What makes a good corporation? The answer depends partly on whether it takes a long-term and broad-gauged view of its activities. This may help clarify a question raised during the recent takeover battle for Nippon Broadcasting System: To whom does a corporation belong? The question may also serve as a reminder of some of the cultural differences between Japanese and American corporations.
Long-term thinking is often cited as a strong advantage of Japanese manufacturers. This was especially true in the booming 1980s when they received international acclaim as “excellent companies.” The secret of their success was said to be their long-term commitment to profitability rather than a short-term fixation on satisfying shareholders.
In fact, Japanese manufacturers worked hard to develop products tailored to consumers’ needs and to bolster their balance sheets over the long haul. As Western observers pointed out, that is why they outdid their American and European rivals one way or another. Honda Motor Co., which developed the world’s first low-pollution engine, was mentioned as a typical example.
Generally, the emphasis on long-term profitability remains a major factor contributing to the competitiveness of Japanese makers. Among the best-performing companies are carmakers, who hold a combined market share of more than 30 percent in North America. Because a manufacturing enterprise more often than not involves factory work, success means spending the time and energy to create a sense of community. The underlying belief must be that a corporation belongs to its employees and customers, not just shareholders.
Japanese corporations have learned much from Western technology and knowhow. But the pursuit of short-term profitability, with its focus on sophisticated and often arcane financial-market transactions, has pitfalls. The United States, the world’s largest debtor nation, continues to attract vast amounts of capital from around the globe, giving foreign investors heavy stakes in its economy.
From the standpoint of the marketplace, corporations surely belong to shareholders. The risk is that a corporation overly conscious of shareholder interests may be tempted to push for quick — and huge — profits through a speculative buyout to please shareholders. That is not likely to serve its long-term interests.
The boom in information technology has spawned many IT businesses with a knack for making fast profits. In fact, many entrepreneurs who have set up these Internet outfits have been active players in high-stakes buyout games. They may be beholden to an American-style capital market, but speculation is certainly not the way to set a global standard.
While Japanese-style management more or less retains its long-term orientation, it appears to be losing some of its broad perspective. Mitsubishi Motors Corp., for instance, has earned a bad name for its extensive coverup of vehicle defects — an attempt that allegedly stemmed from a narrow-minded tendency toward self-preservation among top managers and ranking employees. The obvious but oft-forgotten lesson is this: A corporation that makes light of the interests of consumers and communities is bound to fail.
If Japanese companies are looking inward, it may be because they are paying little attention to their local roots. Since the end of World War II, most of the nation’s largest corporations have moved their head offices to Tokyo, leaving behind the close relations they had established with local residents in the regions. Now, 90 percent of top 100 companies (ranked by sales) are based in the capital city.
Toyota Motor Corp., which has kept its head office in Aichi Prefecture ever since its founding, sets an example that ought to be emulated. Its executives rightly emphasize that “globalism and localism are two sides of the same coin.” In this sense, Nissan Motor Co.’s decision to move from Tokyo to Yokohama, its birthplace, is significant.
In recent years, a growing number of Japanese companies, in an effort to improve their transparency and accountability, have appointed outside directors and auditors. In order to better serve the interests of shareholders and consumers, though, it is also important to establish a hands-on relationship with the communities in which offices and factories are located.
A desire to contribute more positively to the well-being of communities will make corporations more open to the outside world. Ultimately, corporations belong to society. In this sense, kigyo kachi (corporate value) — the term that gained currency during the takeover game between Internet portal Livedoor Co. and Fuji TV Network — means much more than shareholder expectations and stock prices.
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