SCAPIN-981: PAYMENT OF SALARIES TO EXECUTIVE OFFICERS OF RESTRICTED CONCERNS
GENERAL HEADQUARTERS
SUPREME COMMANDER FOR THE ALLIED POWERS
APO 500
24 May 1946
AG 248
(24 May 46)
ESS/AC
(SCAPIN-981)
| MEMORANDUM FOR | IMPERIAL JAPANESE GOVERNMENT. |
|---|---|
| THROUGH | Central Liaison Office, Tokyo. |
| SUBJECT | Payment of Salaries to Executive Officers of Restricted Concerns. |
1. Reference is made to following:
a. Memorandum for the Imperial Japanese Government from General Headquarters, Supreme Commander for the Allied Powers, file AG 004 (8 Dec 45) ESS/AC (SCAPIN-403), subject: “Establishment of a Schedule of Restricted Concerns.”
b. Memorandum for the Imperial Japanese Government from General Headquarters, Supreme Commander for the Allied Powers, file AG 300.8 (8 Dec 45) ESS/AC (SCAPIN-408), subject: “Regulations Affecting Restricted Concerns.”
c. Central Liaison Office Memorandum No. 796, dated 8 January 1946, subject: “Payments of Bonuses to Extcutive Officers of Restricted Concerns.”
2. The proposals of the Ministry of Finance to modify paragraph 2i of reference 1b, above, so as to permit payment of salary bonuses out of profits to executive officers of concerns restricted by reference 1a, above, which were forwarded by reference 1c, above, are disapproved.
3. a. Paragraph 2i of reference 1b, above, which provides “No salary payments in excess of those paid in June 1945, will be made to the executive officers, including, but not limited to, the president, vice president, secretary, treasurer, director, managers, advisors and auditors,” is modified to permit payment of fixed monthly salaries equal to the monthly remuneration as defined in subparagraph 3a (1), below, subject to the limitations provided in subparagraphs b, c and d hereof.
(1) Monthly remuneration shall include the following:
(a) Fixed monthly salary paid in June 1945, plus
(b) Fifty (50) percent of the amount of such bonus as may have been paid out of profits for the last term ending in or immediately preceding June 1945, divided by the number of months of such term, plus
(c) Monthly living allowances paid in or after June 1945, plus
(d) Monthly officers’ allowances paid in or after June 1945, plus
(e) Monthly allowances for dependents paid in or after June 1945.
b. In any case in which a person is employed by more than one company, only the company in which such person devotes the major part of his working time in the active management of its affairs shall be permitted to increase the salary as provided in subparagraph 3a, above.
c. In any case in which the fixed salary payable pursuant to subparagraph 3a, above, will exceed ¥3,000. per month, an application will be submitted to General Headquarters, Supreme Commander for the Allied Powers for prior approval of the salary.
d. In any case in which no profit bonus has been paid for any term ending in or after June 1945, fixed salary payments permitted in subparagraph 3a, above, may be made from 1 January 1946. In all other cases, fixed salaries, as permitted in subparagraph 3a, above, may be made as of 1 May 1946.
FOR THE SUPREME COMMANDER:
B.M. FITCH,
Brigadier General, AGD,
Adjutant General.
MEMO FOR RECORD: (SCAPIN - 981)
WFM/JMcIH/ITB/gg
2 May 1946
1. Reference is made to CLO Memorandum 796, dated 8 January 1946, which proposes modification of paragraph 2i of SCAP directive AG 300.8 (8 Dec 45) ESS/AC (SCAPIN-408), subject: "Regulations Affecting Restricted Concerns," so as to permit the payment of salary bonuses out of profits to executive officers of concerns restricted by SCAP Memorandum AG 004 (8 Dec 45) ESS/AC (SCAPIN-403), subject: "Establishment of a schedule of Restricted Concerns."
2. a. It has been a general practice in Japan to pay executive officers nominal fixed salaries, and at the end of each business term (usually six (6) months), a bonus out of profits. Nominal salaries were in many cases sufficient only to cover bare subsistence, and the periodical bonus payments were considered the principal source of income.
b. SCAP directive (SCAPIN-408), referred to in paragraph 1, above, prohibits the payment of all bonuses or other emoluments or benefits, other then periodic salary payments, not to exceed those paid in June 1945. It limits earned income paid to executive officers to the nominal periodic salaries received in or before June 1945. Whether these salaries provided adequate subsistence, even in June 1945, is questionable, Nevertheless, they do not provide adequate subsistence in many cases at present.
c. The Japanese Government issued instructions postponing the periodic closing of the accounts of business companies (instructions of Monetary Circulation Bureau, dated 15 October 1945). These instructions state: "In case the issue of the insurance monies, compensations, property held abroad and the diminution of income have a considerable bearing on the financial position of the company, they will be directed at their option either
(1) to postpone the time of the closing of accounts or
(2) to declare no dividends on capital."
Where the company has elected to postpone the time for closing of accounts, it is permitted to pay up to fifty (50) percent of the bonuses paid to executive officers in the preceding term.
d. Following the issuance of the SCAP directive, (SCAPIN-408), referred to in paragraph 1, above, the instructions mentioned in the preceding paragraph were withdrawn by the Japanese Government, and business companies were advised to:
(1) Make as much conservative accounting as possible as regards the valuation of property and other matters.
(2) Not to diminish their reserve funds (excepting credit balances brought forward). (In case reserve funds are to be diminished under special curcumstances, the consent of supervising officers must be obtained.)
(3) Make self-restraint so as not to make any increase in the rate of dividends (except in case the increased dividends do not exceed five (5) percent per annum)."
e. The question of war damages, insurance monies, compensation for removal of factories, disposition of foreign properties, etc., is still a matter of important financial consideration to most of the concerns on the Restricted List. In many instances, even though a concern did not suffer war damages or have properties abroad, it holds securities issued by such companies, the valuation of which will be affected. Profits shown by companies since August 1945 would, in most cases, have to assume so many questionable factors that they would be of little meaning.
f. During a period of large profits, the profit-bonus system may have merit. However, the prospect of companies earning large profits in Japan in the immediate future is not bright. Numerous readjustments will have to be made to fit a new economy, and losses written off. During this period, executive officers of these companies will have to receive a living income. It seems reasonable, under the circumstances, to encourage conversion to a system of adequate fixed salaries. It is not intended to eliminate payment of profit bonuses, but every such case will be carefully scrutinized to make certain that profits actually were earned.
4. The interests of USAFIK have been considered. This action does not affect the Korean area.
5. This is considered an administrative matter.
6. Concurrences: Finance Division, ESS (Lt. Col. D. L. Jennings)
Legal Division, ESS (Lt. Col. E. R. Minnich)
Labor Division, ESS (Mr. T. Cohen).
J. McI. H.
