A more balanced internal structure and chain of responsibility are the key to stemming the rash of corporate misconduct plaguing the country’s major firms, according to Takanori Matsuura, an expert in Japanese corporate culture.

Top executives can exercise power only when they have support from their rank and file, said Matsuura, a professor at Tama University in management and information science. “When they lose support from their subordinates, they lose their centripetal power. When they lose their power, they have a sense of crisis. So the answer to creating healthy management lies inside the firms,” Matsuura said. As examples, Matsuura cited the recent cases of All Nippon Airways and Bandai Co., in which top executives changed major decisions in response to protests from their employees.

In the case of ANA, midlevel managers conducted a signature drive to demand an explanation for the conflict among top executives, leading to later resignation of the executives. Bandai, the country’s leading toy maker, last month canceled a planned merger with Sega Enterprises Ltd., a video game manufacturer, after Bandai’s employees put up opposition. “It’s proved that seeking outside power doesn’t work for Japanese firms,” said Matsuura, referring to such methods as calling in external auditors and board members from other firms. Japanese companies belong to employees. So it’s better to let top management have the sense that they may be accused internally,” Matsuura said.

To prevent corporate misconduct, Matsuura stressed the importance of producing transparency in management within the company so employees will know what management is doing. Matsuura thus believes representatives of employees in lower ranks and labor union members should attend board meetings as observers.

“We should first create a system for employees to learn what is going on. Opening board meetings to employees is one way to secure transparency in organizations,” Matsuura said.

Recent cases of corporate misconduct by major firms are structural, he explained, as seen in the illicit ties, questionable loans and payoffs to “sokaiya” corporate extortionists by Dai-Ichi Kangyo Bank and Nomura Securities. “In these cases, top executives make the extortionists’ interests part of their business practice. That’s systematic and different from previous corporate scandals, which were mostly a result of personal wrongdoing,” Matsuura said.

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