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BBC's Kully Dhadda
"Racketeers have been blackmailing firms"
 real 28k

Thursday, 29 June, 2000, 11:31 GMT 12:31 UK
Japan companies bid to bar gangsters
Carlos Ghosn
Nissan's Carlos Ghosn is prepared to take shareholder questions
Nearly two thousand Japanese companies held their annual general meetings on Thursday.

The meetings were synchronised, in a bid to avoid questions from criminal extortionists called "sokaiya". Many companies are thought to pay bribes to sokaiya to stop them asking questions they don't want to answer.

The meetings are thought to last less than an hour, reducing the opportunity for legitimate shareholders to ask questions.

But as the Japanese recession bites hard, companies are finding they have no choice but to face angry shareholders.

Gangster questions

Sokaiya have long been a feature of Japanese company life.

They make their money by threatening to disrupt shareholder meetings unless they are paid off. Sokaiya can also get paid money for preventing other people asking questions at the meetings.

Sokaiyas have played on Japanese management fears of being publicly challenged.

Many of the companies holding meetings on Thursday asked for police protection. Some estimates are that an extra 3,000 police officers were on duty.
Japanese parliament
Parliament has tried to crack down on "sokaiya"

The police have urged companies to cut their ties with sokaiya. Some top businessmen were brought down in Japan in the late 1990s, following revelations of pay-offs to sokaiya.

The Japanese parliament sought to crack down on this kind of racketeering in 1997. It revised the Commercial Code to upgrade the maximum jail term for corporate racketeering offences from nine months to three years.

But no one doubts that sokaiya are still active.

On Monday, Japanese police arrested an alleged corporate gangster and two businessmen on suspicion of trying to extort 50 million yen ($480,000) from a a subsidiary of computer giant Fujitsu.

But numbers are falling.

Police, who monitored Thursday's meetings, said that only 18 of the racketeers attended them, compared with 54 last year.

Shareholders get more say

Shareholders have traditionally had little say over company policies in Japan.

Management, workers and creditor banks have worked closely together, focusing on long-term strategy and protecting managers from impatient shareholders.

But Japan's long recession has prompted many people to question this approach.

Foreign investors - used to the Western way of doing business - have demanded greater accountability.

"There are signs of change by some companies, but a vast majority still adopt an old-fashioned approach as shown by the heavy concentration of general meetings," Tokuo Sakaguchi, a lawyer at Shareholders Ombudsman, a shareholders' rights group.

"What we've seen in the past were shareholders who kept silent, which hurt corporate morals and stalled reforms," Jun Ishii, chief market economist at Tokyo-Mitsubishi Securities said.

He added: "With a growing number of shareholders with a different sense of value, such problems will be eliminated."

The change in shareholder attitude can be attributed to the fact that more foreigners own shares.

Foreign ownership of shares hit a high of 12.4% at the end of March.

Last week, Nissan's new boss, Brazilian Carlos Ghosn, faced an hour of questioning from angry shareholders about his plans to turn the business around.

The questions started with criticism of the way he bowed.

Renault has taken a controlling stake in Nissan, and immediately initiated a plan for huge jobs cuts in its Japanese factories.

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18 Jan 00 | Business
Has Japan turned the corner?
21 May 00 | Business
Japan: Stop-go economy
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