TT-621 -- Tracking Future CEOs, e-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, July 10, 2011, Issue No. 621


- What's New -- Tracking Future CEOs
- News -- Another foreign parent loses child custody
- Candidate Roundup/Vacancies
- Upcoming Events -- Entrepreneur Seminar moved to Sept.
- Corrections/Feedback -- Prosecutor tapes are loaded dice
- News Credits

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In the months leading up to the Annual General Meeting
(AGM) of shareholders, which usually happens in June,
Japanese companies like to announce senior personnel
changes, and in particular if there is a new president.
Traditionally the president selection process has been
about as entertaining as watching paint dry. If the
existing CEO was from the founding family, then you could
bet a son, son-in-law, or someone else typically a male
from the family would be a prime candidate for the

But if the company was old enough that the family wasn't
really involved any more, then depending on the type of
company, the CEO successor would typically be an engineer
(Hitachi was famous for this), or the CFO or someone in a
bean counting or compliance position. The point is that
everything was predictable, companies made enough money to
afford such affectations as management inner sanctums, and
only those on the inside would get promoted.

Of course that all changed when Carlos Ghosn and some other
foreigners started getting selected as CEOs so as to rescue
terminally ill companies. And since you can't get much more
radical than putting a foreigner in charge, companies are
realizing the line has been crossed and other changes are
also now acceptable to shareholders.

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Thus, we are seeing the trend of younger more
internationalized CEOs being promoted from outside the
inner sanctum. These are guys who have done M&A deals that
went extraordinarily well, or who have created major new
domestic or international markets.

The fact that this new breed managers being recognized for
international accomplishments is interesting in and of itself,
because traditionally getting posted abroad was a good way
of derailing your career for 5-10 years. While you were
dispatched to look after the USA or Europe, your colleagues
and competitors for promotion would be cozying up to the
Chief and leaving you behind in the promotion stakes.

Indeed, a friend in a major company told us that once he'd
been sent abroad for a second time, he knew that his career
prospects at HQ were pretty much done. After realizing
that, he made as much effort as he could to stay abroad
continuously and to have a good time doing so. He focused
on developing a broad personal network, and became an
expert in foreign business at a macro level, and politics.
This turned out to be a good move, because although he did
return to Japan eventually, the top job never got offered
and instead he kept his head down and retired on a modest
pension. Then, after retiring he quickly found a position
lecturing at a private university about international

But we digress. There have been a number of interesting
promotions in the last few months that demonstrate that
these changes are real. Our first example is 49-year-old
Yoshihito Yamada who became President of Omron on June
18th. Yamada was a mover and shaker on two fronts. Firstly,
he helped build Omron's healthcare business, a new string
to the control equipment maker's bow. Although just 10% of
the group's overall consolidated sales, Healthcare controls
and systems in 2009 made a big contribution of 25% of
Omron's bottom line. The division got outclassed by the
stupendous resumption of growth in Omron's core Industrial
Controls business last year (FY2010), but obviously the
earlier contribution didn't go unnoticed.

Yamada was also apparently instrumental in increasing the
European business during his tenure there, and he got Omron
squarely into the huge Russian market. The Nikkei says that
through connections he made personally, Omron now owns
about 50% of the blood pressure monitoring equipment market
there. In 2010, Europe accounted for 15% of sales and is

What's important for Omron about Yamada is that not only is
he young and internationalized -- important virtues now
that almost 50% of the company's sales are coming from
overseas operations -- but also that he knows how to grow
businesses from scratch. This ability to inject new and
creative thinking, as well as some measured risk-taking,
will be what sorts out the success stories from the
also-rans amongst Japanese firms in the future.

M&A is also an important strategy for Japanese firms
looking for growth. The local markets are dying off,
literally, and money is cheap. So it's no wonder that so
many Japanese firms are out looking for other companies to
take over and accrue revenues and profits to the parent
P&L back in Japan. Getting an acquired company to work
properly, especially when the M&A is in the billions of
dollars range, requires special talent, and those managers
who get it right are being rewarded accordingly.

So our second example is Shiseido, which promoted 52-year
old Hisayuki Suekawa to President in April. Suekawa was
the prime architect behind Shiseido's JPY180bn takeover of
US-based Bare Escentuals. This was the largest M&A deal
that Shiseido had ever done, and it was quite risky because
Bare Escentuals had already saturated the US market and
wasn't likely to grow much further there, plus the firm
distributed through non-standard sales networks --
something new to Shiseido. But since the deal was done
almost 9 months ago, the merger of the two firms seems to
be going well and as a result Shiseido has risen from 6th
to 4th largest cosmetics company in the world.

There are many other examples of young blood being brought
in to take the helm. According to the Nikkei, 686 firms
appointed new presidents in the first half of this year,
with those having presidents in their 50's accounting for
46.8% of the total, about 5% more than this time last year.

We think this internationalization and merit-based
promotion trend is quite exciting, because it means that
Japanese firms are becoming more competitive, and also
more accessible. Management by inner sanctums runs on a
sort of feudal logic that has no place in a contracting
market like Japan -- in particular they are inaccessible
to business partners with new ideas. But the new wave of
presidents is much more likely to realize through
experience that every person they meet and every
presentation they receive may contain the seeds of a
business improvement that pole vaults their companies back
to market leadership again. For those of us who make a
living out of bringing innovation to Japan, this is very
good news.

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+++ NEWS

- Another foreign parent loses child and does jail time
- High rate of company closures up north
- Police website DDoS attacks traced to China
- Gasoline demand expected to fall this summer
- French oyster kit to Sanriku

-> Another foreign parent loses child and does jail time

A Mexican national was given a suspended 2-year jail term,
after already spending eight months in detention (just like
jail), for trying to kidnap his 1-year old daughter back
from his estranged wife in Niigata. Just another in a
series of similar incidents, the man tried to take matters
into his own hands after becoming estranged from the wife
and wanting to see his daughter. Apparently he broke in to
the mother-in-law's home and was arrested shortly after.
The mother-in-law claimed an injury causing up to 2 week's
of treatment thereafter. ***Ed: This is what happens when
there is no law to force separated couples into proper
conciliation and shared child custody -- desperate
parents, always the foreign parent, find themselves having
to take desperate action. It's shameful that he was
interred for eight months prior to the case coming to
court, a low point in Japan's criminal system, and high
time that Japan signs the Hague Convention on Child
Abduction.** (Source: TT commentary from,
Jul 7, 2011)

-> High rate of company closures up north

A survey of 5,004 companies in Iwate, Miyagi, and
Fukushima, conducted by credit rating agency Teikoku
Databank in June, has found that as many as 48% of
companies have either suspended operations, have gone out
of business, or are otherwise not operating The largest
portion of non-operational companies were those in the
"unknown" category, being 36.1%, where the owners were
generally not contactable. ***Ed: Given the stories of
company owners staying behind until all staff had safely
left the premises, it is highly likely that many of these
people perished in the Tsunami.** (Source: TT commentary
from, Jul 8, 2011)

-> Police website DDoS attacks traced to China

Denial of Service (DDoS) attacks targeting the National
Police Agency (NPA) website in September 2011 have been
since investigated in detail by the NPA and it was
discovered that the bulk of the traffic came from 25
Chinese IP nodes and 8 Japanese nodes that were servers
compromised by hackers. The NPA has since made a request to
the Chinese authorities and Interpol to track down the
hackers involved. The DDoS attacks came after a hacking
group in China threatened revenge on Japan for the arrest of
a Chinese fishing boat skipper. (Source: TT commentary from, Jul 7, 2011)

-> Gasoline demand expected to fall this summer

All is still not well in the travel industry, as it has
emerged that gasoline sales volumes are expected to fall by
as much as 7% this year, the largest decline in the last 30
years. Oil industry analysts are saying that demand is way
down as consumers cut back dramatically on driving in a bid
to economize after the Tohoku earthquake. The situation has
been exacerbated by the abandonment of weekend toll road
caps of JPY1,000 -- indeed, in the weekend the cap was first
removed, gasoline sales plummeted 18%. (Source: TT
commentary from, Jul 08, 2011)

-> French oyster kit to Sanriku

French oyster farmers have come to the aid of Sanriku
farmers by sending a 7-tonne shipment of buoys, ropes,
water-protective clothing, and other items needed to do
oyster cultivation. The french farmers are from Brittany
and Charente-Maritime, and say that they are repaying Japan
for its help back in 1970 and 1990, when disease killed off
much of the french stock, and Japanese farmers sent them
oyster larvae to regenerate their populations. ***Ed: Nice
to see this kind of directed aid coming in, and even nicer
still the story behind it.** (Source: TT commentary from
afp on Google, Jul 08, 2011)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.


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The Entrepreneur's Handbook Seminar scheduled for July 16th
has been postponed until September 10th due to low numbers
registering. Those people interested in learning how to
start a company, can apply for the September event by
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In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

*** In TT618 we mentioned a report by the World Justice
Project where Japan was ranked 4th for rule of law out of
countries globally. Here we have more feedback on that
surprising finding.

=> Reader response:

The piece doesn't report the basis or key factors for the
ranking. Probably one key number is the 93-95% conviction
rate in Japan. (the actual arrest rate is very much lower).
And we know how easy it is for the police in Japan to
brow-beat anyone charged into confessing -- which means
they don't have to work so hard to find actual evidence to

That the prosecutors and police have, so far, only agreed
(partially) to videotaping the actual confession itself,
about 15 seconds in most cases they say, and not to
anything that is said before is good enough reason to
believe these conviction rates could radically change if
complete interviews were taped as originally intended.

My take on why the prosecutors have agreed to at least
partial taping is that they feel if the jury can watch the
charged person actually agreeing to the confession, the
jury will more easily disbelieve any recantation and
insistence that the confession was given under duress. I
suspect the police and prosecutors have been practicing
their "nice cop" table-side manners and are now feeling
fairly confident that with these 15 second video clips they
will get high audience (jury) approval ratings.

Hmmm, could we have the beginnings of a new "reality-soap"
show in the coming years?


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Written by: Terrie Lloyd (

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