I was interviewed by Nihon Keizai Shinbun for a column called "Airspace violation". It is an interview report and aims to have a person present open questions about things other than his/her profession. Although I had several themes in my mind, I decided to talk about personnel management of enterprises. The article appeared in the morning edition page 5 on Aug. 4th, 2008, under the heading of " ‘Tenures’ are not appropriate for executives. Decide according to their performance and actual results." The article is as follows. Gist of my remarks are in the quotation marks.
■ We understand that you have doubts about "Tenure" of business executives?
"I hear that there are many enterprises which have customs or byelaws that set presidents’ tenure as 2 terms of 4 years or 3 terms of 6 years. But does it make any sense? I hardly think that the governance of Japanese enterprises so far was good enough just because they have a tenure system. "
■Current trend is to shorten the tenure of top managements of large industries. Along the trend, many enterprises are shortening the term of office of CEO from 2 conventional years to 1 year.
"If manager’s term of office is set short, he/she won’t consider the business on long term scales. Suppose some problem occurs during the tenure. I suspect that it will not be solved by he/her but will be transferred to their successor." "Same things happen in governments as well as universities, the field where I come from. As government officials are replaced one after another the problems go on passing to the successors. Since tenure of deans and president of university is short, talent training cannot be planned from long term perspectives."
■On the other hand, there are adverse effects if the tenure is prolonged and also criticisms about "problems caused by aged people".
"For ‘problems caused by aged people’, you can simply set young presidents in their 40s. Then even after serving for 10 years, his/her age will still be below 60. There are some cases, like Sharp or Hotel Okura, which had presidents in their 40s. However, in large industries in Japan, the number of young managers is still very small. What is required of a leader is; vision, ability of conveying the vision to the other people, intellectual and physical strength, and strong faith. Age is irrelevant. Younger talents should be selected." "Nevertheless, it doesn’t mean that ‘long term control’ is always no good. There are many founders of corporations in Japan, like Mr. Akio Morita of Sony, who demonstrated wonderful management skills for a long period of time. There may be many employed managers who can achieve excellent results in their long term tenure."
■Problem is not the short or long length of tenure?
"The point is not to set tenure but to build a mechanism so that the ability and achievement of a manager is evaluated objectively and in case any problem arises, the mechanism must work to have him removed immediately. But how many Japanese enterprises actually have such structure functioning? If a company can not have a person to retire till completion of his customary tenure we must say that governance does not exist."
■One more word, please.
Once you become a professor, you will be safe till retirement. This is also strange.
■A word from the interviewer.
How should we select and evaluate the heads of management? It is a very important issue connecting to the base of enterprise governance. There are cases where external reporters or external directors participate in selection of the succeeding director but such advanced examples are yet very few. How do Japanese managers answer to those simple questions about executives raised by Dr. Kurokawa? (Editing committee, Yoshiyuki Miyata）
I expect there will be various opinions, points regarding the contents of this article. Although I spoke for a long time they had to summarize it in a little space. Anyway, pushing theory of your own is useless in this era of global economy, especially if it is the world’s second great economic nation. It is a matter of credibility of a business, a nation. In this information age, governance with transparency is the basis of company’s worth. Not limited to enterprise, everything is transparent from the world even if you tried to hide. And here lies the challenges of "Flat age".
Some of the arguments about this article have appeared at Nikkei Net PLUS. You are able to read them by registration (free). What do you think?