Strategy: Kazou Hirai and the Forgone Bonuses

For Sony's CEO Kazou Hirai - a promise is a promise. Back in April 2012, when Kazou Hirai took over as CEO from Sir Howard Stringer, he pledged to restore Sony's troubled Consumer Electronics division to profitability within one year. In a significant programme of retrenchment, Sony has shed over 10,000 jobs (about 6% of the workforce), sold off major property assets and substantially cut production at the heavily loss-making Sony Television business (which is a significant part of the Consumer Electronics division). The result is expected to be Sony's first corporate profit for five years when it reports final result for the year to 31 March 2013 in May. However, the Consumer Electronics division remains unprofitable - Sony has not met its objective.The reaction by Hirai? It is reported that forty of Sony’s top executives, including Hirai, are to give up bonuses worth between 30 and 50 per cent of their pay. The decision will save Sony around $10m, which is not particularly significant in financial terms.

However, it can be argued that the decision of Sony's leadership to forgo bonuses has a greater symbolic value. Kazou Hirai is leading a major programme of organisational and strategic change at Sony. Strong leadership, which must surely include accountability, will be a key factor in determining whether the turnaround at Sony is achieved.

Students at the BUSS4 exam coaching days will recall that we featured an interview with Kazou Hirai in which he stated his enthusiasm for Sony continuing to compete in consumer electronics. He also explained that his number one priority was to maintain the pace of change in the business in order to address the strategic issues faced by Sony.

Under Hirai, Sony is redoubling its efforts on consumer electronics, with a focus on mobile phones and tablets, cameras and console gaming. But the losses incurred in the television business continue to weigh heavily on overall business performance.

And now many members of the senior management team are paying a personal financial price for missing their key objective and breaking a promise.