Will CEO activism take hold in Japan?

OECD Tokyo Head and G1 Global Board Member Yumiko Murakami shares her insights on the changing nature of business in Japan from a global perspective. Reprinted with permission from the Japan Times.

CEO activism has been spreading widely across industries in the United States. From Tim Cook of Apple to Howard Schultz of Starbucks, 2017 saw a growing number of corporate chieftains taking public stands on highly sensitive political and social issues unrelated to their companies’ business. They passionately advocate for various causes, ranging from race, gender equality, immigration and environment to sexual orientation. This is a relatively new phenomenon. However, it is already making a significant impact in shaping the public debate on historically contentious political and social issues in the U.S.

For the most part, the decision of an individual CEO to “speak up” appears to be rooted in a profound personal conviction on a given topic. For example, Ken Frazier, Merck chairman and CEO, resigned from U.S. President Donald Trump’s American Manufacturing Council in objection to the president’s response to violence in Charlottesville, Virginia. Frazier had been well-known for having strong views on intolerance among his friends and colleagues. More recently, Amazon CEO Jeff Bezos drew attention as he very publicly supported the preservation of Deferred Actions for Childhood Arrivals (DACA) and engaged in a public feud with Trump. Bezos cited his family’s immigrant history as his main motivation in supporting the pro-immigration policy.

Until now, CEO activism has been primarily limited to U.S. companies. Few people expected to see Japanese CEOs weighing in on socially sensitive and divisive issues, but such social norms may be starting to change even in this country. Yoshihisa Aono, CEO of Cybozu, a major software company, sued the government in early January, seeking to amend the Family Register Law to allow married couples to retain separate surnames. Under the current law, married couples are legally required to share the same surnames. In almost all cases, women end up choosing their husbands’ surnames, even if many working women wish to keep their maiden names for professional reasons.

Aono is one of few men who opted for his wife’s surname, which allowed her to continue using her surname at work. Because of this forced surname change, Aono claims to have suffered a great deal of professional inconveniences and even financial damage. More importantly, Aono believes that the right to either keep a premarital name or to share a spouse’s surname should be guaranteed for all individuals. Currently, this option is only allowed for marriages between Japanese and foreign nationals.

The debate over surname choice is a hot-button topic in Japan. Conservatives have argued that giving married couples the freedom to have separate surnames would lead to individualism and exert an adverse effect on the traditional family values. This seems preposterous to many modern thinkers. More progressive views, shared among many working women and younger generations, call for a change in the law. They believe the current system prevents gender equality and the professional advancement of women.

It is too early to tell what may emerge from Aono’s protest. His action, however, has not gone unnoticed. Aono’s decision to plunge aggressively into a thorny social discussion has spurred a robust debate and a grass-roots petition to change the law.

Although this is the first time Aono has taken legal action, he has a long track record of voicing his views on social issues. He has, for example, openly criticized the government campaign for “work-style reform.” He points out the campaign focus is misplaced because much of the debate revolves around shortening working hours instead of encouraging labor mobility — in other words, moving away from a seniority-based system and embracing a merit-based system instead. In fact, when Cybozu introduced flexible working arrangements and open contracts for its employees a few years ago, it was one of very few companies in Japan to break away from traditional employment practices. It now has become a mainstream trend, even for higher-profile companies, to allow employees to work remotely and hold second jobs.

So, is Aono an anomaly in Japan? We have yet to see if CEO activism has shaped public opinions in Japan, but there are plenty of reasons why more CEOs may start speaking up.

For example, there are signs that Japan’s traditional nonconfrontational approaches in addressing social issues are not bearing fruit. The “convoy system,” in which all players in business and government are expected to move in harmony, has proven ineffective within the context of labor market reform and labor mobility. Companies are still expected to follow the guidelines set by Keidanren when they recruit new hires, for example. At the same time, there is a growing sense of urgency stirring at many Japanese firms, as they can no longer compete in recruiting top global talent. In this digital age, CEOs with strong convictions and the confidence to differentiate themselves from the herd have the means to let the world know where they stand.

Another important trend business leaders must embrace is understanding that millennials actually do care what CEOs have to say. Surveys in the U.S. show a large percentage of millennials believe CEOs have a responsibility to speak out on important political and social issues. Furthermore, CEO activism has become a factor, not only in one’s choice of employment but also in daily purchasing decisions. In the case of Aono, the retention rate of Cybozu’s employees has improved significantly under his vocal leadership.

As a final note, the notion that companies should have a larger purpose — beyond profit maximization — has started to gain traction. Today Japanese firms lose approximately 30 percent of their college hires in the first three years of employment. In an ever-intensifying war for talent, many business leaders have begun to realize that raising their voices on societal issues is a highly effective way to engage and retain employees. It is indeed interesting to see how more and more Japanese CEOs are talking about sustainable development goals these days.

Perhaps some CEOs are starting to feel the risk of being silent is too great. This observation is likely to be proven correct.

Photo by Iphonedigital licensed under CC BY 2.0

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