Ichiro Suzuki
Morgan Stanley Chairman James Gorman has announced that he is leaving the post of chairman at the end of the year. He already stepped down as CEO on December 31, 2023 after leading the investment bank for 14 years. J.P. Morgan’s Jamie Dimon has hinted that he would not remain at the helm of the storied bank for too long. This is his 19th year as J.P. Morgan CEO. Tim Cook is in his 14th year as Apple CEO and some speculations are emerging at last about his successor. Satya Nadella has been Microsoft CEO since 2014 but there is little talk about who is going to succeed him. He is only 56. All these men have made substantial accomplishments, significantly altering strategic orientations of their companies and boosting shareholders’ value. All of these companies are considerably different today from what they took over from their predecessors. Who would have thought ten years ago that Microsoft would be once again the largest company with equity market capitalization over $3 trillion?
Here is Corporate Japan, where different men (not women regrettably) come in and out at the top every four years. Directors are appointed by the board and approved by shareholders for a two-year term. Most men serve two two-year terms as president-CEO. Then they ‘step down’ from the top job to assume a position of chairman, vice chairman, etc. They never have to leave the company. Rotation of presidents keep the company’s face always fresh, superficially of course, not making the company dependent on one man, to prevent corruption that might come with a lengthy tenure of a man at the helm.
A year ago, Akio Toyoda stepped down as CEO of Toyota Motor after 14 years at the helm. While this is a notable exception in Japan, Toyota Motor is the company his grandfather started. A special meaning is always attached there to men named Toyoda. His successor Koji Sato is the 12th President/ CEO of the company and 6th man with a different surname from Toyoda. Most likely he will serve a much shorter term as CEO than his predecessor. Mr. Toyoda rose to the top job after the company reported its first loss in decades for the year through March 2009, amid the Great Recession that sent GM into bankruptcy. He turned around the company from huge losses, changed its production system and delivered stellar financial results. Most recently, he kept stressing ‘multi-paths way’, where electric vehicles and hybrid cars coexist though he was often mocked on this. As it turned out, he was proven right upon acute deceleration of EVs demand. A four-year term CEO might have gave in to social pressure, possibly dragging the company into a financial mess.
The Japanese media always loves to talk about the negative aspects of long tenures of men at the top, supporting revolving doors of CEO’s office. Mr. Toyoda didn’t care about such a noise. He was not too old at 66 when he stepped down anyway. For Masahiro Okafuji, 2024 is his 15th year as CEO of Itochu, the trading house, which is not his grandfather’s company. The media wastes no time criticizing his long tenure, bringing up stories on how he is wielding too much power within the company, demoralizing many capable men who have been hoping to replace him. He is truly an exception to be staying at the top job that long, and brought excellent results to the company and shareholders. That said, at 74, Mr. Okafuji is not young even by the standards of Corporate Japan.
Subconsciously, an underlying belief behind two two-year terms for CEOs could be “It doesn’t matter so much regardless of who leads the company.” Though this may be too outrageous a statement, deep in the hearts of Corporate Japan’s top management ranks, leadership of men at the helm is not as highly regarded as it is elsewhere. There seems to be a superficial emphasis on team work or an organizational structure. A new CEO every four years creates an impression that the management team is not growing too old. Never mind that many new CEOs are already in his sixties. Leadership might have mattered less when the Japanese economy was posting double-digit growth rates year after year. Along with life time employment practices, CEOs’ relatively short tenure could be one thing that was institutionalized during the super-normal growth era. In the 21st century, as Corporate Japan is facing different challenges from what they faced over half a century ago, CEOs would have to stay on his job longer to get things done than they used to. Corporate Japan loves to devise a medium-term strategic plan. Since this ‘medium-term’ is assumed to be longer than four years, most of the CEOs leave the office without witnessing what changes the strategy has made. A strategic plan needs to be executed over the course of years under strong leadership in this fast-changing world. In order to thrive, boards of Corporate Japan have to learn how to find rare leadership qualities, and let him or her run the company for a considerably longer period than four years,
Mr. Suzuki is a retired banker based in Tokyo, Japan.
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