Table Speech

“Vocational Service Month” Meeting
“Rotary Spirit and the Japanese Management Philosophy”

October 13, 2010

Mr. Haruo Funabashi
Chief Executive Officer,
Sirius Institute Inc.

 Rotarians often talk about the slogans of “Service Above Self” and “They Profit Most Who Serve Best.” I find the second phrase of the Four-Way Test “Is it FAIR to all concerned?” is also remarkable.

 In reality, however, a totally different ethos prevails within business. The often-discussed “shareholder sovereignty” is entrenched, where the mission of CEOs is defined as maximizing corporate values by raising their share prices to reward the shareholders, who are owners of the companies. US institutional investors or fund managers have been criticizing the Japanese CEOs for not taking adequate measures to raise their corporate values. Business is a fierce competition. As the idiom “Businesses’ Business is Business” goes, its ultimate goal is money-making. Yet, I want to emphasize the significance of the Rotary slogans, “Service Above Self” and “They Profit Most Who Serve Best”, in corporate management.

 Various explanations are made why CEOs in the US tend to be so persistent in pursuing profits. One explanation is the “predestination advocated by John Calvin,” where the fate of each person to go to heaven or hell is pre-determined. A person cannot change one’s own fate before the omnipotent God. Everyone gets concerned about one’s fate and tries to seek relief in thinking that the degree of success in this world is proportionate to the salvation one gets in the afterlife. Therefore, people pursue the most efficient way of daily behavior, try to increase profits and spend them on charity. It might be no coincidence that many of the Founding Fathers of the US were Calvinists.

 Not every American, however, believes Calvinism. For example, the founder of Rotary International, Mr. Paul Harris, was from Wisconsin State where many immigrants from Germany and Scandinavia settled. His wife Ms. Jean Thomson was from Scotland. Rotary was founded in Chicago, where the environment must have been different from the areas where many Calvinists resided. I am going to study the cultural climate that influenced the formation of Rotary spirit.

 I have talked about the notion that separates business from service. Now, let me share with you the opposite notion that business equals service. When I refer to service, I take a broad interpretation that includes providing low-priced products to meet various levels of consumer demands.

 “Business is the service conducted by bodhisattva (Buddhist saint)” is known to be the favorite motto of the first Chubei Itoh (1842-1903). Buddha sent bodhisattva to give relief to all living things. Chubei advocated that commercial activities must save the world and help the others. This creed was shared by many successful merchants of Edo period (17th to mid-19th century).

 I believe the business creed of Edo merchants share the underlying value with what Mr. and Mrs. Harris believed in. Companies would not make sustainable businesses only by maximizing profits and raising share prices. In a short run, it might be successful, but should companies act only as money-making machines, they would not gain long-term profits.
 Nobody is willing to work with those who are only interested in maximizing their own profits. The same applies to companies. No company would survive if it concentrates on profiting only their shareholders. Business will be successful when conducted with the spirit of sharing profits among customers, employees, business partners and local communities, by always asking “Is it FAIR to all concerned?”

 I published an essay 7 years ago on Japanese companies with a long history. Last year, its English version was published entitled “Timeless Venture – 32 Japanese Companies that Imbibed 8 Principle of Longevity.” Tata Group of India cooperated in publishing this book. Now, why did Tata Group show interest in the long-operating Japanese companies?

 About 150 years ago, the founder of Tata Group Mr. Jamsetji Tata stated: “The community is not just one of stakeholders for business, but it is in fact the very purpose of its existence.” Today, this oldest and largest conglomerate in India, the Tata Group, continues to stick to this basic motto. They are actually maximizing their profits. What is the secret of their success? They do not take shortsighted measures to maximize annual profits, but have a long-term perspective on maximizing the corporate profits. Tata Group is based on the principle of “company is community itself.”

 In “Timeless Venture,” I summed up the secret of corporate longevity in the following eight principles, to which Tata Group showed a great empathy:
1. Clear value system, vision and sense of mission
2. Long-term perspective
3. Humanistic, people-first management
4. Customer-first orientation
5. Social consciousness
6. Continuous innovation and internal reform
7. Frugality
8. Continuous efforts to build an organizational culture based on aforementioned principles.

 Before concluding, let me emphasize that we can live like a decent human being by forming a community where each one helps each other. The economic and management philosophy must be based on such a humane view.