Ever sat in a restaurant and wondered how everything was going to fit on your table? Side plates perched precariously on the edge, begging to make a suicidal leap. And if you dared to lift your wine glass, there was a fair chance that the salad bowl would rapidly gobble up the available space.
Next time you’re in that position, spare a thought for the directors at the newly merged Bank of Tokyo-Mitsubishi. Sixty-nine of them will be crowding round the table for the bank’s board meetings.
That either means one heck of a big table and, one envisages, some sort of videoconferencing arrangement to bring those at the far end into the action. Or it means furnishing the boardroom with a really small table which would work on a first-come, first-served basis. Lack of punctuality would be rewarded with a second row seat out of reach of the biscuits. It brings a whole new meaning to directors jostling for position. Or being squeezed out.
Mind you, when you’re sitting at the helm of the largest bank in the world in terms of assets, you’re probably entitled to have a board size of similar proportions. Bank of Tokyo-Mitsubishi has assets of around a staggering $725 bn, dwarfing its nearest rival (Sanwa Bank with just under $600 bn) and making the new Chase Manhattan look relatively puny with a mere $305 bn.
The bank was created on April 1, a year or so since the original announcement that Bank of Tokyo and Mitsubishi Bank would be merging their operations. No suggestions, please, that the delay in wrapping up the deal was due to the search for a suitably qualified cabinet maker.
To be fair to both BoT and Mitsubishi there was some attempt at cutting the board down to size. Both had large boards by any standards – BoT with 35 directors and Mitsubishi with 36 – so shaving off two directors between them seems like a laudable attempt at cost-cutting. Indeed, having led the way, the boardroom discussions will undoubtedly be much more focused on implementing the intended cost-cutting throughout the business. Two directors down, 2,000 staff to go.
John Taylor, senior analyst at the Washington-based Investor Responsibility Research Center, expresses little surprise that the banking behemoth should be crowding so many suits around the table. ‘Board sizes in Japan are enormous by world standards. Admittedly, 69 is out of the ordinary but not by that much for the banks.’
Taylor cites the example of Sakura Bank which was one of the first Japanese bank mega-mergers at the start of the decade. Sakura was formed by a merger between Mitsui Bank and Taiyo-Kobe Bank and it, too, began its operations with a 60-something board which has gradually been whittled down over time. The main aim, argues Taylor, is to preserve at least initially the notion that no-one is going to be facing a career hell due to a merger. That’s how mergers are sold in Japan. Keeping the various interest groups and factions happy is the name of the game.
But how does such a group reach any decisions and actively oversee the company? It doesn’t, says Taylor, and nor does it set out to fulfill such a function. Japanese boards are virtually totally comprised of insiders and not seen as watchdogs in the Anglo-Saxon sense. Most decisions will have been reached some time before the directors sit down around a table.
Nemawashi, or ‘going around the roots’, is how the process is known. The bulk of ideas will be floated among senior managers to see how they fly a long time before being set down on paper. Only once everyone has a good feeling about a move will it be put on a memo and circulated for the directors’ seal of approval.
‘That’s why Japanese companies are notorious for their slow decision-making,’ says Taylor. ‘But once a decision has been made you can be pretty sure that everyone’s been exposed to it. There are very few people in Japan who take the role of the board seriously in terms of what it’s traditionally designed to do.’
Taylor adds that on paper Japanese corporate law is similar to other legal systems in designating the role of the board. But in reality there is no decision-making tension between the board and management. ‘After all, they’re the same people,’ he notes.
Japanese boards only legally have to meet four times a year and it is unlikely that the full Bank of Tokyo-Mitsubishi board will all want to get together any more often. In between times, smaller committees composed of the most senior board members will meet and ratify business.
A quick vox-pop of corporate governance experts in the US and UK finds that twelve is seen as the optimal number for board size. However, most commentators are quite flexible over the actual numbers seated around the table as long as there is some non-executive element, directors are regularly put up for re-election and the board is responsible for shareholders’ interests.
That might not yet be the case in Japan, but you’ll be hard-pressed to find anyone who is prepared to argue that the Bank of Tokyo-Mitsubishi creation is not a leading force in the banking world. Regardless of the numbers playing footsie around the bloated boardroom table.
And just think of the lucrative mineral water contract.
