Once insular, corporate Japan opening up
By Audrey McAvoy
Associated Press
TOKYO — First it was Mazda, then Nissan. Now it's Sony. Some of the biggest names in once notoriously insular corporate Japan have tapped foreigners as leaders, underlining a new flexibility shaped by globalization and years of economic malaise.
Paul Sancya • Associated Press
Japanese companies have increasingly been turning to foreigners for help in revamping their operations, with Sony Corp. picking Howard Stringer, an ex-CBS executive who was born in Wales and holds dual U.S. and British citizenship, to be its new CEO this week.
Frenchman Carlos Ghosn, CEO of Nissan Motor Co., has been credited with turning around the company. Japanese companies have increasingly been hiring foreigners for help in improving operations.
The trend has so far been limited to companies needing help restructuring. The likes of Canon Inc. and Toyota Motor Co., which have been reporting record profits, haven't been recruiting non-Japanese chiefs. But the change is a highly visible symbol of the way Japan has grown amenable to foreign investment, management and influence.
"The global economy has advanced — 70 percent of Sony's revenue is from overseas," said Seiichiro Yonekura, a management professor at Hitotsubashi University. "Nissan had a tie-up with Renault and its brands have a presence overseas. In a global economy, this is a natural trend."
It's a different age from when Texas oilman-financier T. Boone Pickens struggled to get on the board of Koito Manufacturing Co. in 1990 and became a symbol of the difficulty Americans had breaking into the Japanese corporate hierarchy.
Pickens bought a 26.4 percent stake in Toyota affiliate Koito but gave up his quest for a seat after a two-year battle.
The decade long economic slump that followed Japan's stock market and real estate market crash in the early 1990s changed the scene.
Foreign investment funds like Ripplewood Holdings LLC bought bankrupt Japanese banks, golf courses, electronics companies and auto-parts makers.
Wal-Mart Stores Inc., based in Bentonville, Ark., snapped up a struggling Japanese supermarket chain.
Though foreign capitalists are viewed skeptically by some here as vultures preying on honest but weak Japanese companies, many Japanese have also grown accustomed to the idea of foreign bosses.
Success stories have helped.
Mazda Motor Co. led the way in 1996 when it allowed Ford Motor Co. to take a 33.4 percent stake and install a Ford executive at the helm. Henry Wallace, a native of Scotland who previously served as the head of Ford's Venezuela division, took the top job at Mazda in June 1996. He was the first non-Japanese to head a major company in Japan.
Wallace stepped down in November 1997 after leading the automaker out of a four-year slump. Mazda is on course to report record operating profits this fiscal year.
Nissan Motor Co.'s turnaround under the guidance of Frenchman Carlos Ghosn and Renault SA is the most-famous example.
Ghosn and his nickname — "Le Cost Cutter" — initially inspired fears of social and economic upheaval amid plants closings, mass layoffs and the potential damage his reforms would inflict on Nissan's ties with its suppliers.
His triumph, however, has made him an unlikely national hero. At one point, Ghosn was popping up on lists of people Japanese voters wanted to become prime minister even though his nationality made him ineligible.
Hiroshi Okuda, the chairman of Toyota, said it was no surprise that an outsider would be leading Sony.
"Frankly speaking, if you think about the future of Japan, this is natural," said Okuda, who also serves as the head of Japan's most powerful business lobby, Nippon Keidanren. "This will become normal and there will be less and less resistance to it."
Sony has a track record of establishing trends for corporate Japan: It began reporting earnings on a quarterly basis, instead of twice a year, long before its domestic rivals. It also brought in outside directors to its board to join the internally groomed executives that are the norm at many Japanese companies.
If past example of companies following Sony's lead on quarterly earnings reports and outside directors is any indication, other Japanese companies may soon be seeking foreign bosses.
If nothing else, the possibility — or threat — may provide a good psychological push to raise profits.
"It might scare some Japanese managers and companies into thinking 'If we don't do better, we're going to have to have a foreigner as our CEO. So let's do better,' " said John Vail, chief Japanese equity strategist at J.P. Morgan Securities Asia.
But just being foreign is no guarantee of success.
Vail and others, for instance, said they were worried about Stringer's plans to shuttle between his base in New York, Tokyo, and his family in Britain.
Globetrotting may be fitting for a company with interests worldwide, but it might also hamper Stringer's ability to get his message across.
"If Stringer is to really take action, he should, like Carlos Ghosn, come to Japan," Yonekura said. "If you don't do it that way, people won't believe you. It will be difficult (to lead) from videophone from the United States."
