Category: Leadership

  • Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University. Thursday 7 March 2019 in Tokyo

    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University. Thursday 7 March 2019 in Tokyo

    Japan’s corporate governance reforms

    joint event with the alumni organizations of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/ Cambridge University. Thursday 7 March 2019 19:00 in Tokyo

    On Thursday 7 March 2019 we will have a joint event by the alumni organizations of several French Grandes Écoles, HEC, École Polytechnique, Sciences Po, Edhec, Essec, and Trinity in Japan on Japan’s corporate governance reforms.

    Topic: Japan’s corporate governance reforms

    Everyone of us who wants Japanese companies to take major decisions, e.g. in major sales, M&A, as investor, or executive or employee benefits from understanding how Japanese companies take decisions at top level. Corporate governance is about how companies take decisions, and how this decision making is controlled. Reforms were initiated by PM Abe and Japan’s Parliament since 2015, mainly driven by the very low returns on capital by Japanese companies compared to Europe and US, and by a long series of scandals. 

    As the major shareholder of Nissan, Renault shares responsibility for corporate governance at Nissan, and governance of Nissan directly impacts employment in France. Thus interest in Japan’s corporate governance has suddenly shot up in France.The speaker has several years experience as Board Director and Member of the Supervisory & Audit Committee of a stock market listed Japanese SaaS, cloud and cybersecurity group, and will give a practician view of governance at Japanese companies.

    Speaker: Dr Gerhard Fasol

    Dr. Gerhard Fasol, graduated with a PhD in Physics of Cambridge University.  He first came to Japan in 1984 to help build a research cooperation with NTT.  In 1997 he founded the company Eurotechnology Japan KK and has been working with hundreds of Japanese and foreign companies on cross-border business development and M&A projects. For four years he served as Board Director of a Japanese stock market listed company. He is also Guest-Professor at Kyushu University and was tenured faculty in Physics at Cambridge University,  Fellow and Director of Studies at Trinity College Cambridge, Associate Professor at Tokyo University’s Dept of Electrical Engineering, and also Guest Professor in Physics at the École Normale Supérieure in Paris. In recent years he has been focusing also on questions of Corporate Governance at Japanese companies, a topic about which he is frequently presenting at a wide range of organizations in and outside Japan.

    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.

    Event details and registration

    • Date: Thursday 7 March at 19:00 (Please try to be on time).
    • 19:00 – 20:00: Presentation and Q&A
    • 20:00 – 21:00 Cocktail
    • Venue: Aux Bacchanales Kioicho
    • 東京都千代田区紀尾井町4-1新紀尾井町ビル 1F
    • Shin Kioicho Bldg. 1F, 4-1, Kioicho, Chiyoda-ku, Tokyo
    • https://goo.gl/maps/yuqAxJafe1s  
    • Registration: Please register using contact form below, no later than Friday 1 March 2019.
    • Please note that the last HEC event was booked out early, and some late registrations had to be turned away. So to avoid disappointment, make sure you register early!
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.
    Japan’s corporate governance reforms: Joint event with the alumni of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/Cambridge University.

    To register

    Error: Contact form not found.

    Copyright (c) 2019 Trinity in Japan Society All Rights Reserved

  • Corporate Governance Reforms in Japan, Swiss-Japanese Chamber of Commerce in Geneva

    Corporate Governance Reforms in Japan, Swiss-Japanese Chamber of Commerce in Geneva

    Corporate Governance Reforms: How the Way Japanese Corporations Take Decisions is Changing


    SJCC Swiss-Japanese Chamber of Commerce Friday 12 October 2018, 18:30-19:45, JETRO Office Geneva

    Prime Minister Abe’s corporate governance reforms are arguably one of the biggest success stories of his reform program to promote Japan’s economic growth. Japan’s Government in coordination with the Tokyo Stock Exchange and the Financial Services Agency changed the legal and regulatory framework for the supervision of management for stock market-traded companies, faster than many thought this could be done.

    Japanese corporations are changing their governance structure, bring in independent Board Directors with fresh ideas and independent views and experience. The share of foreigners on Japan’s Board of Directors is still low (0.5%) but increasing as they bring global expertise to the top level of increasingly globalizing Japanese companies.

    The presentation is based on Gerhard Fasol’s experience as Board Director and Member of the Supervisory and Audit Committee of a stock market listed Japanese group. It will explain some details of how Japanese stock market listed corporations take decisions, the different models for management supervision available under Japanese law, and how this works in daily practice.

    Understanding how Japanese corporations take decisions, is a key success factor for companies seeking to achieve agreements with Japanese corporations that need Board approval, e.g. for investments, M&A, partnerships or large purchases, as well as for investors in listed Japanese company stock, and employees of Japanese companies. Knowledge about Japanese Corporate Governance is also crucial for the success of Foreign subsidiaries in Japan.

    About the speaker – Gerhard Fasol


    Dr. Gerhard Fasol, of Austrian origin living in Tokyo, graduated with a PhD in Physics of Cambridge University. He first came to Japan in 1984 to help build a research cooperation with NTT. In 1997 he founded the company Eurotechnology Japan KK and has been working with hundreds of Japanese and foreign companies on cross-border business development and M&A projects. For four years he served as Board Director of a Japanese stock market listed company.

    He is also Guest-Professor at Kyushu University and was tenured faculty at Cambridge University, Fellow and Director of Studies at Trinity College Cambridge, and also Guest Professor in Physics at the École Normale Supérieure in Paris. In recent years he has been focusing on questions of Corporate Governance at Japanese companies, a topic about which he is frequently presenting at a wide range of organizations in and outside Japan. He served on the Advisory Board to the former Chairman of JETRO Mr Noboru Hatakeyama.

    SJCC Swiss-Japanese Chamber of Commerce Friday 12 October 2018, 18:30-19:45, JETRO Office Geneva


    Date Friday 12 October 2018
    Time From 18:45 to 19:45 (registration opens 18:30)

    Venue JETRO Office Geneva, Rue de Lausanne 80, 1202 Geneva, Switzerland
    Fee SJCC/JETRO/JCG Members and Guests: CHF 20, Non-Members: CHF 30

    Organization SJCC Swiss-Japanese Chamber of Commerce

    Oceanic Inspiration


    Winding veils round their heads, the women walked on deck. They were now moving steadily down the river, passing the dark shapes of ships at anchor, and London was a swarm of lights with a pale yellow canopy drooping above it. There were the lights of the great theatres, the lights of the long streets, lights that indicated huge squares of domestic comfort, lights that hung high in air.

    No darkness would ever settle upon those lamps, as no darkness had settled upon them for hundreds of years. It seemed dreadful that the town should blaze for ever in the same spot; dreadful at least to people going away to adventure upon the sea, and beholding it as a circumscribed mound, eternally burnt, eternally scarred. From the deck of the ship the great city appeared a crouched and cowardly figure, a sedentary miser.

    Copyright (c) 2018 Eurotechnology Japan KK All Rights Reserved

  • Corporate governance reforms: making Japanese corporations great again? Monday, May 28, 2018, 19:00-21:00 at CCIFJ

    Corporate governance reforms: making Japanese corporations great again? Monday, May 28, 2018, 19:00-21:00 at CCIFJ

    Corporate governance reforms: making Japanese corporations great again?

    Understanding how Japanese Boards of Directors function helps you close deals Monday, May 28, 2018, 19:00-21:00 at CCIFJ

    Stimulating Japanese companies’ growth is a key element of Prime Minister Abe’s economic growth policies. For companies to grow, management needs to be improved, Boards of Directors need to bring in diverse experiences and new ideas, and Boards need to control executive management effectively. Corporate governance is important for investors, and also for those aiming to achieve major decisions from Japanese companies. If you want to make a major sale, an M&A transaction or create a partnership with a Japanese company, you need to understand how Japanese companies take decisions at Board of Directors level.

    The speaker is one of a limited number of foreigners with several years experience as Board Director and member of the Supervisory & Audit committee of a Japanese stock market listed company. His presentation will aim to give you a hands-on understanding of Japanese Board of Directors work from an insider with several years Japanese Board experience. He will illustrate this with an example, where he helped a European industrial group achieve agreement to cooperate from a large Japanese industrial group within 12 hours, by applying his Japanese Board Director experience.

    He addresses C-level executives aiming to close deals with Japanese corporations, and to fund managers who have new duties to interact more closely with Japanese Boards under the new stewardship code of the FSA. He will also prepare you for coming changes to these rules.

    About the speaker

    Gerhard Fasol graduated with a PhD in Physics of Cambridge University, Cavendish Laboratory, and Trinity College. He founded the company Eurotechnology Japan KK in 1997 and has been working with hundreds of Japanese and foreign companies on cross-border business development and M&A projects. He first came to Japan in 1984 to help build a research cooperation with NTT. For four years he served as Board Director of the Japanese stock market listed cybersecurity group GMO Cloud KK.

    He is also Guest-Professor at Kyushu University. He was tenured faculty at Cambridge University, Fellow and Director of Studies at Trinity College Cambridge, and also Guest Professor in Physics at the Ecole Normale Superieure in Paris.

    Date Monday, May 28, 2018
    Time From 19:00 to 21:00 (doors open at 18:30)
    Venue CCI France Japon, 1F Meeting room
    Admission Fee (to be paid in cash at the door or online via PayPal)
    JPY 4 000 for members of the French Chamber
    JPY 6 000 for non-members
    Language English
    Deadline for registration/cancellation Thursday, May 24, 2018, 17:00

    Registration: please click on the button “S’inscrire” at the bottom of this page.

    Copyright (c) 2018 Eurotechnology Japan KK All Rights Reserved

  • EFTA Court – impact on business and our emerging new world order: former EFTA Court President Carl Baudenbacher

    EFTA Court – impact on business and our emerging new world order: former EFTA Court President Carl Baudenbacher

    Former President of the EFTA Court, Carl Baudenbacher

    Former President of the EFTA Court, Carl Baudenbacher
    Former President of the EFTA Court, Carl Baudenbacher

    Gerhard Fasol: Professor Baudenbacher, could you explain in simple terms, what the EFTA Court and your work leading the EFTA Court for many years, means for businesses in Europe, and also businesses in Japan.

    Carl Baudenbacher: The EFTA Court is the second tribunal in the European Economic Area (EEA) next to the Court of Justice of the European Union (ECJ). The EEA consists of the EU and its 28 (soon 27) Member States which form one pillar and the three EFTA States Iceland, Liechtenstein and Norway which form the other pillar. Businesses from these countries have access to the EFTA Court. That includes Japanese companies which are active in Europe. I should add that a group of leading Japanese professors from the universities of Waseda, Tokyo and Kyoto have for many years been doing research concerning the EFTA Court.

    Gerhard Fasol: Can you illustrate the impact of the EFTA Court with an example? What do you consider your most important case?

    Carl Baudenbacher: In Fosen-Linjen (E-16/16), we decided that a public authority which awards a public contract to the wrong bidder, may be liable for a simple breach of public procurement rules and not only for a serious breach. This judgment may have an impact on the jurisprudence of the ECJ, but also of the highest courts, say, in the U.K., Sweden, Norway, Denmark. It could also be that it influences a Japanese court.

    Our most important case was probably Icesave (E-16/11) where we held that in a systemic financial crisis a State is not liable for the incapability of its banks’ deposit guarantee scheme to compensate depositors in other countries.

    Gerhard Fasol: Do I understand correctly, that the EFTA Court is focused on the relationship between Governments and business. Surely the impact is bigger and beyond Government and business only?

    Carl Baudenbacher: The EFTA Court decides cases involving the relationship between Governments and business, for example concerning ownership in energy companies or concerning taxation but also between businesses, for example conflicts between banks and insurance companies and consumers.

    Former President of the EFTA Court, Carl Baudenbacher
    Former President of the EFTA Court, Carl Baudenbacher

    Gerhard Fasol: Professor Baudenbacher, you devoted your life to lead the development of international business law, which is at the core of the post WW2 rule based global system, which is now faced with stronger nationalism, in particular the Trump presidency.

    Can you explain us what you see as your main achievements, and do you feel these achievements are now in danger in view of recent political developments?

    Carl Baudenbacher: I have been a university professor in Switzerland, Germany, the US and Iceland, an author, arbitrator, corporate and political consultant, and a European judge. As a professor, I have founded the post graduate program Executive Master of International Business Law of the University of St. Gallen. This autonomous global program entertains cooperations with American and Asian universities. In Japan, Waseda is our partner. My main achievement has probably been the positioning of the EFTA Court as a voice to be heard. The establishment of international courts, such as the ECJ, the EFTA Court or the WTO Appellate Body has been called the “judicialisation” of international law. This has been beneficial for businesses. With the Trump presidency, there is the risk that the rule based global system will be replaced by archaic mechanisms such as retaliation. Free trade has already suffered and will further suffer.

    Gerhard Fasol: While we do see this emergence of nationalism, important major trade agreements between the EU and Japan, between the EU and Canada and many others have been agreed. From your experience leading the EFTA Court, do you think we will see a future of several ECJ or EFTA-type courts for different regional trade groups? Or will we go back to national courts, driven by renewed nationalism?

    Carl Baudenbacher: What we are seeing is in all likelihood more than a crisis of the post WW2 global trade system. The former German Foreign Minister Joschka Fischer speaks of the end of the Pax Americana. I leave the question open whether the EU has done its homework as regards its trade balance. A natural reaction to the American move would be that Europe and Asia move closer together. If global trade is in peril, regional trade agreements come to the fore. In my experience, regional courts such as the ECJ and the EFTA Court offer a lot of advantages. But the judges must be aware that they cannot interfere excessively with the sovereignty of the Member States. At the same time, going back to national courts is in my view no solution.

    Former President of the EFTA Court, Carl Baudenbacher
    Former President of the EFTA Court, Carl Baudenbacher

    Gerhard Fasol: You often refer to judicial dialogue. Why do you think judicial dialogue is so defining for your work at the EFTA Court, what is its importance beyond? How do you see criticism?

    Carl Baudenbacher: What I mean with judicial dialogue is the dialogue between high courts. In Europe, we see such interaction between the ECJ, the EFTA Court and the European Court of Human Rights. National Supreme Courts may also be involved. Let me give you an example. In many countries around the globe dockers have been able to impose collective agreements on ship owners that give them a priority right to load and unload ships. In 2016, the EFTA Court ruled in the landmark case Holship (E-14/15) that such a system is incompatible with competition law. The Supreme Court of Norway has followed the EFTA Court. The Norwegian unions have now brought the matter before the European Court of Human Rights. At stake is, inter alia, the right of businesses to employ non-organised dockers. Sooner or later, this question will also arise in the ECJ. Obviously it could also end up before any other high court in the world. Then it would be natural for that court to look into how other courts have resolved the problem.

    Gerhard Fasol: How do you see the developments between EU, UK, EFTA and Switzerland? You are actively promoting the EFTA court, and by extension EFTA for a possible future home for the UK. Where do you see the advantages for EFTA and UK – keeping in mind that EFTA was co-founded by UK.

    Carl Baudenbacher: The UK intends to leave the EU because it wants to limit integration to economic matters; it doesn’t want to be part of a political Union. EFTA which was founded under British leadership is an intergovernmental club which focuses on trade. The EFTA Court has in its case law upheld EFTA values such as free trade, open markets, efficiency, a modern image of man.

    Gerhard Fasol: Finally, here in Japan many business people are concerned with Brexit – especially Japanese manufacturing and financial companies have a strong presence in the UK. How do you see Brexit – from your neutral Swiss viewpoint, and from your EFTA Court viewpoint – both outside the EU. How do you see Europe develop?

    Carl Baudenbacher: The Brexit decision of June 2016 was obviously a shock for Japanese businesses which had used the UK as a gateway to the EU. I have already elaborated on this at Keidanren on 1 September 2016 and then again in September 2017 at RIETI. But the British people have spoken. In my view it would be crucial for Britain to retain access to the EU single market. This would also be important for Japanese investors. The countries which are members of the EFTA Court do have this access. If Britain would subject itself to the EFTA Court, Switzerland might do the same. We would then have two structures in Europe and consequently a certain systemic competition.

    Former President of the EFTA Court, Carl Baudenbacher
    Former President of the EFTA Court, Carl Baudenbacher

    Carl Baudenbacher – Profile

    Professor Dr. iur. Dr. rer. pol. h.c. Carl Baudenbacher has served as a judge on the EFTA Court in Luxembourg from September 1995 to 9 April 2018. From 2003 to 2017 he was the Court’s President. Baudenbacher was the Judge Rapporteur in many of the Court’s landmark cases.

    From 1987 to 2013, Carl Baudenbacher was the Chair of Private, Commercial and Economic Law at the University of St. Gallen (Switzerland). Between 1993 and 2004, he was a permanent visiting professor at the University of Texas at Austin. In 1996 he founded the global autonomous program Executive M.B.L.-HSG of St. Gallen University which has a foot in Japan.

    On 9 April 2018, Baudenbacher stepped down from the EFTA Court bench. He will open his own firm focusing on arbitration and corporate and government consulting. His special fields are EU and EEA law, Brexit and the relationship Switzerland – EU.

    Copyright (c) 2018 Carl Baudenbacher and Eurotechnology Japan KK All Rights Reserved

  • Corporate Governance Reforms in Japan, Gerhard Fasol at the Foreign Correspondents Club FCCJ 12 March 2018

    Corporate Governance Reforms in Japan, Gerhard Fasol at the Foreign Correspondents Club FCCJ 12 March 2018

    Corporate Governance Reforms in Japan

    Monday, March 12, 2018, 12:00 – 13:30 at the Foreign Correspondents Club in Japan FCCJ

    While many Japanese corporations are still admired around the world, too many have for years suffered sluggish growth and low profitability. A string of corporate scandals and failures have shocked the pubic and corroded confidence in Japanese business.

    The government of Prime Minister Shinzo Abe has spearheaded reforms. A corporate governance code has been introduced to improve supervision of management and increase the number of independent outside directors. Change is happening faster than many expected and the reforms are generally regarded as successful. Yet, much still needs to be done to bring more diversity into Japanese boardrooms.

    Announcement on the FCCJ website

    Speaker

    Gerhard Fasol is one of a tiny number of foreigners in the boardrooms of listed Japanese corporations. A physicist and entrepreneur, he has been in Tokyo for quarter of a century. For four years he has been Board Director, and since last year additionally a member of the Supervisory and Audit Committee of the Japanese cybersecurity group GMO Cloud KK, which is listed on the Tokyo Stock Exchange.

    With years of experience of mergers and acquisitions and cross-border business development projects in Tokyo, Fasol is well placed to explain what’s happening inside Japan Inc. He will come to the FCCJ to discuss what we might expect from Japan’s corporate governance reforms.

    Copyright (c) 2018 Eurotechnology Japan KK All Rights Reserved

  • Japanese Corporate Governance – The Inside Story, Daiwa Anglo-Japanese Foundation HQ London, Tuesday 16 January 2018

    Japanese Corporate Governance – The Inside Story, Daiwa Anglo-Japanese Foundation HQ London, Tuesday 16 January 2018

    Gerhard Fasol and Sir Stephen Gomersall

    Daiwa Anglo-Japanese Foundation, London, Tuesday 16 January 2018, 6:00pm

    Topic: Japanese Corporate Governance – The Inside Story

    Speakers: Gerhard Fasol and Sir Stephen Gomersall

    Program: Tuesday 16 January 2018, 6:00pm – 7:00pm, Drinks reception from 7:00pm

    Location: 13/14 Cornwall Terrace, Outer Circle (entrance facing Regent’s Park), London NW1 4QP, Organised by the Daiwa Anglo-Japanese Foundation

    Registration and further details

    While many Japanese corporations are greatly admired around the world, certain aspects of Japanese management style are believed to be holding back Japan’s economic growth. The media focus mainly on extreme cases and fraud, but the responsibilities of Directors go far beyond these defensive, compliance-type duties. Preventing fraud alone is not sufficient to ensure growth and long-term success; it is just the baseline!

    Based on several years of direct experience as a non-Japanese Director of a Tokyo Stock Exchange-listed Japanese company, Gerhard Fasol will discuss the reforms to Japanese corporate governance made in recent years, and what, in his view, still needs to be done. He will also discuss issues of diversity and its importance for the quality of management in Japanese corporations.

    About the contributors

    Gerhard Fasol

    Gerhard Fasol founded the M&A and cross-border advisory firm Eurotechnology Japan in 1997, and has worked on a large number of M&A and cross-border projects in Tokyo over the last 20 years. Since 2014 he has been a Board Director and Member of the Supervisory & Audit Committee of the Japanese cybersecurity group GMO Cloud KK, listed on the first section of the Tokyo Stock Exchange, and since April 2017 he has been a Visiting Professor at the University of Kyushu. He gained a PhD in Physics at Trinity College, Cambridge, and then became a Lecturer at Cambridge University, based at the Cavendish Laboratory, while also being a Research Fellow, Teaching Fellow and Director of Studies at Trinity College. He has worked as a research scientist at the Max Planck Institute, Stuttgart, on semiconductor and solid state physics research, as Manager of the Hitachi Research Laboratory in Cambridge, and as an Associate Professor in Electrical Engineering at Tokyo University.

    Sir Stephen Gomersall

    Sir Stephen Gomersall studied at Cambridge and Stanford University, and joined the Foreign and Commonwealth Office in 1970. He served in Japan as Political Officer (1972-1977), Economic Counsellor (1986-1990), and Ambassador (1999-2004), and also in the United States as Political Officer in Washington and as Deputy Permanent Representative to the United Nations in New York. From 2004 he became Chief Executive for Europe in Hitachi, and was the first non-Japanese to serve on the company’s main Board from 2011-2014. He is currently a Director of Hitachi Europe and Hitachi’s main UK subsidiaries investing in railway manufacturing and nuclear power development. He was knighted by the British Government in 2000, and in 2015 received the Grand Cordon of the Order of the Rising Sun from Japan for services to UK-Japan economic relations.

    More on the topic of corporate governance reforms in Japan

    Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

  • Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group

    Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group

    Corporate governance reforms are one of the key components of Abenomics, to improve economic growth in Japan

    Corporate governance reforms in Japan: talk at the OAG House in Tokyo, Wednesday 20 September 2017, 18:30-20:00

    Wednesday 20 September 2017, 18:30-20:00
    Talk: Gerhard Fasol: „Corporate Governance Reformen in Japan: Erfahrungen als Aufsichtsratsdirektor einer japanischen Firmengruppe
    Free of charge. No registration necessary. Everyone welcome.
    Location: OAG Haus, Minato-ku Akasaka 7-5-56, 107-0052 Tokyo-to

    Details: http://oag.jp/events/gerhard-fasol-corporate-governance-reformen-in-japan/

    The wealth and welfare of everyone living in Japan is based on the success of Japanese companies, how well companies are managed, and how managers are encouraged, supported and controlled.

    Therefore corporate governance reforms are an important part of the “Abenomics” economic reform program. Many think that the corporate governance reforms of recent years have been the most successful part of Abenomics, and the former Chairman of the Tokyo Stock Exchange even said that these reforms happened much faster than he had thought.

    Corporate governance mainly refers to the responsibilities of Board Directors who take part in the major decision making of every company, who supervise and support the executive management including the CEO/President of the company, and this make essential contributions to the success of companies.

    Another aspect of corporate governance is the “stewardship code”, which refers to the influence of investors on company’s executive management.

    Understanding decision making and the control of management, the way Japanese companies reach decisions and how this decision making is supervised, is essential knowledge for everyone who works to persuade Japanese corporations to take desired decisions, e.g. to achieve sales, partnerships, investments, or even Mergers and Acquisitions (M&A), who invests in Japanese corporations. Employees should also understand how the companies they work for are run.

    This talk will explain the major components and fundamentals of corporate governance and its reforms in Japan based on several years of practical hands-on experience on the Board of Directors and on the Supervisory & Audit Committee of a stock market listed Japanese corporation.

    Speaker: Gerhard Fasol

    Gerhard Fasol graduated with a PhD in Physics from Cambridge University and Trinity College. He worked as research scientist at the Max-Planck-Institute Stuttgart on semiconductor and solid state physics research. He was tenured Faculty in Physics at the Cavendish Laboratory of the University of Cambridge, and he was Research Fellow, then Teaching Fellow and Director of Studies in Natural Sciences at Trinity College Cambridge. He was Manager of the Hitachi Research Laboratory in Cambridge, Associate Professor in Electrical Engineering at Tokyo University, and is founder of the advisory firm Eurotechnology Japan. He is Board Director of GMO Cloud KK, and since April 2017 he is Visiting Professor at the University of Kyushu.

    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group
    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group
    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group
    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group
    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group
    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group
    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group
    Gerhard Fasol: Corporate governance reforms in Japan: hands-on insights as Board Director of a Japanese group

    Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

  • EU-Japan Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA) closer to conclusion

    EU-Japan Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA) closer to conclusion

    With US withdrawal from TPP and BREXIT, the EU-Japan Free Trade Agreement moves to the center of attention

    EU-Japan Free Trade Agreement and Economic Partnership Agreement nearing conclusion, maybe this summer.

    EU and Japan started to prepare for Free Trade Agreement (FTA) and the political framework Economic Partnership Agreement (EPA) at the 20th EU-Japan Summit in May 2011, three years after Japan and USA had jointed the Trans-Pacific Partnership (TPP) negotiations.

    For several years, TPP was catching headlines, Prime Minister Shinzo Abe saw TPP as a core component of his Abenomics program to restarted Japan’s economy from 20 years of stagnation. The EU-Japan FTA and EPA negotiations always seemed to be in the shadow of TPP.

    In the meantime, President Trump has decided to withdraw from TPP, and the UK seems to be on the way to BREXIT.

    The EU-Japan FTA and EPA negotiations have moved to the center of attention, and seem to near conclusion.

    Trade in goods is only one of 14 different working groups – a modern FTA is very complex

    1. Trade in goods (including Market Access, General Rules and Trade Remedies)
    2. Non-Tariff Measures and Technical Barriers to Trade
    3. Rules of Origin
    4. Customs and Trade Facilitation
    5. Sanitary and Phytosanitary Measures
    6. Trade in Services
    7. Investment
    8. Procurement
    9. Intellectual Property (including Geographical Indications)
    10. Competition Policy
    11. Other issues (General and Regulatory Cooperation, Business Environment, Animal Welfare)
    12. Trade and Sustainable Development
    13. Dispute Settlement
    14. General, Institutional and Final Provisions and Transparency

    Don’t be blinded: Free Trade Agreements reduce business costs and risks and create access – but they don’t guarantee business success

    the Free Trade Agreement will open new sectors previously closed to any foreign company in Japan, e.g. railways procurement, and reduce many barriers, however, top-class leadership, deep Japan knowledge at all levels of management, sufficient investments, and products or services with a large competitive advantage remain crucial to success in Japan.

    Free Trade Agreements reduce business costs and risks, but do not eliminate them.

    More about the EU-Japan Free Trade (FTA) and Economic Partnership Agreements (EPA):

    BREXIT

    Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

  • Japan GDP growth and losses at Japan Post – Gerhard Fasol interviewed by Rico Hizon on BBC TV

    Japan GDP growth and losses at Japan Post – Gerhard Fasol interviewed by Rico Hizon on BBC TV

    Japan’s economy grows five quarters in a row, and Japan Post books losses of YEN 400.33 billion (US$ 3.6 billion) for an acquisition in Australia

    Japan GDP growth, growth of 2%/year. Still, Japan’s economy is the same size as in 2000, while countries like France, Germany, UK today are double the size as in the year 2000

    Japan GDP growth: We have seen 5 quarters of economic growth in Japan, for the January-March 2017 quarter the consensus is that the Japanese Government is likely to announce economic growth corresponding to an annual growth rate of around 2%/year (update: Japan’s Government announced an annual growth rate of 2.2%/year).

    Generally the business mood in Japan is optimistic now, personal consumption and industrial orders are growing. We see investments in preparation for the 2020 Olympics. Venture start-ups and venture investments are growing, while still at a low level, we see venture businesses developing not only in Tokyo, but also in regional centers around Japan.

    One mid-term risk to Japan GDP growth is the potential implementation of the postponed consumption tax rate increase.

    The big picture however is, Japan’s economy today is approximately the same size as 17 years ago in 2000. During the same 17 years most major economies, e.g. France, Germany, UK have doubled in size. France, Germany, UK’s economies today are about twice the size as in 2000, while Japan’s economy today is about the same size as in 2000. Quarterly GDP figures just measure the short term fluctuations of this long term behavior.

    Rico Hizon: so what would Japan have to do to restart long term growth?

    Gerhard Fasol’s answer

    Japan would have to do three things to restart economic growth long term:

    1. Population: Implement policies to make it easier for families to have children, shift spending from the aged to children, improve eduction, shorter work hours, build children’s day care centers, gender equality
    2. Implement Prime Minister Abe’s “third arrow”, the reforms. Deregulation not just in a few “special zones” but nation wide.
    3. Improve corporate governance to improve company’s growth, globalization and management.

    Japan Post trips up on globalization: books YEN 400.33 (US$ 3.6 billion) losses due to an acquisition in Australia – with a Toshiba connection

    Japan Post announced a loss of YEN 400.33 (US$ 3.6 billion), and a resulting net loss of YEN 28.98 billion (US$ 260 million) for the fiscal year ending March 31, 2017.

    Japan Post Holdings was launched on the Tokyo Stock Exchange with the IPO on Nov 4, 2015.

    Investors expect major growth of Japan Post Holdings into a global business, such as Deutsche Post has with privatization and later the acquisition and merger with the global logistics group DH about 20 years ago.

    Around the time of the IPO Japan Post announced the acquisition of the Australian logistics group Toll for about YEN 620 billion (US$ 5.5 billion), while Toll’s market cap previous to the acquisition was about YEN 410 billion (US$ 3.7 billion).

    Japan Post’s recent write-down at Toll is about equal its pre-acquisition market cap, or about 65% of the acquisition prize.

    The deep problem of Japan Post’s steep write-downs at the Australian acquisition Toll, is that this casts doubts on Japan Post’s developments into a global business.

    The Toshiba connection: Japan Post’s former CEO, Taizo Nishimuro (西室 泰三), previously served as CEO and Chairman of Toshiba

    CEO of Japan Post at the time of the questionable Toll acquisition was no other than Mr Taizo Nishimuro (西室 泰三), former CEO and Chairman of Toshiba, now honorary advisor of Toshiba, who spent all his career at Toshiba, working at Toshiba since 1961. Toshiba is currently in severe difficulties caused primarily by Toshiba’s acquisitions of US nuclear construction firms, however Toshiba’s fundamental problems go back much much longer.

    Japan Post Holding [6178]

    Japan Post Holdings was founded on 23 January 2006, following the path to privatization of Japan’s national Post Office initiated by Prime Minister Koizumi.

    Japan Post Holdings is listed on the Tokyo Stock Exchange (No. 6178), IPO was on 4 November 2015, and has five divisions (since October 2012 three divisions):

    1. Japan Post Service (日本郵便株式会社): mail delivery. Merged on October 1, 2012 with Japan Post Network to form Japan Post Co. Ltd.(日本郵便株式会社). Japan Post Co. Ltd is a 100% subsidiary of Japan Post Holdings (Tokyo Stock Exchange: 6178)
    2. (Japan Post Network (郵便局株式会社): Post Offices = retail and real estate. Merged with Japan Post Service to form Japan Post Co., Ltd. on October 1, 2012).
    3. Japan Post Bank (株式会社ゆうちょ銀行): Tokyo Stock Exchange No. 7182
    4. Japan Post Insurance (株式会社かんぽ生命保険): life insurance. Tokyo Stock Exchange No. 7181
    5. Toll Holdings: Australian logistics firm acquired by Japan Post. Toll Holdings is a 100% subsidiary of Japan Post Co. Ltd.

    Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

  • Bill Emmott and Gerhard Fasol – A conversation about Japan’s future

    Bill Emmott and Gerhard Fasol – A conversation about Japan’s future

    Bill Emmott and Gerhard Fasol

    Bill Emmott is an independent writer and consultant on international affairs, board director, and from 1993 until 2006 was editor of The Economist. http://www.billemmott.com

    Gerhard Fasol is physicist, board director, entrepreneur, M&A advisor in Tokyo. http://fasol.com/

    A conversation about Japan’s future

    Bill Emmott:

    I came first to Japan in 1983 as Economist Tokyo Bureau Chief, staying until 1986. Then in 1988 I came back on sabbatical leave and wrote “The sun also sets: why Japan will not be number one”, which against my expectation when it was published in 1989 found big resonance in Japan. The stock market was plunging, and mine was the most immediately available explanation. Ever since, journalists have constantly asked me what the sun is doing now! It also meant that even when I became editor in chief of The Economist in 1993 I spent much more time focused on Japan than I had expected, visiting as often as I could to keep track of the post-bubble developments, and wrote a book that appeared only in Japanese translation called “Kanrio no Taizai”, or the bureaucrats’ deadly sins. But later, with Prime Minister Koizumi consolidating reforms, and the banking system at last getting cleared up, I sent myself back in 2005 to research and wrote a much more optimistic special supplement for The Economist which became a book, “The sun also rises”.

    Throughout the 35 years since I first came to Japan, I have both been fascinated and struck by the fact that although this is in so many ways an inward-looking self-contained nation, foreign observers are listened to and even have a chance of having a positive impact.

    One element that had featured consistently in my writings ever since the 1980s had been observations and expectations for a growing role for women in employment and power. This seemed logical given that, at least before the bubble burst, Japan was heading for a labour shortage, but also the Equal Employment Law of 1986 had led to more females being recruited by major organisations. Japan’s excellent education surely meant that the underused half (= women) of the adult population would soon be used more productively.

    Of course, this has developed a lot more slowly than I expected or hoped, partly for cultural reasons but also because Japan has not in fact had a labour shortage, until now.

    I wanted to meet you, Gerhard tonight because we both are fascinated by the role Japanese women have in making Japan such a fascinating country, and how the many really strong Japanese women could have key roles in bringing growth and dynamic change back to Japan.

    • Could Japanese women have bigger roles for the development of Japan?
    • What is holding women back in Japan?
    • Who are the role models?

    I am making interviews with high-achieving Japanese women to try to find answers, and plan to compile them into a book later this year. What would you say, Gerhard? And anyway, how did you end up here?

    Gerhard Fasol:

    My path to Japan is quite different than yours, Bill. I came to Japan first in 1984 as Fellow of Trinity College Cambridge, and scientist at the Max-Planck-Institute in Stuttgart, part of a project to build a research cooperation with NTT’s R&D labs. I saw that Japan was very important in technology and weakly linked to the outside – and still is today, I think. So in 1984 I decided to make Japan my second professional focus in addition to physics and electronics. Like you – the deeper I get into Japan, the more I learn about Japan, the greater my fascination, and my motivation to contribute.

    Now I am working on many different projects, working on international technology M&A projects, and I am also one of a microscopic number of foreigners on the Board of Directors of a stock market listed Japanese corporation – reforming Japanese corporate governance hands-on.

    Could Japanese women have bigger roles for the development of Japan?

    Gerhard Fasol:

    I think that the equal participation of women in leadership is directly linked to the population issue, ie the number of children born.

    According to the Inter-Parliamentary Union in 2016 http://data.worldbank.org/indicator/SG.GEN.PARL.ZS

    • in Japan 10% of Members of Parliament were women,
    • while in Sweden 44% of Members of Parliament are women,
    • 37% in Germany and
    • 26% in France –
    • the world average is 23% women in Parliaments.

    In Japan the ratio of women in Parliament has increased from 1% in 1990 to 10% in 2016, so there is progress. If we extrapolate, and if the trend continues, then it might take another 30 years or so until Japan reaches world average in terms of women bringing women’s views into Parliament, and taking part in making the laws. And it might take Japan 100 years to reach Scandinavian standards of women’s participation in making the laws of the land – unless there is some acceleration in Japan.

    Japan’s most powerful Ministry, the Ministry of Finance, did not hire any women into career positions for a period of about 10 years!

    At the 2015 New Year event of Kyoto Bank, Keidanren Chairman Mr Sadayuki Sakakibara showed that Japan’s spending on aged people is dramatically higher than spending on children, and that this ratio is increasing with time, Japan spends more and more on aged people and less and less on children. There are two ways to look at this situation:

    • one way is to say: we have an aging society, therefore its only natural to spend more on

      the aged, and less for children
    • the opposite way to look at the same situation is to say: we are spending less and less for children, no wonder we have fewer and fewer children. If we did more for young people, maybe people will have more children….

    Actually most Japanese women I talk to want 2-3 children, but many cannot for financial reasons.

    By nature, women give birth to children, not men, so more women in decision making positions including Government and Parliament will bring children’s issues into decision making.

    As an example, child birth costs in Japan are not covered by health insurance, while they are everywhere in Europe. There are many other open and hidden costs of having children in Japan compared to Europe.

    We discussed some of these issues at the recent Ludwig Boltzmann Forum on women’s development and leadership, which I organized here in Tokyo http://www.boltzmann.com/forum/2016-womens-leadership/

    What is holding women back in Japan?

    Gerhard Fasol:

    The most important factor are mindsets. The key to give more power to women in Japan is to change mindsets, to change the way of thinking.

    As an example, the Prefecture of Kanagawa in 2015 created the “woman act” committee, under the slogan “women, step by step, take more responsibility”, however this committee both in 2015 and also in 2016 consisted of 11 men – not one single woman leader: http://www.pref.kanagawa.jp/osirase/0050/womanact/

    here archived with photographs on the wayback-machine/ internet archive

    https://web.archive.org/web/20160119091535/http://www.pref.kanagawa.jp/osirase/0050/womanact/#top


    Why not create a committee of 11 women leaders to lead efforts on gender equality in Kanagawa Prefecture? Why not promote women to leadership positions in Kanagawa Prefecture?

    Another factor holding women back are the very long working hours common in Japan. As an example, at a recent EU-Japan gender equality conference, the Danish polician Astrid Krag, who was Minister for Health and Prevention at the age of 29 – 32 years, and who has two children, explaned that in the Parliament of Denmark the decision was taken not to take any vote after 4pm, so that Members of Parliament can be back home by 5pm, collect children from daycare centers in time etc. So in the Parliament of Denmark it is guaranteed that Members of Parliament can leave at 4pm. In today’s Japan such action is unthinkable, age 29 – with young children – would be unbelievably young for a Government Minister in Japan. https://en.wikipedia.org/wiki/Astrid_Krag

    Late-night or overnight sessions at work, including Parliament, makes life incredibly difficult in Japan for parents with young children, doubtlessly contributing to the small number of women in top positions in Japan.

    Who are the role models?

    Gerhard Fasol:

    Despite these difficulties, there is a substantial number of very strong women in Japan, who have worked their way up into leadership positions.

    Examples are the Mayor of Yokohama, Ms Fumiko Hayashi, who succeeded in a very distinguished business career, and the Governor of Tokyo, Ms Yuriko Koike, who won the election on her own as an independent candidate, because she did not receive the backing of her party.

    Bill Emmott:

    That is great, as I have now interviewed Koike-san and plan to interview Hayashi-san during my next visit. Personally, as well as admiring women who have made it to the top in the tough political world I also admire and am interested in women succeeding as entrepreneurs and as executives in entrepreneurial companies. By starting and building their own companies, women can really create new realities, showing that new organisational cultures are possible in a Japanese context. Do you agree?

    Gerhard Fasol:

    Japan has quite a number of women entrepreneurs and business leaders, Ms Tomoko Namba, Founder of Japan’s Internet company DeNA come to mind,
    https://ja.wikipedia.org/wiki/南場智子
    as well as Ms Fujiyo Ishiguro, Founder and CEO of the NetYear Group:
    http://www.bloomberg.com/research/stocks/people/person.asp?personId=867078&privcapId=717286

    Science is also an interesting area. We have women leaders in Japanese medicine, I invited some for the Ludwig Boltzmann Forum on women’s development and leadership http://www.boltzmann.com/forum/2016-womens-leadership/

    Kyushu University has one single full Professor of Medicine Professor Kiyoko Kato, she explains the situation of women in Japanese Obstetrics and Gynecology here http://www.boltzmann.com/forum/2016-womens-leadership/kiyoko-kato-obstetrics-gynecology/
    while Professor Kyoko Nomura has built a center to support women medical doctors and women medical researchers at Teikyo University. She spoke about the situation facing women in medicine in Japan here: http://www.boltzmann.com/forum/2016-2/kyoko-nomura/

    Towards the future

    Gerhard Fasol:

    The tantalizing issue is that the key is to change mindsets, and thats at the same time superficially easy, but at the same time incredibly hard. Thus outstanding strong Japanese women – and there are many of them – have a choice either to work their way up to the top in Japan, start their own company in Japan, or on the other hand to move to Europe, elsewhere in Asia, or to the USA – I know several strong Japanese women, including several Japanese medical doctors, who have moved to Europe or USA. They might of course come back to Japan at a later stage bringing global views and experiences to leadership positions in Japan in the future. I am very optimistic for the future of Japan – sometimes I wish things were moving faster.

    Bill Emmott:

    I agree entirely. I see Japanese women as both victims of the slow speed of change and as solutions to it. They really could make the Japan of 2030 look quite different, in all sorts of ways. It will be fascinating to watch.

    Bill Emmott and Gerhard Fasol met at the restaurant MusMus in Tokyo

    left to right: Gerhard Fasol, Ms Atsuko Konta (Manager of the restaurant MusMus), Bill Emmott
    left to right: Gerhard Fasol, Ms Atsuko Konta (Manager of the restaurant MusMus), Bill Emmott

    Copyright (c) 2017 by Bill Emmott and Gerhard Fasol. All Rights Reserved.

  • Toshiba nuclear write-off. BBC interview about Toshiba’s latest nuclear industry write-offs

    Toshiba nuclear write-off. BBC interview about Toshiba’s latest nuclear industry write-offs

    Toshiba is expected to announce write-off provisions on the order of US$ 6 billion today

    Toshiba is on Tokyo Stock Exchange warning list for possible delisting in March 2017

    by Gerhard Fasol

    Toshiba crisis
    Toshiba crisis

    This morning 7:30am I was interviewed on BBC TV Asia Business Report about an update of Toshiba’s ongoing crisis, which has been 20 years in the making.

    Here some notes in preparation for my interview.

    What is Toshiba’s situation now?

    Toshiba’s market cap today is YEN 1024 billion = US$ 9.6 billion.
    Toshiba is expected today to announce write-off provisions on the order of US$ 6 billion.
    Toshiba owes about US$ 5 billion to main banks as follows:

    Mizuho YEN 183.4 billion
    SMBC YEN 176.8 billion
    Sumitomo Mitsui Trust Holdings YEN 131.0 billion
    BTMU YEN 111.2 billion
    Total YEN 602.4 billion = US$ 5.3 billion

    Toshiba is on notice for delisting by the Tokyo and Nagoya Stock Exchanges, and faces the risk of being delisted by March 15, 2017, i.e. in about 4 weeks from now.

    Toshiba is trying to raise capital e.g. by seeking investment in the IC/flash memory division, however, Toshiba seeks to keep control, so Toshiba is trying to raise a minority share, or non-voting shares or similar, in order not to lose control.

    How did Toshiba get into a situation to potentially need to write off US$ 6 billion?

    Toshiba acquired 87% of the US nuclear equipment manufacturer Westinghouse.

    While Westinghouse is a famous name, what Toshiba actually acquired seems to have gone through a period of restructuring.

    For an analysis see “Westinghouse: Origins and Effects of the Downfall of a Nuclear Giant”, in the World Nuclear Industry Status Report: https://www.worldnuclearreport.org/Westinghouse-Origins-and-Effects-of-the-Downfall-of-a-Nuclear-Giant.html

    In 2015 Toshiba acquired the construction company SHAW’s assets from the Chicago Bridge & Iron Company CB&I for US$ 229 million plus assumed liabilities. CB&I had acquired SHAW for US$ 3.3 billion in July 2012, and SHAW has on the order of US$ 2 billion annual sales.

    Why did Toshiba acquire a company for US$229 million, which has US$ 2 billion annual sales, and which was in 2012 acquired for US$ 3.3 billion? Which factors reduced the value of this company from US$ 3.3 billion to US$ 229 million within the 3 years from 2012 to 2015?

    Presumably because there are large liabilities arising from nuclear construction, which Toshiba now seems to have to assume.

    Cost overruns and delays are not uncommon in the nuclear industry. Similar issues happened with a Finnish nuclear reactor recently, see: https://en.wikipedia.org/wiki/Olkiluoto_Nuclear_Power_Plant

    What is likely to happen now with Toshiba? Is Toshiba too big to fail?

    Difficult to say what will happen. Toshiba is a huge corporate group with about 200,000 employees and many factories in many countries, so clearly Toshiba is not going to disappear without trace.

    The immediate risk is that Tokyo Stock Exchange carries out its warning, and delists Toshiba, which will further increase Toshiba’s ability to raise capital. In the case of a delisting, private equity, and/or government might invest and restructure, and Toshiba might be split up. For example, Toshiba’s nuclear Westinghouse division is totally separate from its very successful flash memory division, there is not much business logic in having both under one holding company.

    Impact on UK

    Toshiba acquired 60% of UK based NuGeneration with the view to build nuclear power stations in the UK. This project requires Toshiba to contribute to the funding of the nuclear project, for which Toshiba would probably need a financially healthy partner.

    What is the big picture? How did Toshiba get into this crisis?

    Toshiba’s crisis has been building up for 20 years, and is in my view a consequence of corporate governance issues over a long time.

    Essentially, Toshiba should have been reformed 20 years ago from the top down.

    Japan’s 8 electronics giants have had essentially no growth and no profits for 20 years. This tragedy has been obvious for many years now, and was a big contributing factor for Japan’s government to reform Japan’s corporate governance laws and regulations, see:

    Toshiba’s Board of Directors was exchanged in September 2015, and now includes several very capable and experienced Japanese independent Board Directors, but unlike Hitachi, even today neither Toshiba’s Board of Directors, nor Toshiba’s Executive Board include one single foreigner. 

    One might think that a huge global group like Toshiba with complex businesses around the globe might benefit from a variety of view points and experiences from different countries at Supervisory Board and Executive Board level – not all just from one single country. Japanese corporations including Hitachi, SoftBank, Nissan and a small number of others are now recognizing the benefits of diversity of experience and viewpoints at Supervisory Board and Executive Board level.

    We can only hope that Toshiba’s executives and Board Directors have the experience and ability to solve the extremely complex issues deep inside the bowels of the US nuclear construction industry – far away on the other side of the world.

    Japan electronics industries – mono zukuri

    Copyright (c) 2017-2019 Eurotechnology Japan KK All Rights Reserved

  • Changing Japanese management  – a talk on 6 October 2016 at the Embassy of Sweden

    Changing Japanese management – a talk on 6 October 2016 at the Embassy of Sweden

    Corporate governance reforms in Japan

    Changing the way Japanese corporations are managed: Can it make Japanese iconic corporations great again?

    A talk by Gerhard Fasol at the Embassy of Sweden organized by the Embassy of Sweden, The Swedish Chamber of Commerce in Japan (SCCJ), and the Stockholm School of Economics

    You need to know more details about corporate governance reforms in Japan?

    Corporate governance reforms in Japan – practical views

    Abstract: Changing the way Japanese corporations are managed

    The Executive Management Board and the Supervisory Board are normally independent and composed of different people – except in Japan. In Japan traditionally Executive Management Board and the Supervisory Board are one and the same, ie the Executives of traditional Japanese companies supervise themselves – no surprise that the CEO seldom fires himself!

    It is obvious that such self-supervision has big disadvantages, and may be one of the major reasons for Japan’s weak economic growth, and several recent corporate scandals. Companies in basically all other countries are managed by an Executive Management Board, which is supervised by a Supervisory Board, which approves or vetoes all major decisions of the company, and evaluates the performance of the Executive Manager, including the Chief Executive/CEO, and if necessary fires executives including the CEO, and selects and approves the new CEO.

    To remedy this problem with the governance of Japanese corporations, Japan’s Government, the Tokyo Stock Exchange, and the Financial Services Agency have been changing the rules to improve the supervision of Japanese companies.

    Speaker profile

    Dr. Gerhard Fasol is one of a microscopic number of foreigners who is an independent Director on the Management and Supervisory Board, and also a Member of the Audit Board of a stock market listed Japanese corporation, and he will talk from several years of first-hand experience of how Japanese companies are supervised, which changes are on the way, and which further improvements are necessary to improve the management and supervision of Japanese corporations.

    Date: Thursday October 6th, 2016, 18:30

    Place: Alfred Nobel Auditorium, Embassy of Sweden, 10-3-400 Roppongi 1-chome, Minato-ku, Tokyo 106-0032

    Details and registration

    Further details here.

    To register please contact the Swedish Chamber of Commerce in Japan.

    Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
    Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
    Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
    Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
    Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
    Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
    Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
    Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
    Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
    Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
    Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
    Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016

    Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

  • SoftBank acquires ARM Holdings plc: paradigm shift to internet of things (IoT) and a Vodafone angle

    SoftBank acquires ARM Holdings plc: paradigm shift to internet of things (IoT) and a Vodafone angle

    On 18 July 2016 SoftBank announced to acquire ARM Holdings plc for £17 per share, corresponding to £24.0 billion (US$ 31.4 billion)

    SoftBank acquires ARM: acquisition completed on 5 September 2016, following 10 years of “unreciprocated love” for ARM

    On 18 July 2016 SoftBank announced a “Strategic Agreement”, that SoftBank plans to acquire ARM Holdings plc for £24.0 billion (US$ 31.4 billion, ¥ 3.3 trillion) paid as follows:

    • Cash on Hand: £16.7 billion (US$ 12.5 billion, ¥ 2.3 trillion)
    • Loans: £7.3 billion (US$ 9.5 billion, ¥ 1.0 trillion)
    • Total: £24.0 billion (US$ 31.4 billion, ¥ 3.3 trillion)

    (excluding 20.4 million shares (1.4%) that SoftBank already owned on 18 July 2016).

    Acquisition schedule:

    • 18 July 2016: Strategic agreement between SoftBank and ARM announced by SoftBank
    • 5 September 2016: effective date of Scheme of acquisition
    • 6 September 2016: ARM delisted, cancellation of listing of ARM shares
    • 12 September 2016: cancellation of listing of ARM US Depositary shares (ADS)

    Straight line from SoftBank’s acquisition of Vodafone-Japan to acquisition of ARM

    In a detailed interview in Nikkei on 3 September 2016, Masayoshi son explained that he was interested in ARM ever since about 2006, when he saw the paradigm shift from PC to mobile, when he discussed his designs for mobile internet handsets with Steve Jobs, and when he acquired Vodafone-Japan (see: Why did Vodafone fail in Japan? … and miss an opportunity of US$ 83 billion).

    SoftBank’s acquisition of Vodafone Japan is explained here: Softbank acquires Vodafone Japan with co-investment from Yahoo KK

    SoftBank’s start in telecoms via the acquisition of Tokyo Metallic, SoftBank’s acquisition of Vodafone Japan in combination with having developed YAHOO-Japan into the leading internet service company in Japan, were among the most important stepping stones for SoftBank to become a key global player in mobile communications.

    Masayoshi Son: unreciprocated love for ARM for 10 years

    In the Nikkei interview of 3 September 2016, Masayoshi Son explains that he had an “one-sided / unreciprocated love for ARM” for at least 10 years, but decided to acquire SPRINT first. After acquiring SPRINT he had to pay down debt before being able to acquire ARM now.

    ARM Holdings plc

    ARM was founded on 27 November 1990 as Advanced RISC Machines, however the abbreviation ARM was first used in 1983 and initially meant “Acorn RISC Machines”.

    Acorn Computers Ltd was founded in 1978 in Cambridge (UK) by Hermann Hauser and Chris Curry to produce computers, and its most famous product was the BBC Micro Computer.

    ARM has built an ecosystem of IC design systems and platforms which are at the core of low energy consumption ICs and CPUs for smartphones and many other electronic devices and cars. ARM may become or already is one of the core technology companies for the Internet of Things (IoT).

    SoftBank’s ARM Business Department’s name changed to “New Business Department”

    On 3 September 2016 SoftBank announced that the name of SoftBank’s ARM Business Department has been changed to SoftBank New Business Department.

    SoftBank today and 300 year vision report:

    Copyright (c) 2016-2019 Eurotechnology Japan KK All Rights Reserved

  • Kiyoko Kato: Current state of female doctors in Japanese Obstetrics and Gynecology

    Kiyoko Kato: Current state of female doctors in Japanese Obstetrics and Gynecology

    The current state of female doctors in Japanese Obstetrics and Gynecology

    「日本の産科婦人科における女性医師の現状」

    Kiyoko Kato, Professor, Department of Gynecology and Obstetrics, Graduate School of Medical Sciences, Kyushu University

    加藤聖子、教授。九州大学大学院医学研究院。生殖病態生理学

    The Ludwig Boltzmann Forum on Women’s development and leadership was held on Monday 16 May 2016 in Tokyo in honor of Dame Carol Black’s visit to Japan.

    View the full workshop program here.

    (Summary of Professor Kiyoko Kato’s keynote written by Gerhard Fasol)

    Kiyoko Kato, Professor
    Department of Gynecology and Obstetrics
    Graduate School of Medical Sciences
    Kyushu University

    Japanese Obstetrics and Gynecology: improving medical care requires gender equality – higher numbers and higher retention of women medical doctors

    • 18% of medical doctors in Japan in 2008 are female, 82% are male. Back in 1976 only about 10% of medical doctors were female
    • Medical school: in 1976 about 13% of medical students were women, this ratio increased up to about 35% peaking around the year 2000, and subsequently decreases slowly to around 32% in 2008.

    Thus the ratio of women medical doctors are slowly increasing in Japan.

    The M-curve

    About 90% medical doctors enter employment after graduation, remain employed at that level until about 35 years after graduation, when employment ratios slowly decrease due to retirement.

    For women medical doctors, the employment ratio curve is M-shaped, with a minimum at about 76% employment approximately 11 years after graduation, at an age around 36 years, after this minimum many women medical doctors enter employment again, reaching similar employment ratio’s as men about 35 years after graduation.

    62% of women medical doctors leaving their employment do this because of pregnancy, child birth or child care (80% in case of women younger than 45 years age).

    Obstetrics and gynecology medical doctors older than 40 years are predominantly men, while doctors younger than 40 years are predominantly women

    For medical doctors aged 40 years and over, obstetrics and gynecology specialists are predominantly men: women obstetricians and gynecology make up less than 10% of doctors at higher ages.

    This ratio is reversed for obstetricians and gynecologists younger than 40 years of age: women outnumber male doctors, below 30 years age, women doctors outnumber men nearly by a factor of 2.

    There is a clear trend: older medical doctors in the obstetrics and gynecology field are predominantly male, while below the age of 40 years, women dominate by an increasing ratio.

    Kyushu University Hospital: Professor Kiyoko Kato is the one and only woman Full Professor of Medicine

    Kyushu University has 135 female doctors, and 81.5% are on part-time contracts, only 18.5% have full time employment.

    Ratio of women at different levels of the career pyramid:

    • Part-time intern doctors: 36.3% are women
    • Part-time doctors: 30.1% are women
    • Full-time doctors: 8.6% are women
    • Assistant Professors: 22 women vs 187 men (11.8% are women)
    • Lecturers: 1 single woman vs 48 men (2%)
    • Associate Professors: 1 single woman vs 31 men (3%)
    • Full Professors: 1 single woman vs 24 men = Professor Kiyoko Kato (4%)

    Only one single woman has achieved promotion into each of the higher ranks of Lecturer, Associate Professor and Full Professor, indicating that any women at all in these higher academic medical Professor ranks are rare exceptions rather than the rule (no mention here of still higher ranks, such as Hospital Directors, Deans, Heads of Department, or University President).

    Professor Kiyoko Kato then explained her own career, where she spent time studying in the USA, gave birth to her first child in the USA, and then to her second child after returning to Japan. She had to cope with several challenges, e.g where one of the hospitals she worked was shut down. Finally Professor Kiyoko Kato was appointed Full Professor at Kyushu University Medical School.

    Professor Kiyoko Kato proposes that three issues need to be solved:

    • improve the work environment during pregnancy and child bearing
    • re-integration assistance: re-education and support after leave of absence
    • remove obstacles to career improvements

    Improve the work environment during pregnancy and child bearing: the “Kyushu University Perinatal period cradle net project” 「周産期ゆりかごネットプロジェクト」

    With support from the Ministry of Education, Culture, Sports, Science and Technology (MEXT), Kyushu University created the “Kyushu University Perinatal period cradle net project” (2013 – 2017). In Japanese 「周産期ゆりかごネットプロジェクト」, the website is here:
    http://www.med.kyushu-u.ac.jp/yurikago/
    and an overview of the project can be found here:
    http://www.med.kyushu-u.ac.jp/yurikago/data.html

    As the websites show, the “Kyushu University Perinatal period cradle net project” is carefully designed, structured and provides a depth of support for women medical doctors to give birth and pursue their career. Women doctors are given part-time positions in the out patient department after returning from leaves of absence.

    So far seven women doctors have taken advantage of this program, and several have been assisted to return to full or part-time employment, two are still absent because of a second pregnancy. Part-time work in the outpatient department assisted them to return back to full time employment. Experiencing the hospital as a patient during birth also provided valuable experience.

    Re-integration assistance: re-education and support after leave of absence. The Kyushu University Kirameki Project.

    To support re-integration after absence, Kyushu University created the “Kirameki Project” (Kirameki = glitter, shine). The Kirameki Projekt is described on the website here:
    https://www.kyudai-kirameki.com/

    2007-2009 the Kirameki Project helped female medical workers, female doctors, dentists and nurses to re-integrate after leave of absence.

    From 2010 the program (“Kyushu University Hospital Kirameki Project”) was expanded to support continuation of the career for doctors, dental doctors, nurses for both men and women, because of delivery, child care, or disease / medical leave.

    The aims of the project are to promote women doctors, dentists, and nurses who would have to resign their positions due to family reasons including marriage, children, husband’s job transfer etc, and to help them pursue their career after marriage.

    Activities of the Kirameki Project are:

    • survey the problems of women doctors, dentists and nurses after marriage
    • recruit qualified but “hibernating” female medical personnel
    • learning programs
    • promote “high spirits”, encourage
    • on the job training in the out-patient department

    Structured programs of the Kirameki Project:

    • Administrative: refresher program
    • Reestablishment: getting back to work program
    • Suspension/leave: web based education
    • Medical specialist: continuing specialist medical education
    • Marriage, child-care: continuing education
    • Residents, newcomer nurses: basic training
    • Students: gender equality education

    Remove obstacles to career improvements

    Assist women researchers after child birth and during child rearing: support attending international conferences, support system for hiring research assistants and technicians for research support.

    Construct a support system:

    • Return support after child-care leave: day nursery, team medical care including emergency mutual help system, flexible working time, e.g. 9-5 work day
    • Improvement of career: system of supporting female researchers during child bearing and child rearing, grants for female researchers to support technicians

    Professor Kiyoko Kato’s wishes and expectations for female doctors

    • responsibility and awareness
    • gratitude to all who helped
    • contribution to medical progress
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership

    Notes

    Summary of Professor Kiyoko Kato’s keynote written by Gerhard Fasol, view the full workshop program and summaries of all other keynotes here.

    Copyright 2016 Eurotechnology Japan KK All Rights Reserved

  • Dame Carol Black: Advancing women in healthcare

    Dame Carol Black: Advancing women in healthcare

    Advancing women in healthcare

    Dame Carol Black DBE FRCP FMedSci, Principal of Newnham College, Cambridge University, and Expert Adviser on Health and Work, Department of Health and Public Health England

    The Ludwig Boltzmann Forum on Women’s development and leadership was held on Monday 16 May 2016 in Tokyo in honor of Dame Carol Black’s visit to Japan.

    View the full workshop program here.

    (Summary of Dame Carol Black’s keynote written by Gerhard Fasol)

    Dame Carol Black DBE FRCP FMedSci
    Principal of Newnham College, Cambridge University.
    Dame Carol Black has held top positions in medicine and now holds high-level policy advisory positions on health and work in the United Kingdom.

    Women in healthcare – Women in the British National Health Service

    The gender imbalance in the National Health Service is reflected by the facts that 77% of the total workforce is female, while only 7% of female staff are doctors or dentists, ie only 5.4% of total workforce are female doctors or dentists.

    41% of Chief Executives are women.

    81% of non-medical staff are women.

    Alison Wolf and the XX Factor

    Alison Margaret Wolf, Baroness Wolf of Dulwich CBE, is a British economist, and the Sir Roy Griffiths Professor of Public Sector Management at King’s College London, see:

    In her book “The XX Factor: How Working Women Are Creating A New Society” (Profile Books 2013), Alison Wolf writes that women are split into two groups: one group sacrificing family for rapid professional advancements, while the other group of women opts for having children at a young age, and remain in low level positions. As a result, inequality is growing faster among women than among men, and low status and low paid jobs are predominantly done by women:

    • 97% of secretaries are female
    • 92% of registered nurses are female
    • 89% of nursing, psychiatric and home health aides are female
    • 90% of maids and housekeeping cleaners are female

    The fundamentals: what are the essential characteristics of “good employment”?

    • Good work: is stable and safe, allows individual control, is flexible, gives opportunities, promotes wellbeing, reintegrates sick or disabled people if possible.
    • Good workplaces: have visible senior leadership and well trained managers, enable staff engagement, empower employees to care for their own health

    Good news for medicine, less good news for academic medicine

    Generally we have achieved a good situation regarding gender equality in medicine. We have achieved meritocracy, and their are no reports providing evidence for systematic barriers against women’s professional advancement. Both intake and retention for women in medicine is high, and the pay scales are the same.

    A study (Royal College of Physicians (RCP) Working Party 2009), investigated the female share of Consultants (= established Senior Medical Professionals in the UK), and showed the ratio of women is highest (38% – 49%) in “more plan-able” and “more people oriented” specializations such as general practice or paediatrics, while women’s share is lowest (8% – 23%) in “more technology oriented” and “more unpredictable” specializations such as anaesthetics or surgical specializations.

    There is far less progress in academic medicine, and cultural stereotypes and bias remain, see:

    Women’s advance into top leadership positions suffers from “cultural” prejudices, e.g. prejudices that women too kind, too caring, not logical or strong enough, or otherwise unsuited to lead.

    Prominent leadership roles for women, Prominent medical leadership

    Prominent leadership roles need investment in the “extras”, leads leadership dimension in each speciality, and requires career single-mindedness.

    Prominent medical leadership requires investment of time “over and above” the ordinary duties, requires professional “stewardship contributions”.

    The top 200 leadership positions will naturally go to those who pursue their career goals with a high degree of single-mindedness.

    Women choosing the route towards prominent leadership roles need encouragement and support, they need:

    • role models
    • mentors, and
    • sponsors

    Role models: Prominent women leaders in UK medicine

    • Una O’Brien, Permanent Secretary, Department of Health
    • Professor Dame Sally Davies, Chief Medical Officer
    • Dame Julie Moore, CEO, University Hospitals Birmingham, NHS FT
    • Claire Murdoch, CEO, Central and NW London NHS Foundation Trust
    • Professor Jane Dacre, PRC Physicans
    • Clare Marx CBE, PRC Surgeons
    • Dr Suzy Lishman, PRC Pathologists
    • Dr Maureen Baker, Chair, RC General Practitioners

    Need to debunk leadership myths

    Its important not to fall into the traps of common leadership myths, e.g. that leadership is inborn, that leadership is that of a lone genius, that they must inspire others to follow their vision, the leadership requires formal authority, or that all leaders have common personality features.

    We need to avoid similar leadership myths in medicine, e.g. that men naturally make better leaders.

    Dame Carol Black: From a shoe-making village in decline to Government Advisor

    Dame Carol Black is born in the shoe-making village of Barwell, Leicestershire, went to Grammar School in Market Bosworth, were she became Head Girl, despite her working class background.

    Dame Carol Black studied first History, then Medical Social Work and finally Medicine at the University of Bristol, specialized in Rheumatology research, focusing on Scleroderma. Later advanced to Medical Director, Royal Free Hospital, President of the Royal College of Physicians, Chairman of the Academy of Medical Royal Colleges, Chair of the Nuffield Trust on Health Policy, then advising Government as National Director for Health and Work, and now Principal of Newnham College, Cambridge.

    A major step was Dame Carol Black’s advancement to Medical Director of the Royal Free Hospital, since this meant not just responsibility for an institution or a group or a department, but also responsibility for the health of a population.

    Leading the Royal College of Physicians

    The Royal College of Physicians was founded by Royal Charter by Henry VIII on 23 September 1518 with the aim to promote the highest standards in medicine.

    The skills required were: understanding a wide landscape, consensual leadership, standing ground when necessary, negotiating with Whitehall (= British Government) and building trust.

    Chairing all the Medical Royal Colleges – The Academy, 2006-2009

    Dame Carol Black from 2006-2009 chaired this group of 21 independent organizations. As Chair, Dame Carol Black had no executive powers, needed to lead by persuasion and with consensus.

    Advising Government

    Dame Carol Black shared several of her experiences advising Government and highest ranking Government officials and Ministers.

    Key was to become valuable in the eyes of Government officials by giving independent advice based on scientific evidence, in combination with remaining totally unpolitical.

    Dame Carol Black became a champion for the “cause” of health and work, and kept totally out of politics, never revealing any political views or opinion, and wrote three major reports.

    The Confidence Code – forget perfection…Striving for perfection can waste women’s time, and hold back the best from reaching the top

    Perfectionism and lack of confidence is large a female issue, see Katty Kay and Claire Shipman: The Confidence Code – the science and art of self-assurance, and what women should know.

    Women tend to be held back by striving for perfection, while men tend to take more risks. Striving for perfection can waste women’s time, and hold back the best from reaching the top.

    Women in healthcare, Women and careers, women in scientific careers

    The issue of Women in Scientific Careers was examined in the “Science and Technology Committee – Sixth Report – Women in scientific careers” by the British House of Commons Science and Technology Committee in February 2014, which can be downloaded here as a pdf file:
    http://www.publications.parliament.uk/pa/cm201314/cmselect/cmsctech/701/701.pdf

    This UK House of Commons report finds some common traits which hold women back from reaching top leadership positions, including that women may perceive promotions as undesirable, wait until they meet all perceived criteria for promotion while men often take higher risks and may behave more speculatively, and women may think that “political” skills are required to reach the top.

    Finally, to reach top leadership positions, we need:

    • self confidence
    • aspiration
    • risk taking
    • resilience
    • speaking out
    • staying motivated after failure
    • mentors, sponsors, role models
    • networks
    • personal values aligned to organisational values
    Dame Carol Black DBE FRCP FMedSci: Advancing women in healthcare
    Dame Carol Black DBE FRCP FMedSci: Advancing women in healthcare
    Dame Carol Black DBE FRCP FMedSci: Advancing women in healthcare
    Dame Carol Black DBE FRCP FMedSci: Advancing women in healthcare
    Dame Carol Black DBE FRCP FMedSci, Principal of Newnham College Cambridge, and  Professor Kyoko Nomura, Associate professor, Department of Hygiene and Public Health, Teikyo University, School of Medicine
    Dame Carol Black DBE FRCP FMedSci, Principal of Newnham College Cambridge, and Professor Kyoko Nomura, Associate professor, Department of Hygiene and Public Health, Teikyo University, School of Medicine

    Notes

    Summary of Dame Carol Black’s keynote written by Gerhard Fasol, view the full workshop program and summaries of all other keynotes here.

    Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

  • Ludwig Boltzmann Forum on Women’s development and leadership – objective

    Ludwig Boltzmann Forum on Women’s development and leadership – objective

    Ludwig Boltzmann Forum on Women’s development and leadership – workshop objective

    The Ludwig Boltzmann Forum on Women’s development and leadership was held on Monday 16 May 2016 in Tokyo.

    View the full workshop program here, Gerhard Fasol’s keynote lays out the objectives of the workshop in the present article.

    Gerhard Fasol CEO, Eurotechnology Japan KK, Board Director, GMO Cloud KK. former faculty Cambridge University, and Trinity College, and Tokyo University

    Gerhard Fasol
    CEO, Eurotechnology Japan KK,
    Board Director, GMO Cloud KK.
    former faculty Cambridge University, and Trinity College, and Tokyo University

    Ludwig Boltzmann Forum on Women’s development and leadership: objectives

    There are two immediate objectives for the Ludwig Boltzmann Forum on Women’s Development and Leadership:

    1. empower women leaders with global leverage
    2. lets change mind sets

    I am building the Ludwig Boltzmann Forum as global leadership platform honoring my great-grandfather, and the Ludwig Boltzmann Forum on Women’s Development and Leadership is part if this initiative:

    • drive innovation based on science and technology
    • “there is no other forum for open discussions among leaders in Japan other than the Ludwig Boltzmann Forum” (said one of Japan’s top technology leaders, former Board Director of Japan’s largest Telecommunications Operator, former President of a large University, and former President of one of Japan’s most important technology organizations)

    and as an additional bonus we will create new cooperations and new initiatives.

    Ludwig Boltzmann Forum on Women’s development and leadership – my actions so far

    Several confidential preparations with Japanese Ministry officials and foreign Embassies in Japan.

    One key conclusion from preparations: top priority and most difficult is to change mindsets in Japan regarding empowering women and gender issues

    At the 8th Ludwig Boltzmann Forum on 18 February 2016 at the Embassy of Austria in Tokyo, honored by the participation of Her Imperial Highness, Princess Takamado, and Nobel Prize Winner Shuji Nakamura, invited Professor Kyoko Nomura to give the keynote “Gender inequality in Japan: a case report of women doctors“.

    Next step is today’s (16 May 2016) “Ludwig Boltzmann Forum on Women’s development and leadership”.

    How to change mindsets? Expand the solution space and add new dimensions!

    The basic issues, empowering women and men to combine child care and professional development, work towards greater equality and improving decision making by implementing diversity of decision makers are similar all over the world, especially in Europe and Japan.

    Learning solutions from each other, expands the dimensionality of the solution space.

    Expanding the solution space: learning about The Federal Ministry for Families and Youth

    When we are looking for solutions to solve difficult problems, our search for solutions is limited by our experience, knowledge and imagination. Our search for solutions is in space of limited dimensionality. In many cases solutions exist outside the space we are considering.

    Therefore to reach better solutions, its necessary to expand this solution space. Looking how other countries solve similar problems is one straight forward way to expand the dimensionality of the solution space, and that is where the Ludwig Boltzmann Forum aims to contribute.

    As an example, many people in Japan do not know that most European countries have a Family Ministry (家族省), which represents Families at the Cabinet level. In fact, most Japanese people I have been discussing this issue with are perplexed by the possibility of a Family Ministry (家族省), and usually in response ask, what the tasks of a Family Ministry would be.

    If your country does not have a Family Ministry, if you have never heard about a Family Ministry, its difficult to come up with the proposal to create a Family Ministry, and its difficult to imagine what a Family Ministry should do.

    At the same time, in today’s internet age, its in theory only a click away to have a look at a Family Ministry: here is the webpage of Austria’s Family Ministry: Das Österreichische “Bundesministerium für Familien und Jugend” (The Austrian Federal Ministry for families and youth, オーストリア連邦家族・青年省)

    And here is the current Austrian Minister for Family and Youth, Dr. Sophie Karmasin. 49 years old, with two children, Dr Sophie Karmasin has achieved a Doctorate in Psychology on “consumer behavior in the health market”, from 1993 to 2013, for 13 years she has pursued a very successful career in industry, most recently as Managing Director/CEO of a major market research company, before becoming party independent Minister of Family and Youth. She is not affiliated with any political party, but independent politician since 2013.

    Expanding the solution space: wouldn’t it be better to have at least one woman on a committee promoting women’s empowerment?

    Compare Family and Youth Minister Dr Sophie Karmasin with the all-male “woman act.” committee promoting women’s equality in Japan’s Kanagawa Prefecture, wouldn’t it be better to have at least one woman on a committee promoting women? But unless you are familiar on how this is done in other countries, your solution space is limited to what you know.

    Why did today’s Ludwig Boltzmann Forum on Women’s development and leadership happen? Because of Trinity College Cambridge

    At a recent event of Trinity College Cambridge in Hong Kong, I met with Dame Carol Black, and our meeting led to today’s Forum.

    Trinity College was founded By King Henry VIII in 1546 by combining the two older colleges King’s Hall and Michael House and seven Hostels. Sir Isaac Newton worked at Trinity College and about 32 Nobel Prize winners are or were members of Trinity College. Trinity College is part of the University of Cambridge

    More about Trinity College Cambridge, for example on the website of our Trinity in Japan Society.

    Why Ludwig Boltzmann Forum? Who is Ludwig Boltzmann?

    Ludwig Boltzmann is one of the world’s most important physicists and we use his results and tools every day. Here are some examples of his work:

    • How we measure temperature (Kelvin, Celsius) is directly linked to Boltzmann’s constant k, especially after the new definitions of the SI International System of measurement units
    • S = k log W, linking macroscopic entropy to the microscopic statistics of molecules, and linking statistical mechanics with measuring information, and the arrow of time
    • the Stefan-Boltzmann radiation law
    • Boltzmann transport equations are used to design jet engines and aircraft and in semiconductor physics and many other areas
    • philosophy of nature
    • and much much more….

    I am developing the Ludwig Boltzmann Forum a global leadership platform in honor of my great-grandfather.

    Ludwig Boltzmann and women’s development and leadership

    1872 Ludwig Boltzmann met Henriette von Aigentler (my great-grandmother), who was refused permission to unofficially audit lectures at Graz University, where Ludwig Boltzmann later became University President. Ludwig Boltzmann advised her to appeal, in 1874 Henriette passed the exam as high-school teacher, and on 17 July 1876, Ludwig Boltzmann and Henriette von Aigentler married.

    One of Ludwig Boltzmann’s students is Lise Meitner (November 1878 – 27 October 1968). She was only the second woman to be awarded a PhD in Physics from the University of Vienna. Later she was part of the team that discovered nuclear fission, Otto Hahn was awarded the Nobel Prize for this work. Element No. 109, Meitnerium, is named after Lise Meitner.

    Ludwig Boltzmann Forum on Women’s development and leadership – outlook and next steps

    • Lets build the Ludwig Boltzmann Forum on women’s development and leadership together
      • Lets empower women leaders
      • Lets change mind sets
    • Lets build the Ludwig Boltzmann Forum into a global leadership platform based on science and logic
      • lets expand the solution space for important problems, and work towards implementing these solutions
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership
    Ludwig Boltzmann Forum on Women’s development and leadership

    Ludwig Boltzmann Forum on Women’s development and leadership: Notes

    Ludwig Boltzmann Forum on Women’s development and leadership summary written by Gerhard Fasol, view the full workshop program and summaries of all other keynotes here.

    Copyright 2016 Eurotechnology Japan KK All Rights Reserved

  • Shuji Nakamura on 2nd and 3rd Generation Solid State Lighting

    Shuji Nakamura on 2nd and 3rd Generation Solid State Lighting

    Shuji Nakamura’s invention to save energy corresponding to about 60 nuclear power stations by 2020

    2nd and 3rd Generation Solid State Lighting

    For Shuji Nakamura’s invention of high-efficiency GaN double-heterostructure LEDs he was awarded the Nobel Prize in Physics 2014, while his employer sued him in the USA for leaking intellectual property – Shuji Nakamura won this court case, and his employer lost the case. To defend himself and his family, Shuji Nakamura countersued in Japan, and the Japanese court awarded Shuji a substantial award in a settlement. Shuji shared some insights into the comparison of IP lawsuits in US vs Japan with us at the 8th Ludwig Boltzmann Forum.

    Shuji moved to the University of California Santa Barbara, and is now building the company Soraa in Silicon Valley with investments from major US VC funds. Soraa may already be or is likely to be soon much bigger in value than Shuji’s previous Japanese employer. Soraa develops 2nd and 3rd Generation Solid State Lighting products.

    Energy savings corresponding to 60 nuclear power stations by 2020

    The global lighting revolution triggered by Shuji Nakamura’s inventions leads to energy savings corresponding to 60 nuclear power stations by 2020 – 60 nuclear power stations less will need to be built than without Shuji Nakamura’s inventions.

    2nd Generation and 3rd Generation Solid State Lighting

    With his venture company Soraa, Shuji is now working on 2nd Generation Solid State Lighting (GaN on GaN substrates) and 3rd Generation Solid State Lighting (laser lighting, which allows much higher light density), and which is already in use for car headlights.

    Why squeeze Nobel Prize winner Shuji Nakamura into a top-down narrative?

    Shuji Nakamura showed with a long list of newspaper clippings, TV show extracts, and Japanese Government agency announcements that he is being squeezed into a top-down innovation narrative, which is at odds with the findings of the Nobel Prize Committee of the Swedish Academy of Science.

    Shuji Nakamura asks why he is being squeezed retrospectively into a top-down innovation narrative.

    The truth is that most real innovation is bottom-up and disruptive, not government planned and top-down.

    At the 8th Ludwig Boltzmann Forum we had intense discussions between Her Imperial Highness, Princess Takamado, Professor Makoto Suematsu, Nobel Prize Winner Shuji Nakamura, Professor Nomura, JST-President Michinari Hamaguchi, and several other Japanese technology and R&D leaders.

    Read a summary of Shuji Nakamura’s talk here.

    Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

  • Makoto Suematsu: fast-tracking medical research in Japan

    Makoto Suematsu: fast-tracking medical research in Japan

    Makoto Suematsu, Founding President of Japan’s new Agency for Medical Research and Development AMED: The situation in Japan is so crazy, but now I will stay in Japan because I have a mission

    summary of Professor Makoto Suematsu’s talk by Gerhard Fasol

    Medical research in Japan: Fast-tracking medical research and development in Japan

    In April 2015 Japan created the new “Japan Agency for Medical Research and Development, AMED” inspired by the US NIH (National Institutes of Health), “to promote integrated research and development in the field of medicine”.

    Professor Makoto Suematsu was selected as the founding President of AMED, to build up this new Japanese national medical research agency.

    Professor Makoto Suematsu is not only an outstanding medical professional and researcher, but he is also extremely outspoken about the many changes necessary to “fast-track” medical research in Japan, and particularly to overcome the fragmentation, “the Balkanization” of medical research in Japan, due to several different competing and overlapping supervising Government ministries and agencies in the past.

    Professor Makoto Suematsu also explained the priorities he is setting to set out with relatively modest resources.

    At the 8th Ludwig Boltzmann Forum we had intense discussions between Her Imperial Highness, Princess Takamado, Professor Makoto Suematsu, Nobel Prize Winner Shuji Nakamura, Professor Nomura, JST-President Michinari Hamaguchi, and several other Japanese technology and R&D leaders.

    Read a summary of AMED-President Makoto Suematsu’s talk directly here.

    8th Ludwig Boltzmann Forum, Tokyo 18 February 2016
    8th Ludwig Boltzmann Forum, Tokyo 18 February 2016

    Copyright 2016 Eurotechnology Japan KK All Rights Reserved

  • Top-down vs bottom-up innovation: Japan’s R&D leaders at the 8th Ludwig Boltzmann Forum

    Top-down vs bottom-up innovation: Japan’s R&D leaders at the 8th Ludwig Boltzmann Forum

    How to fast-track innovation in Japan

    Shuji Nakamura’s invention of high efficiency LEDs enable us to reduce global energy consumption by an amount corresponding to 60 nuclear power stations by 2020, for which he was awarded the 2014 Nobel Prize in Physics.

    Still, a poster child for bottom-up innovation, Shuji Nakamura was sued by his employer, left for the USA, and is now building a company in Silicon Valley which might soon become bigger than his former Japanese employer.

    Why does Shuji Nakamura’s bottom-up innovation not fit into top-down innovation narratives?

    Why does Shuji Nakamura’s bottom-up innovation not fit into top-down innovation narratives? Would Japan be a better and faster growing place with a better balance between bottom-up and top-down innovation? Does top-down innovation work at all?

    Shuji Nakamura came specially from the USA to address many of Japan’s science and technology R&D leaders at the 8th Ludwig Boltzmann Forum, and explain why it makes no sense to try squeezing his bottom-up inventions into a top-down narrative and why its better to overcome established top-down narratives.

    Read how Shuji Nakamura tries to help Japan’s leaders to overcome top-down-only narratives, and understand what bottom-up innovation means.

    The 8th Ludwig Boltzmann Forum brought together Nobel Prize Winner Shuji Nakamura, the leaders of Japan’s two major research and technology R&D funding organizations, Professor Nomura, who is working to overcome gender inequality for Japan’s (too few) medical doctors, and several of Japan’s technology leaders to discuss how to accelerate innovation in Japan.

    Her Imperial Highness, Princess Takamado honored us by taking a very active part, and asking thoughtful questions to Nobel Winner Shuji Nakamura and other speakers.

    Read and join the discussions with Japan’s R&D leaders’ talks held at the 8th Ludwig Boltzmann Forum.
    [in Japanese 日本語]

    Copyright 2016 Eurotechnology Japan KK All Rights Reserved

  • SHARP and the future of Japan’s electronics

    SHARP and the future of Japan’s electronics

    SHARP is in the news, but its about Japan’s US$ 600 billion electronics sector

    The need for focus and active portfolio management

    SHARP, supplier of displays to Apple, faces repayment of about YEN 510 billion (US$ 4.2 billion) in March.

    Innovation Network Corporation of Japan INCJ (産業革新機構) and Taiwan’s Honhai Precision Engineering (鴻海精密工業) “Foxconn” compete for control of SHARP.

    While SHARP makes headlines, the big-picture issues are:

    1. corporate governance reforms in Japan
    2. the future of Japan’s US$ 600 billion electronics sector, which dominated world electronics in the 1980s but failed to keep up with the evolution and growth of global electronics.

    To survive Japan’s old established electronics conglomerates have two choices:

    1. focus on a small number of key products (remember Apple CEO Tim Cook showing that all of Apple’s products fit on one small table)
    2. actively managed portfolio model

    however, for Japan’s economy to prosper, Japan needs many more young fresh new companies in addition to the old established conglomerates.

    Interviews for BBC-TV and French Les Echos

    Last week I was interviewed both live on BBC-TV and also by the French paper Les Echos about SHARP’s future:

    In summary, I said that its not just about SHARP’s current predicament, but its about corporate governance reform in Japan, about reinventing Japan’s electronics sector, and that its more likely at this stage that Japan’s Innovation Network Corporation (INCJ) will take control SHARP, since INCJ is not just concerned with SHARP but with the bigger picture of restructuring Japan’s electronics sector.

    INCJ has concepts for combining SHARP’s display division with Japan Display, and has plans for SHARP’s electronics components divisions, and for the white goods division, and other divisions.

    SHARP governance: How and why did SHARP get into this very difficult situation?

    SHARP is a poster child for the urgent need for corporate governance reform in Japan.

    Essentially SHARP assumed that the world market for TVs and PC displays will continue to demand larger and larger and more expensive display sizes, and thus took bank loans to build a very large liquid crystal display factory in Sakai-shi, south of Osaka.

    In addition, SHARP, has a huge portfolio of many different products ranging from office copying machines and printers and scanners, mobile phones, high-tech toilets, liquid crystal displays, solar panels, and hundreds of other products. SHARP keeps adding new product ranges constantly expanding its portfolio of businesses, and rarely sells loss making divisions.

    Effective and strong independent, outside Directors on the Board might have asked questions during the decision making leading to the building of the Sakai factory. They might have asked for a Plan B, in case the global display market takes a turn away from larger and larger and more expensive displays, or if the competition heats up and prices start decreasing, they might have asked about SHARP’s competitive strengths, they might have also questioned the wisdom to finance an expensive factory via short-term bank loans as opposed to issuing shares to spread the risks to investors.

    Its not just outside Directors, shareholders could have also asked such questions.

    SHARP has about YEN 678 billion (US$ 5.6 billion) debt, most is short-term debt, and in a few weeks, in March 2016, SHARP needs to repay about YEN 510 billion (US$ 4.2 billion), and needs to find this amount outside.

    SHARP is a Japanese electronics company, founded in 1912 by Tokuji Hayakawa in Tokyo as a metal workshop making belt buckles “Tokubijo”, and today one of the major suppliers of liquid crystal displays for Apple’s iPhones, iPads and Macs.

    SHARP today has about 44,000 employees, many factories across the globe, sales peaked around YEN 3000 billion (US$ 30 billion) in 2008, and show a steady downward trend since 2008.

    Revenues (profits) peaked in 2008, and have fallen into the red since.

    SHARP's revenues (sales) peaked in 2008, and since then stagnated around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
    SHARP’s revenues (sales) peaked in 2008 around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
    Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)
    Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)

    What future for SHARP? Focus vs portfolio company

    SHARP (or rather, its creditors, the two “main banks” Mizuho and Mitsubishi-Tokyo-Bank, and others controlling the fate of today’s SHARP) needs to decide whether it focuses on a group of core products, in which case it needs to be No. 1 or No. 2 globally for these products. Successful examples are Japan’s electronic component companies.

    Or on the other hand, SHARP could be a portfolio company, in which case this portfolio must be actively managed.

    What future for Japan’s US$ 600 billion electronics sector?

    Japan’s 8 large electronics conglomerates:

    • Hitachi
    • Toshiba
    • Fujitsu
    • NEC
    • Mitsubishi Electric
    • Panasonic
    • SONY
    • SHARP

    combined have sales of about US$ 600 Billion, similar to the economic size of The Netherlands, but combined for about 15 years have shown no growth and no profits. They are poster children for the urgent need for corporate governance reform in Japan.

    These 8 electronics conglomerates are portfolio companies, and they need to manage these portfolios actively, such as General Electric (GE) or the German chemical industry are doing. Germany’s large chemical and pharmaceutical industries started active and drastic product portfolio management in the 1990s, and are continuing constant and active portfolio optimization via acquisitions, spin-outs, and other M&A actions, and so is GE.

    A stark contrast are Japan’s very successful, profitable and growing electronics component companies.

    Innovation Network Corporation of Japan INCJ (産業革新機構)’s dilemma

    INCJ aims “to promote the creation of next generation businesses through open innovation” according to its website.

    Japan’s NIKKEI financial daily mentions INCJ’s dilemma, whether attempting the rescue of an old conglomerate is compatible with its mission to create next generation business through open innovation.

    Why “let zombie companies die” is beside the point

    Concerning SHARP some media wrote headlines along the lines of “let zombie companies die”. Thats easy to write, however, SHARP is a group with 44,000 employees, many factories, about US$ 30 billion in sales annually.

    “Let this zombie die” is not an option, SHARP has 100s of products, and divisions, and the best solution for each of these divisions is different. And that is exactly what the Innovation Network Corporation of Japan seems to be considering in its plans for SHARP.

    I think the way forward is not “to let zombies die”, but to develop private equity in Japan

    I think the move of Atsushi Saito, one of the key drivers of Japan’s corporate governance reforms, from CEO of Tokyo Stock Exchange/ Japan Exchange Group, to Chairman of the private equity group KKR is a tremendously important one in this context.

    Will there be native Japanese private equity groups with sufficient know-how and ability to take responsibility of restructuring Japan’s electronics sector? Thats maybe the key question.

    Why its not really about nationalism

    Some media bring a nationalist angle into SHARP’s issues. However, Nissan was rescued by French Renault, UK’s Vodafone acquired Japan Telecom, and there are many other examples, where foreign companies acquire Japanese technology companies.

    I don’t think nationalism is an issue here. The key issues is to create and implement valid business models for Japan’s huge existing electronics sector, and more importantly, create a basis for the growth valid new companies – not just reviving old ones.

    Japan electronics industries – mono zukuri

    Copyright (c) 2016-2019 Eurotechnology Japan KK All Rights Reserved

  • Economic growth for Japan? A New Year 2016 preview

    Economic growth for Japan? A New Year 2016 preview

    Economic growth for Japan in 2016?

    Economic growth: Almost everyone agrees that economic growth is preferred over stagnation and decline. Fiscal policy and printing money unfortunately can’t deliver growth.

    1. Building fresh new successful companies,
    2. returning stagnating or failed established companies back to growth (see: “Speed is like fresh food” by JVC-Kenwood Chairman Kawahara), and
    3. adjusting the structure and business models of existing companies to the rapidly changing and globalizing world (see: “Japanese management – why is it not global?” by Masamoto Yashiro)

    deliver growth.

    Governments best help economic growth by reducing friction, and by getting out of the way of entrepreneurs building, turning-round, and refocusing companies.

    Some required action is counter to intuition: for example, in many cases reducing tax rates increases Government’s tax income, a fact known for many years. Effective education and research are key to create, understand and apply such non-obvious knowledge.

    Companies need efficient leadership, leadership needs feedback, wise and diverse oversight by Boards of Directors, who ring alarm bells long before a company hits the rocks, or fades into irrelevance. Corporate governance reform may be the most important component of “Abenomics”. Read a Board Director’s view on Japan’s corporate governance reforms:

    Japan’s electrical conglomerates are some of the poster children motivating Japan’s corporate governance reforms. In an interview about Toshiba’s future on BBC-TV a few days ago, I explained that Japan’s electrical conglomerates showed no growth and no profits for about 20 years, and the refocusing Toshiba has announced now should have been done much much earlier, 10-20 years ago (“Speed is like fresh food“). Refocusing Japan’s established corporate giants will release resources for start-ups, spin-outs and growth companies.

    Japan can be very good at restructuring and turn-rounds, e.g. see

    Happy New Year!

    Gerhard Fasol

    Copyright 2016 Eurotechnology Japan KK All Rights Reserved

  • Corporate governance reforms in Japan – practical views of a Board Director

    Corporate governance reforms in Japan – practical views of a Board Director

    A Board Director’s view

    Corporate governance reforms in Japan progress faster than even one of their key promoters expected, and cost almost no tax payers money

    Author: Gerhard Fasol

    Corporate governance reforms in Japan are one component of “Abenomics” to bring back economic growth to Japan.

    Corporate governance reforms in Japan are driven at least in part by the spectacular stagnation of Japan’s top 8 electronics conglomerates, which 25 years ago dominated world electronics, but largely failed to adapt to the changes driven by much more agile Silicon Valley or South Korea based competitors. The right type of Board Directors, could potentially have rung the alarm bells much earlier, and woken up executive management under their supervision.

    A welcome factor is that corporate governance reform costs Japan’s heavily indebted Government almost no money – unlike public works programs, and similar traditional ways of stimulating the economy.

    The speed with which Corporate Governance Reforms in Japan are being implemented surprised even one of their main promoters, emeritus Group CEO of the Japan Exchange Group, Atsushi Saito, as expressed in his recent talk.

    In March 2014 the shareholders appointed me as independent Board Director of the Japanese cybersecurity company GMO Cloud KK, which is listed on the First Section of the Tokyo Stock Exchange. Our main business are internet security solutions, cybersecurity, digital identity management solutions, and cloud hosting and related services and solutions.

    Read an article on Corporate Governance Reforms here in the Journal of the American Chamber of Commerce in Japan (ACCJ), and more below in this post – from my experience practicing corporate governance in Japan as a Board Director.

    The main components of corporate governance reform in Japan

    The main components of Japan’s corporate governance reform are:

    1. The revision of the Company Law (会社法(平成十七年七月二十六日法律第八十六号)), Law No. 816 of July 26, 2005. The latest revision is No. 63 of September 4, 2015 (平成二七年九月四日法律第六三号).
    2. The Corporate Governance Code of the Tokyo Stock Exchange (TSE), issued on June 1, 2015, “Seeking Sustainable Corporate Growth and Increased Corporate Value over the Mid- to Long-Term”
    3. Japan’s Stewardship Code, issued by Japan’s Financial Services Agency (FSA) on February 26, 2014, “Principles for Responsible Institutional Investors ≪Japan’s Stewardship Code≫- To promote sustainable growth of companies through investment and dialogue”

    What is corporate governance and why?

    Japan’s Corporate Governance Code, which was issued by the Tokyo Stock Exchange on June 1, 2015, defines Corporate Governance as “a structure for transparent, fair, timely and decisive decision-making by companies, with due attention to the needs and perspectives of shareholders and also customers, employees and local communities”.

    The subtitle of Japan’s Corporate Governance Code is its mission statement: “Seeking sustainable corporate growth and increased corporate value over the mid- to long-term”.

    Corporate governance has been analyzed in great detail in Professor John Kay’s analysis of UK’s capital markets: “The Kay Review of UK Equity Markets and long term decision making“, which was triggered by certain M&A transactions among other factors, and published on 23 July 2012.

    “The Kay Review of UK Equity Markets and Long-Term Decision Making” has been archived in UK’s National Archives here.

    The Kay Review analyzes UK’s capital markets in depth, and argues that its companies’ duty to be successful in the long-term, and its only the success of companies that brings wealth to all stake holders and people who invest in companies, in many cases pensioners. Over the years a fine grained system of specialized service providers has developed between companies on one side, and individual investors on the other side. Professor Kay argues that this system of intermediaries (fund managers, analysts etc) can be seen as “overhead” and needs to be as efficient as possible.

    Overall the capital market system needs to be built on long term trust and stewardship, not on anonymous one-time monetary transactions.

    The Kay report had important impact, for example it led to the end of the requirement of quarterly financial reports by UK companies, as we discussed here.

    Martin Lipton, of the NY law firm Wachtell, Lipton, Rosen & Katz, in an article published on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog encourages the US Securities and Exchange Commission (SEC) to keep the UK developments in mind, when reforming the reporting requirements for US corporations, and also calls for an end to the requirement of quarterly reporting.

    Why end the requirement of quarterly financial reports? Because short term focus on quarterly financial performance may cloud the view on long-term success and investment. Intense discussions between fund managers and management are strongly encouraged.

    Will the end of quarterly financial reporting reach Japan?

    Why Japan’s focus on corporate governance?

    GNP as a measure of economic size has many flaws – however many signals, not just GNP, indicate that Japan is the only major economy that does not grow.

    While there are many excellent Japanese corporations, overall it is no secret that Japan’s economy has the potential to do much much better.

    Japan’s decline was even deplored by Keidanren and Toray Chairman Sadayuki Sakakibara at the 2015 Kyoto Bank New Year Gala event. Stanford Economics Professor Takeo Hoshi has analyzed the factors which caused Japan’s economy to stop growing after catching up with the developed economies, see Professor Hoshi’s recent talk about Abenomics for the Stockholm School of Economics.

    A case in point are Japan’s 8 large electronics conglomerates which combined are approximately the same size as the economy of The Netherlands. Unlike The Kingdom of the Netherlands, Japan’s top 8 large electronics conglomerates have not grown for the last 20 years, while on average reporting losses over these 20 years. While Japan’s top 8 electronics conglomerates dominated the global electronics sector, they have been faded, and today Apple alone is about 10 times bigger in market cap/value than all top 8 Japanese electronics conglomerates combined, see: “Japan’s electronics giants – FY2012 results announced. 17 years of no growth and no profits.

    There is much hope that outside directors supervising executive management will bring outside expertise, and improve the performance of company-insider executive management, and if necessary also insist on replacements.

    Much faster than expected

    One of the most outspoken promoters of corporate governance reform is emeritus Tokyo Stock Exchange Chief Executive Atsushi Saito. In a recent talk, Atsushi Saito expressed his great surprise that corporate governance reform was implemented in Japan must faster than he had expected.

    The cheapest part of “Abenomics” – corporate governance reform comes at essentially zero cost to tax payers

    Many measures of Premier Minister Abe’s “Abenomics” stimulation programs pump borrowed Government Bonds (JGB) money into the economy, thus cost money and ultimately increase Japanese very large Government debt.

    By comparison, corporate governance reforms cost essentially zero cash and don’t further increase government debt.

    Theory and practice

    Non-diversity: about 0.6% of Japanese Board Directors of listed companies are non-Japanese

    As of 17 December 2015 Japan has 3504 listed companies on the exchanges operated by the Japan Exchange Group:

    • TSE 1st section: 1933 (incl. 6 foreign companies)
    • TSE 2nd section: 544 (incl. 1 foreign company)
    • Mothers: 219 (including 1 foreign company)
    • JASDAQ Standard: 750 (including 1 foreign company)
    • JASDAQ Growth: 44 (including 0 foreign company)
    • TOKYO PRO Market: 14 (including 0 foreign company)
    • Total: 3504 (including 9 foreign companies)

    In addition there are three regional exchanges:

    • Fukuoka Stock Exchange
    • Nagoya Stock Exchange
    • Sapporo Stock Exchange

    Assuming there are about 10 Board Directors per company, there are about 35,000 Board Directors of listed companies in Japan. Of these approximately 200 are foreigners, ie. about 0.6% of Directors of listed Japanese companies are foreign (I am one of these).

    Maybe 10-20 of Japan’s public companies are “Englishized” such as Rakuten or SoftBank, or hire simultaneous interpreters at Board Level (you’ll see Directors with headphones listening to the interpreted/translated version of what is being said – of course slowing and filtering understanding and communication)

    All other approx. 3490 Japanese Stock Exchange listed companies are run 100% in Japanese language at all levels including Board level – and almost exclusively by Japanese men.

    In a rapidly globalizing world, these companies desperately need global input from many nationalities, different backgrounds, and genders at Board level in Japanese language, but the number of people providing this depth of diversity, having the qualifications and being able to function at Board level in Japanese in addition to several other languages is severely limited – this is one of several factors limiting Japan’s growth after having caught up with developed countries in the 1980ies.

    What are the main issues?

    Diversity delivers better decisions and better results

    Japan has many outstanding leaders, such as SoftBank’s founder Masayoshi Son, or Kyocera’s founder Kazuo Inamori, who also founded part of today’s KDDI, and who turned around Japan Airlines from bankruptcy in his 80s.

    Some Japanese Executives are outstanding leaders, however, many are not, but function more like chief administrators – as in any other country.

    Outstanding leaders don’t fear working with excellent people and will attract top leaders. However, chief administrator type executives will fear for their power and will assemble teams who fear to speak out, as can be observed in many recent corporate scandals in Japan, and many other major countries. Corporate scandals and corporate governance failures may happen anywhere, not just in Japan.

    Diversity at top management levels and Board levels has many benefits, as has been proven in many studies. Diversity delivers better decisions and better results. Boards of Directors are one way to bring diversity to decision making.

    Overcoming stagnation

    Many major Japanese corporations show no growth and no income for the last 20 years.

    A showcase example are Japan’s top-8 electronics conglomerates. Combined they are as large as the economy of the Netherlands, but contrary to The Netherlands, they have shown no growth for the last 17-20 years, as well as losing money on average over all these years. Of course, as a consequence the market capitalization = value of these top-8 electronics companies has decreased dramatically. While Japan’s top-8 electronics companies dominated 60% or more percent of the global electronics industry in the 1980, they have fallen steep. Clearly a dramatic example of failed corporate governance, and surely a big push for Prime Minister Abe to put so much priority on improving Japan’s corporate governance, together of course with the need to improve employment, and returns for pension funds to fund Japan’s aging population.

    Three forms of corporate organization: splitting supervision and execution

    Traditionally, executives supervised themselves at Board level

    Traditional Japanese corporation have a Board of Directors composed of corporate executives, i.e. the executives supervise themselves without external supervision or input. Supervision is done by the Kansayaku Board (corporate auditor’s Board) which however has limited powers on corporate decision making.

    Japan’s corporate government reforms now give Japanese companies options to split execution (executives, 執行役員) and supervision (Board Directors, 取締役).

    Japanese corporations now can chose between three forms of organization

    • company with Kansayaku Board
    • company with Supervisory Board
    • company with three committees:
      • Nomination Committee
      • Audit Committee
      • Remuneration Committee

    According to the new Corporate Governance Code, the Board (independent which of the three options is selected) has the following three duties:

    1. setting the directions of corporate strategy
    2. encourage and support appropriate risk taking by senior management
    3. supervise Directors and executive management, including senior executives (執行役員)

    Connecting the dots: the link between accounting issues and the space shuttle Challenger disaster

    Toshiba’s recent accounting issues reflect much deeper fundamental problems – of course.

    I see parallels between Toshiba’s accounting issues and the space shuttle Challenger disaster: Nobel Prize Winner Richard Feynman determined that the cause of the space shuttle Challenger disaster was the failure of top management to communicate with the people doing the work (“genba”, 現場): “Appendix F – Personal observations on the reliability of the Shuttle, by R. P. Feynman“.

    Space shuttle Challenger’s top management was insisting to keep the planned launch date fearing public relations issues, while the workers and engineers on the ground, “genba”, knew that they were not ready. But top management at space shuttle Challenger did not listen to “genba”.

    My advice to Japanese corporations: embrace and learn to love diversity!

    Embrace and learn to love diversity! Diversity delivers better results overall. We all learn from each other.

    My advice to foreign investment funds seeking more influence on Japanese companies

    Shouting at the CEO or Boards of Japanese companies will not help – many foreign activist investors have already proven this fact many times. Insisting on your superior knowledge will not make you many friends – as anywhere else.

    You need to develop trust and relationships. You need to start by learning Japanese, understanding Japan, and earn trust and contribute with achievements, or partner with people who have: KKR hired Japan Exchange Group emeritus CEO Atsushi Saito.

    There are no increasing numbers of examples, where outstanding Japanese corporations careful listen to outside advice from investors, and thus become even more outstanding: SONY and robotics maker FANUC come to mind.

    My advice to foreign companies operating in Japan

    Your subsidiary in Japan is a Japanese corporations and needs corporate governance. There have been a long list of corporate governance failures leading to huge problems and losses at foreign subsidiaries in Japan, in the financial sector, the elevator sector, the pharmaceutical sector and several others.

    Make good use of the Board of Directors of your Japanese subsidiary corporation.

    Need to know more?

      Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved

    • Was Osamu Suzuki first to understand Volkswagen’s Diesel issues?

      Was Osamu Suzuki first to understand Volkswagen’s Diesel issues?

      Osamu Suzuki: “we looked at Wagen’s technologies, and could not find anything we need” (Nikkei, 1 July 2011)

      by Gerhard Fasol

      Did Volkswagen underestimate Mr Suzuki?

      Over the last 18 years myself and our company have worked on many foreign-Japanese company partnerships, therefore we always have great interest in business partnerships involving Japanese companies, and have followed the Volkswagen-Suzuki relationship closely.

      We published two blog articles after the ICC Arbitration Court issues judgement sealing the Suzuki-Volkswagen divorce, and before we became aware of the Volkswagen Diesel issues:

      When I was asked to brief German President Horst Köhler on April 3, 2005 about Japan’s technology sector, my advice included the following:

      Interaction with Japan enforced total restructuring of leading US companies, including INTEL and MOTOROLA. According to my knowledge, there are almost no European companies yet which were forced to totally restructure their business due to interaction with Japan. I feel that this may happen in the future.

      Volkswagen could be a candidate now, although US agencies and courts are now primary actors, Suzuki’s role may not be negligible.

      Volkswagen had already lost out against Suzuki, and Suzuki’s CEO Mr Osamu Suzuki in the 1980s when India started to build an Indian automotive industry. India had considered to build India’s car industry based on Volkswagen’s Beatle, but decided to go with Mr Osamu Suzuki instead. Maruti Suzuki India Limited (マルチ・スズキ・インディア) achieved 45% market share in India’s passenger car market in 2014. Suzuki Motors owns 54% of Maruti Suzuki, and Mr Osamu Suzuki is greatly respected as Japan’s No. 1 top India expert.

      When Mr Osamu Suzuki entered into the Maruti Suzuki India Joint-Venture, he reportedly insisted to have 100% decision making and management rights in the Joint-Venture.

      Links between the Suzuki-Volkswagen and the Volkswagen Diesel issues time lines.

      We can see interesting links in the time lines of the Suzuki-Volkswagen relationship and the Volkswagen Diesel issues:

      Time line of events relevant to the Suzuki Volkswagen relationship

      • 16 Nov 1970: “Maruti technical services private limited” (MTSPL) to create an Indian automobile industry, first CEO: Sanjay Gandhi. Sanjay Gandhi contacted Volkswagen AG to seek a cooperation to produce an Indian version of the VW Käfer (Beatle). However, a cooperation with Volkswagen did not work out. The company failed in 1977, and was reborn as Maruti Udyog Ltd by Dr V. Krishnamurthy.
      • 1982: Maruti Udyog Ltd and Suzuki entered into a licensing and joint venture agreement, creating Maruti Suzuki India Limited (マルチ・スズキ・インディア), which in 2014 achieved a 45% market share of India’s passenger car market.
      • 20 0ctober 2005: Suzuki and FIAT announce a partnership on FIAT’s Diesel engines (see: Suzuki announcement)
      • 6 March 2006: Suzuki and GM announce the reduction of GM’s stake in Suzuki from 20% to 3%, strongly reducing the GM holding in Suzuki, which had started in August 1981. (see: Suzuki announcement)
      • 9 Dec 2009: VW-CEO Martin Winterkorn and Suzuki-CEO Osamu Suzuki announced the “comprehensive partnership” at a press conference in Tokyo (see: joint Suzuki Volkswagen press announcement)
      • 9 Dec 2009: Suzuki transferred 107,950,000 treasury shares to Volkswagen AG, valued approx at 226,695,000,000 yen (= approx. US$ 2.3 billion)
      • 15 Jan 2010: VW purchased 19.89% of Suzuki shares for about € 1.7 billion
      • March 2011: Volkswagen writes in the annual report that Volkswagen “significantly influence financial and operating policy decisions” at Suzuki
      • 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから (鈴木修氏の経営者ブログ)” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
      • Sept 2011: Suzuki’s Board decides to terminate the partnership
      • 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
      • 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
      • 2013-2014: The International Council on Clean Transportation (ICCT) conducts a research project in collaboration with the West Virginia University to determine real world, away from test rigs, emissions from diesel cars in the USA. Project leader is John German. ICCT tests a VW Jetta, a VW Passat, and a BMW X5, and finds that in real world driving conditions, the VW Jetta exceeds the US-EPA Tier2-Bin5 Nix (Nitrogen Oxide) emission standards by 15 to 35 times, the VW Passat by 5 to 20 times, while the BMW X5 generally conformed to the standards except in extreme conditions. The fact that the BMW X5 conforms to the standard for the ICCT was proof that the technology to conform existed. (see: ICCT announcement)
      • 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
      • 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW via Tokyo Stock Exchange ToSTNeT-3 system for 460,281,547,500 yen (approx. US$ 3.9 billion), completing the termination of the partnership and capital alliance with VW
      • 18 September 2015: Press announcement by The ICCT “EPA’s notice of violation of the Clean Air Act to Volkswagen
      • 18 September 2015: EPA notice of violation to Volkswagen (See: EPA announcement), EPA website concerning Volkswagen
      • 18 September 2015: California Air Resources Board (CARB) letter to Volkswagen, “Re: Admission of Defeat Device and California Air Resources Board’s Request”
      • 26 Sep 2015: Suzuki announced the transaction to sell all 4,397,000 Volkswagen shares which Suzuki owns to Porsche Automobile Holding SE, completing the termination of the partnership and capital alliance with VW

      The International Council on Clean Transportation (ICCT) study on real-world exhaust emissions from modern diesel cars

      The ICCT noted that there is a wide discrepancy in emissions by cars under test conditions and in real live road driving conditions, and conducted the project on real-world exhaust emissions from modern diesel cars.

      The report can be dowloaded here as a pdf file: “REAL-WORLD EXHAUST EMISSIONS FROM MODERN DIESEL CARS

      “In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States”

      The ICCT contracted with the Center for Alternative Fuels, Engines and Emissions (CAFEE) at West Virginia University to test the real road emissions of three cars in the USA. This study is explained on the ICCT website “In-use emissions testing of light-duty diesel vehicles in the U.S.”

      The final report can be downloaded here: “Final Report: In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States. by Dr. Gregory J. Thompson (Principal Investigator)“.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Mr. Suzuki didn’t want to be a Volkswagen employee, and that’s understandable (Prof. Dudenhoeffer via Bloomberg)

      Mr. Suzuki didn’t want to be a Volkswagen employee, and that’s understandable (Prof. Dudenhoeffer via Bloomberg)

      Mr Suzuki (Chairman of Suzuki Motors), wrote in his Japanese blog, that “ending the partnership with Volkswagen (Wagen-san as he calls VW) was like the relieve I feel after having a fishbone stuck in my throat removed”

      No partnership works without meeting of minds, with opposite agendas and colliding expectations

      by Gerhard Fasol, All Rights Reserved. 20 September 2015, updated 27 September 2015

      VW Volkswagen Suzuki
      VW Volkswagen Suzuki

      Suzuki Volkswagen – bottom line first:

      • Volkswagen wanted Suzuki more than Suzuki needed Volkswagen
      • Suzuki-CEO Osamu Suzuki: “we looked at Wagen’s technologies, and could not find anything we need” (Osamu Suzuki’s blog in Nikkei, in Japanese language)
      • Volkswagen underestimated Suzuki’s strength and resolve, and didn’t do the required homework
      • Volkswagen overestimated its own leverage on the opposite side of the world from Wolfsburg
      • Partners with opposite agendas and colliding expectations, without communication and no homework can’t partner
      • Its not about “cultural differences”. Not at all.

      On 9 December 2009 a beaming Martin Winterkorn (VW-CEO) was celebrating the new “comprehensive partnership” with Suzuki Motors, and Osamu Suzuki, the 79 year old CEO of Suzuki, was looking the other way, avoiding Mr Winterkorn’s eyes – as you can see in Reuters’ photograph of the occasion.

      Reuters reported, that Mr Osamu Suzuki was asked how he would feel about a German CEO of Suzuki Motors in the future, and his answer was unambiguous: Mr Suzuki emphatically stated that Suzuki will not become a 12th brand for Volkswagen, and that he does not want anybody to tell him what to do.

      Wall Street Journal reported, that Suzuki and Volkswagen would negotiate details in the weeks or months to come. We now know that these negotiations did not lead anywhere, and were never concluded satisfactorily.

      It is obvious that there never was any “meeting of minds”, the expectations were colliding, and the CEOs had not a single language in common in which they could talk directly. At the press conference they looked away from each other.

      Osamu Suzuki airs his frustrations with “Wagen-san” in his Japanese language blog in Nikkei – the world’s largest business daily

      Mr Suzuki (Chairman of Suzuki Motors), wrote in his Japanese blog, that “ending the partnership with Volkswagen (Wagen-san as he calls VW) was like the relieve I feel after having a fishbone stuck in my throat removed”

      On 1 July 2011, Suzuki-CEO Osamu Suzuki informs the world about his frustrations about “Wagen” (ワーゲン), via a blog post “スズキとワーゲンの今とこれから (鈴木修氏の経営者ブログ)” (english translation: “Suzuki and Wagen now and the way forward”). Osamu Suzuki’s blog post can be read here (may need Nikkei subscription).

      Professor Ferdinand Dudenhoeffer, Director of the Center for Automotive Research at the University Duisburg-Essen according to Bloomberg, summarized: “Mr Suzuki didn’t want to be a Volkswagen employee, and that’s understandable”.

      VW’s reply: “The tail is not going to wag the dog” (VW-CEO Winterkorn cited in Der Spiegel on 19 Sept 2011)

      Germany’s leading intellectual and business weekly Der Spiegel on 19 Sept 2011 quotes VW-CEO Martin Winterkorn about the VW-Suzuki relationship: “Da wackelt der Schwanz nicht mit dem Hund” (the tail is not going to wag the dog, which I guess has the meaning that Mr Winterkorn perceived Suzuki Motors as the junior partner who cannot have any independent power in a relationship with Volkswagen).

      Suzuki Volkswagen alliance time line

      • 9 Dec 2009: VW-CEO Martin Winterkorn and Suzuki-CEO Osamu Suzuki announced the “comprehensive partnership” at a press conference in Tokyo
      • 9 Dec 2009: Suzuki transferred 107,950,000 treasury shares to Volkswagen AG, valued approx at 226,695,000,000 yen (= approx. US$ 2.3 billion)
      • 15 Jan 2010: VW purchased 19.89% of Suzuki shares for about € 1.7 billion
      • 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから (鈴木修氏の経営者ブログ)” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
      • Sept 2011: Suzuki’s Board decides to terminate the partnership
      • 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
      • 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
      • 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
      • 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW via Tokyo Stock Exchange ToSTNeT-3 system for 460,281,547,500 yen (approx. US$ 3.9 billion), completing the termination of the partnership and capital alliance with VW
      • 26 Sep 2015: Suzuki announced the transaction to sell all 4,397,000 Volkswagen shares which Suzuki owns to Porsche Automobile Holding SE, completing the termination of the partnership and capital alliance with VW

      A teachable moment

      • “Comprehensive partnership” without meeting of minds does not work
      • Partnerships are hard when CEOs on both sides don’t have any language in common, thus can’t talk to each other – and have exactly opposite expectations from the start and don’t address them until its too late
      • Processes and methods successful in Europe or USA often don’t work in Japan
      • Its not about “cultural differences”. Not at all.
      • Its about trust, respect, communication and “meeting of minds”, shared (not opposite) expectations and agendas.
      • Speaking at least one language in common helps.
      • more details and analysis here

      Financial aspects

      • VW made approx. US$ 1.3 billion profit on the Suzuki shares it owned from 2009-2015
      • Suzuki broke even approximately on selling own treasury stock to VW and repurchasing the same shares back from VW a few days ago, and on temporarily owning 2.5% of VW, but still may have to pay compensation to VW.
      • Read detailed financial analysis here.

      During the period 2009-2015 both VW and also Suzuki share prices increased substantially. The reason that VW made substantial financial profits from the VW-Suzuki share transactions, while Suzuki did not, is that Suzuki used 1/2 of the proceeds of selling Suzuki treasury stock to VW for R&D, thus had a much smaller holding of VW shares than VW did of Suzuki shares.

      With cash reserves of approx. US$ 8 billion Suzuki will be just fine, and can now focus on expanding Maruti-Suzuki’s 37% market share of India’s passenger car market and other exciting growth projects.

      And Volkswagen can now focus on growth markets, and Toyota – and other very pressing issues.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Quarterly financial reports to go away: UK and EU remove requirements for quarterly financial reports

      Quarterly financial reports to go away: UK and EU remove requirements for quarterly financial reports

      Voluntary quarterly reporting?

      Quarterly financial reports: can they be the trees which obscure long term growth of the forrest?

      As a Board Director of a Japanese company traded on the Tokyo Stock Exchange I have to study and approve monthly, quarterly and annual financial reports, and I share responsibility for the future success of the company.

      It is obvious that the longterm success and growth of the company is the most important priority for all stake holders. So how useful are quarterly financial reports? Lets look at some recent developments and at an example below from our Report on Japan’s Telecommunications Industries.

      UK setting the trend!

      Britain’s leading economist, Professor John Kay, created the Review of UK Equity Markets and Long-Term Decision Making which he reported to the UK Secretary of State for Business, Innovation and Skills in July, 2012.

      Motivated by Professor John Kay’s report, the UK regulator removed the requirement for companies to publish quarterly financial reports.

      Mark Zinkula, CEO of Legal & General Investment Management, one of UK’s largest investment management firms, around 8 June 2015 wrote a carefully worded letter to 350 UK company Chairmen, recognizing that each company has different circumstances, and encouraging them to report the most meaningful key metrics and to omit reporting quarterly financial results if these don’t contribute to longterm value creation. You can download Mark Zinkula’s letter as a pdf file here.

      Martin Lipton, of the NY law firm Wachtell, Lipton, Rosen & Katz, in an article published on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog encourages the US Securities and Exchange Commission (SEC) to keep the UK developments in mind, when reforming the reporting requirements for US corporations.

      The European Union (EU) reduced the reporting requirements including the requirement for quarterly financial reporting.

      Will Japan and other important countries such as USA follow this trend as well?

      Quarterly financial reports: pro’s and con’s

      Essentially all well managed companies have fine grained financial management systems which document the financial position of the company at any moment in time.

      As an example, when Kazuo Inamori rebuilt Japan Airlines from bankruptcy, he created a reporting system which calculates the profit/loss of every single flight in real time: i.e. when a Japan Airlines flight from Tokyo arrives in San Francisco, the pilot and everyone else knows before landing in San Francisco whether this particular flight was profitable or not – while before Japan Airlines bankruptcy, profit/loss (mainly losses for the last years leading up to bankruptcy) was determined on a full company basis every 3 months in arrears. Read Kazuo Inamori’s talk here. Clearly Kazuo Inamori thinks that such fine grained profit/loss awareness is a crucial component for Japan Airlines’ revival from bankruptcy.

      Its obvious that for today’s IT systems the creation of quarterly financial reports from such fine-grained measurement systems such as Kazuo Inamori had installed at Japan Airlines does not cause much additional effort or costs once the coding is done.

      Quarterly financial reports: trees vs. the forrest

      Quarterly financial reports can be complicated to understand for highly cyclical industries: lets have a look at the quarterly vs annual reports of Japan’s mobile operators from our Report on Japan’s Telecommunications industries.

      The figures below show exactly the same financial data – the net income (= profit) of Japan’s mobile operators NTT-Docomo, SoftBank and KDDI over the last 10-15 years:

      • Upper Figure: quarterly net income (thick curves) vs annual net income (thin curves)
      • Lower Figure: quarterly net income (thin curves) vs annual net income (thick curves)
      Net income of Japan's mobile operators: quarterly results (thick curves) vs annual results (thin curves)
      Net income of Japan’s mobile operators: quarterly results (thick curves) vs annual results (thin curves)
      Net income of Japan's mobile operators: quarterly results (thin curves) vs annual results (thick curves)
      Net income of Japan’s mobile operators: quarterly results (thin curves) vs annual results (thick curves)

      It is hard to draw conclusions from quarterly income curves above. Most eye-catching is that SoftBank’s quarterly income results became much more fluctuating in the last two years. Its hard to judge the relative performance of Docomo, SoftBank and KDDI from the quarterly income curves.

      Annual net income curves give a much clearer picture. Annual figures clearly show that SoftBank caught up and overtook Docomo and KDDI in net profits.

      As Mark Zinkula points out that every company and every industry is different. In the case of Japan’s mobile operators, annual figures give a clearer picture.

      Will quarterly financial reports become voluntary and go away? They might partly in the UK, and maybe also in other countries. As so often in finance, the UK sets the global trends.

      Quarterly financial reports & the Toshiba accounting issues

      Quarterly financial reports can be the trees and annual reports the forrest… seeing the forrest can be more important than seeing individual trees

      Would focus on annual and long-term performance have prevented Toshiba’s accounting issues?

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Burberry Japan: breaking up is hard to do

      Burberry's new directly operated flagship store in Tokyo Omotesando

      Burberry’s Japan pivot

      Burberry Japan pivots from successful partnership to direct business

      by Gerhard Fasol, All Rights Reserved.

      many of the underlying issues also apply in all other business areas, such as electronics, and technology.

      Sanyo Shokai pivots from Burberry to Mackintosh and other brands


      Burberry Japan pivots to direct business to solve Burberry’s “Japan Problem”: for the last approx. 50 years Burberry’s business in Japan was not Burberry’s business at all, but run under license by the Japanese company Sanyo Shokai and the giant trading company Mitsui. Sanyo Shokai’s core business was developing its own product lines Blue Label and Black Label and selling them under the Burberry Blue Label and Burberry Black Label brands.

      Almost every day a foreign company approaches us to help them find a “Japanese partner” to build their business in Japan…

      There are many examples of very successful Japan-market-entries via partnerships. Success stories include: Oracle, Salesforce.com, Starbucks, Fuji-Xerox, Yahoo, SuperCell, and many more, and until a few months ago, Burberry.

      Read our analysis here, and background facts here.

      Burberry found an excellent Japanese partner in 1965, Sanyo Shokai, backed by giant trading company Mitsui, and Sanyo Shokai built a terrific business for Burberry in Japan! Not only did Sanyo Shokai import Burberry products to Japan, but Sanyo Shokai also developed two enormously successful sub-brands for Burberry in Japan: Burberry Blue Label and Burberry Black Label. And Sanyo Shokai kept transferring substantial royalties/license fees to Burberry’s headquarters.

      Actually it turned out that almost all the business value for Burberry in Japan was in the Burberry Blue Label and Burberry Black Label sub-brands, which were developed by Sanyo Shokai in Japan, by Japan and for Japan – and with the required Japanese quality and customer service. Sanyo Shokai also contributed the Japanese Burberry flagship store in one of the world’s prime luxury shopping areas, Ginza, and about 300-500 Burberry stores all over Japan – many in prime locations.

      In June 2015, Burberry terminated this very successful licensing relationship.

      Now after their divorce, both Burberry and Sanyo Shokai rebuild their businesses in Japan from scratch:


      why has Burberry not decided on a less disruptive transition?

      For example, acquiring Sanyo Shokai comes to my mind. Acquisitions in Japan are not unheard of, and since Sanyo Shokai is a publicly traded company, well established rules apply.

      why did Sanyo Shokai over the 50 years since starting the relationship with Burberry not build its 100% owned brand?

      Much smaller Yagi Tsusho managed to acquire Mackintosh, why did not Sanyo Shokai within the last 50 years acquire or develop a 100% owned and successful brand? With Blue Label and Black Label, Sanyo Shokai has proven its ability to build and develop brands, why not under their own brand?

      Some puzzles about this split


      Winding veils round their heads, the women walked on deck. They were now moving steadily down the river, passing the dark shapes of ships at anchor, and London was a swarm of lights with a pale yellow canopy drooping above it. There were the lights of the great theatres, the lights of the long streets, lights that indicated huge squares of domestic comfort, lights that hung high in air.

      No darkness would ever settle upon those lamps, as no darkness had settled upon them for hundreds of years. It seemed dreadful that the town should blaze for ever in the same spot; dreadful at least to people going away to adventure upon the sea, and beholding it as a circumscribed mound, eternally burnt, eternally scarred. From the deck of the ship the great city appeared a crouched and cowardly figure, a sedentary miser.

      Has this transition been well thought through?


      It will be interesting to see where both Burberry and Sangyo Shokai will stand 10 years from now – 10 years from this divorce. Both certainly are in challenging situations in Japan now after this divorce. Will both survive in Japan? Or only one of the two?

      Read more details here.

      Foreign companies seeking to build a business in Japan via a partnership, and Japanese companies seeking to build the business of foreign companies in Japan can certainly learn from this case study. Although its fashion and apparel, many of the underlying issues also apply in all other business areas, such as electronics, and technology.

      Burberry's new directly operated flagship store in Tokyo Omotesando
      Burberry’s new directly operated flagship store in Tokyo Omotesando
      Sanyo Shokai's flagship building  in Tokyo-Ginzs, one of the world's prime luxury shopping areas, much frequented by cash-rich Chinese shoppers. Currently being converted from the Burberry brand to Mackintosh and other Sanyo Shokai brands (second building from the left)
      Sanyo Shokai’s flagship building in Tokyo-Ginzs, one of the world’s prime luxury shopping areas, much frequented by cash-rich Chinese shoppers. Currently being converted from the Burberry brand to Mackintosh and other Sanyo Shokai brands (second building from the left)

      Copyright 2009-2024 Eurotechnology Japan KK All Rights Reserved

    • Toshiba income restatement: corresponds to one full year of average operating income

      Toshiba income restatement: corresponds to one full year of average operating income

      Toshiba’s income restatement announced by the independent 3rd party committee

      by Gerhard Fasol

      Independent 3rd party committee chaired by former Chief Prosecutor of Tokyo High Court

      On 12 June, 2015, Toshiba announced corrections to income reports, and at the same time engaged an independent 3rd party investigation committee headed by former Chief Prosecutor at the Tokyo High Court, Mr Ueda, to investigate. This independent 3rd party committee submitted their report yesterday, and held a Press Conference this evening.

      Lets look at the announced Toshiba financial data in detail. The figure below shows:

      • Toshiba’s previously reported operating income/profits (blue curve),
      • corrections announced by an internal committee on June 12, 2015 (green curve),
      • corrections announced by the independent 3rd party committee on July 20, 2015 (red curve).

      The combined amount of downward corrections determined by the independent 3rd party committee is YEN 151.8 billion (US$ 1.22 billion) in total.

      Lets put this amount into context:

      • annual sales: approx. YEN 6000 billion (US$ 60 billion)
      • annual operating income (average over last 17 years): YEN 148 billion (US$ 1.5 billion)
      • annual net income (average over last 17 years): YEN 19 billion (US$ 190 million)

      Therefore the downward correction summed over the years corresponds to:

      • approx. 2.5% of average annual sales
      • approx. 103% of average annual operating profits, ie more than a full year of average operating profits
      • approx. 8 years of net profits

      Toshiba – typical for Japan’s large electronics corporations – operates with razor-thin profit margins: Toshiba’s net profit margin averaged over the last 17 years is 0.25%.

      Therefore, the downward correction corresponds to 8 years of average net income/profits.

      Toshiba's corrections: internal investigation (June 12, 2015, green) vs independent 3rd party committee (July 20, 2015, red)
      Toshiba’s corrections: internal investigation (June 12, 2015, green) vs independent 3rd party committee (July 20, 2015, red). Source: https://www.eurotechnology.com/store/j_electric/
      • Blue curve shows Toshiba’s initially reported operating income.
      • Green curve shows corrections determined by an internal examination, announced on June 12, 2015. Corrections amount to approx. YEN 50 billion (= approx. US$ 0.5 billion).
      • Red curve shows corrections determined by the independent 3rd party commission, chaired by former Tokyo High Court Chief Prosecutor Ueda and announced on July 20, 2015. Corrections amount to YEN 151.8 billion (= approx. US$ 1.22 billion)

      Japan electronics industries – mono zukuri

      Copyright (c) 2009-2019 Eurotechnology Japan KK All Rights Reserved

    • How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

      How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

      Dentsu dominates Japan’s media sector and advertising

      Dentsu switches from JGAAP to IFRS accounting standards with big impact on KPIs

      Dentsu dominates Japan’s advertising and media industries, and attracts some of the most creative Japanese talent, although Dentsu is not the first advertising agency in Japan – that priority belongs to Hakuhodo.

      From April 1, 2015, Dentsu decided to switch to IFRS accounting standards from Japan’s JGAAP standards. For FY2014, Dentsu reports financial results both using IFRS and JGAAP standards, giving us the fascinating opportunity to compare both accounting standards for a major corporation.

      So how big is Dentsu? For FY 2014 (April 1, 2014 – March 31, 2015) Dentsu reports (we have rounded the figures):

      • Turnover (IFRS) = ¥ 4642 billion (=US$ 37 billion)
      • Net Sales (JGAAP) = ¥ 2419 billion (=US$ 19 billion)
      • Revenues (IFRS) = ¥ 729 billion (=US$ 6 billion)

      For operating income, net income and other data IFRS and JGAAP measure quite different KPIs.

      Disruption is on the way: CyberAgent based on blogs, Recruit based on classified advertising and HR, LINE based on sticker communications, and many more…

      How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?
      How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

      Managing Japan/West cultural issues via the Dentsu-Aegis-Network

      As for many Japanese corporations, Dentsu’s challenge is to leverage a dominating position in Japan into a global business footprint, while managing the well-known cultural issues. Dentsu’s approach was to acquire the French/UK agency Aegis, and then via Dentsu-Aegis acquire a string of agencies all over Europe:

      Dentsu and Dentsu-Aegis

      Dentsu dominates Japan’s advertising space, and is a very very strong force in Japan’s media industry sector, through control and management of major advertising channels with an overwhelming market share in Japan, and has been working hard to leverage its creative power and strength in Japan into a larger global footprint.

      A big step forward towards a larger global footprint for Dentsu was the acquisition of the London based Aegis Group, announced on July 5, 2012.

      Read our report on Japan’s Media Landscape

      Dentsu HQ
      Dentsu HQ

      Copyright (c) 2009-2015 Eurotechnology Japan KK All Rights Reserved

    • Masahiro Morimoto, entrepreneur, CEO and Chairman of the Board, UBIC Inc. (today: Fronteo) A discussion with Dr. Gerhard Fasol

      Masahiro Morimoto, entrepreneur, CEO and Chairman of the Board, UBIC Inc. (today: Fronteo) A discussion with Dr. Gerhard Fasol

      UBIC Inc (today: Fronteo): founded to curb huge losses of Japanese corporations due to litigation abroad

      A discussion between UBIC (today: Fronteo) CEO Masahiro Morimoto and Dr. Gerhard Fasol

      From Japanese/Chinese/Korean (CJK) e-discovery, to data forensics, virtual data scientist and predictive coding

      Masahiro Morimoto founded UBIC Inc. on August 8, 2003 to stem the huge losses he saw Japanese corporations incurring due to litigation abroad. English-only software cannot be used for e-discovery of documents in Japanese, Chinese or Korean, and UBIC Inc initially focused on e-Discovery for these double-byte languages. Today, UBIC has grown beyond CJK e-discovery, into applying artificial intelligence tools to predict human behavior from emails and social media, forensics and other fields. Cloud based services are increasing rapidly. Recently, UBIC acquired the US e-discovery company TechLaw Solutions, expanding US business.

      UBIC was founded on August 8, 2003
      Traded on:
      Tokyo Stock Exchange (Code 2158), IPO on November 6, 2007
      NASDAQ (Symbol UBIC), IPO on May 16, 2013

      UBIC Inc. Financial Data for the Financial Year 2014

      (ended March 31, 2015, $1=119.96yen)
      Revenues: YEN 6274 million (US $52.3 million)
      Operating income: YEN 266 million (US$ 2.2 million)
      Net income: YEN 260 million (US$ 2.1 million)

      Market capitalization: YEN 33.25 billion ($276 million) ($1=120.17)

      Note: on July 1, 2016 the company name was changed from UBIC to FRONTEO.

      Discussion between Mr Masahiro Morimoto, CEO and Chairman of the Board, UBIC Inc. (today: Fronteo) and Dr. Gerhard Fasol

      1. Question (Dr. Gerhard Fasol): You announced your most recent financial results on May 13, 2015. Could you kindly give us some of the highlights and some comments?

        Answer (Masahiro Morimoto): For UBIC, the fiscal year ended on March 31, 2015, was memorable for three main reasons:

        1. First, we successfully acquired TechLaw Solutions, a well-established US e-discovery company.
        2. Second, we launched Lit i View EMAIL AUDITOR, a product powered by our proprietary AI program. 
        3. And third, we have promoted several innovative projects with business partners.

        It was not by luck alone that UBIC achieved record high revenue, but as a result of great effort. We achieved both organic and inorganic growth. Our company is entering a new era now.

      2. Question (Dr. Gerhard Fasol): The core of your business is e-discovery with special focus on Asian languages. Can you tell us more about the current state of the e-discovery market, your competitive advantage, and how you can assist your clients?

        Answer (Masahiro Morimoto): Our strength lies in operations that enable us to integrate and manage data within Japan. This is of particular value to the increasing number of Asian companies that do not want their highly confidential data to leave the country. At the same time, we provide an end-to-end, full e-discovery service. Our high level technology has enabled us to develop our own e-discovery reviewing tool, Lit i View.
        Further, our document review services in Asian languages including Japanese that use Predictive Coding, our proprietary AI technology developed by the in-house team, can cut costs while improving the quality of reviews, which can account for up to 70% of discovery costs.
        Lastly, our consultants and project managers can help in bridging any gap there might be between Asian companies and US attorneys, so that complex matters and projects may proceed smoothly for both sides.

      3. Question (Dr. Gerhard Fasol): I understand that most of your work is ultra-confidential, since your work is in the field of data security. However, could you tell us about one or two successes so we can get an idea of how UBIC is able to help clients, and the reason they like working with you.

        Answer (Masahiro Morimoto): One of our customers, which regularly faces cases filed by non-practicing entities (NPEs) in the US, was able to reduce their e-discovery costs by up to 40% by utilizing our services based on our proprietary AI technology. We have heard that achievement garnered a special company award.
        (Note added by Gerhard Fasol: NPE’s are often nicknamed “patent trolls”).

      4. Question (Dr. Gerhard Fasol): I understand that your core product is Lit i View. Can you explain the main characteristics of this electronic data analysis platform, and tell us why it is so important for your customers?

        Answer (Masahiro Morimoto): Currently in Lit i View, we have three types of products.

        1. First, Lit i View E-DISCOVERY, which is an e-discovery support product;
        2. second Lit i View XAMINER, a digital forensics tool; and
        3. third the Lit i View EMAIL AUDITOR, our email auditing tool.

        The feature that these three products have in common and which is unique is that they are equipped with Virtual Data Scientist (VDS), UBIC’s AI software, which enables them to analyze big data.
        Furthermore, Lit i View fully supports data in English, Chinese, Japanese, and Korean, and accurately displays multi-byte characters. In contrast, conventional e-discovery tools developed in English-speaking countries cannot accurately process legal documents written in Asian languages or multi-byte characters, without experiencing problems such as garbling.
        Asian companies, which thus are at a disadvantage in terms of the e-discovery process, have found that Lit i View provides an effective solution to their problems. We are receiving very positive reviews from clients in Asian countries, who tell us that they truly need to use Lit i View for documents in Asian languages.
        For further information, see http://www.ubicliv.com/en

      5. Question (Dr. Gerhard Fasol): Virtual Data Scientist (VDS) is important part of your business model, could you explain us about Virtual Data Scientist?

        Answer (Masahiro Morimoto): At UBIC, we do not consider big data to be merely an accumulation of data, but a collection of people’s thoughts and behavior outcomes. We define behavioral informatics as an analytical interpretation of behavior, and the synthesis of information science (including statistics, mathematics, data mining, and pattern recognition) and behavioral science (including psychology, criminology, and sociology).
        Conventional approaches to big data merely analyze past incidents, from which they extract some facts. But, in behavioral informatics, we are able to predict the future, and we do so by basing our analytics on human cognition and by generating patterns of human and social behavior.
        The highly accurate Virtual Data Scientist software applies a behavioral informatics approach to analyzing big data, thereby making it possible for one to find whatever information is being sought.

      6. Question (Dr. Gerhard Fasol): Predictive Coding is another concept for the basis of your business. Could you explain us Predictive Coding?

        Answer (Masahiro Morimoto): Predictive coding is based on the concept of text mining and AI technology. When e-discovery uses predictive coding, our VDS software analyzes and emulates the e-discovery review sample produced by experienced attorneys, before carrying out the rest of e-discovery review processes. Our AI software not only applies e-discovery to the review of documents at a speed more than 4,000 times faster than that achievable by humans, but also avoids the wide discrepancy in review results that often result from human error. Furthermore, our AI software has proved to be more than 90% accurate in extracting information for e-discovery reviews. Although in litigation, e-discovery is the most expensive process, costs can be cut drastically with our AI. If people use our predictive coding in addition to conventional keyword searches, relevant legal documents will no longer be omitted as often happens when only keyword searches are conducted and keyword settings are misconfigured.

      7. Question (Dr. Gerhard Fasol): Your cloud hosting services appear to be the most rapidly growing area of business, accounting for more than half your revenue. Can you explain what this means for you? Will all your services simply move to the Cloud, or are your Cloud services a new class of products? What benefits do your customers derive from using your Legal Cloud?

        Answer (Masahiro Morimoto): Before answering your question, I would like to explain about our business and work flow of e-discovery. E-discovery has several steps such as identification, preservation, collection, processing, analysis, hosting, document review, and production. We charge for each of the steps. Hosting service is one of the steps of e-discovery, and its purpose is to store the data which has been loaded to the hosting server after collection, processing, analysis, and document review. Unlike the e-discovery process which only takes between one to twelve months to complete, hosting service usually lasts more than five years. One reason that the data which has been processed and reviewed by attorneys must be kept for a long time is that there is high possibility of reusing the data in case of multiple lawsuits and other issues for one particular case, for instance. Furthermore, these data are too valuable and expensive to discard since these data can be leveraged across multiple matters. These are the reasons why hosting revenue has been growing. It is a kind of recurrent revenue for us.
        To answer your question regarding whether we plan to move all our products to the Cloud: we will provide cloud solutions to our customers continuously. But, it depends on the customer and the market requirement. Although we must have cloud solutions to meet the market requirement, we provide all types of solutions such as cloud and on-premise products and services.

      8. Question (Dr. Gerhard Fasol): When I discuss the Cloud with customers and friends, automatically almost the first question concerns security. How do you ensure the security of your Cloud services, and do you see this security as a business opportunity for your company?

        Answer (Masahiro Morimoto): In our Intelligence Cloud Service, clients’ data are securely managed. First, only permitted users have access to restricted virtual desktops; second, we have secure communication networks; third, our communications system has a firewall; fourth, we employ VLAN-based logical separation for network segments; and fifth, we have disaster recovery centers for redundancy operations.
        Currently, our priorities do not include offering Cloud-related security business solutions, since our main business is not only offering Cloud services.

      9. Question (Dr. Gerhard Fasol): I have two questions regarding your TechLaw Solutions acquisition.
        1. First, could you explain the reasons for the acquisition of this electronic discovery and litigation consultancy?
        2. And second, it is a fact that mergers involving US or EU companies on the one hand, and traditional Japanese companies on the other, are often difficult, and sometimes the two companies lead almost independent lives, without really integrating. That being the case, how are you overcoming cultural issues, and could you give some advice to companies undertaking Western-Japanese mergers? What are your key experiences and the conclusions you have drawn that might be applied to ensure successful Western-Japanese company mergers?

        Answer (Masahiro Morimoto): In answer to the first part of your question, we acquired TechLaw Solutions – a US e-discovery consultancy and solutions provider that has been in business for more than 30 years – as part of our strategy to expand our e-discovery market share, with a view to giving ourselves a high-profile presence in the US. Since TechLaw Solutions already has developed a large number of sales channels, its acquisition has given us a unique opportunity to establish the UBIC brand in the US.
        Regarding the second part of the question, all companies have their own culture, so even companies with identical national backgrounds have different cultures. To ensure there are no cultural obstacles when companies merge, it is necessary to recognize and accept that differences exist. UBIC has always respected cultural diversity, and so does not perceive it to be a major challenge.
        Most important of all is the need to share clear, solid, and positive goals, and to clearly visualize the path to those goals. I accompanied members of the UBIC management team on a visit to TechLaw Solutions. We held a number of team meetings, during which I continued to make every effort to convey to them my thoughts, regarding what we expected would be the outcome of the acquisition, the degree to which I believed Techlaw Solutions could help UBIC grow, and the reason I had confidence in our technology.
        At the same time, I held one-on-one meetings with all key employees, and made sure that each of them was enthusiastic about their work and that they held values akin to those upheld by UBIC. Had there been no relationship of trust or the support that comes from sharing common goals, it would have been hard for the companies to merge successfully. But, once we found we had the same goals and could help each other, the cultural differences became non-issues.

      10. Question (Dr. Gerhard Fasol): Your venture company is certainly one of the most successful, having grown rapidly into a global corporation that continues to expand. What are the main factors behind your success? Since improving conditions for the setting up of businesses is one of Prime Minister Shinzo Abe’s growth strategies for Japan, based on your experience, how would you suggest conditions might be improved for entrepreneurs?

        Answer (Masahiro Morimoto): One piece of advice regarding how to improve conditions for entrepreneurs concerns the Japanese education system. Schools should teach children, from a young age, about entrepreneurs and startups.
        Although the climate surrounding fundraising has improved, one critical drawback that Japanese entrepreneurs face is the difficulty in attracting smart, competent people to work for startups in Japan. In Silicon Valley, very competent new university graduates are eager to work for startups or small companies with less than five employees. They do not target Fortune 500 or well-known companies, or even companies such as Facebook or Twitter. In Japan, however, very competent students tend to want to work for big-name companies, rather than startups.
        Part of the problem is that we have not learned about startups and entrepreneurship, which makes it difficult for such businesses to attract young Japanese. For example, I used to be a public servant working for the Japan Maritime Self-Defense Force (JMSDF) prior to working for Applied Materials Japan Inc. But then, having a specific goal that I wished to achieve, I set up my own company. Yet, even at that time, had I had the option of working for a startup, I would not have done so, because the concept of startups was so ill-defined.
        Our children need to be taught that there are any number of work possibilities, ranging from being a florist, an astronaut, an entrepreneur or an employee at a startup. We also should teach our children that working for a large company is not the only option. In Japan, we still believe that large, well-known companies are “safe,” “good,” and, thus, “socially acceptable.” It is interesting to note that, these days, even some of the big companies are setting up-within their organizations-business incubators.
        Japanese media have begun to mention startups and entrepreneurs, while some universities have launched incubator programs to draw students into this area of expertise. This is important, since the younger generations should be made aware that there are any number of ways in which they can utilize their skills.
        There are several reasons for UBIC’s success. One factor is that we are a strong team, committed to a goal. Whereas one person alone can achieve relatively little, a great team with members who empower each other and work together can achieve great things.
        A second reason is that we have a clear corporate mission which is shared by the team. Fortunately, it dovetails well with the current social environment. When we launched our e-discovery business, our mission was to provide secure and cost-effective solutions for Japanese and other Asian companies facing litigation. Based on our expertise in analyzing of huge volumes of litigation-related data in English and several Asian languages, we have been able to develop our behavior informatics analytical tool, which makes it possible to predict how people will think and act based on the human conditions and behavioral norms.
        A third factor behind our success is the strong commitment to working as a team. Our motto – “Enthusiasm, Persistence and Impression” – was chosen to motivate our team to persevere in committing to our shared mission.

      11. Question (Dr. Gerhard Fasol): How did you finance the startup of UBIC? Did you accept venture capital? And what are your thoughts on the use of venture capital in Japan?

        Answer (Masahiro Morimoto): I believe that, in Japan, the overall environment for venture capital has improved, but I did not use venture capital because, in those days, there was little understanding of the benefits of incubating startups over the long term; mostly, their objective was short-term investment for profit.
        As a result, when startups got support from venture capitalists, they had no choice but to make a profit by, for example, opening more stores than they may have thought prudent. The results, at times, were fortunate and I did not wish to have such constraints. I wanted to be able to manage my company with a long-term vision. Nowadays, however, one finds venture capital enterprises even in Japan that want to incubate companies with a long-term vision. The situation has improved immeasurably.

      12. Question (Dr. Gerhard Fasol): You have started a number of new ventures in the medical field as well as the social networks. Can you tell about your vision for the future of UBIC?

        Answer (Masahiro Morimoto): We would like to contribute to the creation of a better future for society through the application of information analysis. At the same time, we hope to introduce a new approach to behavior informatics, on the basis of our extensive experience in litigation support and the application of innovative technologies developed through our research.
        Currently, many businesses are providing solutions for big data analysis of human behavior. But the amount of big data is so huge, that it is difficult for people to conduct in-depth analyses. Generally, little more than average results are produced, without specific topic-related differentiation.
        Our AI technology, however, which has been developed by our legal technology specialists, closely emulates human ability and behavior. In addition, it replicates tacit knowledge: the wisdom, and intuition of experts. In other words, our technology can reproduce what is difficult to verbalize. As a result, we are able to analyze subtleties, sensitivities, and distinctive aspects of individuals, which can for example, form the basis of medical diagnosis and individual consumer behavior and preferences.
        Our vision is to provide AI-based solutions that enable each person to realize his or her individuality and potential in order to develop creativity at work and in other settings.

      13. Question (Dr. Gerhard Fasol): Can you tell us the reason you decided to become an entrepreneur and start UBIC? What is your advice to other entrepreneurs who wish to set up their own business in Japan, or globally?

        Answer (Masahiro Morimoto): Well, at first I had no intention of becoming an entrepreneur. But, I developed a strong sense that I had to do something for those Japanese companies that were incurring huge financial losses as a result of litigation abroad. At the time, there were not many forensic or e-discovery services in Japan that offered strong support. That was why, after having accumulated from scratch the know-how required to set up a company, I established my own enterprise. My mission today is to support companies worldwide with our AI, which can emulate experts’ behavior and apply their wisdom to that we can continue to come up with appropriate business solutions.
        My advice to entrepreneurs and people who want to set up their own company is to have a clear mission, and to commit to this with persistence and the support of a strong team.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Toshiba accounting restatements in context

      Toshiba accounting restatements in context

      July 21, 2015: Update – report of the independent 3rd party committee chaired by former Chief Prosecutor of the Tokyo High Court.

      Corrections amount to 2 1/2 years (31.5 months) of average annual net profits

      by Gerhard Fasol

      Sales stagnation combined with almost zero net profit of Japan’s top 8 electronics companies creates increasing pressure to improve performance: top 8 electronics groups stagnate while Japan’s top-7 electronics parts makers thrive

      Toshiba over the last few weeks published a number of announcements, and corrections to these announcements concerning accounting issues. Toshiba also engaged internal and independent external expert commissions to analyze possible accounting discrepancies, these committees have made preliminary announcements.

      At a recent Press Conference, the CEO of the Japan Exchange Group (JXP) which includes the Tokyo Stock Exchange, Mr Atsushi Saito, said that “he feels very much ashamed for Toshiba”, and that “he cannot understand how Toshiba can be so lazy about their accounting”.

      To understand Toshiba in the context of Japan’s electronics industry, read our report on Japan’s electronics industry sector:

      Toshiba in the context of Japan’s electronics industry sector: top-8 electronics groups stagnate while electronics parts makers thrive

      Japan’s top-8 electronics giants – including Toshiba – have essentially stagnated for the last 17 years with negligible growth and negligible profits. Japan’s top 8 electronics groups combined have sales approximately as large as the economy of The Kingdom of the Netherlands. However, the big difference is, that in the 17 years since 1998, the economy of The Netherlands has approximately doubled, while Japan’s top 8 electronics companies have not grown their sales at all over these 17 years. Expressed in Japanese YEN, the combined sales of Japan’s top 8 electronics companies in FY1998 is about the same as in FY2014.

      Japan’s electronics parts makers are a very different story: similar to The Netherlands, Japan’s top-7 electronic parts makers have grown to more than twice the size over the 17 years from FY1998 to FY2014. Some of the Japanese electronics parts makers have growth targets which should allow them to overtake Japan’s current incumbent electronics groups!

      To understand Japan’s electronics sector, read our report.

      The stagnation of sales growth combined with almost zero profits over 17 years of Japan’s top 8 electronics groups, of which Toshiba is one, certainly puts much pressure on Japan’s electronics groups to improve performance. This pressure might be the background of accounting issues.

      Lets look at the actual Toshiba financial data in detail

      The figure below shows Toshiba’s previously reported operating income/profits (blue curve), and the recently announced preliminary corrections (red curve). The combined amount of downward corrections is about YEN 50 billion (US$ 0.5 billion) in total.

      Lets put this amount into context (financial data from our Report on Japan’s electronics industries):

      • annual sales: approx. YEN 6000 billion (US$ 60 billion)
      • annual operating income (average over last 17 years): YEN 148 billion (US$ 1.5 billion)
      • annual net income (average over last 17 years): YEN 19 billion (US$ 190 million)

      Therefore the downward correction corresponds to:

      • approx. 0.8% of average annual sales
      • approx. 33% of average annual operating profits
      • approx. 2 1/2 years (31.5 months) of net profits

      Toshiba – typical for Japan’s large electronics corporations – operates with razor-thin profit margins: Toshiba’s net profit margin averaged over the last 17 years is 0.25%.

      Therefore, the downward correction corresponds to 31.5 months of average net income/profits.

      Toshiba accounting corrections amount to approx. 33% of average annual operating income

      Toshiba operating income: previously announced (blue) vs preliminary corrections (red)
      Toshiba operating income: previously announced (blue) vs preliminary corrections (red). source: https://www.eurotechnology.com/store/j_electric/

      Japan electronics industries – mono zukuri – report

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