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Staff writer

Economist Iwao Nakatani relentlessly preaches the virtues of deregulation.

The Hitotsubashi University commerce professor has no qualms about opening up national universities, drastically slashing Nippon Telegraph and Telephone Corp.’s interconnection charges and swiftly restructuring the country’s manufacturing sector in order to shed excess capacity and create an information-oriented society, even if it means a temporary rise in unemployment.

Up till now, however, the 57-year-old Nakatani had never dreamed the issue of deregulation would affect him so personally.

Presented with a prime opportunity to put his theories into practice, Nakatani will probably have to relinquish his post at the national university as of June because of a law that limits the scope of other jobs civil servants may hold.

The issue, now stirring a nationwide debate over the law in question, dates back to March, when Sony Corp. knocked on Nakatani’s door to offer him the post of outside director. The electronics giant is expected to appoint him to the post at its general stockholders’ meeting in June.

“We took into account the professor’s extensive knowledge of macro- and micro-economics, his ability to put his ideas into plain words, his international academic experience at Harvard University and his experience heading advisory panels to the prime minister, such as the Economic Strategy Council,” a Sony spokesman said.

“As Sony is broadening its business in such areas as (information) networks, we expect (him) to provide useful advice in determining business validity and directions” the firm should take, the official said. “Academic talent like his is taken as a prime (business) resource, say, in America.”

Novel as it seems among Japanese business circles, however, the National Civil Service Law, which prohibits national civil servants from concurrently serving as directors at private, profit-seeking companies, threw a wrench into his plans.

The Education Ministry decided to approve Nakatani’s appointment as an exception allowed under the law — apparently in the hope that it would promote the role of national universities as attractive and useful institutions.

But the National Personnel Authority, which has the final say, spurned outright such an “unprecedented move,” Nakatani told The Japan Times in an interview.

“The social status of civil servants is guaranteed in order for them to solely serve the general public,” said an official at the National Personnel Authority.

In principle, the National Civil Service Law is interpreted by the authorities to mean that those who acquire knowledge and information through taxpayer money and public funds should not make use of that knowledge at profit-making enterprises.

The law is also aimed at preventing civil servants and the private sector from developing cozy relationships.

“Unless the National Personnel Authority changes its obstinate attitude, I might as well quit the university in June. It’s such a pity,” Nakatani said.

While acknowledging the principles of the law, Nakatani said his case should be an exception, because he considers his role not as one of a profit-maker but as a watchdog to enhance corporate transparency for the sake of civil responsibility.

“It has become an international norm for companies to introduce strict outsiders, including national university professors, as outside directors to scrutinize their business operations,” Nakatani said. “Otherwise, there’s no way they can win the trust of global markets.”

Such a practice will also help meet growing demand for enhanced exchanges between industry and academia, he added.

“It must have a positive impact on education for those studying business like me to step into the real business world,” said Nakatani, expressing a strong interest in how Sony will incorporate the Western way of corporate governance into its management.

Echoing the enthusiasm shown by Sony, Nakatani said his cross-sector knowledge of industry will blend with the specialized knowledge of company employees to create an interesting business end-product.

Although Nakatani’s case drew to a close with the sides failing to find any middle ground, the issue provoked significant discussions in the media and among business and political circles. Earlier this month, the Japan Corporate Governance Committee, a joint research group established by industry and academia, issued a recommendation calling for revision of the law.

Late last month, the government decided to start deliberating on the issue as one of the items included in an update to its ongoing three-year deregulation program that runs to fiscal 2000.

Cases like his should be subject to liberalization eventually, Nakatani said, but it will take a few more years.

“Why the wait for a foreseeable result, though?” he said. “To make a fuss over a matter of this level itself shows Japan’s backwardness and draws ridicule from abroad.”

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