turning anglo saxon - will japanese companies adopt shareholder value model?
TRANSCRIPT
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
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
The pitfalls in both models
Anglo Saxon Agency problem
Japanese stakeholder model Free rider problem
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
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
Corrections
Anglo Saxon (or Anglo American) Corporate governance Sarbanes Oxley
Japanese stakeholder model Move to shareholder model?
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
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
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
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?
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
Entrepreneurship in a group oriented society 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
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?