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As Japanese firms seek to adopt more elements of western-style business management practices and ideas, pressure appears to be mounting on corporate executives to increase shareholder value.

But is the supposed maxim of U.S. business — that companies exist to maximize shareholder value — really correct? Bob Emiliani, professor at Rensselaer Polytechnic Institute’s Lally School of Management and Technology, in Connecticut, does not think so.

“Most people seem to agree with (that notion). They don’t seem to question it and automatically seem to agree with it,” Emiliani told a symposium held June 18 at Keidanren Hall in Tokyo.

Emiliani suggested that increasing shareholder value is just one of the roles a business plays, noting that companies have social as well as purely economic reasons for existing.

“One of the problematic outcomes of focusing on shareholder value is that it creates wasteful imbalances,” he said. Some of the ways to achieve the financial goals of a company — such as layoffs, plant closings or by squeezing suppliers — can be destructive to the interests of employees, customers, or members of the local community.

The professor warned that in adopting western management practices, Japanese firms should be careful to adopt them the Japanese way. “The strength of Japanese management practices has been the very effective utilization of stakeholder resources, and I hope the adoption of western business practices will be done carefully, so as not to have a negative impact on the resources.”

Garrett van Ryzin, a professor at Columbia Business School, also said that Japanese companies, in trying to follow the model of their American counterparts, should not go to extremes and abandon the positive elements of their traditional management practices.

To contrast the Japanese and U.S. business environments, Ryzin cited the mentality of MBA students at his institution and a business school that he visited in Tokyo during his latest tour.

“(In the U.S.), individuals put in a lot of effort to build up their outside credentials. . . . Employees view their own development as paramount to the development of any firm that they work at. When we think of an ideal career for our MBA students, (they might) go work for a consulting business for a while, leave that and maybe start up a business, make a fortune in stock options, sell that off, go start a hedge fund — that’s the kind of career path that many of our students aspire to,” he said.

“When we visited a business school in Tokyo, (we heard) that there are students who have to sneak out at night to go to school to get an MBA, because some firms in Japan consider it disloyal to do that because you’re developing expertise outside of the company.”

He also cited the different approaches to technology. While the U.S. has a lot of major university institutions that do a lot of basic research, in Japan a lot of technological research and development is done by the corporate sector.

“Each system has its own strengths,” he said. “The real strength of the Japanese model is in long-term development and refinement of technology,” he said, noting how employees at Japanese firms are allowed to spend years improving the quality of their products and the manufacturing process.

Meanwhile, the virtue of the U.S. system is its focus on innovation, speed and fostering creativity, he said. “Our MBAs and our employees are perfectly willing to jump ship and join another firm if they think the grass is greener in a different place, and . . . there’s a whole infrastructure for venture capital firms that facilitates that.

“There’s the culture of individualism where someone with a crazy idea can get funded. . . . People flow freely, capital flows freely, and there’s an infrastructure to develop your ideas.” The professor asserted that the gap between Japanese and U.S. economic performance over the past decade does not mean either of the two models is superior.

Japan’s economic model enabled the country to dominate many of the postwar industries like consumer electronics for decades. But the technological shift from the late 1980s to 1990s — with the arrival of personal computers and the Internet — “matched well with the strengths of the U.S. model” and enabled American firms to enjoy strong performance, he said.

Ryzin also said that in the process of its success over the past decade, American firms successfully adopted many Japanese management practices, narrowing the gap with their Japanese competitors in terms of quality control.

“Japan now is in a situation very much like we were in the mid-80s, when American firms were very anxious about their relative competitiveness and looking to Japan and copying many of the elements of the Japanese system,” he said.

But while many Japanese firms may successfully copy and adopt the U.S. system, essential differences will remain. “Just as I think General Motors will never be Toyota, I don’t think Kyoto will ever be Silicon Valley,” he said. “There are fundamental differences in the two systems. I think there will be a convergence, but each system will and should retain its relative strength,” he said. “One thing I would be a bit concerned about is (if Japanese firms may abandon) their traditional strengths, because I think it would be a mistake to throw out the baby with the bath water.”

Now that the U.S. has seen the burst of its “technology bubble” over the past year, Ryzin said the strengths of the Japanese system may well come into the spotlight again, “as the Internet and PC technology enters a more mature phase, where the easy work of inventing new businesses and industries may be behind us and we have to work hard to make that technology successful.”

Yoshihiko Wakumoto, an adviser to Toshiba Corp. who followed the two U.S. scholars in the presentation, said Japan should realize that business sectors of the two countries have interacted and learned from positive elements of each other’s economic model.

“We should know how much the American businesses have learned from Japan,” Wakumoto told the audience.

Some of the so-called American business practices Japan is looking at may in fact have originated from Japan and been adapted to the U.S. style, he said, adding that Japanese businesses should not reject them but actively incorporate them.

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