Japanese Political Economy Revisited by David Chiavacci Sébastien Lechevalier

Author:David Chiavacci, Sébastien Lechevalier [David Chiavacci, Sébastien Lechevalier]
Language: eng
Format: epub
ISBN: 9780367661564
Barnesnoble:
Publisher: Taylor & Francis
Published: 2020-09-30T00:00:00+00:00

3.2. In-house careers – a central pillar of Japanese corporate governance

As the name suggests, an in-house career means that an employee spends his other whole career with one company. In-house careers appeared in Japan in the pre-war period (Gordon 1985, pp. 81-107, Nishiguchi 1994, pp. 19-28). In response to the necessity to retain in-house trained employees, companies in the heavy industries such as shipbuilding and steel production offered their core employees wage increases and promotion opportunities to induce them to stay. After the war, unions fought successfully to have their demands for employment stability and for wages based on needs rather than productivity accepted by industry (Gordon 1985, pp. 374-411). The ensuing period of high growth combined with a then very young working population made it easy and even beneficial for companies to commit to lifetime employment and salaries that would increase with the years of service.

In-house careers imply lifetime employment, but the two institutions differ in important aspects. First, most lifetime employees do not make it to the very top of the corporate hierarchy. Second, starting in the mid-1970s, the once favourable growth and demographic conditions steadily worsened, and companies have been steadily reducing their commitment to lifetime employment by increasingly limiting the number of core employees (Waldenberger 2004, pp. 94-96). They nevertheless continue to preserve in-house careers for their core employees.

In-house careers also exist in other economies. The natural choice when it comes to filling higher ranks is to choose in-house candidates from lower ranks. However, whereas in other advanced economies, in-house promotions are only considered as a first option, they represent a quasi rule in Japan. Their predominance can best be seen when looking at the top of the career ladder. Top management positions in Japan, including the board of directors, are almost exclusively reserved to employees with a lifelong career in the company (Miwa 1996, pp. 204-205, Learmount 2002, pp. 125-129, Dore 2007). In other countries, top managers tend to have moved at least once among employers (Waldenberger 2004, pp. 79-80). In the US and Europe, companies tend to fill even the highest corporate rank in one third of all cases with an outside candidate. In Japan, such outside appointments occur only in five per cent of all cases, typically when a company suffers severe distress (Waldenberger 2013, p. 201). Other empirical manifestations of the predominance of in-house careers are:7

a very low turnover rate for skilled and managerial labour, that is even lower than the average turnover rate for all employees,

a significant loss of lifetime income for most industries and professions when moving to another employer.

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