every point along the way, there have been unexpected challenges...As we continue to grow,
there will most certainly be problems and challenges that we couldn't have anticipated in
advance."
Spiber's leaders were ready to make adjustments to the social salary system. In Sugahara's
words, "We want to pursue continuous improvement of the system while aligning ourselves
more closely with the philosophy that led to its introduction." But what adjustments were
needed to make the system successful as the company continued to expand?
Exhibit 1 Spiber Company History
September 2007 Company founded
December 2011 Raised 410 million yen
May 2013 Announced Blue Dress, first ever synthetic spider silk clothing prototype Raised 800
million yen
May 2013 Raised 800 million yen
November 2013 Completed construction of fermentation pilot plant
November 2014 Raised 2.6 billion yen
March 2015 Raised 959 million yen
May 2015 Completed construction of headquarters research building
October 2015 Raised 9.6 billion yen
October 2015 Announced North Face Moon Parka, incorporating synthetic spider silk
May 2016 Displayed North Face Moon Parka at G7 Summit
September 2016 Announced Lexus Kinetic Seat, incorporating synthetic spider silk
Exhibit 2 Initial Reason Document and Revised Reason Document for Example Employee in
2017
INITIAL REASON DOCUMENT
Contributions to the Company
Contributions as an Individual
- Financial and tax-related support related to investment from company [My degree of
contribution: 5%].
- Management of monthly closing of accounts (progress management, review) [My degree of
contribution: 70%].
- Implementation of International Financial Reporting Standards [My degree of contribution:
60%]
- Explanation of business plan and providing updates of business situation to shareholders [My
degree of contribution: 80%]
- Updating the budget plan [My degree of contribution: 80%].
- Responding to shifts in shareholder structure [My degree of contribution: 60%].
- Coordinating the contract change with company and related adjustment with other companies
[My degree of contribution: 60%].
- Salary committee [My degree of contribution: 10%].
Contributions as Part of a Team
- Improvement of the budget formulation process
- Streamlining monthly closing of accounts
- Simplifying the relationship between budget and orders received
If you were a manger or a shareholder evaluating yourself, how much value do you think you are
producing? Why?
- I used the average national salary as the base value, and I assumed this salary to be the salary
corresponding to the average skill level for my position. The 2015 average national salary base
value in Japan was 4.2 million yen (350,000 month). This salary base estimate is gender-neutral,
includes overtime pay, and is before tax/ social security payments.
- I then numerically expressed the monetary value of the various skills I possess that are above
the average skill level for my position (my "skill value"). I added base salary amount with my
skill value to calculate the value I add to this company.
- I determined what skills I possessed that were above this average skill level based on my own
understanding of the skills of those who occupy similar positions in other companies. I relied on
a series of premises to classify what I considered to be “other companies.” First, I refer only to
companies that I assume would hire me. Based on my own understanding of my skill level and
capacity, this does not refer to high-performing TSE companies or foreign-affiliated enterprises
with established operational systems. Instead, I refer to corporate entities that operate
sustainable businesses (e.g., earnings of several hundred million yen a year) and are looking to
expand their business rapidly in preparation to publicly list the company in the future (e.g.,
limited focus on management due to a focus on business expansion).
Base value (National Tax Agency
4,200.000 yen
"Survey on Private Income 2015"
National Average)
Proficient in Excel above a certain skill +500,000 yen
level (essential for accounting finance)
and can code macros with VBA (a
basic automated program). As a result,
can execute tasks more efficiently than
the average worker (lower end of upper
level)
A level of expertise in accounting
+1,000,000 yen
knowledge that corresponds with that
required by listed companies (lower
end of middle level)
Ability to conduct complicated financial +1,500,000 yen
modeling related to budget creation
(financing, calculation of corporate
value, profitability calculation/analysis,
etc.) and manage various simulations
(lower end of upper level)
Ability to interpret various demands
+500,000 yen
and interests of multiple stakeholders
and coordinate/balance them as
necessary; propose internal
mechanisms and strategies to create
incentives and facilitate target
achievement by companies/individuals
(lower end of middle level)
Ability to grasp the scope of overall
1,500,000 yen
project, build a schedule, manage
progress on necessary tasks, and
facilitate workflow for middle manager
Total Annual Income
9,200,000 yen
Reason for Declaring Salary of 671,875 yen [before tax, less than the value in the previous
section]
I believe Spiber is a team that will undoubtedly create value for the world. Nevertheless, we
have yet to contribute anything to the world. We have established a wonderful vision, acted on
it, and conducted R&D development with considerable speed; however, we have not generated
any monetary value from our efforts. Considering we, as a company, currently do not make any
financial contributions to society, I believe we are still at a point where we should limit
compensation for management and employees as much as possible. (Of course, there are many
forms of contribution; I define the contribution I refer to here as to "provide structural proteins
to society and have them be used in the real world").
At the same time, I believe it is necessary to maintain a sustainable lifestyle to continue working
effectively for this team. As such, I have listed my necessary monthly expenditures below. My
salary declaration is based on the following calculation.
Required Monthly Amount: 470,000 yen (after tax)
- 150,000 yen: My living expenses at Tsuruoka (rent, utilities, communications, food expenses,
life insurance, loan, etc.)
- 200,000 yen: The cost of living for my wife and child in Tokyo (rent, food expenses,
transportation, utilities, communication, clothing expenditures, entertainment, etc.)
40,000 yen: Transportation to Tokyo (twice per month, via high-speed bus to limit expenditure
as much as possible)
- 40,000 yen: Nursery school fee for my child (age 2), after deducting the subsidized amount
- 40,000 yen: Other average monthly expenditures (funds for visiting family, educational fees,
ceremonial occasions, gifts to express gratitude, taxes, etc.)
Supplement to Salary Declaration
Although my expected monthly salary based on past patterns of overtime is 670,000, we are
currently expecting to hire more personnel to mitigate the increase in overtime that occurred
during the January to June 2016 period (average 83 hrs/ month) that resulted from a dearth of
personnel. I have declared my base salary based on this assumption. Due to the hiring of
personnel, I expect my overtime to decrease to approximately 60 hours/ month from January to
June 2017; under these conditions, my expected monthly income will be 590,000 yen (470,000
yen net of taxes and social security payments).
Comparison with Previous Salary Declaration
- Previous base salary [excluding overtime]: 340,000 yen
- Previous expected monthly income [including overtime]: 500,000 yen (overtime 60 hrs/
month)
- Previous actual monthly income [including overtime]: 560,000 yen (overtime 83 hours/ month)
- Base salary (this time) [excluding overtime]: 400,000 yen
- Expected monthly income (this time) [including overtime]: 590,000 yen (overtime 60 hrs/
month)
Expected Contributions Over the Next Six Months
- Funding procurement support during Spring 2017
- Introduction of cost accounting (deadline around March 2017)
- Introduction of International Financial Reporting Standards and Implementation
- Introduction of Internal Organizational Structure Improvement
- Post January 2017 new budget compilation
- Budget formulation; improving the efficiency of operational processes
- Monthly closing of accounts within five days
- Delegation of accounting finance tasks (raise the skill level of the accounting finance team)
- Strengthening financial functions organizational design to facilitate a more efficient use of
funds (analysis of transaction requirements/ investment effects when considering large-scale
investment projects)
- Providing support to increase the efficiency and skill level of the entire business management
department
Profile
- Family of three (my wife, child (3 years old), and me) My wife and child live in Tokyo
- My wife is currently on work leave (as of previous salary declaration she was working)
Other
- The unfair relationship with current shareholders
- I suggest here that stock options should exist for employees.
- While I explain subsequently in-depth, the crux of my argument is that stock options
represent a form of non-salary compensation for employees that will engender a sense
of fairness within the entire company.
- Under normal conditions, an individual's contribution value should equal his or her
salary amount; however, conscientious SP members tend to declare their salary amounts
modestly. Personally, considering SP's R&D, business development, and financial
situation, I believe salaries should be limited. Nevertheless, this is an unfair situation for
employees. Under the current system, part of the risk that shareholders should bear (in
this case, personnel expenses) are borne by management and employees, who invest
their valuable time and energy into SP without fair compensation for their efforts. One
could interpret this situation as one in which employees grudgingly bear this burden.
- I believe that distributing risk and return fairly among shareholders and officials/
employees is critical to allow both parties to focus most effectively on maximizing this
business, and key to accelerate this company's growth. As such, I often think of how this
"unfair risk burden" that the current salary system imposes can be mitigated. I do not
want SP to become a business in which hard workers suffer losses.
- I am not saying we should ignore SP's financial situation and ask other employees to
declare salary amounts that match their contribution. Any sensible employee would not
declare a full salary amount that corresponds to their contribution value. If such salary
declarations occurred, SP would be in a very precarious position in terms of cash flow;
the current salary system would be ill-suited to SP's financial circumstances.
- To achieve a more equitable distribution of risks and returns, employees/ officials
should receive some other form of compensation for their contributions to the company,
like the restoration of stock options.
REVISED REASON DOCUMENT
Summary of Discussion with Three Self-Chosen Coworkers
- Discussion with [colleague): Since in my first reason statement I summarized my personal
contributions as an itemized list, I supplemented with specific details. I explained that I had a
particularly significant contribution in coordinating the shareholder transfers and corresponding
with investors. I received feedback that my discussion partner understood the details of my
contribution.
- Discussion with [colleague]: I received feedback that my discussion partner
understood the details of my contribution.
Summary of Discussion with Other Colleagues Who Wanted to Have a Conversation
- Discussion with [colleagues]: Since in my first reason statement I summarized my
personal contributions as an itemized list, I supplemented with specific details. I
explained that I had a particularly significant contribution in coordinating the
shareholder transfers and corresponding with investors. I received feedback that my
discussion partners understood. In addition, many people commented that "the salary
increase is reasonable because you are doing the corresponding work while [colleague]
is absent."
- In my conversation with [colleague], we discussed whether "really only I can do the work
that I am currently doing." About this point, I explained that managing external relations
(ease of business explanation to investors, understanding the business's potential, etc.)
is easier for Spiber than other companies, due to a solid track record of R&D, etc. I am
aware I have successfully produced results partly due to these factors.
- During my conversation with [colleague, he/she] asked "you are evaluating your
accounting knowledge as being at the lower end of the middle level. What does that
mean?" I explained that "at my previous job there were many highly skilled people, and I
did not consider myself particularly skilled relative to other accountants. Moreover, I
have limited experience in accounting practice. As a result, I believe my skill level is
inferior to that of accounting professionals."
- Discussion with [colleague]: I received feedback that my reasoning made sense.
Although my declared salary amount has increased considerably relative to last time, as
detailed above, I explained that I have made contributions commensurate to that
amount. Moreover, I also expressed my intention to reduce my overtime (80 hrs/month
to 60 hrs/month) via work efficiency improvement and future personnel hires.
Estimated paid salary based on first declaration: 671,875 yen
Estimated paid salary based on second declaration: 671,875 yen
What Led to the Second Salary Declaration
- I am increasing my salary considerably this time around. To be honest, I really struggled with
this decision, particularly as an accounting officer who manages the company's finances. On an
annual income basis, my salary will be the second highest of all employees, including
- I intended to lower my salary if even one person opposed this salary increase; however, no
single person that I discussed this matter with expressed such an opinion. I am aware that I have
a high salary level within the company generally, but to maintain my standard of living and my
family relationships while contributing to Spiber's business, I would like to keep my first salary
declaration amount.
- I promise to make contributions commensurate to this salary declaration.