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Turning Anglo Saxon - will Japanese companies adopt shareholder value model?


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Presentation to the Asia Pacific Technology Network at Chatham House London in 2006.

Presentation to the Asia Pacific Technology Network at Chatham House London in 2006.

Published in: Business, Spiritual, Technology
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  • Lost decade? – I was in Japan at heart of changes being made in a big J co. Tell Kiichi story
  • See arrest of Murakami as Japan preventing shareholder model from being implemented?
  • Kanebo – been hiding losses since 1970s!
  • Sox stricter rules on auditors and made corporate directors criminally liable for lying about their accounts.
  • Anglo saxon corrections are making individual punishment clearer, and checks by outsiders (eg non-execs) stronger. Japanese model is improve accountability, but not so individual is punished but whole company adopts policies Accounting Big Bang – mark assets to market value, consolidated reporting, Also cut pay roll costs thru reduced hiring, hiring temps, early retirements. Nobody made redundant
  • Mitsubishi keiretsu persists – bail out MMC Hankyu take over Hanshin – regional communities as stakeholders
  • Pay for amakudari falling. Younger bureaucrats joining private sector Mobile phone Patents Generally, big business fed up, disillusioned. DPJ preferred, if only no Ozawa.
  • 90% of salarymen both in 1985 snd 1998 stated that enjoy lifetime employment Seniority based pay is being phased out by Toyota, Canon
  • 90% of salarymen both in 1985 snd 1998 stated that enjoy lifetime employment Seniority based pay is being phased out by Toyota, Canon
  • massive change in takeover and stock swap rules, dividend payment rules, share classes, financial statement changes, and much else besides
  • H o ri was seen as outsider Murakami more shocking because from an elite background Son – Korean Couldn’t get Japan The Apprentice off the ground – approached Ghosn, Son. Most said did not want to draw attention to themselves.
  • Company bank borrowings are rising. Hiring young people. Y oung people more conservative again, income differentials will shrink again? Finish story As an entrepreneur, then as now, have to be an outsider that is still ‘in’. Why Murakami confessed so quickly?
  • Transcript

    • 1. Anglo Turning Saxon? Pernille RudlinRudlin Consulting/Japan Intercultural Consulting
    • 2. Agenda Anglo Saxon or Japanese stakeholder? Carrots and sticks in both systems Recent scandals and the need for further controls Have Japanese companies changed? The supply side – has the Japanese worker changed? Entrepreneurship
    • 3. A false dichotomy? Anglo Saxon  Companies should be run to maximise returns to shareholders Japanese stakeholder model  Companies should be run to benefit the community of employees  Companies should also benefit society
    • 4. The pitfalls in both models Anglo Saxon  Agency problem Japanese stakeholder model  Free rider problem
    • 5. Carrots and sticks Anglo Saxon  Carrot – remuneration tied to share price  Stick – the sack Japanese stakeholder model  Carrot – status within the group  Stick – shame within the group
    • 6. Distortions and recent failures Anglo Saxon (or Anglo American)  Greed leading to accounting fraud – Enron, Worldcom, Global Crossing Japanese stakeholder model  Fear of shame leading to cover-ups – Long Term Credit Bank of Japan, Mitsubishi Motors,Kanebo
    • 7. Corrections Anglo Saxon (or Anglo American)  Corporate governance  Sarbanes Oxley Japanese stakeholder model  Move to shareholder model?
    • 8. Corrections so far Stakeholder solutions to a stakeholder problem  Companies restructuring themselves to make P&L centres clearer, focus on cash flow, reducing debt  Laws supporting this:  Accounting ‘Big Bang’ 1999 -  Holding company law  Limited introduction of performanced based pay, mainly to cut pay roll costs
    • 9. Corrections so far Other stakeholders – ‘keiretsu’  Reduced cross shareholdings (18.4% of value of all shares traded in 1987, 7.6% in 2003)  Bank borrowings reduced from 1/3 of total assets in early 1980s to 1/5 total assets  But ‘main bank’ concept still persists (96% of Nikkei 500 corporations surveyed in 2003 said they had a ‘main bank’  Hostile M&A still not happening – acquisitions still perceived as aid to a failing company
    • 10. Corrections so far Other stakeholders – the state  Amakudari  Industrial policy  Asia
    • 11. Successful stakeholder companies Toyota  Lifetime employment “for Toyota an immense plus” Canon  “Lifetime employment…conforms to Japanese culture and is our core competence to help survive global competition” Fujio Mitarai 2002 ‘Family-owned’ Murata, Omron, Kyocera
    • 12. The supply side – Japanese workers 850,000 NEETs 4m freeters 5m part timers 1985, 12m 2000 = 21% of workforce, now nearly 1/3 of workforce 1986 Worker Dispatching Law Job-hopping Rising income inequality Entrepreneurs?
    • 13. Entrepreneurs May 1 2006, new commercial code (Shouhou) enabling limited liability, ¥1 capital Previously:  Substantial capital required  Kabushiki Kaisha needed 3 directors  High personal risk to directors as bank borrowing required personal guarantee, using own money
    • 14. Entrepreneurship in a group orientedsociety Outsiders so cannot be controlled through company-based group status and shame, so have to find other controls? Society-based group shaming, for anyone seen to act against benefit of society Roppongi Hills Tribe - Livedoor, Murakami Fund Softbank , Rakuten – still OK! Corporate venturing
    • 15. Conclusion Japanese stakeholder model still alive and kicking But ‘lost decade’ actually a time of significant adjustments to the model Younger generation show some signs of entrepreneurship, individualist career development but group orientation still strong influence As economy recovers, revert to old ways?