Presentation Summary #8
NIIHARA Hiroaki RIETI, METI
The following is a summary of my research on what makes a superior company. Japanese companies have tried to reform themselves in past years. For our study, 30 to 40 companies with high operating profit were examined. We identified the following six characteristics of excellent companies.
First, the scope of the business should be limited. Successful companies stayed out of unfamiliar lines of business. Managers need to have a feel of the market conditions on the ground. Second, successful companies did not accept conventional wisdom. The managers thought for themselves. Third, they looked objectively at the company and its inefficiencies. Managers were not elites. Managers could make drastic decisions without the baggage. Fourth, the companies were able to turn crises into opportunities. Fifth, the companies aimed at growth suited to the company's structure. Research and development must be suited to the company. And, finally, there had to be a sustainable corporate culture of discipline, a sense of mission, and an ethical code.
Profit is a means towards contributing to society. Corporate culture supplements corporate governance. The key is to remember that corporate governance is not a system, but a sense of mission. In April 2003, Japan's Commercial Code will change. Companies will be given a choice of two board structures with different relationships between management and supervision. But, we should remember that there is no direct relationship between a company's form of corporate governance and the superiority of the company.
