CSR and Japan's Kaisha

James C. Abegglen
Chairman, Asia Advisory Service K.K.

The Japanese company is a social organization, not simply an economic machine. Its main stakeholders are the humans that make it up. There is an exchange of obligations between employee and company, a commitment to mutual support.

Whose company is it? Who has a right to the company's income? In the Anglo-American view, the company is the entire property of the shareholders. In this view, corporate philanthropy is charity with other people's money since all the surplus moneys of the corporation are the property of the shareholders, who should as individuals decide on philanthropic gifts.

In the Japanese view, the company is a social organization, responsible for the well-being and future security of its members. It is not a mere collection of physical assets as in the Anglo-American view. Thus for example the company cannot be easily bought or sold, since the purchase or sale would be of people, not simply property.

Thus the Japanese company displays in many respects a very high level of social responsibility. It does not easily layoff or dismisses, even under severe economic pressure. It is prepared to invest in personnel training and education, since the employees remain in the company and the return on training investment is kept in the company. Income levels in the kaisha are relatively equal in contrast to the enormous differences in compensation in the Anglo-American model.

women and their careers, the failure to provide day-care and nursery facilities for example. Again, the concern for elderly is inadequate, with a very early retirement age and failure to provide tasks suitable or older people.

The company as social organization is deeply rooted in the value systems of Japan's long-lived society. All of the changes of the past several decades have not cancelled out the fact that the employee and company exchange a career commitment of mutual obligation. The most successful Japanese companies are still those that have adhered most closely to what are described as Japanese methods of management Nihon teki keiei. This method of management, with the key stakeholders employees and the community, brings with a high and continuing emphasis on social responsibility.

All of this deals with domestic Japanese matters with companies generally taking good care of employees, respecting environmental needs and constrains and displaying a much increased level of transparency in financial dealings.

However, we are in an era in which simply domestic affairs are only part of the corporate complex. Japan's kaisha are increasingly engaged in international trade and investment, and that involvement will continue to deepen. Here we are likely to find some serious issues regarding CSR. To list the most important

Environmental issues --- The appalling human costs of the crude mining of ores in Indonesia by a major Canadian company are an example of corporate irresponsibility. Are the kaisha doing what is necessary to prevent another Bhopal disaster in their foreign operations? As kaisha go abroad, will these catastrophes be avoided?

Corruption issues --- Much of the investment abroad by Japanese companies is into countries where corruption is rife and provides an all-too-easy solution to problems of regulations and bureaucracy Indonesia and China are examples. But yielding to the temptation of using corruptive practices is surely a classic instance of poor corporate responsibility.

overseas locations. Nike has taken a lead in proving its current adherence to the highest standards of ethical working practices in developing countries.

In summary, with some areas of real weakness, for the most part the kaisha show a quite exceptional level of corporate social responsibility. And they are not handicapped in this regard by the primitive Anglo-American view that all money in the company is the shareholders money. However, care needs be taken as the kaisha move abroad that they bring with them to their foreign locations a similarly high level of corporate social responsibility.