Most small and medium-sized enterprises in Japan are family-controlled companies, in which tax strategies that adjust the executive compensation paid to family members are widespread. The conventional labor share, however, combines family executives' compensation and employees' wages in its numerator, and therefore cannot reveal to whom value added ultimately accrues. Moreover, because profits in family-controlled companies are often compressed for tax purposes and dividends are rarely used, profit-based indicators such as ROE fail to reflect their actual situation. This paper decomposes the labor share into an executive compensation distribution ratio and a wage distribution ratio, and proposes an "executive compensation productivity" indicator, defined as the ratio of executive compensation to wages. The indicator can be calculated solely from the executive compensation and wage figures in the income statement, without computing value added. Estimates based on fiscal 2018 industry data from the 14th edition of the Gyoshu-betsu Shinsa Jiten (Industry Review Handbook) yield values of 0.27 for gasoline stations, 0.87 for plastic and cosmetic surgery clinics, and 0.16 for nursery schools, showing that the structure of value-added distribution differs substantially across industries.
