Senior Counselor with Morrison & Foerster and former Vice-President of the World Bank discusses business in different cultures and globalization
Cultural attitudes, traditions and norms can influence the make-up of a board and the board’s relationship with stakeholders. Ko Yung Tung, Senior Counselor with Morrison & Foerster LLP and former Vice-President of the World Bank, discussed these differences, and spoke specifically about US and Japanese approaches to their stakeholders when he attended the recent Salzburg Global Seminar session The Corporate Balancing Act: How Can Directors Manage Conflicting Pressures?
One of the major themes to emerge from the session was how it is often difficult to address issues of corporate governance and the role of boards of directors across cultures and geographic boundaries. This is because business culture often varies based on geographic and cultural boundaries, especially in the case of the US and Japanese companies.
As Tung explains, the Japanese attitude defines the purpose of a company loosely: “In Japan a corporation is seen as a social player, and therefore they are responsible not only to the shareholders, but what they refer to as their stakeholders.”
The most important “stakeholders” to Japanese companies are usually their employees, to whom the company has an obligation that exceeds just paying their salary, providing benefits such as housing subsidies. In return they expect loyalty and long-term service from their employees. “If you expect an employee to be there for a long time you can invest more in them.”
This long-term service and investment can lead to a well-trained and highly-skilled workforce, however, it can have negative outcomes too, Tung notes: “If they have too much job security maybe they’re not incentivized to perform at their highest level.”
The US approach, on the other hand, Tung says, is “shareholder-centric” where “the primary objective is to increase financial returns for shareholders.” Maximizing profit for the shareholders is the main, and often the only, concern. Provisions like those from Japanese companies to their employees make for a stark contrast when compared to the US culture, which sees companies invest little in their employees resulting in a “very fast turnover of employees” compared to the decades of loyal service found at Japanese companies.
There are also noticeable differences in the moral philosophies of US and Japanese companies, which Tung explained:
“Japanese companies tend to act as good citizens within their family. They see the world through ever-expanding concentric circles, first its employees, next its shareholders, next its suppliers and so on.” If you’re within the “circle,” you can expect “good” treatment, but if outside, you’re not thought of as that company’s responsibility at all.
In contrast to this, “Americans talk about morals and they’re very mission-orientated – they propagate good principles and good morals, yet at the same time they may believe their morals are the correct ones.” They try to spread their morals, but they assume they’re in the right, possibly without considering cultural differences.
These differences in company expectations and moral philosophies highlight just a few of the differences worth considering when doing business on a global level, and they lead Tung to conclude: “We need to be more nuanced and more knowledgeable as we tackle issues relating to globalization.”
Ko Yung Tung was a participant at the Salzburg Global session The Corporate Balancing Act: How can Directors Manage Conflicting Pressures? More information on the session can be found here: www.salzburgglobal.org/go/567