Shame is gangsters' deadliest weapon

Japanese bosses will pay to avoid humiliation, writes Richard Lloyd Parry in Tokyo

Once a year, the presidents and board members of Japan's biggest companies submit themselves to an awful torment. Every June these unhappy people, whose decisions affect the lives of workers and consumers all over the world, are forced to present themselves publicly and - would you believe it? - answer questions from their shareholders.

The ordeal of the annual shareholders' meeting (sokai, in Japanese) is usually finished in double-quick time, although this is by no means guaranteed.

Sometimes, horror of horrors, a shareholder may ask an awkward or searching question, or even express dissatisfaction with the board's performance. Worst of all, professional troublemakers set out deliberately to embarrass the mortified executives. They shout, they refuse to sit down, they make awkward allegations.

Faced with this humiliating prospect, the MDs and CEOs do what any sensitive captains of industry would do: they buy off the trouble-makers, for millions of pounds every year.

The corporate blackmailers are called sokaiya, and in the last week their extraordinary place in Japanese corporate life has been dramatically exposed. Yesterday, the president of Nomura, the world's biggest securities house, resigned to take responsibility for a scandal in which the company apparently channelled hundreds of millions of yen to a company with connections to a former extortionist.

Three days before, police arrested two executives of a leading food company, Ajinomoto, for allegedly paying some half a million pounds a year to protect their president from embarrassing questions.

These are strikingly large sums for what is, after all, only a shareholders' meeting. In the past, sokaiya have punished companies who refuse to pay up by a variety of means.

In 1982, a Sony shareholders' meeting was prolonged for thirteen hours by filibusters; three years ago the president of Fuji Film had bottles thrown at him by a spurned sokaiya. But these cases are extreme, as the case of Ajinomoto demonstrates. Typically, the shareholders' meeting lasted just half an hour. In 1995, apparently because of a failure to pay off sokaiya, it went on for over an hour. However uncomfortable, those extra forty minutes saved the company 100 million yen (pounds 520,000).

The sokaiya are a uniquely Japanese institution, a product both of history and of the almost medieval importance of form in even the most modern companies. Incidents which would be routine at European or American shareholders' meetings - stroppy shareholders, aggressive heckling - are such anathema to the public image of corporations that they are prepared to buy peace and quiet.

"Japanese companies attach a great deal of importance to maintaining the dignity of their senior management," says Raisuke Miyawaki, a retired senior policeman, who now advises companies on how to deal with gangsters. "Actually, the bosses are a bit timid: if they are seen to make a mistake during the meeting, it's very shaming to them, so they want it to be as short as possible so that no one has a chance to ask questions."

In an attempt to frustrate the racketeers, companies have taken to holding their shareholders' meetings at the same time. These tactics have apparently worked: according to the police, there are about 1000 sokaiya, compared to nearly 7,000 before the change in the law. But since the passing of the anti-racketeering laws their methods have become both more ingenious and more brutal.

Three years ago, a Fuji Film executive responsible for the annual general meeting, ran into trouble with a group of sokaiya. Soon after, he was found dead, stabbed to death with a samurai dagger.

Nomura chief goes, page 22