Michael Woodford, the former British CEO of Olympus is back in Tokyo to meet with the Olympus board members. While in Tokyo, he gave a press conference at the Foreign Correspondents’ Club. When a journalist asked him why he had not gone to the Japanese authorities when he first learned about potential wrongdoings by his predecessors, Woodford answered with a rhetorical question: Does anyone the room believe that such action would have been effective? The Olympus saga raises grave concerns not only about corporate governance but the transparency of any large Japanese organization.
The most interesting aspect of the Olympus saga has been the reaction of the Japanese mainstream press. Their first coverage of Woodford’s dismissal was to repeat verbatim the Olympus’s official announcement: Woodford was a foreigner who didn’t understand Japanese culture and proved dysfunctional. Even after various British and American newspapers published detailed stories, Japan’s mainstream newspapers did little more than summarize foreign news coverage. It was only after the free fall of Olympus stock price that they started following the story more earnestly.
The silence of Japanese mainstream papers is especially surprising, because a Japanese monthly magazine, FACTA, first broke the story of accounting irregularities in Olympus’ M&A deals back in July. Since the writer of the FACTA article was a former journalist for Nikkei, a major business paper, the question arises why mainstream newspaper journalists have been so reticent to pursue this story.
The answer has a lot to do with the structure of the media in Japan. Japanese newspapers have a strong incentive to underplay stories that reflect badly on those corporate clients who buy their advertisement slots. In all countries, businesses exert financial pressure on newspapers. But when there is competition in the market and in politics, it creates space for a free press and lively debate. In Japan, the lack of any such competition makes financial pressure on newspapers much more insidious. Unlike in the US or UK, there are no independently owned national newspapers. In Japan, a handful of national papers and TV networks own one another and form very close-knit media conglomerates. TV networks, whose main revenue source is advertisement, are even more vulnerable to corporate pressure. Moreover, a mammoth advertisement company controls a large bulk of the flow of advertisement money in Japan. TV networks depend on advertisement companies for their revenue. This vulnerability feeds through to the major newspapers that own the TV networks.
As far as the Olympus case goes, Nikkei and Asahi were visibly less critical of Olympus in their coverage. Not surprisingly, Nikkei and Asahi, received more advertisement contracts from Olympus than other papers. Nikkei received the most amount of ads from Olympus, and Asahi came second. Asahi also benefited from Olympus sponsoring of one of the TV programs in TV Asahi. I hasten to add that Nikkei was the only paper that printed an exclusive and defensive interview with Olympus chairman Kikukawa, who hired and fired Woodford.
The complacency of the media produces grave consequences for Japan well beyond the Olympus saga. It has hindered debate about the causes and consequences of the Fukushima nuclear accident. Journalists from the mainstream press hardly question Tepco—the owner of the crippled nuclear power plant despite its record of concealing accidents and inconvenient data. Immediately after the accident, Tepco announced that they would be taking out advertisements in all major newspapers to apologize for the accident. Tepco, which has a regional monopoly and no need for advertisement, has one of the biggest advertising budgets.
The complacency of the press undermines Japanese democracy. The combination of the ownership structure of media conglomerates and collusion of interests within the corporate sector makes Japan a society where consent is easily manufactured and dissent suppressed. The press often uses ‘Japanese virtues’ and ‘Japan’s cultural uniqueness’ to cover up these facts. It is not Japanese to disagree or challenge the authorities, the story goes. The ruling Democratic Party of Japan (DPJ) was aware of some of these problems when in opposition. It had vowed to end the debate-stifling cross-ownership structure of the Japanese media. When they finally came to power in 2009, the time seemed ripe to democratize the Japanese media. Unfortunately, after facing a very hostile press, the DPJ government quickly caved in.
The Fukushima Accident has, however, had one silver lining. It has pushed some Japanese newspapers and companies to fight back. More citizens have begun to realize that much of the press coverage has been mere PR rather than journalism. This has created an opening for some newspapers to challenge the market share of the two largest national papers. Japanese language editions of foreign press are also increasing the competition in the information market in Japan as evidenced in the recent Olympus saga. Only by destroying the cozy relationship in Japan between the press and powerful organizations is there any hope of building a free, safe and prosperous society.
