Itochu Corp., a major Japanese trading house, announced Monday that its top two officials will give up their salaries from July to an unspecified date to take responsibility for major extraordinary losses it has incurred over the past 15 years.
Itochu President Uichiro Niwa announced the move, which will affect he and Chairman Minoru Murofushi, following a four-month internal investigation into the massive losses.
Several hundred executives, including former presidents, were interviewed during the investigation, the company said. The results of the probe were not made public.
Niwa and Murofushi have not been taking bonuses since January 1998 because the company has not been able to pay dividends. The two will thus effectively be working without remuneration from July.
Murofushi will also give up his representation right, which enables him to make executive decisions, as of June 29, Itochu said.
Itochu, based in Osaka, has spent the equivalent of about 40 percent of its gross profit over the past 15 years to write off extraordinary losses accumulated during the same period.
In the year through March 2000 alone, the company posted a 253 billion yen consolidated extraordinary loss to liquidate its nonperforming property assets.
“The investigation did not turn up any violations of the law, but did find several breaches of internal rules such as those regarding reporting requirements,” Niwa said.
The losses were largely linked to property investments the company made during the “bubble economy.” “We would like to learn from what management did during the bubble period,” Niwa said.
Following Itochu’s suspension of dividends in fiscal 1998, Niwa in July 1999 cut his annual salary in half.
Commenting on Monday’s announcement, Hiroshi Okumura, economics professor at Chuo University, commended Itochu for undertaking the probe.
He said such probes are rarely conducted by Japanese companies, a sign that they disregard their accountability to shareholders.
But Okumura noted that Itochu did not make clear the responsibility former executives bear regarding the losses.
Itochu “should have disclosed detailed results of its investigation,” Okumura said.