Business

Management

Seat of power— Tokyo

Preface

As the battle for control of Japanese furniture company Otsuka Kagu reaches a climax, the family members at the heart of the feud represent a major issue facing corporate governance in Japan today says Monocle’s Fiona Wilson.

Japan, Otsuka Kagu, Corporate governance, Family-owned firm, Furniture, Shareholders, Takeover

26 March 2015

The travails of Otsuka Kagu, one of Japan’s biggest furniture retailers, have gripped the press here for months now. At the centre are two protagonists: the 71-year-old founder of the company, Katsuhisa Otsuka, and his 47-year-old daughter Kumiko, who succeeded him as president and was in charge for five years until her father removed her last summer. The pair are now locked in a fierce battle to control the company and it looks like it will all come to a head at a shareholders meeting tomorrow, when both will be presenting a future for the company that doesn’t involve the other.

Katsuhisa Otuska started the business in 1969 and built it into a powerful chain with more than a dozen showrooms. The business was riding high until the financial crisis hit. That, and the small matter of an insider-trading scandal, encouraged Otsuka to hand over the reins to his daughter in 2009. She returned the business to profitability but in the process moved away from her father’s core business strategy of keeping to the top end of the market. Katsuhisa Otsuka was furious and last July reappointed himself as president. The drama has continued to unfold ever since, with various twists and turns including Kumiko’s own reappointment as president in January, something her father referred to as a “coup”.

If you went in to the vast Otsuka Kagu showroom in Shinjuku 10 years ago, it was an unusual shopping experience. You couldn’t simply browse and buy – you had to sign in as a member at the front desk and then be shown around by a consultant. Katsuhisa Otsuka was convinced that this was the best way to provide good service to customers and for many years it worked. Otsuka dealt directly with furniture makers in Japan and abroad and the selection was broad but at the same time it was tailored to a different era when a young couple would go into one shop to kit out a house with beds and kitchen diner sets.

Kumiko Otsuka realised that people don’t necessarily shop that way anymore. Never mind the social changes that have occurred since the business started. The likes of Ikea and Muji have made huge inroads into the Japanese furniture market. Kumiko did away with the membership system and introduced a lighter, more contemporary look with Scandinavian-style furniture and lower-priced pieces. In his rage Katsuhisa Otsuka has thrown some harsh words in Kumiko’s direction, including saying in public that making his daughter – who he now describes as “a bad child” – president was a mistake.

For many, the story is symbolic of the modern-day struggles of Japan’s family-founded companies and it comes just as the Japanese prime minster, Shinzo Abe, is calling for improved corporate governance, a stance that doesn’t sit comfortably with personality clashes and family feuds.

Katsuhisa and Kumiko will be presenting their rival visions for the company and the matter will be decided by a proxy vote by shareholders. Whoever comes out on top, it doesn’t look like this story will have happy ending.

Fiona Wilson is Monocle’s Asian bureau chief.

Monocle 24

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