Zaibatsu Governance In Japan

A zaibatsu is a group of diversified businesses owned exclusively by a single family or an extended family. The zaibatsu in Japan were founded by wealthy individuals during the Meiji Restoration of 1868.They embarked monopoly business by the government's support, and then diversified into various industries. Until the World War II, the zaibatsu became the focus of the world for their development both in size and quantity, and led Japanese industrialization reform, also turned Japan from a closed agrarian system into a modern industrial regime. Many large-scale Japanese companies had their origins in the zaibatsu. It is very useful to research Japanese zaibatsu for deeply understanding the Japan-style corporate governance. Eight zaibatsu cases are applied in this paper for study, namely Mitsui, Mitsubishi, Sumitomo, Yasuda, Furukawa, Okura, Asano, and Fujita. These business groups owned and operated large-scale enterprises in a variety of industries, and exerted a strong influence over the Japanese economy as a whole. Although the major zaibatsu did not develop at the same tempo or along the same path, the leading zaibatsu had been a model for other zaibatsu to follow or copy. So in most of the cases, Mitsui and Mitsubishi are selected as examples for explanation and analysis.Based on Japanese zaibatsu history, this paper develops five aspects related to corporate governance. (1) Emergence of the zaibatsu. This paper is to trace the origin of family wealth, the analysis of key factor in the wealth amassed, such as the sale of government enterprises to the emergent zaibatsu during Meiji era and the diversification strategy, and to review the history of the zaibatsu. (2) Family constitution of the zaibatsu. This sector relates to the regulations of the zaibatsu using their wealth, which is the important source and guarantee of the zaibatsu development. The cases of Mitsui, Sumitomo, Yasuda and Mitsubishi are utilized in this section. (3) The role of salaried managers in the zaibatsu. Understanding how to use talents to maintain and increase families' wealth. It is to discuss the important role that salaried managers played in the zaibatsu development, with the examples of several famous salaried managers' growing. (4) Organizational structures of the zaibatsu and its development. It is to describe the early structure of the zaibatsu in brief and to analyze the zaibatsu reorganization after the enforcement of the commercial code and the formation of the zaibatsu family multi-subsidiary system during 1910s. The logic of zaibatsu organizational structure development is also discussed. (5) Governance of the zaibatsu. This section involves the control exercised by the holding company as the head office over the subsidiaries, and the control held by the zaibatsu family over the salaried managers. In addition, the role of zaibatsu banks is analyzed.The conclusion is that the structure of the zaibatsu is the outcome of effective control and flexible development under a certain historical and cultural background. And the control of the zaibatsu is the combination of exclusive ownership and progressive management.