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
ebooksA celebration of British elections
  • Get to the point
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

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power