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Monday, Sept. 2, 2002

JAPANESE PERSPECTIVES

Japan laying it on thick with ancient corporate shtick


The hammier the act, the better it gets. Nippon Ham, Japan's largest ham and sausage processor, tries to tap the government's post-BSE meat buyback program by pretending it has a lot of unsold domestic beef on hand, which actually turns out to be imported stock.

Undignified enough for a company of its size and established presence. But the fiasco deepens when subsequent revelations uncover that secretiveness and rigidly hierarchical family ties seem to have been at the bottom of the conspiracy.

Indeed there is something positively Gothic about the father-son relationship that has emerged between Nippon Ham founder Yoshinori Okoso, who was finally persuaded to resign as chairman of the company, and his son Hiroji Okoso, who stepped down from the presidency. The tearful Okoso junior would perform well as the hapless hero in a 15th century tragedy, torn between social justice and filial duties, with the latter having an instinctively greater pull on his well-trained heart strings.

Although the essentially nontransparent nature of family-run and founder-owned businesses is not unique to Japan, when such tendencies make up the current in mainstream economic activity, they cannot be shrugged off as mere eccentricity.

And make up the current they do. When push comes to shove, it is not just the genuinely family-based companies that resort to inward-looking and conspiratorial ways here. For all the talk of corporate governance, the instinct remains one of seeking solutions behind closed doors, among the influential, and away from the public's gaze.

To this extent, it could even be argued that the modern-day concept of the corporation has not yet taken root in Japanese business society.

Keeping it in the family is not necessarily all bad at all times. But 15th-century solutions do not work in a 21st-century setting. Japan's economy has grown far too large -- and its companies are now answerable to far too large a public -- to be settling issues in these Byzantine ways. Yet the tragicomedy of conspiracy continues.

The Nippon Ham incident is a symptom of a deeper and more widespread problem in Japan today. Again and again, we see situations in which there is a complete mismatch between the institutions and the reality.

Japan's companies behave as though they are in the Middle Ages, where the boss is prince and no dissent is allowed. Its banks wouldn't look out of place in a Merchant of Venice setting. But the reality that surrounds them is one filled with intense global competition, instant communication, and an increasingly aware and well-informed citizenry.

Closed-circuit institutions with strictly rigid internal protocols are fine when the operating environment is itself part of a very large and closed system. That was how the postwar Japanese economy was designed.

So in that particular set of circumstances, it was no surprise that the family-like company, the patriarchal bank, and the unaccountable government got on so well with each other, and even worked to the advantage of Japan's many and swift economic achievements.

But that was then, and the setting has changed. Acting that went down well in the past no longer convinces. This, however, is a difficult truth for Japan's once-celebrated thespians to accept.

No matter how strongly discouraged, the erstwhile stars will keep reverting to their antiquated tricks and stagecraft. The audience has moved on though, and they are demanding an altogether more up-to-date performance. Hams need no longer apply in the post-postwar theater of the Japanese economy.

Noriko Hama is a research director and economist in the Research Center for Policy and Economy at Mitsubishi Research Institute, Inc.


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