Sōkaiya

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History

Sōkaiya originate from the late 19th century. At this time, the unlimited liability of the management put the managers personal fortune at risk in case of rumors and scandals. Hence the management hired protection, called sōkaiya, to reduce the risk of such rumors. Even after the Japanese laws included a limited liability, hence reducing the personal risk to the managers, these sōkaiya continued to prosper, and were often used to quiet down otherwise difficult meetings. One infamous case is related to the Minamata disease, where Chisso managed to close a number of annual meetings within minutes even though hundreds of protesters wanted to voice their anger. In that respect, they have even been compared to corporate lawyers in America.cite book |last=Szymkowiak |first=Kenneth |title=Sokaiya: Extortion, Protection, and the Japanese Corporation |year= 2002|publisher=East Gate Book |isbn=978-0765607805 ]

While yakuza were involved in the business early on, only in the late 1960s did they start to change the business relationship from protection to extortion. Police confiscations related to extortion were 900 million yen, greater than any other yakuza "business".Fact|date=April 2007

In 1984, the law made first steps to reduce the threat from sōkaiya by establishing a minimum number of holdings (50 000 yen) in order to be allowed into the shareholder meeting, leading to a slow decline of the number of sōkaiya. In response to this, the sōkaiya formed fake uyoku dantai, announcing embarrassing company secrets, fictional or not, from loudspeakers mounted on trucks in order to extort money from companies.

In 1994 Juntarō Suzuki, vice president of Fujifilm, was murdered by sōkaiya after he stopped paying these bribes. [ [http://www.japanesestudies.org.uk/reviews/Maruko.html Sōkaiya and Japanese Corporations] , Eiko Maruko, Electronic Journal of Contemporary Japanese Studies, 25 June, 2002]

Activities

Disrupting shareholder meetings

Individuals acquire enough stock from multiple companies in order to gain entrance to a shareholders' meeting. There, they disrupt the meeting (and embarrass the company) until their demands are met. For this, the sōkaiya often research the company in detail beforehand to uncover incidents of misconduct or other company secrets, and then blackmail the management so that these issues are not raised in the shareholder meeting or elsewhere. Often, they also invent fictional issues that the company would have a difficult time disproving.

Modern sōkaiya have developed other, similar methods to accomplish their goals. One example is the "banzai sōkaiya", who disrupt business places with their cries of "Banzai!" and praise of the emperor until they are quietly paid to leave.

Other disruption

Sōkaiya also form fake right wing groups, announcing embarrassing company secrets, fictional or not, from loudspeakers mounted on trucks in order to extort money from companies. They may also print special newspapers with topics embarrassing to companies, and then ask the company to buy the entire print at inflated prices, or even to subscribe to these newspapers, generating a steady flow of cash.

Preventing disruption of shareholder meetings

Sōkaiya have also been used by companies to drown out questions from legitimate shareholders that company officials do not want presented. One infamous case is related to the Minamata disease, where Chisso managed to close a number of annual meetings within minutes even though hundreds of protesters wanted to voice their anger. However, they have also been active against anti war protesters and other potential troublemakers.

Countermeasures

Article 968 of the Japanese corporations code prohibits sōkaiya activity, imposing imprisonment of no more than five years or a fine of no more than five million yen for "receiving, demanding or promising a proprietary benefit with regard to" statements or the exercise of voting rights at a shareholder or creditor meeting.

A practical countermeasure used by large corporations is to hold all shareholder meetings on the same day, reducing the risk of exposure to sōkaiya.cite journal
author = Ray Heath
year = 2002
month = December
title = Japan reels from Sokaiya scam
journal = ThisIsMoney.co.uk
url = http://www.thisismoney.co.uk/news/article.html?in_article_id=341787&in_page_id=2
format = html
accessdate = 2007-03-18 ]

Background

While in the west a shareholders' meeting is usually an earnest discussion between the shareholders and the management, in Japan it is often more of a ceremony, and the management does not feel the need to truly inform shareholders.cite journal
year = 1997
month = March
title = Japan faces fresh scandal - Corporate Japan finds cutting racketeer ties tough
journal = CNN Money
url = http://money.cnn.com/1997/03/11/companies/japan_gangsta_pkg/
format = html
accessdate = 2007-03-18 ] In this atmosphere, the sōkaiya are able to prosper. However, the trend for more deregulation in the Japanese market the business environment for sōkaiya is getting more and more difficult.

Companies that have bribed sōkaiya

Major companies that have been found guilty of employing sōkaiya include but are not limited to:
*Mitsubishi, including a number of arrestscite journal | year = 1997 | month = December | title = Sokaiya scams hit Japan - Japanese companies ill-equipped to deal with corporate extortionists | journal = CNN Money | url = http://money.cnn.com/1997/12/19/investing/q_sokside/ | format = html | accessdate = 2007-03-18 ]
*Daiwa Securities Group
*Nikko Securities
*Nomura Securities Co., with three top executive pleading guilty for multi-million dollar payments. In this case, the sōkaiya actually owned enough stock to propose one of their choosing as a member for the board of directors. After the scandal came to light, the entire board resigned.
*Nippon Shinpan, forcing the president Yoji Yamada into retirement after various executives paid up to 80 million yen (ca. 650 000 US dollar) to the subsequently arrested Kikuo Kondo of the Sumiyoshi-kai,cite journal | year = 2002 | month = November | title = Executive quits over gangster charges | journal = BBC News | url = http://news.bbc.co.uk/2/hi/business/2498445.stm | format = html | accessdate = 2007-03-18 ] although police reports only 28.35 million yen.
*Dai-Ichi Kangyo
*The Tokyo Electric Power Companycite book |author= Tamae K. Prindle; M.E. Sharpe|title="Made in Japan" and other Japanese business novels |year=1989 |publisher= |location= |isbn= ]
*Meiji Seika

References

Further reading

*Baldwin, Frank, Sōkaiya, the Idiom of Contemporary Japan, "Japan Interpreter", 8, Winter 1974
*Ogino, Hiroshi, The Sōkaiya's Grip on Corporate Japan, JQ, July-September, 1997
*Szymkowiak, Kenneth, F., Sōkaiya Criminal Group and the Conflict for Corporate Power in Postwar Japan, "Asia Profile", Vol. 20, No.4, August, 1992
*Szymkowiak, Kenneth, F., Sōkaiya: An Examination of the Social and Legal Devoloupmet of Japan's Corporate Extortionist, "International Journal of the Sociology of Law", Vol. 22, 1994
*Szymkowiak, Kenneth (2002). Sokaiya: Extortion, Protection, and the Japanese Corporation. East Gate Book. ISBN 978-0765607805.

External links

* [http://money.cnn.com/1997/03/11/companies/japan_gangsta_pkg/ Japan faces fresh scandal] , cnn.com, March 11, 1997
* [http://money.cnn.com/1997/12/19/investing/q_sokside/ 'Sokaiya' scams hit Japan] , cnn.com, December 19, 1997
* [http://news.bbc.co.uk/2/hi/business/2498445.stm Executive quits over gangster charges] , BBC News, 21 November, 2002
* [http://www.thisismoney.co.uk/news/article.html?in_article_id=341787&in_page_id=2 Japan reels from Sokaiya scam] , Evening Standard, 3 December 2002