Thursday, November 08, 2007

Presidential Prerogative

Last week, there was quite a fuss made over what was seen as the indulgent and lavish offices of a failed English language school chain's (Nova's) former president's office. News programs showed us how large it was and the amenities that it included such as a big screen T.V., bed, bath with a closet-size sauna, a large tea area, and a big desk. I supposed the outrage was over the fact that he squandered lots of money on such a huge office while failing to pay staff and building a huge debt for his company. While it was a large space for Japan, it didn't strike me as incredibly opulent. In fact, mainly, it struck me as having a really tacky bad Vegas room decor.

In my opinion, it's not unusual for presidents of all companies to indulge their egos to the extent possible. In the U.S., the big cheeses of large companies tend to get private jets, chauffeured transportation, and put up at lavish hotels when they travel. I'd also guess most of them have roomy offices with amenities that the average grunt might envy. However, it's been my experience that even little cheeses will waste money to feed their vanity proportional to their company's size.

My former company, a small business with about 30 employees occupied two floors of a building in Nishi-Shinjuku when I first started working there. The office moved twice while it was still under the control of the president who started the company and he was certain to exercise complete control over how space was portioned out and where everyone was situated during each move. In each case, his office had to be right in front of the largest available window and an air conditioner vent of which he personally could control the temperature.

The president's office also occupied more space than the combined area of no less than 4 cubicles designed for the foreign teachers to occupy. His office had a large, high-backed chair and a desk big enough to use as a single bed. In addition to the desk, he always had to have a private meeting table in his office where he could sit and work should his spacious desk prove insufficient and conduct business with staff members in private meetings. Of course, his spacious desk was always completely cleared off since he didn't do much in the way of actual work so there was little risk of his needing more. There was also a side board which was about 7 feet long which he used to display various "awards", pictures of staff at anniversary parties, and one copy of each of the textbooks made by the company (which were rarely used and mainly for display). He also had a personal wardrobe closet for hanging his coat, stashing his umbrella, or hiding his ashtray. All of the furniture was huge, heavy and made of wood. His desk was so huge that it had to be abandoned during a later move to a more modest office space after his retirement and sale of the company to a larger corporation. The desk wouldn't fit in the elevator to get it to the new office.

Considering the relative size of my former company, his office was just as ostentatious and as wasteful a display of ego as the old Nova president's. We all crammed our desks into spaces between the support pillars in the office and shared lockers (two people each to one high school gymnasium-style metal locker) in the back of the office which doubled as a storage room for inventory and stacks and stacks of junk. Sometimes crap was piled so high due to lack of space that we couldn't get into our lockers but the president could have fit two king-size beds in his office with room to spare.

His wastefulness didn't stop with sucking up more space than he needed in the juiciest spot in the floor plan. Even when the company started to fall on hard times, he'd find ways to use company money for his own interests but peddle it as being a company-wide benefit. When he became infatuated with golf (no, not all Japanese men start out that way), he arranged for company golf tournaments and forked over money for a custom trophy for the winner. When one of the salesmen won, he kept the trophy for himself in his office rather than allow the winner to keep it and proclaimed it a "company trophy". He also maintained "company" vacation houses which he quietly discouraged others from using though he liked to keep brochures of them around and pretend anyone could use them.

There were also a variety of "anniversary" parties and indulgences on which great quantities of cash were squandered. The biggest was a party at a major hotel which we were all commanded to attend and schmooze with the guests without pay and with orders not to eat the food or consume the beverages except to nurse one glass of something for the duration. This allowed the president to stand up in front of his clients and nervously offer a speech to his own success while his employees stood around tired, hungry, bored to death, and aching to get the hell out of there.

There was actually a constant parade of high profile toys of the moment which he'd buy and set up in his office only to grow bored with them. The worst of these was a then state of the art PC which he never learned how to use but kept as a prop in his office while those of us doing actual work toiled on old, painfully outdated and sluggish equipment. After this PC passed into obsolescence, he unloaded it on his daughter who was hired in an act of bald-faced nepotism. Eventually, these expensive, useless, and underused items would migrate into the general work space where no one wanted them taking up their limited working area but all were obliged to keep them around as monuments to the president's ego.

While none of these things compare to an office with automatic curtains, a private bath, bedroom, etc. such as the former Nova president had, you have to keep in mind that our company was dying by yards each year and was very tiny. None of us were getting raises because the company was doing so poorly and salesmen were being forced to quit if their quotas weren't fulfilled even when they had new babies to feed. Office girls with university degrees were getting gross salaries of around 170,000 yen a month and working unpaid overtime while the president easily wasted money on his own vanity.

The old president used to get a magazine simply titled "President" which I never actually looked at as it went straight to his hot little hands. Since the teachers cubicles were directly across from his office (so he could keep an eye on us and put us in the spot with the fewest number of windows), I often witnessed him spend a few hours reading it just after it arrived. The cover usually showed some big corporate cheese like the president of Sony or Toyota. I think that a lot of presidents of pathetic little companies fancied themselves a part of a community of presidents heading businesses all over Japan and consequently afforded themselves all the perks that they believed went along with their titles.


Chris ( said...

I'm certainly not making an excuse for the actions of greedy presidents, but the Japanese tax system does encourage this sort of behavior.

Director and owner bonuses can only be paid out of post-tax profits (vs pre-tax profits in the West). So effectively there is double taxation at work. Suppose you want to pay your pres/director a Y10mn bonus (net of all taxes) this year. The company has to make Y40mn in order to do so - half goes on corporate tax, and half of the remainder gets paid in income tax. Much better for that director to buy his toys/go drinking in Ginza on the company account, as then the government is effectively subsidizing 75% of the cost (vs paying for it of your salary).

The tax system means that much of the value remains locked within the company and the owners are unable to release it in a tax efficient manner. This often encourages the kind of wasteful and abusive use of corporate expenses that we see in Japan.

tornados28 said...

I agree. The CEO uses that office to meet with other important people and to conduct business deals.

Many people, including here in the U.S. are critical of the pay and benefits top CEO's receive. But they don't understand that a top notch CEO and the leadership they provide may mean additional billions in profits and shareholder value.

These huge salaries and benefits may be completely justified.

Certainly of course there are many cases where top corporate managers have missused company funds for their own benefit however.

Shari said...

Chris: Thanks very much for that informative and interesting comment. It does shed some light on the situation and allows me to view it somewhat more charitably.

I really love learning this sort of thing about the way things work in Japan because I think it provides perspective.

tornados28: In the U.S., what you say is true. It may even be true for some companies but it was not true for our president. In general, Japanese salespeople leave the office and meet clients at their offices. That means that only people of low status tend to visit the president's office so it's not important to impress them. People who visited the president wanted him as a customer, not the other way around.

Our president rarely did anything besides meddle in other people's work in ways that made life harder (like idiotic suggestions for textbook edits or holding salesmen hostage in pointless meetings for hours on end). Trust me, his office served no business-based purpose. Since I sat across from it, I saw how little he did. The salesmen met the clients at their companies and did the sales. We made the textbooks. The accountant did the books. The office ladies did all the support. The president did nothing except make new office layout plans every 6 months as he decided to rearrange his kingdom when he grew bored with it.

The only important business deal done in that office was the one in which he arranged to sell us off to someone else when the company was headed downhill sufficiently that he decided to retire early and hand us off to...Nova. Yes, we were sold to Nova. Fortunately, later we were bought out by someone else and freed from those shackles.

Thanks for your comment!