RPT-Japan Inc is tough terrain for foreign bosses

Wed Apr 18, 2012 7:28pm EDT

TOKYO, April 18 (Reuters) - The abrupt departure of Craig Naylor, an American, as CEO of Nippon Sheet Glass Co Ltd on Wednesday is the latest sign of just how tough it can be as a foreign chief of a major Japanese company.

There have not been many over the years - deterred perhaps by the language, relatively low pay and a corporate culture steeped in tradition and consensus decision-building.

Welsh-born Howard Stringer had a 6-year run as CEO of Sony Corp, but was moved aside early after a dismal run of losses left the electronics giant trailing rivals such as Apple Inc. Six months ago, another Briton, Michael Woodford, was sacked as head of camera and medical device maker Olympus after he blew the lid on dubious financial filings.

Naylor's resignation, however, cites "fundamental disagreements" over strategy and comes at one of Japan's more progressive and transparent companies - a $1.3 billion firm that signalled its global ambitions six years ago by buying British glass maker Pilkington Plc.

Naylor, who followed another foreigner, Briton Stuart Chambers, as head of the Japanese firm, was appointed two years ago after a lengthy global talent search and his arrival was seen as a sign that Japanese firms were taking steps to fill their management ranks with more overseas talent needed to keep pace with increasing global competition.

"There are more and more Japanese companies trying hard to diversify their boards because to be a truly global company ... they need to attract good talent," said Tetsuo Ii, president of Commons Asset Management. "I think the efforts are definitely there to become more global and diversify at the board level, but it's possible the company as a whole is not keeping pace with those changes."

Nicholas Benes, representative director of the Board of Director Training Institute of Japan, likened the move to bring in overseas talent to what U.S. companies such as Procter and Gamble and IBM went through three decades ago. "I think Japanese companies will figure it out, too. They're going through the stumbling age, just like P&G and IBM did."

Jamie Allen, secretary general of the Asian Corporate Governance Association, said Nippon Sheet Glass was unusually open about why Naylor was quitting. "The fact that the company has actually been quite honest about why he is leaving, that is actually quite positive," he said.

Allen also noted that corporate Japan has a more consensus-driven structure. "I think it would be quite difficult for an average western CEO to fit into that structure. Plus, there's the language," he said.

FRUSTRATION

That consensus-building culture means change is often slow.

"This was no doubt a source of frustration to him (Naylor)," said one executive who has done business with Naylor but who declined to be identified because of the sensitivity of the issue. "He struck me as a middle American guy who might be comfortable running a global company from America as opposed to running a global company from Japan."

At Olympus, Woodford found out how fragile his position was at the top when he returned from a business trip, was fired, thrown out of his company apartment and told to take the bus to the airport. His failing was to not comprehend that the company board would support its entrenched chairman over a long-running $1.7 billion accounting fraud. The company's main lenders are also its main shareholders, stifling real change at the firm.

"They supported this board and they didn't support me. What did I do wrong? I reported a fraud but they stuck together like glue," Woodford told Reuters on Wednesday in Tokyo ahead of an Olympus shareholders meeting on Friday to pick a new board.

Japanese companies also tend to promote from within, and CEO pay can be lower than in other developed markets.

Naylor, for example, made 173 million yen ($2 million) including bonuses in the year to March 2011, according to the company's financial statements. By comparison, Pierre-Andre de Chalendar, CEO of French building materials group Saint-Gobain , was paid over $3 million.

Language, too, can be a barrier. Foreign leaders can struggle to get their message across and will normally need an interpreter to listen to their workers.

A Sony executive, who didn't want to be named, said Stringer was not always sure his staff understood what he wanted and on occasion was left out of the loop in decision making.

But it's not all gloom for foreigners looking to lead major Japanese businesses.

Brazilian-born Frenchman Carlos Ghosn still heads Nissan Motor Co after more than a decade as CEO, and Brian Prince has been chief at Aozora Bank for three years.

Also, the number two and three executives under Nippon Sheet Glass' new CEO Keiji Yoshikawa are a German and a Briton.