You've got to have 'wa'

When Japan's old-fashioned boardrooms open up to the modern world, disrupting harmony (wa) often follows. David McNeill reports from Tokyo


A venerated but barnacled Japanese firm appoints a British CEO to drag the management into the 21st century and chart a course through the shark-infested waters of global business. Months of painful internal headbutting later, the appointee is gone, citing a cultural wall too high to climb.

Sound familiar? Two years ago the man in the executive hot seat was not ex-Olympus CEO Michael Woodford, but Stuart Chambers, who abruptly quit as head of Nippon Sheet Glass after only a year in the job. Mr Chambers ran the Merseyside-based Pilkington when Nippon Glass took it over in 2006, and was made the Japanese company's president and CEO to smooth the integration. After his resignation, he explained that he was unable to meet the demands of his new employers to put work before family. "In that process I have learned I am not Japanese," he said.

That memorable departure line seemed to sum up two widely held beliefs about Japanese business: That it is a grim, airtight all-male club leaving little room for anything else, and that most foreigners don't have what it takes to survive there. Time and again, gaijin (foreigners) like Mr Woodford find the upper reaches of corporate Japan too foreign and impervious to change.

"A couple of weeks ago, those who support the 'Japan is changing' theory would have been able to cite the appointment of a gaijin president at Olympus as evidence of this," says Graham Harris, a veteran Japan-based British business consultant. "Now, as we get a glimpse below the surface, we see that 'old Japan' continues to thrive, even in a Japanese company with an international reputation."

For decades, Japanese companies generally operated in a way that modern American or British CEOs would find incomprehensible, flouting many of the accepted "rules" of global capitalism. Veteran Japan-watcher Karel van Wolferen, who once memorably called Japan "a wartime economy operating in peacetime", says it has always done things its own way. "Neo-liberals don't understand Japan because Japan is not a capitalist economy."

The Japanese way: long-term, government-directed industrial planning, strong banks and weak shareholders was immensely successful and drove the economy to the top of the economic league tables before it ran out of steam in the early 1990s. During Japan's journey from ruined Second World War pariah state to the world's second largest economy, its corporations were largely insulated from the West and business was done very differently.

Boards of directors were, by and large, considered rubber-stampers, not governing bodies as they are understood in Britain or the US. Elderly chairmen and CEOs retire "yet still come to the office on almost a daily basis, still wielding considerable power and undermining the authority of the new head", points out William Saito, a Tokyo-based venture capitalist and long-time business commentator. "Shareholders rarely fight management," he says, especially when so many companies are tied to main banks and subsidiaries through cross shareholdings. "The board doesn't represent the shareholders' interests but their friends internally." Regulators, employed to show that this system functions along standard capitalist lines, rarely show their teeth.

Women still make up only 1.2 per cent of top Japanese executives, and foreign board members on Japan's roughly 4,000 listed companies are as rare as sparrows in winter. The exception is a handful of troubled giants, notably Sony, which made Welshman Sir Howard Stringer its chairman and CEO in 2005, with very mixed results, and Nissan Motor, where Brazilian Carlos Ghosn has been in charge successfully for more than a decade. That startling lack of diversity, and the lingering insularity of corporate Japan, has not gone unnoticed at home. In 2009, the Japan Association of Corporate Executives (Doyoukai) published the results of a damning two-year survey that concluded by calling on its members to revolutionise their boardroom practices. "Japanese firms are terribly behind in accepting diversity," said the Association's then vice chairman, Yasuchika Hasegawa. "They should radically transform their corporate culture to provide the same opportunities to employees all around the world."

Easier said than done. Ever since Japan's corporations began operating in large numbers overseas in the 1970s, they have followed a tried and tested formula: whatever happens outside of the country, control stays in the iron grip of the all-Japanese boardroom back home. Managers – many of whom can barely string together an English sentence – are still dispatched from head office to run Japanese operations around Asia, Europe and the US. The companies that prove the exception to the all-Japanese rule are instructive. For Nissan, it was change or die. And Sony, operating in a hi-tech world where radical decisions need to be made quickly, was struggling with an increasingly sprawling, calcified management. It had become "too Japanese".

"Japanese companies are gradually realising the need for external directors, especially those who are genuinely trying to globalise," says Ian de Stains, former executive director of the British Chamber of Commerce in Japan. "But there is still a long way to go."

What was Woodward's mistake? Clearly, his questions about the $687m paid to advisers during the 2008 buyout of Gyrus ruffled feathers and, in Saito's words, upset the wa (harmony) of the Olympus establishment. "No one expected Woodford to bite back – they probably forgot that he wasn't Japanese because he spent so much time working for them." One of the virtues of wa is you can ignore contradictions. So Olympus chairman Tsuyoshi Kikukawa is scheduled to talk next week to an international audience in Tokyo on "Global social responsibility". Olympus, it seems, believes it is still obeying the rules of good global capitalism.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea