Long-established Japanese companies such as Toshiba tend to have a highly hierarchical structure, making it difficult for employees to challenge top-down decrees over cover-ups to "save face" for the

Madoff's ponzi scheme was institutionalized one

That comment shows me that 'institutionalized' doesn't mean what you think it does.

Or in other words, no it wasn't.

This happens in western companies too.

It does, but it's not institutionalized in western companies the way it is in Japanese companies.

It can be changed with more immigration, and more overseas business collaboration - both of which would bring an alternative approach to doing things, and people who wouldn't necessarily put up with hierarchical structure.

I do some work with a large Japanese company that joined forces with a very large European company about 5 years ago. Part of the deal was that the Japanese company would change to the structure and procedures of the European company. Also, the most senior manager at each site in Japan is now French. At first the majority of Japanese staff hated the changes, as they thought their way of doing things had been more efficient and more suitable for Japanese workers. However now, they love the fact that they are able to discuss and debate things with their superiors, they like the fact that their French senior managers want to know their opinions, and they also like the fact that the French managers insist that they MUST take their full allocation of holidays every year.

So I have seen first hand that it can be changed, but I can only see it coming from outside sources.

Do you think this corporate culture can be changed?

No. This is deeply rooted in all Confucian societies where people are expected to know their place, respect their elders and keep their mouths shut. You can't expect a company to change something which starts from childhood.

..if the average Japanese worker can't even go home when his schedule/contract states his shift is over without raising a fuss how can we expect them to challenge their boss on this?

I don't know that it 'can be', but it should be.

The Olympus guy became a hero, bestseller writer, and some award winner on the Olympus story. In other cases, some go back to the original positions. Not so bad deals. You can go to court if it was a career death.

A hero where? A hero to who? Not in Japan where was his life was threatened by the yakuza. He fled the country. He was fired here and he won a huge settlement. So, you trying to say whistleblowing in Japan isn't a career killer is absolutely false.

Btw, the awards you mentioned? They came from western business publications, not Japanese.

From what I know of the Toshiba issue is that profit was exaggerated and there was failure at disclosure - basically auditing and accounting practices are either shite or just unethical.

Hierarchical structure and tatemae (cover up) corporate and management culture are one thing, but I think that the Toshiba now is showing up problems in financial governance across the board. Just going through a list of developments in auditing and governance regulations from the Japan Institute of Certified Public Accountants (JICPA) now (http://www.hp.jicpa.or.jp/english/accounting/history/development.html), the standard (ie. good practice) rules all seem to be in place - lots since the end of the 90s and early 00s when lots of corporations caused financial institutions to write off truckloads of bad debts.

But what JICPA says is all well and good unless it is applied. It seems that more fundamentally there is a problem with compliance. There are so few mechanisms for making compliance ensured. But this is a problem all through Japanese community - there is the perpetual ironical circumstance of there not really being any laws or rules for anything until they are applied. Rather there are are millions of well-trodden convention or custom-based pathways. This includes drivers being lazy about stopping for red lights and even corporate governance.

It's not really a question of whether East is worse than West or East is better than West - corporate corruption & deceit knows no bounds. A globalization of fraud if you like.

With that though, it has been said many many times that a little more transparency, a little more lateral decision making, a little less seniors know best, a little less officiousness all together with a dollop of "lets listen" would help ease some of the company constipation problems for workers, management and clients.

My wife works at a large regional bank head office and quite frankly it is way out of whack with progressive business operation ideas. It's not my opinion - but a common view amongst staff, some who privately express their opinins. The upper echelons and mid level seniors of the company work think & work in a parallel universe. The high school you attended, the university you graduated from, the people you know(OBs etc) still hold great power. Some of the brilliant young(ish) staff I've met abhor this culture, but toe the line for their carrers and families sakes.

Could be anywhere, I know, but the Cheops pyramid model still appears to be the #1 company model in Japan.

Its going to have to get MUCH worse before real changes even have a chance of being tabled sadly!

This happens in western companies too.

Happens everywhere.

All companies commit some form of accounting fraud, most insiders will tell you the same. It's up to the auditors to reveal them or not, but they'd be loathe to turn in their own clients. Think of Enron.

What absolute, unmitigated, uneducated nonsense. First off, Enron was 14 YEARS ago. Second, if you knew anything about corporate governance in the U.S. you would know that immediately after Enron, and as a direct result of Enron, the U.S. Congress passed the Sarbanes-Oxley Act, which, among other things, mandates criminal penalties for corporate officers/board members for accounting high-jinks. In fact, CEO's must sign a statement whenever their company issues earnings results stating that under penalty of criminal prosecution, they swe tarhat the reports are correct to the best of their knowledge. If you Japanophiles are going to constantly fall back on the old "everyone does it" excuse to rationalize Japan's shortcomings, at least get your facts straight.

I would say that making Japanese company directors criminally liable for fraud (which would include deliberately misleading investors as to the financial health of a company), and actually enforcing prosecutions, rather than the usual hand slap that these guys will get, might go a long way to solving the problem.

What's the basic difference between what Horiemon did time for, and these Toshiba directors have now admitted to ? Both are effectively stock manipulation and lying to shareholders.

No, it can't change, because to get to anywhere near the top of nearly any company here you have to be part of the system. Change does not come from those who would benefit least from making change. Hoards of useless aging managers do not fire themselves even if they know that they are the problem; that's simply not what happens. Japan is stuck in its ways and will remain a very hierarchical (essentially feudal) country for many, many years. Toshiba and Olympus are the tip of a very deep iceberg.

Happens everywhere. Maybe a little more stiff in Japan. big companies are generally bureaucratic and minions are in fear of bosses.

@tinawatanabe yes nothing like on the scale of japan, and most western countries have strong whistle blower protection laws, that are actually enforced. a whistle blower in Japan is basically signing there career death warrent

tinawatanabe: "This happens in western companies too."

Not compared to here, where it's a national past-time and something guaranteed to land you a plum job somewhere else. You mention ponzi schemes in the US, but do tell us what happened to the masterminds behind those? They died in prison, or died on the way there. In Japan they may as well run for Prime Minister because they'd get it.

And no, as long as Japan EMBRACES this kind of practice, which they do from a very young age, it'll never, ever stop. People saying immigration would change it in the future need to realize that foreigners trying to change things for the better here are called trouble-makers at best, and kicked out at worst. Look at the female CEO who recently was jailed for weeks without charges compared with the CEOs of Olympus. Look at former presidents of companies like TEPCO -- who have caused SOOOO many problems and cost soo much while making huge profits for themselves. Isn't he an advisor on nuclear issues somewhere now? This nation is a joke when it comes to punishing people responsible for this kind of MASSIVE crime and cover-up.

All companies commit some form of accounting fraud

Um, no. We make sure everything is above board in our companies, and that we could pass any audit without issue.

The once renowned Japanese corporate set-up and management hasn't withstood the test of time. Nor bore any economic fruit since the bubble years.

Do you think this corporate culture can be changed?

No. Seems like Japanese work-ethic and anything corporate culture related (the good & bad) are ingrained into every salarymans' DNA.

Your side

I love how you break everyone here into 'your side' and 'my side', completely ignoring the fact that 'my side' (the foreigners) disagree and argue amongst each other as much as we disagree and argue with you. There is no 'your side'. There is simply other points of view.

The only way that will change is for a greece like scenario to shock Japan into changing ALOT of things. I suspect that time is very near. I'm guessing in about 10-12 years

Do you think this corporate culture can be changed?

Well of course.

Oh wait, in Japan? No.

MacArthur tried to change the system after the second war. The big companies and trading houses were broken up, and the people were free to create whatever system they liked. But unfortunately, they weren't given time to acclimate, Washington was impatient with the expense of economically supporting post-war Japan. The old companies and trading houses were allowed to reincorporate (becoming Japan Inc), and begin dominating the country, they still dominate it today.

They control every part of the economic structure of Japan, including the educational system. They run the banks, the factories, the builders and real estate developers, everything. The control society, and they keep out competition. Every young person is taught not to be the nail that sticks out, to respect their elders, and obey implicitly. In university students are taught nothing, making them completely dependent on their future employers. And the goal of all young people in Japanese society is to get a job at one of the famous companies.

A friend of mine is working hard at his company, and was talking about how badly he needed a vacation. I asked him why he doesn't take one, but he says he is afraid to ask his boss. In Japan workers are legally entitled to vacation time, yet many don't. Last year this same friend used his vacation days, but had to work while he was supposedly on vacation. That is actually a crime, but it is a common one in Japan, and is an example of how terrible the Japanese corporate system is. In America I was not required to take my vacation time, but if I didn't use my days, I could expect to be paid for them. In Japan this does not happen. But since the companies have such power here, the workers feel helpless to do anything other than what they are told to do. If my friend were to complain, he would get his vacation, probably several week's worth, and the company would not be able to fire him. But he would be moved to the broom closet, and forced to do things like make copies and do the tasks normally assigned to new employees, which would be a great shame to him. And of course the company could not be punished for doing something like that.

A great pity it all is.

All cultures change with time. Any culture can be changed. It just takes work. You can't have a group of outsiders say, "You need to change," and then have the insiders respond with, "We are going to think deeply about changing." People need to actually like, do stuff.

A big factor in cultural change of any kind is what is happening in the neighboring cultures. The culture of Company ABC exerts some pressure on the culture of company XYZ. So if you want to change the big, problematic giant companies, start with changing the small, not-yet problematic up-and-comers.

@Guy_Jean_Dailleult Seems like a straw man to me, i.e., criticism of practices in Japan = inability to criticize other places or recognize problems in other societies. Why wouldn't someone be equally capable of criticizing many places, including their country of origin? Is it because you believe we have to identify ourselves nationalistically? I know a lot of Japanese people who believe certain aspects of Japanese work "culture" are harmful. What would you tell them? I wonder if people with that "love-it-or-leave-it" attitude believe they're the true defenders of "the people."

No

@Tina:

When you make grand sweeping statements, such as your quote above, then yes: you are talking about any and all cases involving American and/or Japanese business, including the Toyota case.

In that quote you insinuate that Japan is in some way better or more concerned than USA at protecting customers, which is simply not true.

Bad cases may have occurred in the states, but as a result VERY big legal changes and/or punishments are dealt. That is to say, when bad stuff goes down, it is usually very big and very game changing whereas in Japan it's a lot of bowing and apologies.

That's what people are saying- it's not that Japan is inherently worse than the States, it's that there's less repercussion for companies when said bad things happen.

BTW: speaking of not true, the Toyota brake case was in fact totally Toyota's fault (glitch in their software). http://edition.cnn.com/2010/WORLD/asiapcf/02/04/japan.prius.complaints/

@Tina:

No, I didn't insinuate that, I said different corporate culture. It is useless to criticize a different culture from your culture without understanding the different culture.

See:

there is a big difference in the corporate cultures between Japan and western countries....In Japanese companies they also have to be worried about employees and customers to protect

Which implies that America does not have to be worried about protecting employees and/or customers. (otherwise, why mention it as a point to explain how Japan is different from USA?)

Your side is saying worse as this is a Japan thing.

I think you need to check the word inherently. That is to say, naturally, Japan is not worse than USA. Both have corporate problems, etc.

The difference is how Japan historically has handled things and/or what kind of punishments have been given. It's kind of apples and oranges, but I've seen no case where harsh justice was delivered to Japanese companies, whereas I have seen American company CEOs sentence to 25+ years jail time and their companies bankrupted.

Olympus people and Horie lost lots of things, not slap on the wrist. I think those were effective. I heard no Japanese criticize USA over Enron or other scandles as American things.

Because the Enron execs were treated harshly. Something that didn't happen at all with Olympus. It did happen to some degree with Horie, but even his punishment was not that harsh as compared to what would happen in the US.

So?

Wow, are you really not able to follow the conversation?

The question seems to expect change to come from bottom up ("employees to challenge top-down decrees over cover-ups to "save face" for the company") which is idealistic and is not going to happen.

Change here regarding accounting fraud needs to come from top down. And top here doesn't mean the Board of Directors. Top means the shareholders. That's the real mystery here. How can companies get away with operating in a way that is detrimental to their shareholders? Why do shareholders put up with incompetent performance from management? And even passive shareholders should be protected by law from fraud. That they aren't just doesn't make sense.

More serious and greedy fraud cases happened in USA.

LoL, but japan is a homogeneous and harmonious society. This cannot be said about US. Is corporate Japan afraid of wearing the same shoe?

tina - as I posted earlier this has nothing to do with east vs west or west vs east. Some may raise that point - including you - but it's not the pertinent point.

I live in Japan, my family is Japanese, I own a house in Japan, I work & socialize in Japan - in fact my life is consumed by all things pertaining to Japan. This forum is "Japan Today".

So I think it's only right and fair to make comment on things in Japan that I believe directly affect my welfare, the welfare of my family and friends and in fact the welfare of all citizens of Japan.

If I lived in the states I'd no doubt make comments re their state of affairs on any number of public forums or media sites from NY times to Huffington post etc.

And on this topic, my belief is there is a severe lacking in corporate accountability and transparency in JAPAN. The same opinion is held by many here from the lower rung of status temp workers through to government, academic and judiciary persons.

Accepting a valid observation when it's made, instead of casting in them & us terms, can have positive benefits.

How does any of that relate to your previous incorrect comment?

All companies commit some form of accounting fraud, most insiders will tell you the same. It's up to the auditors to reveal them or not, but they'd be loathe to turn in their own clients. Think of Enron

@kaynide. . .this is that so-called loyalty to the company. And all that machoism, how they all brag about how late they leave the office.

Not in any of our lifetimes. It hasn't changed since the 70's despite the bubble bursting, and over two decades of stagnation. Why would it possibly change now?

Aly, agreed Japan doing a Greece or similar is what worries me about living here. People always say no problem Japan owns its own debt, while mostly true if the you know what hits the fan & the YEN vs other currencies goes haywire & the Yen gets super weak trade with the outside world will essentially STOP & we would head to the lifestyle of NKorea in short order.

I can picture this happening, obviously DONT want it too but Japans debt is TODAY MUCH WORSE than the Greeks debt!!!

@Tina:

you should know that there is a big difference in the corporate cultures between Japan and western countries where stockholders are the priority. In Japanese companies they also have to be worried about employees and customers to protect.

..you remember when the CEO of Toyota was summoned to the American Supreme court and chewed out? That was not about stockholders, as the Supreme Court doesn't give a damn about that. It was about the stupid loss of American lives because a car wasn't safe and a company wasn't fixing the problem.

I think Olympus and Livedoor was punished severely. Why do you think Japan should do the same things as Americans when what they did were different things/scale?

What are you talking about? The Olympus execs got suspended jail sentences, and Horie only went to jail because he had defied the establishment and didn't follow their rules, so they hammered him down for being a 出る杭. Hardly the rule in Japan.

Did you see "the List of reported accounting scandals" in Nigelboy's link? Most of the accounting scandals are in USA. Why are you so proud of your country's way of doing when it does not seem to be working?

Yes, I am proud that most of the scandals have been caught in the US, that means that the government is catching and punishing the crooks. The system is working quite well. The reason that the list in Japan is shorter is that the Japanese government does not investigate or punish such things until they become public news, and they have no choice.

And how about FIFA? FIFA has been bribing and accepting bribes around the world, for decades, yet it was only in America that they have been punished. Many european fans have long been angry that their own governments have been reluctant to punish FIFA for it's corruption, and are quite happy that America finally did something about it.

How about price fixing? There are more Japanese in jail in America for price fixing than there are in Japan. Have you been to a movie theatre lately? I suppose you know that all theatres in Japan charge 1800 yen for a ticket. That is price fixing, it is obvious, and it is blatant, and in Japan, it is a crime. Yet the movie theatres are never punished for this crime, are they? And movie theatres are only the tip of the iceberg of this illegal practice which occurs in nearly every industry in Japan, and is never investigated or punished.

Yes, I am glad that America investigates and punishes companies that keep bad books, and I am sad that Japan refuses to do the same. I am glad that America enforces it's laws against price fixing, and corruption, and that American jails are full of dirty politicians, crooked accountants, and others. I am not proud that Japan refuses to the the same, and that even when such people are caught red handed, they are not punished. Why isn't Tokyo's former governor in jail right now? If he were in America, he would be on trial right now, and looking at 5 to 10 years in a jail cell.

@Tina

The point many are desperately trying to make is not whether these things occur or not, and not whether USA is better or not at corporate honesty. What we are are trying to say is that the USA handles occurrences in a much more severe way, so corporations that do business dishonestly do it at a huge personal and corporate risk.

In Japan, it seldom is anything more than a slap on the wrist. That is the problem.

Btw, both Enron and Olympus were busted/in trouble for not reporting losses/debt. The scale is different, true, but both were hiding billions of dollars in loss.

The link of nigelboy seems to show that USA has more fraud cases than Japan. Why do you assume your way of doing is better?

America has farmore companies than Japan. America the world's largest economy, Japan is number three. America creates five times as many news businesses each than Japan. America has nearly three times the population of Japan. Isn't it rather obvious that an economy which is far lerger than Japan's is likely to have more cases of fraud? Doesn't anyone use their heads anymore? Is the world stupid? I guess so.

Last year 70% of Japanese companies reported a loss, and paid no tax. This has been going on for years, yet these companies manage to stay open for year after year, reporting loss after loss. Isn't it rather obvious that many of these companies are in fact not really losing money, but are simply not accurately reporting their income? Understating income is no less fraudulent than overstating income, it is actually a greater crime because it includes tax evasion. At least Toshiba had to pay more tax on it's overstated accounts.

The problem with Japan is that there is no clear line between the regulators and the regulated. The boards of the big Japanese companies are full of retired bureacrats and politicians. Japan is ruled by a business/government complex, in which one hand washes the other, and no one bites the hand that feeds them. It is thoroughly corrupted, and since the relationship between the government and business is so close, we can't count on the government to enact or enforce any law which interferes with business.

I just had to look it up. Post Enron

https://en.wikipedia.org/wiki/Accounting_scandals

Doesn't do any good when companies/executives still practice them despite the 'harsh' penalties.

I think Olympus and Livedoor was punished severely. Why do you think Japan should do the same things as Americans when what they did were different things/scale?

I think you may be underestimating the scale of corporate malfeasance in Japan. Back when the Olympus scandal broke, some of my friends in Japanese companies said that Olympus was far from being alone in cooking it's books. Had these executives been running an American company, they would have probably died in prison. The former CEO of Enron is still in prison, and because he is there (he was originally sentenced to 24 years), other American companies have been very careful to keep their books straight, and their financial reports honest.

But since Japanese bureaucrats and politicians count on amakudari jobs at the companies they are supposed to be keeping an eye on, it is no surprise that they look away when the company misbehaves. Until practices like amakudari are banned and punished, Japanese executives don't have any fear of being sent to jail when they lie to their stockholders, employees, and regulators.

The Olympus execs got suspended jail sentences, and Horie only went to jail

What Horie did was much worse than Olympus, his intention was greed while Olympus was to protect the company from the loss they incurred during bubble burst.

sangetsu03 - Did you see "the List of reported accounting scandals" in Nigelboy's link? Most of the accounting scandals are in USA. Why are you so proud of your country's way of doing when it does not seem to be working?

I admit Amakudari is a bad practice, but are you aware those bureaucrats are the people who are helping USA?

@browny1

When did I object your making comment on Japan? I'm saying many posters praticularly westerners are often assuming their way of doing is the norm, by which they judge Japan.

The link of nigelboy seems to show that USA has more fraud cases than Japan. Why do you assume your way of doing is better?

@Kaynide

There is a difference in corporate culture between Japan and US. I don't say which is better. Both has the pros and cons. It is true that Americans think corporations belongs to shareholders and the managements tends to listen to the sharholders and make decisions. The Japanese tend to consider corporations in broader sense: they belong to not only to shareholders but employees and customers and the soceity, which is one of reasons Japan's corporation fraud happen I think.

I've seen no case where harsh justice was delivered to Japanese companies, whereas I have seen American company CEOs sentence to 25+ years jail time and their companies bankrupted.

I think Olympus and Livedoor was punished severely. Why do you think Japan should do the same things as Americans when what they did were different things/scale?

kaynide - I'm not talking about Toyota case, which was turned out to be not Toyota's fault as I suspected because if the car had the problem, much more accidents would have occured, not only a few. Toshiba's case was the accounting. Yes Toshiba was wrong. But it is wrong to say this is a Japan thing. More serious and greedy fraud cases happened in USA.

@sangetsu03

you can't live a day without comparing Japan with your home country. Japan's crime rate is very low, but that does not mean Japan's police is cheating the record to make Japan look safe.

FIFA was corrupt for a long time. I don't know why now USA moved. I didn't know that USA had power over FIFA too. Why didn't do anything until now if they had power? It does not look something to be proud of.

I am not proud that Japan refuses to the the same

Japan is in fact a different country.

@Kaynide

Olympus people and Horie lost lots of things, not slap on the wrist. I think those were effective. I heard no Japanese criticize USA over Enron or other scandles as American things.

@kaynide

When you make grand sweeping statements

If you look at the posts of your side above objectively, You'll see your side is making grand sweeping statements.

In that quote you insinuate that Japan is in some way better or more concerned than USA at protecting customers, which is simply not true.

No, I didn't insinuate that, I said different corporate culture. It is useless to criticize a different culture from your culture without understanding the different culture.

it's not that Japan is inherently worse than the States,

Your side is saying worse as this is a Japan thing.

Bad cases may have occurred in the states, but as a result VERY big legal changes and/or punishments are dealt.

So, it is not a Japan thing, and how to deal with it is depend on the country/culture, pro and con.

whereas in Japan it's a lot of bowing and apologies.

And punishments by court. Horie and Olympus people both got severe ones.

Your link about Toyota is old, I saw an official anouncement from your governing body recently saying that they did not find anything wrong as conclusion.

@Wc626

LoL, but japan is a homogeneous and harmonious society. This cannot be said about US.

What's that have to do with anything. A homogeneous and harmonious society is wrong? I know US is not.

Japan afraid of wearing the same shoe?

No need to wear the same shoe. Not interested.

whistleblowing in Japan isn't a career killer is absolutely false.

I didn't say it wasn't a career killer. Anyway Olympus was charged and fined, and Toshiba should be too. But you should know that there is a big difference in the corporate cultures between Japan and western countries where stockholders are the priority. In Japanese companies they also have to be worried about employees and customers to protect. So in Olympus case, it was not from greed but they tried to protect the company (in the wrong way). it is not so simple as many posters here think.

They came from western business publications, not Japanese.

right. I shouldn't have mentioned it because I haven't read his book.

.

a whistle blower in Japan is basically signing there career death warrent

The Olympus guy became a hero, bestseller writer, and some award winner on the Olympus story. In other cases, some go back to the original positions. Not so bad deals. You can go to court if it was a career death.

Oh wait, in Japan? No.

In anywhere, No. In Japan, the number of fraud cases is 20 times smaller than in South Korea. I don't know in western countries but maybe a similarly big difference.

This story, like the Olympus "scandal" before, is catnip for the "Japanese culture must change" crowd who see everything that happens in Japan as exposing some deep, ingrained flaws in the culture. The same people who seem to think their home countries are squeaky clean, perfect countries where everything runs wonderfully. As pointed out above, this happens in western companies too, or have people never heard of the issues surrounding corporate whistle-blowers and their lack of protections? As for the level of accounting fraud at Toshiba, it is hardly the only place where that is going on, and it is going on at far greater levels elsewhere. Basically, the entire western financial system is an accounting control fraud, but I don't see anybody here wringing their hands over the flaws in American, British, and European "cultures" that have led to that, even though the costs are infinitely greater to the general public than the any costs from Toshiba cooking the books (which for the public are probably zero).

It does, but it's not institutionalized in western companies the way it is in Japanese companies.

Madoff's ponzi scheme was institutionalized one, the largest in history.

making it difficult for employees to challenge top-down decrees over cover-ups to "save face" for the company.

This happens in western companies too.