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Business & Society:
New Perspectives
by
Nobuo Tateisi
Geneva, 23 March 1998 |
 Opening Statement
Business & Society: New Perspectives
Opening Statement by Mr. P. Gopinath, Director, IILS
Welcome to this Public Lecture on Business and Society. The end of the 1990s, as we come to the end of this decade, has taught us many lessons about the relationship between business and society which perhaps was not perceived so clearly at the beginning of the 90s. We have understood the lack of synchronicity between political and economic cycles and we have understood better the viscosity of institutional change compared to technological and market change, and the Asian crisis and the fires in Sumatra last year have brought home the truth that expanding markets can go hand in hand with shrinking social space and, above all, firms and corporations we can now see are defined by their social cultural environment as much as they define that environment themselves.
Companies today face four major challenges: they face a rise in public expectations partly because of the decline of the State and partly because the erosion of a common framework for dialogue between business, which is global, and communities which remain local. They face a challenge through the new individualism which is already impacted on the State and on political institutions and this new individualism impacts on firms and their market environment in a whole series of ways. It affects product markets because it impacts on consumer demand as individual values and ethical considerations are given market expression, we have examples of human rights, environment, child labour, all of which affect consumer choice. It affects company reputations in terms of boycotts or media disasters or corruption scandals. It affects the internal labour markets of companies because of the employee concerns for participation and greater transparencies and ethical behaviour and these are an important powerful dynamic within corporations themselves for change. It affects the capital markets through investor preferences and new types of performance rating and accounting and how can business strategy and profits considerations be reconciled with these changing and growing social demands, and this question has been sharpened by the inexorable drive towards greater shareholder value and hyper competition, and by growing consumer power.
These factors are realities which business has to face and it is this issue that the Institute is going to consider in its current programme, and these issues are reconciling societal demands with the bottom line. But Japan has long been held up as an example where these apparently contradictory forces have been held in balance or even reconciled. For many years you've had social consensus, you've had employer welfare and corporate profits which have been brought together in high-growth trajectories. This model is now under stress. It began with the outsourcing of production as a more individual workforce and a shift from bank to equity financing and the very notion of long-term economic relationships in Japan, the notion Keirestu, with has been challenged in international trade negotiations. Now, few companies have faced these problems more squarely than OMRON, which is a world leader in advanced electronic technologies and few business leaders have taken up the challenge more vigorously than Nobou Tateisi, the Chairman of OMRON and our speaker this evening. He is vice-chairman of the Japan Federation of Employers' Association, Nikkeiren, as well as a co-chairman of the Japanese Federation of Economic Organisations, Keidanren, and Japan's representative on the APEC Business Advisory Council. Under his leadership, OMRON has taken the lead in calling for a new corporate management system to take into account two major developments, and the first is the concerns of employees and societies to be taken into account in corporate strategy as well as current short- term business needs and, secondly, he has called on Japanese industry to adopt a global perspective going far beyond Japan, and OMRON itself employs over 20,000 people in over 30 countries. It is therefore a great pleasure to welcome Nobou Tateisi to the Institute and the ILO.
Business & Society: New Perspectives
Nobuo Tateisi
Chairman, Omron Corporation, Japan
I am deeply grateful for this opportunity to address this distinguished international gathering of constituents and staff of the International Labour Organization (ILO) and to share with you my views on some of the new departures in the relationship between business and society.
My remarks will fall into three parts. I will begin with a brief profile of the Omron Corporation of which I am the Chairman. This will be followed by my perception of the way in which the corporate role is evolving and on the kinds of reforms companies must pursue in light of their expanding responsibility to society. I will then use Omron's own experience as an illustration of both the practical application of such reforms, and of a management philosophy which is grounded in awareness of the public dimension of the corporate nature.
A Profile of the Omron Corporation
Omron was founded in 1933 for the development and manufacture of X-ray photography and was one of the first firms to work in this area in Japan. In the 1950s, it opened up new markets for automation control equipment, laying the foundation for its advancement, experiencing rapid growth.
Today, Omron covers a wide variety of product fields including factory automation systems, automatic teller machines, automatic ticket wickets, Point of Sale (POS) systems for shopping centres, urban traffic control systems, modems and other types of computer peripherals, in addition to health and medical care systems such as electronic blood pressure monitors.
Omron is capitalized at 64 billion yen and employs about 7,200 workers. The number of employees rises to 24,000 with its 123 affiliates both within Japan and outside it. Its consolidated sales amount to 594.3 billion yen (4.6 billion US $) in 1996 fiscal year and are expected to reach 645 billion yen (5.0 billion US $) in the 1997 fiscal year. Omron is actively developing business in other countries and has established a regional headquarters in Amsterdam, in Chicago, and in Singapore. With the head office in Japan, these locations give it a management scheme of four centres for business development around the world. Operations for China, Hong Kong, and Taiwan were detached from the Asia-Pacific headquarters in light of their rapid growth as emerging markets and a separate centre has been set up in Hong Kong for what is called the Chinese Economic Sphere.
The future shape of companies
The issue of "corporate governance" has recently gained prominence in Japan and elsewhere. Japan is finding it essential to align with global standards. As economic activities and management become increasingly globalized problems behind the recent corporate scandals also require urgent attention. It is in this climate that corporate governance has come to the forefront . Up to and including the 1980s, Japan witnessed steady economic growth, and its companies created a distinctive system of "Japanese-style" management characterized by cross share holding within the main banking system with transactions confined to relationships of affiliation; and lifelong employment. In addition, corporate management considered employees above all other stakeholders.
However, after the collapse of its economic "bubble", the country entered a phase of minimal economic growth, and has yet to recover from the post bubble recession. Moreover, as management and economic activities become increasingly globalized and borderless, the inward-looking systems, which made sense in the Japanese context are ceasing to function.
The recent series of financial scandals has exposed the weakness of Japanese style management. Companies are now being called upon to disclose information on their activities and to explain their behaviour to society as a whole. Furthermore, corporate responsibility, which was previously concentrated in the hands of individual executives, is coming under tough scrutiny. Consumers and the general public are taking a harder look at corporate behaviour. In the past, the size of the company and a long history were accepted as indications of excellence, today companies are being judged on the basis of new criteria, such as, their contribution to environmental preservation and to local communities.
Of late, the question of "to whom do companies belong?" Has gained currency and importance. From the standpoint of corporate governance, there is a dichotomy between the Anglo-Saxon view that companies belong to their shareholders and the Rhine view that they should be more concerned with all the parties which have a stake in them, including their employees, customers, and the surrounding community. This issue was discussed for 2 years at the OECD Advisory Group on corporate governance, on which I represent Japan. This group also included representatives from the United States, United Kingdom, Germany, and France. In the course of this dialogue, I found it interesting that even the American representative, who had, at first, emphasized the need to maximize returns to shareholders, later indicated the beginnings of soul-searching over, and correction of, management behaviour that essentially ignored social obligations and long-term interest. I am talking here about such practices as the laying off of tens of thousands of employees, cutbacks of capital investment, and purchase of stock in the open market, with the sole purpose of ensuing short-term profits. I think it is significant that the Advisory Group report which has now been submitted to the OECD distinguishes between the economic and social aspects of the corporate mission, and takes upcorporate responsibilities to society as a new issue.
How then should companies deal with not only their shareholders, but all other stakeholders? I feel that they will have to find answers to this by fashioning programmes of concrete reform which encompass relationships with employees, customers and the local community. In the context of globalization, in which companies are embedded is in the process of rapid and far reaching change. Companies themselves need to be managed in ways which allow flexible adaptation to this change. Each country has its own particular problems, companies will try to find solutions to those problems and will need to foster constant efforts. Nevertheless, I envision two items to be incorporated into the agenda of corporate management around the world, regardless of the country context. The first is the idea that corporate enterprises are subsystems of society and cannot possibly continue to grow without the sound development of society. Now that companies have acquired immense influence, more attention is being paid to whether or not they are fulfilling these social obligations. From now on, they will be unable to stay in business unless they work with the community as good corporate citizens. This will mean the end of socio-economic systems that put economic activities first that are primarily business- centered. The second is a global perspective. International divisions of labour in production are spreading, and this is deepening ties of mutual interdependence among countries. In addition, the borderless flow of information is driving a steady globalization of consumer interests and values. As this socio-economic globalization proceeds, companies can no longer cling to the logic of the home markets or their own organization; it will be necessary for them to aim for harmony with the rest of the world.
As I have already noted, firms must be managed to adapt swiftly to changing circumstances. However, they must also have an unchanging, spiritual core that serves as a guideline for all employees to follow. This is the corporate philosophy. At Omron's, philosophy is epitomized in the company motto, which encapsulates corporate philosophy, its raison-d'être serves as the foundation of all its activities. The motto is : "At work for a better life, a better world for all." The words "at work for a better life" express what we, at Omron, are working and living for. The phase "a better world for all", refers to the social obligations of firms, including ours. It was formulated by Omron's founder, Kazuma Tateisi, in 1959, and grew out of his conviction that companies must be public-spirited institutions fulfilling their obligations to society. Since then, it has been recited every morning by all our employees, including those in our affiliates.
Back in 1959, companies were in relentless pursuit of higher levels of productivity and efficiency and had no doubt that their goal expanded returns and profits. Our founder, therefore was ahead of his time when he stressed harmony lay entirely in the economic end of the community and the social obligations of companies in the role as public and private entities.
Although it was drawn up more than 30 years ago, the motto is an excellent statement of all that is required of companies today. It forms the basis of all Omron's activities and is subscribed to all of our employees. I feel a great sense of indebtedness to our founder and cannot help but admire his foresight.
The public dimension of companies
The underlying idea here is that, as members of society in the broad sense, companies have obligations to that society and must be publicly-minded. At Omron, we put this idea into practice in aspects of both business and community activities.
In our business activities, we contribute to our employees by providing employment and benefits through development and sales of products, and to our clients by offering useful products; services through our processing and sourcing activities. Similarly, we contribute to the country through our tax payments; and to our shareholders through our dividends.
However, this is not enough in itself. We believe that, since they are to benefit greatly from the local community in which they are embedded, companies must return the favour and make some kind of direct contribution in the form of social or community activities. This is what we, at Omron, mean by the practice of public-mindedness through social activities. The activities in question include campaigns of contribution rooted in the community, support for organizations working for community improvement; and assistance for budding engineers and artists. In each case, the essence is return of profits, and practical contribution to the community in ways that are both appropriate and concrete. Our active contributions to the community are directed by an in-house department known as the Corporate Citizenship Group. These activities are founded on respect for human beings. We acknowledge that our continued existence is grounded in the society, and we constantly seek for more human-centered arrangements both inside and outside the company walls. With this awareness, we define profit as something given to a company by customers who value its goods and services, and as a cost paid by the society for the growth of the company. For those who assert that firms can, and should, remain exclusively business-oriented, returns and profit are purposes. To those who advocate good corporate citizenship, they are results.
In July 1991, Omron instituted an in-house department for the promotion of citizenship activities. This unit was originally called the Corporate Citizenship Office, but was later renamed the Corporate Citizenship Group. The unit's mandate is to equip the company for coping with external changes; provide for the continuity and improvement of existing activities and to support action at the group level. Its activities are supported by a Corporate Citizenship Committee, comprising of nine heads of branch offices and departments, which deliberates over policy and concrete plans for corporate citizenship activities. A corporate citizenship charter was formulated in October 1991 to serve as a guideline for these activities throughout the Omron group. The charter declares that through our actions, we aim to create a better society, enrich our lives as human beings, and bind together people's hearts and minds.
Fields of activity
Omron's corporate citizenship activities cover four main areas : social welfare, culture and arts, science and technology, and international cooperation. As a reflection of the main interest of our founder, emphasis is on the social welfare, and particularly on activities aimed at bringing the physically disabled back into society and creating opportunities for their active involvement in it. Examples of activities in this field include assistance with, and volunteer work by some of our employees for the Oita International Wheelchair Marathon and the National Wheelchair Relay Race. In the area of culture and arts, we offer promotional support through various programs. This includes "Omron Kyoto Cultural Forum", with lectures by noted experts; the donation of a pipe organ to the Kyoto Concert Hall; and the sponsorship of a series of pipe organ concerts, which allow young musicians an opportunity to demonstrate their skills and the public, the possibility to enjoy such music at an affordable cost.
In the area of science and technology, citizenship activities center around the Tateisi Foundation for Promotion of Science and Technology, which was established in 1990. The Foundation provides grants for research and international exchange in areas of electronics and information engineering. Its mission is to contribute to the optimal conditioning of the socio-economic environment through approaches that are both technically innovative and human centered. In 1997, the Foundation provided a total of thirty-four grants worth about 55 million yen in total. In the area of international exchange, Omron provides support for students coming to Japan from other countries for study (accepts foreign nationals for training programs); and assists certain groups in developing countries.
In addition, we have instituted an Omron Day on May 10
th
, which is the anniversary of our founding. Recognizing the support and cooperation of the community, has been an important factor in Omron's success, its offices and departments around the world hold community programmes on this day as a demonstration of appreciation to local communities.
Another structure worth mentioning is the "Warmth-Network", which supports volunteer work by Omron employees. Through it, employees are recruited for events assisted by Omron. A journal of the same name is published and contains articles describing the experience of the volunteers. The "Warmth-Network" therefore heightens awareness of the value and rewards of volunteer work among employees.
Omron Taiyo
Let me also tell you something about Omron Taiyo factories which employ disabled workers. In our organization, we have two such factories, Omron Taiyo and Omron Kyoto Taiyo, which has the status of a corporate enterprise. These factories were established as joint ventures with Japan Sun Industries, a social welfare foundation in the city of Beppu which was set up in 1965 by Dr.Yutaka Nakamura, who worked as a member of the plastic surgery department at the Beppu National Hospital. Dr.Nakamura was very concerned with the plight of disabled, who would not be hired by ordinary employers, however strong their will to work. His response to the problem was to set up the foundation to enable working and living environments that were supportive of the disabled, and that would help them lead self-supporting lives while contributing to society through work commensurating with their capabilities. The Foundation which deals mainly with the severely disabled has built a job placement facility; factory; skill development centre and rehabilitation facilities for the purpose of developing job capabilities. It also carried out education and training programmes for participation in society as professionals and for self-sufficiency as employed members of society.
In 1971, Dr. Nakamura approached Omron's founder, Mr. Tateisi, for assistance with the establishment of a factory to employ the disabled. Despite the unstable economic situation in Japan at that time, and the construction of three new plans in regional centres, his request received favourable attention. The construction of a plant which would provide employment in and around 50 disabled workers required considerable resolution given the un propitious circumstances. However, Omron's founder believed that it should be given high priority in view of convictions.
Consequently, in 1972, Omron Taiyo, Japan's first factory for the disabled was born as a result of cooperation between a social welfare foundation, the disabled and a private company. On its 10
th
anniversary and to commemorate, in 1981, the International Year of the Disabled, Omron Taiyo built a second factory for the disabled. In 1986, the sister company Omron Kyoto Taiyo commenced operations in Kyoto, where Omron has its headquarters. Its major product are sensors. Omron's disabled employees currently number 101 at the Beppu factory and 146 at the Kyoto factory.
Corporate ethics statement
The string of scandals involving corporate actions in recent years has prompted Omron to formulate a statement of corporate ethics, which was officially promulgated on February 5
th
, 1998. Our purpose was to articulate the implications of our central ideal of public-mindedness in the context of ethics and to clarify corporate policy regarding it. The statement declares our commitment not just go to distancing ourselves from elements which work against the interests of society, but also to keep our company a highly ethical one which honours all laws and social rules. Our statement on corporate ethics reads :
"We at Omron hereby pledge ever to remain aware that our company is part of a society governed by laws and ethical standards, to place observance of the law and respect for rules of social fairness before all other considerations, and to conduct our business activities with a keen sense of ethics".
Ten rules underwrite our stand on ethics. They are - Fair and free competition.
- Active disclosure of information.
- Preservation of safety and the environment.
- Respect for human rights.
- Respect for intellectual property.
- Observance of international rules.
- Observance of limitations on international transactions.
- Sound relations with public administrative authorities.
- Opposition to antisocial elements.
- Adherence to this statement in all activities.
Omron also intends to draw up ethical guidelines setting forth specific lines of action and instruct employees in ethics.
Many firms have fallen on hard times in the recession that set in after the bursting of Japan's economic bubble. There is considerable concern that some of them will now cut back on corporate citizenship activities which have just got off the ground. Yet, activities of this type should not be temporary and enterprises must reaffirm the principles
which guide their involvement in them. They should stand firmly by their convictions and should ensure that these activities are supported by the mass of employees who share these beliefs.
Widespread in-house communication is needed to deepen understanding of corporate citizenship activities among employees. Enterprises must make a continuous effort to stimulate employee interest and participation through such means as publicity in the company newsletter; a system for registration of volunteers; and calls for ideas for new activities. Funds for corporate citizenship should be earmarked in the budget and viewed as a necessary cost.
Environmental charter
The environment is another key concern and considerable attention is now being paid to the problem of global warming. We at Omron have always aspired to make Omron environment-friendly and, in 1994, drafted an environment charter to focus greater attention to these issues. It charter reads:
"Aiming for harmony between the environment and mankind, we will use environmentally-friendly technology and responsible corporate activities to contribute to a better world."
To lessen the burden imposed on the environment by our activities, we are doing our best to reduce our use of Styrofoam for packing, and to recycle waste. From the development stage on, our products are designed with a view to conserving resources and to recycling. We are also mounting a group wide effort to establish total systems for environmental management and product assessment that will enable us to meet the ISO 14000 standards relating to the environment. So far, ISO 14000 certification has been won by 12 of our plants in Japan and three overseas, in the Netherlands, Indonesia (Omron is the first hi-tech company in Indonesia to achieve ISO certification), and the United Kingdom. We intend to have all of plants ISO certified by March 1999.
Closer to home, we provide environmental instruction and training throughout the year and hold an in-house symposium in June, Which we have designated as "environment month."
From 'strong' to 'gentle' companies
As a result of the spate of corporate improprieties after the bursting of the bubble, Japanese companies are coming in for some tough criticism both withing and outside Japan. They need to correct their defects and establish patterns of corporate behaviour that will make them trusted players, both in Japan itself, and in the international community.
Like their real life counterparts, corporations, as legal entities, must also have integrity and the quality expected of companies is changing from strength to gentleness. In one of Raymond Chandler's stories, a character says that a man has to be strong to live, but that he has no right to live if he's not gentle. I think this can be applied also to companies.
For companies, "strength" means the economic power to stay in business. This strength is measured by such indicators as sales revenue, profits, growth, dividend propensity, wage levels, employee allowances, product performance and price, tax payments, and job creation. "Gentleness," on the other hand, is a prerequisite for the company to be a positive presence in society. It is manifested in respect for the rights of personnel, hiring of the disabled, disclosure of information to shareholders, services for, and responsiveness to, customers, support for community life, sharing assets with the society, and efforts to preserve the global environment.
The criteria used to evaluate firms consisted solely of indicators of economic merit, that is of strength. They are now expanding to include indicators of social merit, that is of gentleness. The gentle company is one that practices good corporate citizenship instead of being concerned exclusively with its own business.
21st century companies community minded management
In my remarks so far, I have described the optimal shape of the enterprise of the future set in the context needed for reform engendered by globalization and the new age, and coloured by the philosophy behind the corporate behaviour of Omron itself. I would like to end with comments on what Omron is doing to renew itself for the 21st century. At Omron, we have set ourselves the objective of human-oriented management and are working to create a new style of management through a four-pronged agenda to reform.
The first aspect is that of labour management relations. Companies must move from labour conditions to "people" conditions. By this I mean that they must set the scene to facilitate cooperation between labour and management in contributing to society. This should become their common goal and they should feel a sense of fulfilment and gratification in striving after it.
The second aspect is that of business stance, which adds creativity to efficiency as a focal concern. Enterprises must be managed with the idea that business should also be a setting for exercise of individual creativity.
The third aspect is that of management values. Companies must shift emphasis from pursuit of profit to social contribution. The conventional management mind overemphasizes economic value and merit. What we now need is management that recognises not only economic but also social and cultural merit.
The fourth aspect is that of outlook. Management must broaden its perspectives from a domestic scope to a global one. The reason is that from now on, getting along with people, around the world, will be a natural part of the corporate mission.
At Omron, we are diligently promoting reform in these four areas to achieve our goal of being a company that will be trusted by all parties in the 21st century.
This concludes my remarks here today, and I would like to thank you for your kind attention.
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