Sōkaiya and Japanese Corporations
Volume 2, Issue 1 (Book review 7 in 2002). First published in ejcjs on 25 June 2002.
Szymkowiak, Kenneth (2002) Sokaiya: Extortion, Protection, and the Japanese Corporation, New York: M.E. Sharpe. ISBN 0-7656-0780-8, Paperback, xvii, 203 pages, includes bibliographical references and index.
Organized crime has penetrated various industries and aspects of modern Japan, from drug trafficking to real estate to politics and finance. The corporation has not been immune from the fund-raising strategies of organized crime groups, as corporate managers have become intertwined with professional corporate extortionists, or sōkaiya. Sōkaiya can extort money from a corporation by threatening to publicise secrets or misconduct, real or fictional; they can also be hired by a corporation as a form of private protection against other sōkaiya. The main stage for sōkaiya activities is the shareholder meeting, where they use a variety of methods to either attack or protect the corporation. For example, sōkaiya working on a corporation’s behalf can push through a company’s agenda by shouting "No objection", while those working against the corporation can instigate prolonged debate or disrupt the meeting with the use of physical violence.
It is somewhat surprising that more has not been written about this form of organized crime. Perhaps it is the fear of a lack of sources or of personal danger that accounts for the sparse literature on sōkaiya and on organized crime in general. Scholarly attention to the subject of sōkaiya has been limited to short articles or brief treatment in the few existing works on organized crime. With Sokaiya: Extortion, Protection, and the Japanese Corporation, Kenneth Szymkowiak provides the first English-language monograph on the subject and a study of sōkaiya that has broad implications for understanding the operations of Japanese corporations, the limits of the law, and the adaptability of organized crime groups.
Szymkowiak’s main concerns are how sōkaiya came to be and why they continue to exist. Regarding the origins of the sōkaiya, he argues that the shortcomings of the legal system and the unregulated nature of corporate growth in the late nineteenth-century encouraged business leaders to solicit private protection from "underworld figures". Especially before the enactment of limited-liability regulations, entrepreneurs sought to protect their personal fortunes from the negative impact of rumours and scandal; even after their private assets were protected under the law, the fear of losing investors led them to enlist the help of sōkaiya. Sōkaiya thus came to serve as sources of information and protectors of a corporation’s image. Sōkaiya remained useful to corporations through the early post-war period, when they were hired by some companies to ensure corporate security against pollution protesters or against peace activists who opposed corporate profiteering from the Vietnam War. In the case of Minamata pollution, victims bought stock in the Chisso Corporation and attended the shareholder meetings to protest the Corporation’s dumping of mercury into their water. Sōkaiya were hired by the Corporation to shout down the victims and quickly end the meetings. In one case involving peace activists, Beheiren, or the People’s Organization for Peace in Vietnam, protested against Mitsubishi Heavy Industries and found themselves physically confronting corporation-hired sōkaiya who sought to protect Mitsubishi’s interests. Szymkowiak uses these two incidents, among others, to draw a parallel between the function of sōkaiya and that of corporate lawyers in the United States.
Sōkaiya have continued to exist, argues Szymkowiak, in part because of their ties to Japanese gangsters, or yakuza. In the late 1960s and early 1970s, yakuza became more involved in sōkaiya activities and made connections with a new generation of sōkaiya, ushering in an era of "numbers and violence" in which the hybrid sōkaiya-yakuza would attend shareholder meetings in large numbers and demonstrate their willingness to use violence. As a measure of yakuza involvement in sōkaiya activities, the National Police Agency reported in 1974 that they confiscated more yakuza money from corporate extortion (900 million yen) than any other source of income. The sōkaiya population also swelled in the mid-1970s, to 6,504 estimated sōkaiya in 1977 from a figure of a few hundred in the early to mid-1960s. The increase in sōkaiya numbers and the additional yakuza muscle behind the sōkaiya helped to bolster and cement their role in the corporate system. Szymkowiak also suggests that the increased use of sōkaiya violence and "terrorist attacks" against corporations account in part for the inability of corporate managers to extract themselves from relationships with sōkaiya. In this context, Szymkowiak discusses the February 1994 murder of Suzuki Juntarō, vice president of Fuji Photo Film Corporation. Suzuki, who had stopped payment to sōkaiya, was stabbed to death with a sword on the doorstep of his own home by sōkaiya. The discussion of other incidents of such attacks, as well as a general elaboration on the use of "terrorist tactics" by sōkaiya, would have clarified how Szymkowiak views the role of violence in the relationship between sōkaiya and corporations. As it is, some questions are left unanswered. Was there a significantly higher number of violent incidents involving sōkaiya in the 1990s? If so, what were the sōkaiya’s motivations and who were their targets? From a discussion of the Suzuki incident alone, it is unclear how Szymkowiak views the relative importance of violence as a factor in the continued existence of sōkaiya since the early 1990s.
Szymkowiak also points to sōkaiya adaptability to legal changes as a reason for their continued existence. The 1982 Commercial Code reform sought to eradicate sōkaiya by instituting a Minimum Unit Stock Rule, whereby a person has to own shares worth fifty thousand yen in a corporation as a prerequisite to exercise shareholder voting rights and privileges at a shareholder meeting. The reform also broadened provisions that prohibit the use of corporate funds to buy shareholder rights, though it did not limit the use of personal funds. Although the number of sōkaiya at shareholders meetings declined after the 1982 reform, Szymkowiak suggests that the sōkaiya adapted to the legal change by finding other means by which to extort money from corporations. One tactic was to form fake right-wing groups, or uyoku dantai, which use vehicles equipped with loudspeakers to blare messages about a corporation; a payoff would be necessary to silence this harassment.
Szymkowiak’s conclusions — how legal shortcomings, ties to yakuza, and adaptability have perpetuated sōkaiya involvement in Japan’s corporate system — are convincing and based on solid primary research. Szymkowiak did most of his work in Kobe from June 1993 to December 1994, and during that time was able to interview corporate managers, police officials, lawyers, members of organized-crime syndicates, as well as sōkaiya. His more interesting materials include a 298-page list of sōkaiya active in 1985 and 1986, as well as a tape recording of a shareholder meeting at which sōkaiya were active. The information gathered is impressive, especially given the charged and potentially dangerous atmosphere after the February 1994 murder, already mentioned, of Fuji Photo Film Corporation’s vice president.
The cultural explanations of the sōkaiya phenomenon put forward by Szymkowiak are less convincing than the ones stated above. In describing sōkaiya, Szymkowiak asserts, "they lead lives dominated by the cultural and historical traditions of the Japanese people created over thousands of years. Sōkaiya clearly understand, perhaps sometimes at an intuitive level, how they and others go about being Japanese" (page 6). The implication that there are universal characteristics that define what it means to be Japanese, that "the Japanese people" can be treated as an undifferentiated group, and that there is an uncontested understanding of what it means to be Japanese, are at best unhelpful in explaining the existence of sōkaiya. How is it that "the cultural and historical traditions of the Japanese people" have led to the emergence of both extortionist and extorted? What does it mean that a corporate manager and a sōkaiya go about "being Japanese" in such different ways? Equally problematic are the cultural traits, the specific aspects of "being Japanese", that Szymkowiak identifies to explain the existence of sōkaiya: "There are elements of Japanese culture, history, language, and even gesture that lend themselves to abuse through extortion, intimidation, domination, and control" (page 6). One wonders how Szymkowiak would explain the existence of extortion, intimidation, domination, and control in societies other than Japan.
One of the cultural elements that Szymkowiak cites to explain the sōkaiya phenomenon is a heightened Japanese concern with the idea of "face". While he acknowledges that corporations in all countries seek to protect a good reputation, Szymkowiak suggests that the desire to preserve "face" is particularly acute in Japan. He argues that a Japanese firm’s primary concern is with reputation, even above share price, and gives as an example a case involving the Mitsukoshi department store. Szymkowiak suggests that a post-scandal drop in the price of Mitsukoshi stock was of less concern to the firm than its tarnished reputation. It is to protect the corporation’s reputation, he argues, that corporate managers hire sōkaiya. To his credit, Szymkowiak states that the concept of "face" alone is "far too simplistic an explanation of the sōkaiya phenomenon" (page 176). Yet it seems that the idea of "face" plays too central a role in Szymkowiak’s analysis, that the primary concern of a corporation is not with their reputation, but the decline in corporate profits that results from a tarnished reputation. Perhaps what is taken hostage by extortionists is not the corporation’s reputation, as Szymkowiak asserts, but the corporation’s financial well-being.
Szymkowiak’s treatment of culture is in part a response to the question that he poses about why there are no sōkaiya in the United States, Germany, or any other modern capitalist nation. The discussion of Japanese uniqueness which follows might have been more meaningful if placed in the context of a short explanation of the forms that corporate extortion takes in other modern capitalist nations.
The shortcomings of the cultural explanation aside, Szymkowiak has written an informative book that can be assigned to undergraduates and contributes to the scholarship on Japanese corporations, law, and crime. Most sections of the book go a long way to untangle the complex issues that surround the continued existence of sōkaiya, including the creativity of sōkaiya in finding new means to extort money from corporations, the legal difficulties of clamping down on sōkaiya while protecting shareholder rights, and the unwillingness of corporate managers to cooperate with government efforts to crack down on sōkaiya due to fear of exposing corporate wrongdoing. The combination of legal, financial, and social approaches to his subject, as well as the information presented, are the strongest contributions of Szymkowiak’s work.
Kanda, Toyoharu (1991), Sōkaiya hyakunen, Tokyo: Richmond KK.
West, Mark D. (1999), "Information, Institutions, and Extortion in Japan and the United States: Making Sense of Sōkaiya Racketeers," Northwestern University Law Review 93, no.3, pp.767–817.
Article copyright Eiko Maruko.