Hiroshi Okumura

Who Rules Japan

Who rules Japan? At one time, this was a question that Japanese social scientists used to put to each other, but now it seems that the very question has disappeared from those circles. However, it still lives on in the minds of most ordinary people, some of whom reply that it is the prime minister who rules Japan, others that it is the bureaucracy, and still others that it is the mega-rich like Konosuke Matsushita, the founder of the firm that bears his name. It is the responsibility of social scientists to resolve this question both theoretically and empirically. But in Japan, this responsibility has long since been abandoned. This is the first reason why the structure of control in Japan is invisible to the mass of the people and why each person can only answer the question from his or her own experience. This is the fault of Japanese scholars who used up their energies in importing foreign works and in explaining and interpreting them, and who did not construct an independent theory on the basis of the actual situation in Japan.

Managers and Shareholders

Up to this time various characteristics of the Japanese top-management structure have been pointed out by many writers, among whom Akihiro Okumura has found the following specific features by comparing Matsushita Electric and RCA. However, it should be noted that for Japan, ‘top management’ refers to the directorship only and does not include the audit committee, whilst for America, the term includes both directors and officers.

The Logic of Corporate Capitalism

Those unseen monsters that we call organisations insert themselves in amongst human beings that are their slaves. They unjustly magnify the things that are useful to them, disgorge those things that are of no use to them and grow stronger and stronger as they trample things down around them.

The ‘Companised’ Society

There are approximately two million companies in Japan employing some thirty million salaried workers. When young people leave school, college or university, in almost all cases it is a question of joining a company. When a child is asked ‘what does daddy do?’, as if predetermined the answer comes back, ‘daddy works for a company’. It is just as the poet Nakagiri Masao wrote: ‘Japan is chock-full of companies.’ Whether you are on a train or walking down the street, what meets the eye are company-men (kaisha-in). It is just as if not to be a companyman is not to be a person at all. Indeed, non-company-people are merely those preparing to become company-people, or else members of families who are supported by company-people. Everyone depends on the company and lives with the company. Thus is Japan a ‘company state’ and a society where ‘companism’ (kaisha hon’i) rules. When we speak of corporate capitalism, it is to this kind of state and this kind of society to which we refer.

The Privilege and Position of Management

The question of who chooses the manager must be separated from the question of who becomes manager. As noted before, a manager who rises from the ranks of the employees is not necessarily a representative of the employees. Managers in most companies in Japan start as employees, but clearly managers are not chosen by the employees. So let us look at who does choose the managers.

Dividends and Share Prices

The joint stock company is part of a system where companies gather together the invested monies of their shareholders, set them to work as capital and return the profits thus obtained to the shareholders. This being so, it is a fundamental right of the shareholder to be able to claim that profits be distributed. No one will deny this fact. If a company belongs to its shareholders, then more importance must be attached to dividends than to anything else. Managers, to whom the running of the company is entrusted by the shareholders, must endeavour to ensure that dividends are as large as possible. However, it is fair to say that there are in Japan scarcely any private individuals of the sort who invest in shares for the sake of the dividends they might earn, and there are hardly any managers of the kind whose first consideration is dividends. According to a survey by the National Tax Administration Agency, Japanese companies paid out 3688.3 billion yen in dividends in 1988. As against this, they paid out in the same period some 4550.3 billion yen on their expense (for entertainment, etc.) accounts. Do Japanese companies exist to make profits and to return them to their shareholders as dividends; or do they exist in order that their managers and employees can eat out and drink in style? At any rate, it would not be strange to say that in Japanese companies expenses are thought of as having priority over dividends.

Mutual Control and Mutual Dependency

Reciprocal business, or mutually beneficial trade, in its simplest form, results when company A and company B agree to buy and sell from each other on mutually agreeable terms. As noted below, such trade relationships in Japan are extremely common. Reciprocal business started to become popular in America in the 1920s, but with the move towards amalgamating conglomerates in the 1960s, it became a problem in the eyes of anti-trust lawyers. So to counter the growth of reciprocal business, article seven of the Clayton Act was applied to conclude its illegality in a number of cases. In Japan, on the other hand, reciprocal business is common, is seen as natural and does not seem to run foul of unfair trade practice laws, in spite of its accountability having to be questioned.

Externalisation and Formation of Keiretsu

It has been pointed out that large manufacturers in Japan entrust their buying and selling functions and transportation to a separate company and subcontract the manufacture and processing of parts, so they concentrate solely on the function of assembly of the main body of products. This was first found by Rodney Clark. In The Japanese Company he mentioned the high degree of specialisation in a Japanese company. He states that ‘many firms limit themselves to one industry even to the extent of production or distributing only one item’.He further details the situation as follows:

The ‘Companism’ System

In the second half of the 1970s, a tendency to sing the praises of ‘Japanese-style’ management grew stronger both inside Japan and abroad. Everywhere one came to hear the assertions: ‘Japan is powerful. The Japanese are superior.’ Before that time, it had been the premodern aspects of Japanese-style management that had been the issue, and the thrust of the argument had been that it was because of this that Japan was ‘a hopeless case’. At about that point came a complete turn-around, and the assertion began to be made that it was ‘because of Japanese-style management that Japan excels’. There are peculiar circumstances which account for this great turn-about. After the oil crisis of 1973, the world economy was beset by ‘stagflation’ and all the advanced capitalist countries of Europe and North America suffered from both rapid inflation and high rates of unemployment. While this was occurring, Japan, too, was buffeted for a while by wild increases in prices. However, it soon overcame this problem, and was able to come through the second oil crisis with little adverse effect. Manufactured goods made by Japanese firms conquered world markets, and from this point on the image of Japan summed up in the words ‘dame na Nihon’ (‘hopeless Japan’) gave way to an image summed up in the words subarashii Nihon (‘wonderful Japan’).

Representatives of the Company

As indicated above, managers are neither the representatives of shareholders nor the representatives of workers. So on what basis do the managers control the company? This question pertains to the theory of managerial control. We have examined suggestions that control is based on the ownership by capitalists as well as the suggestion that it is not based on ownership. The former is called ‘ownership control’ and the latter ‘managerial control’; most importantly, the question is whether this control is based on ownership, and if so, what type of ownership is it based upon? In order to answer this question, it is necessary to take a step back to the previous discussion: