ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2:1 - 20

Power And The Japanese Ceo Allan Bird*

This paper explores the sources of Japanese CEO power and the processes through which power is acquired. Japanese CEOs realise two types of power, positional and personal. Positional power derives from strategic contingencies which encompass the office CEO. It also arises from institutional dimensions of the office's role within an organisation and within society. PersonaI power has two basic components and is a consequence of Japanese human resource management processes which are predicated upon an internal labor market. Slow promotion and job rotation provide managers with the opportunity to acquire expert influence and to build extensive acquaintance networks. Promotions legitimise the acquisition of power. CEO power is moderated by factors which directly ii~uence the extent of legitimacy which is accorded both the individual and the office.

Japanese companies have achieved impressive success in global markets over the past fifteen years. Eight of the world's fifty largest industrial corporations are based in Japan, and 157 of the 500 largest non-U.S, firms are Japanese (Fortune, August, 1988). They have also achieved financial success. The ten largest commercial banks in the world are Japanese (New York Times, 15 July 1988).

Do Japanese CEOs play any role in these phenomenal accomplishments? Based on research to date, the answer is "no". A review on past writing leads to the conclusion that the success of Japanese firms is a function either of their strategies, (Abegglen & Stalk, 1986), their human resource management practices (Hatvany & Pucik, 1981), their overall approach to management (Ouchi, 1981), or a complex mix of these and other variables (Pascale & Athos, 1981). Apparently the executive at the top has little, if any impact. Disregard for the possible influence or power of Japanese CEOs is surprising. Even if their instrumental influence is limited, one wouid expect them to wield symbolic power which might dramatically affect firm performance (Pfeffer, 1981). Moreover, it is top management, guided by a CEO, which bears responsibility for the formulation and implementation of policies and strategies which guide a firm to success or failure (Okumura, 1982). It is CEOs who take credit when companies are successful (Pascale & Athos, 1981; Pfeffer, 1981) and blame when they are not (Gamson & Scotch, 1964).

* Assistant Professor of Management and International Business, Stern School of Business, New York University. This research was funded through Fulbright Graduate Research Fellowship. I wish to acknowledge the helpfutcomments of Allan Meyer, Mark Ramsmeyer, Kiyoaki Shiostugu, and two anonymous reviewers on earlier drafts of this article.

Power

Interest in the power of Japanese CEOs extends beyond the realm of organisational behaviour and theory. An understanding of CEO power may also prove useful to public and private interest groups in foreign nations who find it necessary to deal with Japanese companies. The spate of books touting Japanese style management (Ouchi, 1981; Pascale & Athos, 1981) over the last decade has created expectations about the way Japanese firms behave, particularly in the area of decision making. Consequently, host country parties negotiating with Japanese multinational firms may naively overlook the power and influence of the CEO in strategic decisions at the subsidiary level.

For instance, historically workers in the U.S. welcomed Japanese foreign direct investment, looking forward to working in companies that had been described to them as considerate of the labour force and oriented toward participative approaches in management (Furlong & Schoenberger, 1977; Tsurumi, 1978). What they have frequently found, however, are companies which are tightly run from headquarters in Tokyo, with the head of the subsidiary, in some cases, reporting directly to the CEO. Indeed, in one plant employee suggestions for plant improvements had to be ratified by the board of directors back in Japan (Businessweek, Oct. 5,1981).

The lack of concern with CEO influence and power may derived from several phenomena. Research on power is hard to do. Most people don't want to talk about power, including those who possess it (Pfeffer, 1981). The difficulty is compounded in Japan, where firms are often perceived as secretive and disinclined to share information about themselves (Halberstam, 1986).

Perhaps a lack of concern with CEO power is justified. Japanese CEOs have been portrayed as powerless. Advocates of this perspective argue that bottom-up decision making processes operating through a complex ringi (proposal) system reduce the role of Japanese CEOs to that of mere rubber-stampers whose primary responsibility is to ratify proposals collectively agreed upon at lower levels of their organisation. As Clark writes:

...because the ringi is first issue in a unit of lower management .... by the time it has reached the upper management it has gained so much support and so many approving comments that the president and directors can scarcely reject it (1979, p. 127).

Yet Clark (1979) notes that his own observations and his readings of the popular business press in Japan find support for the thesis that many Japanese CEOs do wield forceful influence over the affairs of the companies they run. Indeed Clark concludes that many Japanese companies are run autocratically.

How powerful are Japanese CEOs? If many Japanese CEOs run their companies in an autocratic fashion, why do so many observers believe that they don't? If there are differences in the amount of power that Japanese CEOs wield, what would explain those differences? The answers to these questions canbe found

2

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

in an examination of the ways in which CEOs acquire and exercise power within their firms. The central thesis of this paper is that CEO power derives from organisational processes and policies which legitimise the authority ascribed to both the office and the officeholder. These processes and policies are themselves enmeshed in a sociocultural context which serves to maintain and to strengthen them, thereby not only legifimising CEO power, but obfuscating its use.

Previous research on power in Western organisations has noted two potential sources of power, both of which are applicable to Japanese CEOs. CEO power may derive either from the position or from the person. Whether emanating from one or the other, power and the ability to exercise it are moderated by a number of factors. The relationship of Japanese CEO power to its sources and to moderating factors is presented in Figure 1.

FIGURE 1 A Model of Sources of Japanese CEO Power

Positional Power

Strategic Contingmeies Insdtufional Factm's

Utilization of Company and Societal Norms

Promotion as a Proce~ of Legitimation

Power Moderators ~ ] Former Executivea CEO

P¢.~ Power Interest Groups

Personal Power

Expertise Acquaintance: Networks

Positional Power

Power is distributed unevenly throughout any large, complex organisation. In an organisation, power may be conceived of as a social relationship in which one member is dependent on other members (House, 1984). Inequality in the relative dependencies of organisation members leads to inequality in the distribution of power. Accordingly, power may then be viewed as "the ability to obtain compliance with one's wishes (House, 1984).

Power

In the case of a Japanese CEO, positional power obtains to the officeholder as a consequence of occupying a unique position within the organisation, a position which copes with critical contingencies confronting the organisation. The Strategic Contingency Theory argues that the relative power of an organisational subunit or of a specific position is contingent on three factors: (a) the degree to which a position or subunit is able to cope with uncertainties for the organisation; (b) the degree to which its coping abilities are nonsubstitutable; and (c) the degree to which its coping abilities are central to, or interlinked with, the organisation (Hickson, Hinings, Pennings, & Schneck, 1974). The strategic contingencies approach has met with strong support (House, 1984) in a variety of field studies which, though conducted in Western firms, appear to be applicable in a Japanese context (Shiotsugu, 1982).

As the theory pertains to top management, Hambrick (1981) found that environmental scanning and strategy formulation were two areas where uncertainty coping functions provided power to executives. This is wholly consistent with Okumura's (1982) thesis that Japanese top managers' have a threefold role as environmental scanners, strategy formulators, and policy implementers. This constellation of duties grants top management teams (TMTs)* a central position in the workflow of the organisation, charged with responsibility for coping with the primary uncertainties confronting the organisation, namely: (a) uncertainty that exists in the firm's environment; (b) uncertainty deriving from the complex arrangements that occur within large organisations; and (c) uncertainty growing out of the dynamic interaction between firm and environment.

* The phrase "top management team" refers to a specific and clearly identifiable group of executives within a Japanese firm. The official title for executives at the highest level of a Japanese firm is torishimariyaku, and is translated as "director". The torishimariyaku as a group constitute a Japanese firm's formal board of directors. However, the activities of Japanese directors differ substantially from their U.S. counterparts (Kono, 1984; Okumura, 1982). The great majority of Japanese directors hold line responsibilities and are deeply involved in the operations of the firm. They are in a position analogous to that of inside directors on a U.S. board. A U.S. board with nearly all inside directors can be viewed as a simple equivalent to a Japanese board. The American term "board of directors" conveys a different set of connotations, however, a set which confuses rather than facilitates discussion of the top level of Japanese firms. At the same time, "general manager," the term most frequently used to describe those executives with the line responsibility at the top of U.S. firms, is equally inadequate as label for Japanese directors because it lacks a component reflecting the executive's involvement in affairs typically handled by the board of directors in a U.S. firm. For this reason, throughout this paper, torishimariyaku as a group will be referred to as the top management team.

4

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

With TMTs commanding power as a result of performing crucial uncertainty coping functions, the structure of a Japanese TMT places the CEO at the hub of this most powerful organisational subunit. It is the responsibility of a CEO, as prescribed by law and codified in formal organisational policies, to preside over the TMT. Consequently, CEOs are in a position to control both the frequency and agenda of TMT meetings. This influence is enhanced by the increasing use in many large companies of executive committees (Kono, 1984). Executive committees, comprised of a limited number of senior executives and led by the CEO, have taken over the policy and strategy formulation duties previously performed by TMTs. By reducing the number of people involved at this level of decision making, the ability of the CEO to influence outcomes is further enhanced. Moreover, CEOs are in a position to solidify their base of power within the executive committee because they personally control the selection of committee members.

Strategic contingency theory is useful in explaining a second source of CEO power. In a study of suppliers and their ability to control wholesale distributors, Bagozzi and Phillips (1982) found support for the extension of strategic contingency theory to interorganisational situations. As legal representatives and symbolic figureheads of their companies, CEOs hold power as a consequence of their ability to mediate interorganisational relationships. This is particularly important in Japan where most firms are involved in industrial groups.

There are three types of industrial groups in Japan: keiretsu, bank groups, and industrial families. In general, however, they share four common features which make them distinctive (Clark, 1979). First, they each share a sense of community in that member firms clearly identify themselves and are identified by others as belonging to a particular group. Second, firms within the group are hierarchically organised, primarily along the lines of company size. Third, members within the group all tend to specialise in a given industry or, within an industry, a specific product or portion of the production process. Fourth, member firms hold shares in each other, not necessarily as a form of interlocking control, but as an expression of the relationship that exists between them.

Ueda (1986) notes that industrial groups have president's clubs to which all members belong and which serve as a decision making body for the group as a whole. Industrial groups in Japan provide affiliated firms with access to important resources, among which the two most important may be capital and information (Gerlach, 1987). Affiliation with an industrial group results in interfirm contacts at a number of levels of the firm. Nonetheless, the most important contact occurs at the CEO- level (personal communication, T. Harima, April 21, 1987). Industrial group represent external constituencies in a strong position to influence a firm's intemal operations. A CEO occupies a position at the nexus between finn and industrial group and, hence, resides in a strategic position in terms of gaining access to valued resources and mediating extemal influences.

Power

Evidence of CEO power in mediating external influences is reflected in the distribution of formal authority. There is no greater outward evidence of power within an organisation than the power to represent it and bind it legally. In Japan this power is known as daihyoken and commercial law requires that it be vested in at least one corporate officer (Yoshino, 1968). There is, however, no upward limit on the number of executives who may possess it.

In a small, pilot survey of forty manufacturing and service firms listed on the Tokyo Stock Exchange in 1985, 20 percent vested daihyoken status only in the CEO. Firms granting daihyoken status to the CEO and only one other officer, in essence a "fight-hand man," represented another 15 percent of the sample. If daihyoken status is a measure of power at the top, then in roughly one out of three large Japanese firms power is tightly held by the CEO.

A second internal factor contributing to CEO power is the ability to control personnel processes within the TMT. Power over personnel decisions within the TMT resides with the CEO alone. Interviews with Japanese executives indicated that, though a CEO may consult with senior executives about whom to bring into the TMT or whom to promote, the final decision making authority rests with a CEO and no one else (Bird, 1988).

Control over personnel decisions gives a CEO the capacity to institutionalise power in two ways. First, personnel decisions can be used to place allies in strategic positions within the TMT or to remove pretenders to the throne by passing them over for promotion or forcing their premature retirement. An example of this is found in the actions of Snow Brand Milk's president, Kenichi Yamamoto (Nikkei Sangyo Shimbun, July 6, 1987). In 1987 Yamamoto removed from the board three directors who were all considered to be in the running as his successor. Two years previously Yamamoto had turned Snow Brand Milk's TMT inside out, removing eleven of fifteen directors.

Another way in which a CEO' s control over personnel decisions can consolidate or increase power is through the implementation of procedures and arrangements which crystallise as organisational policies and structures, thereby legitimising them, and making it difficult for others to challenge them (Pfeffer & Salancik, 1977). President Iida of Takashimaya, provided an illustration of this when he removed two family members from the board, announced to the public that the firm was no longer a family firm, and then selected an outsider as his successor. The change in policy regarding the origin of successor served to increase CEO power vis-a-vis the Iida family, the firm's major shareholder group.

INSTITUTIONAL DIMENSIONS OF THE POSITION

The position of CEO and its accompanying strategic contingencies within a firm are embedded in the larger context of Japanese society. Large business

6

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

organisations are important social and economic institutions within modem industrial societies (Scott, 1981). The position of CEO in a Japanese firm carries power as a result of factors within the larger context of society in general.

As legal entities, Japanese companies must justify their existence to society. From the end of World War II to the present, they have done this with considerable success. As Clark (1979, p. 225) points out, they have conferred "their benefits on enough people for there to be a considerable support for the status quo." This support for the status quo translates into freedom of action for a Japanese CEO.

Japanese society contributes to the power of CEOs through its recognition of companies as legitimate social institutions. Clark (1979) points out that, unlike their western counterparts, Japanese companies occupy a respected place within society. This respected position affords companies considerable maneuvering room. By association, CEO actions tend to be accepted because a CEO personifies the organisation by virtue of being its highest officer. This is not to say that CEO actions are without social constraints. A specific decision or course of action which runs counter to the interests of any of a firm's constituencies may be met with substantial opposition.

The concept of idiosyncrasy credits developed within organisational behaviour to explain the willingness of members of a group to accept behaviour on the part of a leader which deviates from group norms. The more successful a leader, the greater the willingness of group members to allow deviant behaviour on the part of the leader, i.e., the larger the store of that leader's idiosyncrasy credits.

An analogous concept may apply to companies within the broader context of society. Firms who are successful in satisfying the demands of their constituencies build up a store of idiosyncrasy credits. Firms and their symbolic personification, the CEOs, are able to draw upon this store of credits which the firm has acquired over time. Like real funds, idiosyncrasy credits can be increased or they can be drawn down to zero. CEOs who are associated with a company's success increase their ability to manoeuvre and engage in behaviour which deviates from constituency norms and expectations. However, CEOs who are associated with a company's failure Or who consistently deviate from norms deplete their store of credits and find their constituencies unwilling to give them free rein.

Japanese society has strong norms emphasising hierarchical relationships (Nakane, 1971). From the elucidation of Prince Shotoku's Seventeen Article Constitution in the seventh century onward, there has been an explicit presumption that superiors have the fight to lead and subordinates have a responsibility to follow. This results in a social ratification of CEO power and its use, the strength of which is reflected in the extremely low incidence of forcible removal from office among Japanese presidents.

Power

The ousting of Shigeru Okada as CEO at Mitsukoshi after having been exposed for a number of criminal acts in 1982 represents one of the few cases of visibly forced resignation by a Japanese CEO in postwar history. Pfeffer and Salancik (1977: 235) suggest that "a measure of the extent to which power is institutionalised is the magnitude of the problem that must occur before the organisation responds." In this case, the problem was of monumental proportions, yet still it was difficult to remove Okada from office. The actual removal required a joint effort by anti-Okada forces within the TMT and external stakeholders led by Mitsui Bank. Even then Okada was not removed directly, but was first reappointed as a director, then later removed. The final piece of evidence revealing the strength of social norms supporting CEO power in the Okada case was revealed four years after his removal when the three most prominent members of the anti-Okada faction were prematurely retired, ostensibly because of their role in ousting Okada. Okada's removal was essential. Nonetheless, their actions represented a direct attack on the office of CEO and, therefore, necessitated a measure of retribution. The whole affair bore a striking resemblance to the tale of the forty-seven samurai. In that story, a group of samurai avenge the death of their master; then, in a demonstration of respect for the law which they violated, they commit harakiri. In like fashion, the three Mitsukoshi executives, having carried out their duty to the company, then had to sacrifice their careers to re-establish in the minds of all the sanctity of presidential power.

The definition of power originally advanced-the ability to obtain compliance with one's wishes-makes no distinction regarding how compliance is obtained. When the use of power is viewed as legitimate the mode of influence changes to that of authority. Authority represents the exercise of power with an absence of coercion; influence targets comply not because they are forced to do so, but because the influence attempt is viewed as justified or proper (House, 1984). Employees consider compliance with their superiors' influence as a condition of membership in the organisation (March & Simon, 1958), thereby legitimising managerial power.

According to Bamard (1938), the extent to which subordinates are willing to comply with influence attempts in the absence ofcoercionis their zone of indifference. Orders or influence attempts which fall outside the zone of indifference are not recognised by subordinates as legitimate. Japanese social norms regarding the position of CEOs within companies suggests a societal equivalent of Bamard's zone of indifference which also applies to organisational members. The position of a Japanese CEO is made more powerful because societal norms substantiate and buttress robust company norms.

Personal Power

There are individual characteristics of Japanese CEOs which also lead to the acquisition of power. Western research into the sources of individual power appears

8

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

applicable in the Japanese context (Shiotsugu, 1982). Expert influence (C.F. French & Raven, 1959; Hollander, 1960) and charismatic influence (C.F. Etzioni, 1961; House, 1984; Smith, 1982) are two characteristics which appear relevant to a consideration of Japanese CEOs.

Expert influence and a variant of charismatic influence are developed through the human resource management system employed in Japanese firms. CEOs acquire power as they rise to the top of the orgmnisation through a system that both provides opportunities for the acquisition of power and simultaneously legitimises that power in the eyes of internal and external constituencies.

THE PROCESS OF LEGITIMISING PERSONAL POWER

Hatvany and Pucik (1981) have proposed an integrated model of Japanese management which emphasises human resource development. A key component of this model is the development of an internal labor market supported by a process of job rotation and slow promotion. The structure of career mobility and the nature of the promotion process within Japanese companies create opportunities for those on a path toward the top to garner expert power and build a network of popular support that translates into a base of influence.

Recent research in career mobility in Japanese firms (Sekimoto & Hanada, 1985; Pucik, 1981; Wakabayashi, i987) reveals the presence of a tournament model of mobility. Under a tournament model there is a sequence of competitions much like those in a tennis tournament. Those who successftflly compete at one level are allowed the opportunity to compete a t the next. A loss at any level removes a competitor from the tournament. The operations of the tournament create among those involved an impression of legitimacy regarding those who advance.

In an empirical test of the tournament mobility model examining a cohort group within a single Japanese company Wakabayashi (1987) found that employees who were promoted early had significantly different and better promotion chances than those who were not. Moreover, he noted that determination of early promotion occurred within the first three years of employment, despite the fact that the first major promotion did not come until much later. In another study of career mobility in a Japanese firm, Pucik (1981) found additional support for the tournament model, identifying a group offast-trackmanagers whose promotion chances were significantly better than the remainder of the cohort. In a subsequent study investigating the antecedents of successful careers, Pucik and Hanada (1982) discovered that a disproportionate number of fast-track managers came from prestigious universities. They concluded that graduates of prestigious universities are more likely to be targeted for inclusion in the fast promotion group.

The early selection of a fast-track group and the inclusion in that group of a disproportionate number of graduates from prestigious universities suggest that

Power

promotion decisions are predicated on criteria in addition to performance on the job over an extended period of time. This presumption is supported by the fact that, because Japanese firms hire white-collar personnel who enter directly upon graduation from four-year universities without the benefit of experience or training in any functional area, the early years of promotion are spent mainly in learning the work, rather than performing it (Abegglen, 1972).

Rosenbaum (1984) has suggested that the mechanism driving the tournament model of mobility is signalling. Participants involved in promotion decisions work with subjective information and operate under conditions of bounded rationality (March & Simon, 1958). They search for acceptable candidates in a limited, sequential fashion. In the absence of more objective criteria, decision makers will tend to rely on other indicators which signal ability (Spence, 1973).

Using university prestige as a criteria for inclusion in the fast-track group provides the selection process with credibility because this particular criteria is predicated on intelligence and ability. Admission into Japanese universities is based on performance in entrance exams, with more prestigious universities administering more difficult exams. The exams are merit-based and those who get into better universities are considered, on average, to be smarter and more capable than those who do not (Clark, 1979). Under the assumptions of signalling theory, university prestige serves as a proxy for one's intelligence and ability in early placement and promotion decisions.

The promotion process itself is perceived as valid by members of the organisation because of the normative belief that it is based on merit criteria and that the consequent hierarchy is a rational one. Slow promotion, i.e., the long period of time between promotions, further reinforces the perception of legitimacy by leaving organisational members with the impression that promotions are the result of performance over time. Consequently, those advancing higher are viewed as legitimate recipients of the greater authority which accompanies each advancement.

EXPERT INFLUENCE

House (1984; p. 53) defines expert influence "as the ability to influence others by the use of logic and facts that the others perceive to be instrumental for the attainment of desired needs." Future Japanese CEOs acquire a two-dimensional variety of expert influence as they move up through the company. Job rotation provides managers with the opportunity to acquire the extensive knowledge about the operations of the organisation itself. Additionally, in-house, on-the-job training endows managers with expertise in a functional area such as marketing or production.

Through lateral promotions managers are exposed to the firm's full breadth of activities. Job rotation makes Japanese managers generalists, according them a wide-

10

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

ranging knowledge of how the firm operates-who are its suppliers and buyers, how it finances its operations, how it produces what it sells, how it markets what it produces, and how it manages its human resources. In short, job rotation provides managers with a holistic knowledge of the organisation. Concurrent, upward promotions propel managers in toward the center of the organisation (Schein, 1978) conferring upon them an increasingly more intimate knowledge of the firm and its operations, and giving them knowledge not available to those below.

A Japanese firm's internal labour market creates a need for in-house training in functional skills, the acquisition of which endows rising managers with expert influence along a second dimension. Though Japanese managers are perceived as having functional skills which are firm-specific and more general than those of their U.S. counterparts (Hanada, 1983), this does not mean that such skills are insignificant within the organisation. Moreover job rotation need not necessarily entail training or experience outside a functional discipline. Pucik and Hanada (1982) found no support tbr the notion that successful Japanese managers were generalist. They found, instead, that managers specialising in one field achieved higher level of advancement. A pilot interview survey of ten executives suggested that those who rose to the top were functional specialists, spending most of their pre-TMT careers in a single functional area (Bird, 1988).Typical of this was an executive in a food processing company who had spent, prior to entry into the TMT, twenty of his twenty-three years in marketing-related areas. While being rotated through a number of different divisions of the company, he had worked in product distribution, marketing research, new product development, and marketing strategy. The sequencing of functional training and experiences suggests a carefully planned progression of functional skill development as he moved upward in the organisation. Parenthetically, rather than portray Japanese managers as generalists, it may be more appropriate to characterise them as T-shaped in skill and knowledge-their knowledge of the firm is broad, while their functional experience is deep.

The description above depicts expert influence as being informally acquired and legitimised through a process of job rotation and in-house training. Expert influence may also come via the endorsements of influential others within the firm (House, 1984). Promotions to key positions or departments serves as one signal of competency. Other forms of endorsement may be more symbolic. The creation of new rifles, involvement in special project groups, the acquisition of a mentor or senior-level confidant may all be perceived as ratification of a manager's capability. It is this ratification which legitimises a future CEO's power.

INFLUENCE THROUGH ACQUAINTANCE NETWORKS

A second source of personal power is a CEO's interpersonal network, what is referred to in Japanese as jimmyaku, and which may be viewed as a variant of

t l

Power

charismatic influence. Within the organisationat research literature, charisma has been defined as "the ability of an actor to exercise diffuse and intense influence over the normative orientations of other actors (Etzioni, 1961; p. 209)." In the context of Japanese firms and their CEOs, this definition must be altered to reflect the nature of Japanese human relations. A Japanese with interpersonal influence is adept not so much at shaping the normative orientations of others, but in skillfully managing those normative orientations within an extensive network of acquaintances.

The acquisition of influence founded on a richly connected acquaintance network is centered in the personnel policy of job rotation, which gives managers an opportunity to establish broad-based networks of support within and without the organisation. By moving from one section or department to another, managers who are interpersonally skillful can establish an organisation-wide network of superiors, colleagues, and subordinates who are familiar with their work. This far-reaching network can provide a bulwark of popular support, insightful advice, and preferential protection. A manager's networks within a company can also be a source of information, thereby augmenting the manager's expert influence.

Acquaintance networks may also extend to important stakeholders outside the company. In the case of Japanese firms involved in industrial groups', there are opportunities for a manager to interact with affiliated firms by means of group- sponsored training and development sessions. At these functions, managers have the opportunity to establish acquaintances with peers and superiors in other firms which hold stock in the company or who are major purchasers and suppliers. Moreover, favourable comments to superiors by external stakeholders can enhance a manager's image in the eyes of superiors, colleagues, and subordinates.

Moderators of CEO Power

Once in office, there are forces in a CEO' s environment which moderate both the continued acquisition of power and the ability to use it. Variations in CEO power are a consequence not only of variations in levels of positional and personal power, but also a consequence of variations in moderating forces. Three factors in particular are relevant to Japanese CEOs: (a) the presence of former senior executives; (b) a CEO's peers; and (c) interest groups.

FORMER EXECUTIVES

The presence of the founder of the firm, of an influential former CEO, or of a senior executive with a distinguished career moderates the ability of a CEO to exercise power as a result of such individuals being in a position to question or to ratify CEO judgment and behaviour. Given their experience base and their prestige, former executives take on the stature of senior statesmen or godfathers whose

12

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

wisdom and insight are above reproach. Former executives can enhance the legitimacy of a CEO by lending their support and approval. An example of this is found in the ascendancy of Yamashita to the position of CEO within Matsushita (Shiotsugu, 1986). At the time of his selection by Konosuke Matsushita, the fotmder of the company, Yamashita was twenty-sixth in seniority out of twenty-eight directors. He had served in the TMT for a mere two years. Nevertheless, there was no opposition to Yamashita' s appointment, nor was there much opposition two years later when he introduced sweeping structural changes within Matsushita's TMT. Having been anointed by the founder as the chosen one, the mantle of authority had been passed on and Yamashita's actions were hard to resist.

Conversely, former executives can also be instrumental in removing CEOs, in reducing their legitimacy or, at the very least, in constraining their behaviour, as a result of residual influence within the firm. In 1987, Shogi Nogawa, the President of Komatsu, returned to Tokyo from a ribbon-cutting ceremony at Komatsu's new plant in Tennessee to find that he was no longer in charge (Nikkei Sangyo Shimbun, June 22, 1987: 28). Just prior to the board meeting on the Monday after his return, Nogawa was met by Chairman Ryoichi Kawai who asked for his resignation. Though Nogawa's fall was sparked by a revolt among his subordinates who called him an autocrat who refused to entertain any dissent in board meetings, it was clear that the real mover was Kawai, who had been watching developments for some time. Kawai did not like Nogawa's way of running the company and said, "My father was also an autocrat. I did not like such one-man management." Though Kawai was only chairman, usually a figurehead position within the company, the fact that he was the prior CEO gave his opinions great weight within the TMT.

PEERS

Fellow company heads and senior executives within an industrial group are also in a position to place constraints on a CEO's use of power. Because of the strong emphasis on human relations and the group within Japanese society and within Japanese business (Rohlen, 1974), the opinions of one's peers can serve as a potent check on behaviour. Within industrial groups, monthly and semi-monthly meetings of CEOs and other senior executives provide ample opportunity for peers to express their approval or disapproval ofbehaviour. One CEO frankly admitted that he thumb his nose at the members of his TMT because they were all younger than he and because he had the power to get rid of them, but the same was not true of his peers. Other CEOs in his industrial group would ostracise for any behaviour which they felt was unbecoming. They would not tell him what to do in advance. But after the fact, if they thought he had done something wrong or inappropriate, they would let him know.

13

Power

An example of peer influence is found in the retirement of Toshihiko Kubota as president of Toa Domestic Airlines, a member of the Tokyo group (Nikkei Sangyo Shimbun, June 23, 1987). In May of 1987, Kubota indicated that he intended to remain on as president despite the fact that he had reached retirement age for presidents at Toa. When Noboru Iijima, President of Tokyu Railways and an outside member of Toa' s board, heard about this he set up a luncheon meeting with Kubota to ask him to reconsider. At the end-of-fiscal-year board meeting Kubota announced his decision to retire.

INTEREST GROUPS

Shareholders and rival coalitions represent two interest groups with strong potential to increase or curtail a CEO's ability to exercise power. A third interest group, government, represents a moderator of the CEO's decision environment. Rival coalitions, among which shareholding family members may be included, embody a moderating effect on CEO power and a direct challenge to it. By contrast, shareholders possess a latent potential, more powerful than that of rival coalitions, but currently occupy a position of relatively weak influence.

From a legal standpoint, shareholders in Japanese companies have the capacity to wield formidable influence over CEOs. According to Japanese commercial law (Commercial Code of Japan, 1983), a shareholder owning only three percent of the outstanding shares can require that a board meeting be held or request that the civil courts remove a director from the board. Notwithstanding this legal clout, shareholder influence is much more restrained. The reason for this restraint is that roughly seventy percent of a large Japanese firm's stock is held by other firms (Abegglen & Stalk, 1986). These firms are frequently members of a common industrial group, or are a firm's major buyers or suppliers, and are less interested in the performance of the company's stock than they are in the stability of the company. They are passive shareholders (Kono, 1984), disinclined to action unless the CEO's behaviour threatens to disrupt the organisation's stability. Bamard's (1938) concept of a "zone of indifference" appears to fit well in the case of shareholders' response to CEO actions.

The large "zone of indifference" industrial group members may accord a fin~ does not detract from their ability to take forceful action when CEO behaviour extends outside the zone. The ousting of Okada from Mitsukoshi is enlightening on this point. Mitsukoshiis a core member of the Mitsui industrial group and the actions of Okada were clearly disrupting not only Mitsukosh_i but the Mitsui group as a whole. Despite the presence of a strong anti-Okada faction within Mitsukoshi's TMT, the prime mover whoi engineered Okada's departure was an outside director, Goro Koyama, who was concurrently a director at Mitsui Bank and who represented the bank's interest in Mitsukoshi. He served as the catalytic agent within the TMT,

14

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

letting it be known that the Mitsui Group could not abide a continuance of Okada a CEO and that shareholders would be forced to act if the TMT did not.

Potentially powerful though shareholders may be, rival coalitions represent the greater threat to a CEO's power. Based on the extensive coverage given the behaviours of factions (habatsu) within the Japanese press, it appears that a CEO cannot take rival coalitions lightly. Yoshino (1968) cites their presence within TMTs as a major problem.

Societal and company norms are a two-edged sword for both CEO and rival coalition alike. In the case of the coalition, norms gravitate against outright revolt or open coup d'etat attempts. Simultaneously and conversely, these same norms prevent a CEO from autocratically disposing of rival coalition members because such actions may be viewed as detrimental to the long-term interests of the company, resulting in a legitimisation of the rival coalition's position within the organisation.

Moreover, because rival coalitions spring up from within the company, they are particularly troublesome for a CEO. Faction members are knowledgeable about the finer details of firm operation and performance. They know the weaknesses of both firm and CEO. Their position and knowledge makes it possible for them to lodge direct challenges to a CEO's power. For instance, Dixie, a venture business which manufactures plasma display panels, was in tumult for nearly a year and a half as pro- president and anti-president forces feuded over the scale of a new factory (Nikkei Sangyo Shimbun, July 9, 1987). Rival coalitions engaged in guerilla warfare, taking advantage of opportunities to ambush each others' plans. Eventually anti-president forces were powerful enough to call for the resignation of the president at a board meeting. Though they went down to defeat, media analysts were of the opinion that their loss was due more to an unfortuitous upturn in business, rather than to the president's ability to counter their manoeuvres.

Additionally, rival coalitions may indirectly challenge a CEO by releasing damaging information to shareholders or to the media. Done with great subtlety, the effect of such leaks is to gradually erode away a CEO's image in the eyes of the business community, thereby making resistance to a rival coalition's demands untenable.

The importance of the broader political and bureaucratic environment as a moderator of CEO power must also be considered. Unlike peer influence, which can be substantial and direct, political and bureaucratic pressures may be more indirect, i.e., they may shape the environment within which CEO power is exercised. The close relationship that exists between business and government provides ample opportunity for bureaucrats to convey their expectations regarding the behaviour of the firm. This can occur either directly through conversations between ministry personnel and a CEO, or indirectly through Keidanren (Federation of Economic Organisations) or industry association policy pronouncements influenced by the

15

Power

ministries. One CEO noted that before traveling abroad to visit a prospective joint- venture partner, MITI officials had called upon him to hear out his intentions. Though no ministry officials endeavored to influence the CEO's actions, the mere act of inquiry sent a powerful message regarding the government's concerns. Such apparently benign intrusions into the affairs of a private company may be relatively rare, the fact that they do occur, however, is not lost on CEOs and must surely influence their behaviour.

In the final analysis, however, Japanese CEOs are granted a large degree of latitude in the exercise of their power. While they do face opposition and they do have clear constraints placed on their ability to act, yet because of their multiple bases of power, their positions are relatively unassailable. They are rarely exposed to out-in- the-open, frontal attacks.

CONCLUSION

The basic thesis presented herein is that Japanese CEOs access two types of power, positional and personal. Positional power is derived from the strategic contingencies which encompass the office of CEO. It also originates from institutional dimensions of the office's role within the organisation and within society. Personal power has two, interrelated components and is a consequence of Japanese human resource management processes which are predicated upon an internal labour market. Slow promotion and job rotation provide managers with the opportunity to acquire expert influence and build richly connected acquaintance networks. Promotion acts as a legitimiser of authority. In the course of reaching the office of CEO and once established therein, an executive' s power is moderated by five factors which directly influence the extent of legitimacy which is accorded both the individual and the office.

Power, having been legitimised, takes on the form of authority (House, 10840. Consequently, Japanese CEOs are not perceived as wielding power because they do so through exercising their authority rather than by resorting to political influence.

The inclination of Japanese CEOs to use authority rather than political influence is consistent with perspectives developed in the West on the application of power. House (1984) argues that it is only natural for a powerholder to prefer the use of authority over political influence. When legitimate authority is internalised by the broader collectivity of organisation members, or the even broader community of society in general, it willbe supported and reinforced (Wrong, 1979). Additionally, the use of legitimate authority does not usually lead to negative feelings, nor does it require as extensive surveiUance as does the use of political influence (Frenh & Raven, 1959).

16

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

This paper has proposed a theory of Japanese CEO power which identifies both the sources of that power and the process by which it is acquired. It has also proposed factors which are hypothesised to mediate the exercise of CEO power. Examples and discussion have focused primarily on CEO power within large organisations. Application of the model to small and medium-sized businesses may require modifications. For example, while a CEO's personal power may still be predicated on expertise and acquaintance networks, it is not clear that these would necessarily develop through promotion processes occurring within an internal labour market. Many small and medium-sized businesses are family-owned and the CEO position is passed from father to son. Being raised in the business, an heir would acquire expertise and also develop acquaintance networks. Nevertheless, these would not accrue as the result of promotions, rather the heir would more likely be promoted as expertise and relationships are developed. Additionally, we would expect far greater constraints on the positional power of CEOs in small businesses, particularly where the firm is a lesser member of or subcontract within an industrial group. The preponderance of research in small and medium-sized firms suggests that CEO power is curtailed by the dependence of the firm on larger members of the group, consistent with a resource dependence view of the firm.

Future research should move in two directions. First, an empirical test of the model is required. Numerous examples have been cited within this paper to demonstrate specific aspects of the model. However, a real test of the model requires a rigorous examination which explores both the model's structure and processes.

Second, further theoretical elaboration of the process is required. Some individuals are better able to take advantage of the opportunities which slow promotion and job rotation offer in terms of garnering expert influence and building networks. What are the characteristics of these individuals and how do those characteristics fit the process?

Given the remarkable amount of power that Japanese CEOs wield within their organisations, within Japanese society, and, increasingly, within the international business community there is much more that we need to know about how they acquire it and when they use it.

REFERENCES

Abegglen, J. (1972). Management and worker: The Japanese solution. Tokyo: Sophia University Press.

Abegglen, J., & Stalk, G. (1986). Kaisha. New York: Basic Books.

Bagozzi, R. & Phillips, L. (1982). Representing and testing organisational theories: A holistic construal. Administrative Science Quarterly, 77, p. 489.

17

Power

Barnard, C. (1938). The functions of the executive. Cambridge, MA: University Press.

Bird, A. (1988). Nihon kigyo executive no kenkyu [Research on Japanese executives.] Tokyo: Sangyo Noritsu Daigaku Shuppansha.

Clark, R. (1979). The Japanese company. New Haven, CT: Yale University Press.

The commercial code of Japan. (1983). Tokyo: Horeisha.

Emerson, R. (1962). Power-dependence relations. American SociologicalReview, 27, pp. 31-40.

Etzioni, A. (1961). Comparative analysis of complex organisations. Glenco, IL: Free Press.

French, J. & Raven, B. (1959). The bases of social power. In D. Cartwright (ed.), Studies in Social Power. Ann Arbor, MI: Institute for Social Research, pp. 150- 167.

Furlong, T. & Schoenberger, K. (1977). Japan's U.S. firms: The cultures mix. Columbia Journal of Worm Business, Spring,.

Gamson, W., & Scotch, N. (1964). Scapegoating in baseball. American Journal of Sociology, 70, pp. 69-76.

Gerlach, M. (1987). Business alliances and the strategy of the Japanese firm. California Management Review, Fall, pp. 126-142.

Halberstam, D. (1986). The Reckoning. New York: Avon.

Hambrick, D. (1981). Environment, strategy, and power within top management teams. Administrative Science Quarterly, 26,.

Hanada, M. (1983). Ten questions regarding Japanese type management. Tokyo: Japan Overseas Enterprises Association.

Hatvany, N., & Pucik, V. (1981). An integrated management system: Lessons from the Japanese experience. Academy of Management Review, 6, pp. 469-480.

Hichson, D., Hinings, C., Pennings, J., & Schneck, R. (1974). Structural conditions of interorganisational power. Administrative Science Quarterly, 19, pp. 2-44.

Hollander, E. (1960). Competence and conformity in the acceptance of influence. Journal of Abnormal and Social Psychology, 61, pp. 365-369.

House, R. (1984). Power in organization: A socialpsychologicalperspective. Working paper. University of Toronto.

Japan's banks: Top 10 in deposits. (1988, July). New York Times, pp. D1, D6.

Kono, T. (1984). Strategy and structure of Japanese enterprise. London: Macmillan.

March, J., & Simon, H. (1958). Organizations. New York: Wiley.

Nakane, C. (1971 ). Japanese society. Berkeley, CA: University of California Press.

18

ASIA PACIFIC JOURNAL OF MANAGEMENT VOL. 7, NO. 2

Okumura, A. (1982). Nihon no toppu manejimento [Japanese top management]. Tokyo: Daiyamondosha.

Ouchi, W. (1981). Theory 2. New York: Addison-Wesley.

Ouchi, W. (1984). The M-form society. New York: Addison-Wesley.

Pascale, R.T., & Athos, A.G. (1981). The art of Japanese management: Applications for American executives. New York: Simon & Schuster.

Pfeffer, J. (1981). Power in organizations. Marshfield, MA: Pitman.

Pfeffer, J. & Salancik, G. (1977). The external control of organizations. New York: Harper & Row.

Pucik, V. (1981). Promotions and interorganizational status differentiation among Japanese managers. Proceedings of the Academy of Managements: pp. 59-63.

Pucik, V. & Hanada, M. (1982). Determinants of successful careers among Japanese managers. Sanno College Bulletin. 2, pp. 33-49.

Rohlen, T. (1974). For harmony and strength. Berkeley: University of California Press.

Rosenbaum, J. (1984). Career mobility in a coporate hierarchy. New York: Academic Press.

Schein, E. (1978). Career Dynamics. Reading, MA: Addison-Wesley.

Scott, W.R. (1981). Organizations: Rational, natural, andopensystems. Englewood Cliffs, NJ: Prentice-Hall.

Sekimoto, M., & Hanada, M. (1985). Juissha 4539 mei no chosa bunseki ni motozuku kigyo kizoku ishiki no kenkyu (jo) [Research on organizational commitment based on a survey analysis of 4539 workers in eleven companies (Part 1)]. Diamond Harvard Business, Oct-Nov, pp. 84-96.

Shiotsugu, K. (1986). Kaisha shihai to keieisha kotai [Company control and managerial succession]. Matsuyama Shodai Ronshu, 37: pp. 107-128.

Shiotsugu, K. (1982). Soshiki no pawaa-Gainen no seiri to tansakka [Organizational power-A search for and ordering of concepts]. Matsuyama Shodai Ronshu, 34: pp. 49-77.

Smith, B. (1982). An initial test of the theory of charismatic leadership based on the responses of subordinates. Doctoral dissertation, Faculty of Management Studies, University of Toronto.

Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 83, pp. 355-374.

Staff. (1988a, August). The International 500. Fortune, pp. D7-D25.

Staff: (1981, Oct. 5). Japan's U.S. plants go union. Businessweek.

19

Power

Staff. (1988b, August). The world's 50 biggest industrial corporations. Fortune, pp. D1-D4.

Toppu jinji zukan: Dixie [Executive personnel picture-book: Dixie]. (1987, July 9). Nikkei Sangyo Shimbun, p. 28

Toppu jinji zukan: Komatsu [Executive personnel picture-book: Komatsu]. (1987, June 22). Nikkei Sangyo Shimbun, p. 28.

Toppu jinji zukan: Takashimaya [Executive personnel picture-book: Takashimaya]. (1987, July 7). Nikkei Sangyo Shimbun, p. 28.

Toppu jinji zukan: Toa koku [Executive personnel picture-book: Toa Domestic Airlines]. (1987, June 23). Nikkei Sangyo Shimbun, p. 28.

Toppu jinji zukan: Yuki jirushi gyunyu [Executive personnel picture-book: Snow Brand Milk]. (1987, June 23). Nikkei Sangyo Shimbun, p. 28.

Tsurumi, Y. (1978). The best of times and the worst of times: Japanese management in America. Columbia Journal of World Business, Summer.

Ueda, Y. (1986). Intercorporate networks in Japan: A study of interlocking directorates in modem large corporations. Shoken Keizai, 157, pp. 236-254.

Wakabayashi, M. (1987a). Career mobility: A thirteen year follow-up. SoshikiKagaku, pp. 13-27.

Wakabayashi, M. (1987 b). Management career progress: Japanese style. Keio Studies on Organizational Behavior and Human Performance, March.

Wrong, D. (1979). Power: Its forms, bases and uses. New York: Harper & Row.

Yoshino, M.Y. (1968). Japan's managerial system: Tradition and innovation. Cambridge: MIT Press.

20