Entries from January 2012 ↓

As 4/3 Rumors reports the Tokyo Exchange slapped Olympus with an unexpectedly light penalty of $129,800 for the concealment scandal and hiding of $1.7 billion in losses.  Olympus isn’t out of hot water yet however.  The Japanese police and Scotland Yard and FBI investigators are pressing ahead with criminal charges.  Former CEO Michael Woodford, the one who revealed the entire mess at Olympus, is suing for wrongful dismissal after the board fired him to cover up their actions.  Disgusted with the lack of support from Japanese institutional investors to reinstate him as Olympus CEO the whistleblower stated, “despite my having done the right thing, none of the major Japanese institutional shareholders have offered one word of support to me.”

Also this week a crack team of attorneys organized an effort to invite former shareholders to sue Olympus and the company’s auditing firms.  As ZetaBids.com reports the Lawyers for Shareholders’ Rights are not charging for their services and hope to change the cozy relationship between Japanese institutional investors and boards of directors.

Despite the damage that the scandal has done to Japan’s corporate governance image worldwide, the Government, the corporations and the institutional investors have not taken the Olympus debacle as an opportunity to reform a very dysfunctional system.

Chinese and Russian testing of Japan’s air defenses were at an all-time high in 2011. Japan scrambled its fighter jets 143 times in response to Chinese aircraft in the April-December period of 2011, nearly triple the level from a year earlier and surpassing the record high of 96 times in 2010.  Many of the Chinese approaches to Japanese territory were near the disputed Senkaku Islands, an archipelago in the East China Sea. Russia kept Japan even busier, with Russian approaches requiring 175 scrambles during the nine months.

The Chinese and Russian aircraft don’t have to enter Japanese territory to elicit a scramble response from Japan.  Japan sends up interceptors if foreign military craft fly within Japan’s Air Defense Identification Zone (ADIZ) or around the median line between Japan and China. Because the ADIZ is not the same as territorial airspace, foreign aircraft flying into the zone are not considered to be violating airspace. Until recently, Chinese fighter jets and fighter-bombers had usually avoided entering Japan’s ADIZ. But that changed soon after the Senkaku Islands incident in 2011 that triggered a major diplomatic row between the two countries.

Ironically, in October 2011 China’s Ministry of National Defense complained about Japanese surveillance (intercepts?) of China’s military aircraft which “undermines China’s national security interests”.  A Chinese spokesman actually called on Japan to stop scrambling fighters to intercept Chinese planes, warning that this was the cause of air and maritime safety problems, and had “severely disturbed military drills”.

The point about air safety is a valid point but aimed at the wrong party. Most defense experts agree that Chinese military pilots are less skilled than Japanese and American pilots and they fly erratically at times.
No one should forget about the incident in 2001 when a U.S. Navy EP-3 collided in midair with a Chinese fighter jet over the South China Sea, leading to the death of the Chinese pilot.

It isn’t good when the American government is seen as interfering in an allies’ democratic elections but for some reason some members of the Obama Administration have done so in recent weeks.  Now the former head of the unofficial U.S. mission to Taiwan has gone even farther and explicitly warned of instability if the DPP opposition regains power.  This just before the elections this weekend.  The State Department cannot control what a former diplomat says but it reflects very poorly upon the former envoy to embroil his country in an ally’s election.  Not only is it poor form but it could easily backfire.  Several members of Congress have urged the Administration to avoid being seen as favoring either side in the Taiwan elections.

When American businesses look at hiring an interpreter for their meetings in Japan they are often taken aback by the prices – approximately $600-1000 per day for A or B grade interpreters.  Many make the decision to forego interpretation, hoping to save costs by relying on the Japanese organization’s staff interpreter or just hoping that the Japanese they are meeting with will understand English.   This lack of preparation or needless reliance on hope can be very costly.  Let me illustrate.

I recently heard from a U.S. company about an import-related regulatory problem they had recently experienced with a Japanese government agency.  Like so many foreign companies the U.S. firm had been relying on help from a part-time, non-exclusive distributer in Japan – let’s call him Sato-san.  Sato-san set up a meeting with the government agency and the American firm’s sales manager for Asia (call him Mr. Haggar) flew in for the meeting – probably thinking Sato-san would interpret for him.  During the meeting Sato-san sat quietly and did not interpret.  Nevertheless, the American thought he got across his point and that the government agency was convinced.  A month passed and the import problems persisted so the American called me to ask for help.

When I talked to the Japanese government agency staff that had met with the American they explained that their English ability was quite limited and they had been unable to understand most of what the American had said during their meeting.  The way they described the meeting reminded me of Charlie Brown listening to a parent talking to him or his friends in the Peanuts animations – “wawwaw wawwaw wawwaw”. “During the first part of the meeting Haggar-san sounded gracious and kind, during the second part of the meeting he was agitated and stabbing the table with his finger, and during the last part of the meeting he calmed down and smiled a lot.”  So, in essence, Haggar-san’s trip to Japan was completely wasted and another month had gone by with tens of thousands of dollars in lost sales.

Was it worth trying to save a few hundred dollars by not using an interpreter?  No, of course not.  There are many reasons to go into a meeting with an interpreter that you are paying to do nothing but interpret.  Haggar-san’s experience is just one example why.

Many papers in the region reported today on yesterday’s meetings in Beijing between Treasury Secretary Geithner and senior Chinese government officials, noting that the Chinese snubbed the Treasury Secretary and rejected a U.S. call for additional sanctions on Iran.

Patrick Chovanec had a good analysis of Geithner’s challenge in his blog recently.  I would differ with Patrick only on his portrayal of the U.S. trying to “dictate” to China who they buy oil from.  I would portray it as an attempt at reason, pointing out to China that a nuclear-armed Iran is not in China’s interest either.  The attempt at reasoning with Beijing is part of Washington’s overall and longstanding attempt to pull China into a stakeholder role in a peaceful world order.  As Patrick points out however, China has more immediate and selfish interests in maintaining a flow of the cheapest possible oil from Iran to China.

According to several papers Premier Wen responded to Secretary Geithner’s request for cooperation in stopping Iran’s nuclearization by saying: “China continues to insist that dialogue and cooperation, rather than confrontation and deterrence, are a better option.”

Hmmm.  Interesting concept.  Can we now look forward to Beijing finally agreeing to the dialogue and cooperation the Dalai Lama has been calling for for decades?

This week’s episode of Freakonomics (get it free on iTunes by podcast) discusses the inability among businesspeople to say they don’t know something.  They point out that not being able to say “I don’t know” is one of the most dangerous threats to businesses.  It causes managers and executives to charge ahead on projects that are likely to fail simply because the businessperson doesn’t take the academics’ approach – to test and find out the answer before proceeding.  I think this is a particularly bad problem with U.S. businesspeople – especially MBAs who fudge and bluster rather than ask questions before making a decision.  American businesspeople are especially prone to this fundamental mistake in international business.  More often than not the American just assumes the mechanics of culture and business operate the same overseas as they do at home – and this is almost never the case.  Ask an international consultant?  Hire someone with international experience?  Heavens no.  Just assign old Bob from the engineering department to take care of our Japan business – I think his wife is Japanese – or Chinese.  Have you heard of such cases?  I hear them every day.