Japan Should Lead the Way Toward Practicing Public Interest Capitalism (2) [2020年03月18日（Wed）]
Business Communities Reluctant to Raise Wages
I have no objection to raising compensation for senior company executives in Japan, which is said to be lower than in the United States and western Europe. But while Japanese companies’ internal reserves hit all-time highs almost every year and executive compensation keeps rising, why do employees’ wages remain stagnant in contrast to other developed countries?
As a rule of thumb, internal reserves are supposed to pay dividends to shareholders, make capital investments, and raise employee wages. Regrettably, Japanese companies have been reluctant both to raise worker wages and make new capital investment, despite the government’s call on the business community to do so.
I understand companies’ cautious attitudes are attributable to Japan’s rapidly aging society and declining population as well as their experience in wrestling with the fallout from the collapse of Lehman Brothers in 2008−the so-called “Lehman shock” that triggered a global financial crisis. But if so, companies are not taking on social responsibilities.
Konosuke Matsushita (1894-1989), the founder of Matsushita Electric Industrial Co., now known as Panasonic Corporation, and revered as the "god of management” in Japan, is famous for such quotes as “Business is people,” underscoring the importance of developing human resources.
Eiichi Shibusawa (1840-1931), known as “the father of Japanese capitalism,” who founded over 500 banks and business corporations, including the First National Bank (now Mizuho Bank), Tokyo Gas, Sapporo Brewery and the Imperial Hotel, developed his solid conviction that morality and economic activity are compatible−the doctrine that saw morality as an essential part of economic activity and stressed pursuit of the public interest.
It is the mission of a company to value people and proactively work on virtuous business management for society. This is the tradition that Japanese companies have cultivated over the years. From this April, the principle of equal pay for equal work will be applied to large companies. I would hope that the business community will act proactively, working to narrow the income gap between regular and non-regular employees.
Companies’ internal reserves are after-tax revenues. So, there may be a lingering objection in the business community to imposing a tax on internal reserves, claiming that it would amount to double taxation and possibly encourage more Japanese firms to manufacture their products abroad. But if Japanese companies leave their internal reserves mostly untouched, it would give more reasons for a new tax on them.
The Sense of Crisis Also Spreading in the U.S., Europe
In the United States and Europe, there is also a growing sense of crisis about shareholder capitalism, which has brought about excessive income gaps and serious environmental degradation. Prior to the annual World Economic Forum in Davos, Switzerland, in January, the NGO Oxfam International came up with a mind-boggling report revealing that the world’s 2,153 billionaires had more wealth than the 4.6 billion poorest people on the planet in 2019. I do not think that such a distorted society is sustainable.
High on the agenda at the Davos conference was how to redefine capitalism, and there was a strong call for switching to “stakeholder capitalism,” which values all employees, society and the environment.
At a time when shareholder capitalism remains dominant in the world, Japan still maintains stable employment compared to other countries. Japan, which values human resources and social harmony, should be in a position to lead the world toward having second thoughts about shareholder capitalism.
Public interest capitalism should be one of our goals. I sincerely hope that Keidanren (Japan Business Federation), comprising the nation’s 1,412 big business corporations, will take the initiative now to achieve this goal.