The new Japanese Firm as a Hybrid Organization

verfasst von: Dr. Mitsuharu Miyamoto

Verlag: Springer Singapore

Buchreihe : Evolutionary Economics and Social Complexity Science

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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This book examines corporate reform in Japan by focusing on corporate governance and the employment system. Contrary to a prevailing assertion of radical change, it is revealed that actual change is gradual, and a new type of Japanese firm is generated by reform with gradual change. Throughout the book, Japanese firms are seen to be evolving through gradual institutional change. Chapter 1 discusses how Japanese corporate governance changed incrementally and cumulatively to rebuild management and restore corporate performance. Chapter 2 focuses on reform in work organization and discusses how performance-related pay was introduced in tandem with corporate governance reform. It is shown that the practice of long-term employment has been maintained despite the prolonged depression and mounting pressure to shift to shareholder-oriented corporate governance. Chapter 3 investigates how Japanese firms are diversified into four types, based on whether performance-related pay is introduced and whether long-term employment is maintained. The author demonstrates that major Japanese firms reconstruct their organization as hybrid structures based on a combination of long-term employment and performance-related pay. Chapter 4 investigates how performance-related pay actually operates. It is analyzed by distinguishing the three main objectives to be attained by performance pay: succeeding in individual performance, contributing to overall organization performance, and meeting the challenge of new tasks. Finally, Chapter 5 investigates how employees react to changes in corporate governance. Using survey data, the book shows that Japanese employees approve of increasing shareholder value, regarding it as corporate value. They not only approve the monitoring of management by shareholders, but also demand a part in the monitoring. Employees seek to be engaged in corporate governance—a true challenge for a Japanese corporation.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Change and Continuity in Japanese Corporate Governance

Abstract

This chapter discusses the corporate governance reform in Japanese firms since around 2000. It was initially modeled on US firms because in contrast to the prolonged slump in Japanese firms, US firms were praised for their prosperity due to prioritizing shareholder interests in corporate governance. However, Japanese firms did not adopt such a direction of shareholder-oriented corporate governance despite the increasing shareholder pressure. They preserved the stakeholder-oriented corporate governance and reformed managerial organization to restore their corporate performance. This chapter investigates the actual change in the governance structure, particularly focusing on the board structure, and presents that change is incremental and cumulative contrary to the assertion of an overall institutional change such as US-style committee system. Japanese firms preserve their own governance structure and present a diversity among different forms. We found change and continuity unfold as the reform proceeds in the course of gradual institutional change.

Mitsuharu Miyamoto

Chapter 2. Reform of the Work Organization: Performance-Related Pay and Employment System

Abstract

This chapter discusses the reform of work organization that proceeded in parallel with corporate governance reform. It is argued that performance-related pay was introduced in tandem with the introduction of the corporate executive officer system. While the latter intended to strengthen strategic management, the former intended to stimulate employees’ incentives for work. On the other hand, long-term employment practice has been maintained despite the prolonged depression and mounting pressure to shift to shareholder orientation. Japanese firms reconstruct their organization as a hybrid structure composed of market-based performance-related pay and organization-based long-term employment. As in the case of corporate governance reform, change and continuity unfold as the reform proceeds. However, Japanese firms are surrounded by many arguments to insist on an overall institutional change modeled on the US-style market-based employment system. We examine them in detail and demonstrate the fallacy of the claim for such a radical change.

Mitsuharu Miyamoto

Chapter 3. Diversification of Japanese Firms: How Did a Hybrid Organization Emerge from Corporate Governance Reform?

Abstract

This chapter discusses the diversification of Japanese firms under corporate governance reform. First, it is shown that Japanese firms are classified into four types, based on whether performance-related pay (PRP) is introduced and whether long-term employment (LTE) is maintained. Next, such classification is analyzed as a diversification from the traditional Japanese firms and demonstrated that it is boosted by the effect of the board reform to strengthen strategic management, and a hybrid organization emerges by the combined effects of the board reform to advance the introduction of PRP and stakeholder orientation to maintain LTE. We also found that the other type—a combination of not-maintaining LTE and introducing PRP—emerges by the combined effects of the board reform and shareholder orientation. In this way, we show a gradual institutional change in Japanese firms; it begins by the board reform, an incremental change compared to the US-style governance structure, which proceeds to cumulative change in the work organization and finally results in the diversification of Japanese firms.

Mitsuharu Miyamoto

Chapter 4. How Do Japanese Employees React to Performance-Related Pay?: The Working of Hybrid Organizations

Abstract

This chapter discusses the work of performance-related pay (PRP) within hybrid organization. Although a hybrid organization intends to raise employees’ motivation for work by the two measures, stimulating incentives by PRP and providing stable employment by long-term employment (LTE), the two measures may conflict with each other. Thus, the scheme of PRP may be modified and weakened to be compatible with LTE. From these perspectives, the work of PRP is analyzed by specifying the three types of motivation: for achieving individual outcome, contributing to the organization performance, and challenging a new task. It is found that PRP works effectively along expected lines for the motivation to achieve individual outcome, whereas it works restrictively for the second and third motivations. We further discovered that the effect of work satisfaction compensates for the lack of LTE concerning the motivation to achieve individual outcome. Thus, if employees are required to achieve only their own performance, LTE is not needed as long as work satisfaction is achieved. In this way, it can be predicted that hybrid organization shifts to the other structure with strengthened PRP and without LTE. On the contrary, as long as employees are required to contribute to the organization’s performance and challenge a new task, hybrid organization is confirmed to be effective.

Mitsuharu Miyamoto

Chapter 5. How Are Japanese Employees Reacting to Changing Corporate Governance?

Abstract

This chapter discusses the employees’ attitudes to changing corporate governance. Although Japanese employees have been characterized by their cooperative relationships with management based on the stakeholder-oriented corporate governance, change to shareholder orientation may dissolve their cooperation. This may erode competitiveness of Japanese firms. While survey data shows that employees present an unexpectedly high ratio of the approval for increasing shareholder value, regression analysis demonstrates that they consider shareholder value as similar to corporate value to be shared with employees as well as shareholders; Japanese employees convince stakeholder-based management even under changing corporate governance. We further found that employees recognize the necessity to strengthen the monitoring by shareholder on facing poor corporate performance and seek monitoring by employee themselves when perceiving long-term employment not to be maintained. In short, Japanese employees want to participate in corporate governance together with shareholders to increase corporate value and protect stakeholder orientation, as is the German counterparts. However, there is no such institutional mechanism in Japan. We address that this is a true challenge for the Japanese corporate governance reform.

Mitsuharu Miyamoto

Chapter 6. Conclusions

Abstract

We purposed to understand exactly the ongoing changes in Japanese firms. Although the arguments that insist on a radical institutional change have been repeated, such a change has never been realized. We discovered throughout the investigation that actual change is incremental and cumulative, and Japanese corporations evolve in different directions through the gradual institutional change. We summarize the main findings in the previous chapters.

Mitsuharu Miyamoto

Erratum to: The New Japanese Firm as a Hybrid Organization

Mitsuharu Miyamoto

Backmatter

Titel: The new Japanese Firm as a Hybrid Organization
verfasst von: Dr. Mitsuharu Miyamoto
Verlag: Springer Singapore
Electronic ISBN: 978-981-10-8851-3
Print ISBN: 978-981-10-8850-6
DOI: https://doi.org/10.1007/978-981-10-8851-3