What Beji Sasaki’s bidding war with Fujitsu tells us about Japan’s work culture
BEJI SASAKI, chairman of Freesia Macross Co., is the abrasive maverick from the Japanese island of Aogashima, which boasts a tiny population of 145 people and a decidedly difficult transportation system – the island is only reachable by helicopter or boat from a neighboring island.
Sasaki’s career is a tale of American-like brashness towards business ventures – he exhibits a can-do attitude driven by a compulsive need to move forward.
His attitude stands in stark contrast with the slow, unchanging face of Japanese commerce and innovation, which is probably why he rubs so many people the wrong way.
The Japan Times recently conducted an interview with him, gleaning details from his life and career as a consummate disruptor of Japan’s static company culture. When he moved to Tokyo to open his own electronics business, he undercut his rivals and worked as a cartel: “Being an islander, I had no choice but to make my own way. I got shouted at a lot.”
Sasaki’s ambition has served him well; now he owns 50 small businesses, including extermination companies, ATM operators and fashion brands. But the part of his business that’s really making headlines is his bidding war with computer giant Fujitsu to acquire a 36 percent state in chip maker, Solekia Ltd.
Sasaki offered US$13 billion for the aforementioned stake, but has been met with resistance from not only Fujitsu and Solekia’s governing board, but by Japanese society at large, who frown upon Sasaki’s hostile approach to takeovers.
— Tom Redmond (@tomredjp) April 24, 2017
“I have no problem causing friction,” says Sasaki. “Solekia is just the first test case.”
Fujitsu made a counteroffer, which Sasaki has challenged three times – currently, the two are at a deadlock, with the offer rising by 173 percent to stand at JPY5,300 (US$47.6) per share. Fujitsu, on the other hand, stopped at JPY5,000 (US$45). However, there are signs Solekia is leaning towards Fujitsu, citing long-standing relationships, and aligned policies and markets.
“Solekia is an important partner,” says Fujitsu spokesman Shinnosuke Okubo. “We want to align our business strategy and policies, and we thought making it a subsidiary would speed up decision-making.”
According to Sasaki, Japanese conglomerates are deeply entrenched in a business culture that prizes “long-standing relationships” over pragmatism, resulting in them being mired in various financial scandals. Sasaki claims Solekia’s true potential has been allowed to languish in part because of its relationship with Fujitsu -Solekia receives favorable terms from the latter, which leaves them with excessive stocks and a dull competitive edge.
Sasaki’s offer emerges in a Japanese culture that is vehemently opposed to change and prizes respect above all. The hostile approach to business is uncommon, and rather opposed to Japan’s rather passive-aggressive business culture, where backroom meetings and decision-making are normal occurrences.
Venture Japan, a website aimed at clarifying business opportunities in the East Asian country, notes companies are core to business culture in Japan, and the guarantee of lifetime employment and pensions are expected from all Japanese workers. From the day they leave university, a Japanese worker can expect to join one of the big conglomerates, such as Hitachi, Panasonic, Toyota, Toshiba, and of course, Fujitsu, rise up in the ranks and eventually retire.
Hostile takeovers disrupt this culture and do not tend to succeed because they break up long-standing relationships and have a decidedly competitive flavor. Milton Ezrati in The National Interest writes the Japanese government has failed to allow enough free market forces to exert change and innovation in Japanese companies, which is part of the reason Japan’s economy is seeing a steadily increasing slowdown in its fortunes.
“For decades,” he writes, “Japan has set its economic emphasis on close cooperation among big business, the permanent government bureaucracy and elected politicians – what the Japanese call the iron triangle.”
The iron triangle has been instrumental in Japan’s rigid societal and commercial structure. Japan has always been a famously homogeneous society, resistant to immigration – despite Prime Minister Shinzo Abe’s attempts to lure foreign workers into the country – and persistently patriarchal. Despite noting the distinct lack of females in the workforce, the government has failed to implement policies to drive up female participation.
The picture doesn’t improve, especially when you consider the critical mass of op-eds that have been written about the free fall of Japan’s demographics and labor force. Wages have stagnated despite rising profit margins, investment rates are near zero, and birth and marriage rates are too low to compensate for the increasingly elderly workforce. In late December 2016, Japanese media announced birth rates would fall below one million for the first time since 1899.
Part of the stagnation lies at the heart of the small population of young people: The Economist reports in Tokyo, the number of those aged over 65 will increase from 2.7 million to 4.7 million between 2010 and 2040. In rural counties, that number spikes. In short, the country is becoming increasingly grey, but still ruthlessly resistant to change.
Another hallmark of the country’s problematic approach to corporate governance is looking increasingly like the biggest cause of its economic stagnation. Despite regulatory exercises to purge corruption, Abe’s policies have not managed to change the fact many businesses still have low returns on equity and the country still works to manipulate the value of its currency.
Actually, they've been built on trade. Japan has been stagnant for a generation thanks to protection & restricted immigration
— Martin Farley🔰 (@martin_farley) March 29, 2017
Toshiba’s current gamut of problems can be traced back to a secretive company culture that resorts to doctoring account books rather than ousting its bad apples. Large corporations continue to collude to ensure the appearance of health, and are particularly resistant to the intrusion of outsiders.
Furthermore, companies have no incentive to improve their profit margins: increasing profits would increase inheritance taxes on the next generation, while non-owners are not incentivized to push productivity. A vicious cycle thus ensues, and according to Sasaki, the cycle can only be broken by financing management buyouts.
Tetsuo Seshimo, a broker with Saison Asset Management Co, says:
“Brushing aside new shareholders suggests an aversion to change.”
“These kinds of situations may be one reason the Japanese market isn’t creating much profit,” he says.
Despite a long reputation as a technology hub, Japan has long ceded its reputation to other developed nations, particularly neighbors China and South Korea. The country is looking to robots and drones to subsidize the shrinking population, but it’s no longer making the frontrunner strides it used to make back in the ’80s and ’90s.
Technology is undoubtedly the future, which is why the Fujitsu-Sasaki feud is so significant. If technology companies themselves are averse to improving diversity, Japanese companies will never be able to compete with the agile, hyper-innovative startups cropping up in the United States, Southeast Asia and Europe.
What we can glean from Sasaki’s merger and acquisition moves is that Japanese company culture must change – demographically, culturally and management-wise – if it hopes to be able to continue competing on the world stage. Without a strong meritocratic culture and higher equity values to lure investors and young entrepreneurs, the country doesn’t have a prayer of saving its economy.