Japan Isn’t Only Model for Union Pacts

Some of the more daring leaders of American corporations and unions are improving their relations so quickly that they are leapfrogging Japan’s often-praised style of management.

Admirers of the industrial achievements of that economic juggernaut, resource-poor Japan, often contend that our productivity would soar and labor costs decline if only U.S. managers could instill in their workers the same intense sense of company loyalty and dedication to work that the Japanese have.

To achieve this goal, American managers are urged to offer their workers such well-known Japanese advantages as “lifetime” jobs and a consensus form of management that treats workers and lower-echelon managers as adults, not doltish cogs in the industrial machinery.

But the Japanese system, while better than that used in most of the far more authoritarian U.S. companies, is certainly not perfect--nor even based necessarily on humanistic principles. Also, much of Japan’s labor relations have roots in this country.


Too often overlooked is the fact that many American firms and unions have already modernized their contracts so that they contain numerous so-called Japanese concepts, which enable workers to effectively give their views of working conditions and the way that their jobs are performed.

More importantly, a number of U.S. labor contracts have gone further than the Japanese in democratizing the workplace, giving workers a major voice in the company’s operations. And a few contracts here potentially approach true co-determination, such as the pact between General Motors and the United Auto Workers for the planned Saturn car.

In the Saturn agreement, workers and managers are expected to share equally in almost all company decisions traditionally left to management, including the price and design of cars and the salaries of managers. These issues are rarely put before joint labor-management committees in any country, even where industrial democracy is required by law, as in Sweden and West Germany, where workers are in a minority on almost all joint committees.

Unlike the benefits given to Japanese workers, comparable benefits for U.S. workers in the new-style contracts are spelled out in written, legally enforceable union contracts, where the workers are organized. Japanese union pacts rarely include the advantages that were instituted unilaterally by management and usually continue because of tradition, not written agreements.


Take a look, for instance, at those Japanese “lifetime” jobs that we hear so much about. They are not promised in writing but are what a well-known expert on Japan, UCLA Prof. William Ouchi, calls “binding expectations” based on tradition.

Also, only an estimated 25% to 30% of Japanese workers are even promised such jobs when they enter the work force.

If they quit to work for some other company, they lose their “lifetime” position and almost never regain another with their new employer. Also, “tradition” calls for them to retire at age 55.

The U.S. “lifetime employment” contracts cover almost all workers, whether they started with the firm as a youngster or not. Despite the sound of permanency in the phrase, though, there are loopholes in it in both nations.


Workers in both countries can be laid off in times of a “catastrophic” drop in sales. Before such layoffs, however, the companies must bring back to the parent plant all work subcontracted to outside firms and reduce managerial jobs and salaries. In the U.S. pacts, the joint labor-management committees decide when the business is really catastrophic and layoffs of “lifetime” workers are justified. In Japan, management decides that question, although they almost always do so in good faith.

As the Japanese economic juggernaut slows down because of a higher yen and cheap-labor competitors in South Korea and Taiwan, legitimate questions are being raised about the long-range effectiveness of the Japanese style of management. It is also being noted more frequently these days that at least some of their style, and much of their labor law, originated in this country.

Stanford Prof. William Gould’s book, “Japan’s Reshaping of American Labor Law,” points out that most of their labor legislation was copied from the Wagner Act, the U.S. labor law whose provisions were imposed on them after World War II by Gen. Douglas MacArthur, the head of the U.S. occupation forces in Japan.

With increasing regularity, charges are being made that the Japanese managerial style is more authoritarian than consensual. While it is often credited with helping maintain marvelously harmonious labor-management relations, critics say it is based more on fear than on good will between workers and their bosses.


A recent article in the magazine Inc. suggests that Ouchi’s best-selling book, “Theory Z,” which explains and praises the Japanese system, should be replaced by “Theory F (for fear),” particularly among the sararimen, (salary men) who are in mangement ranks.

Authors of the Inc. article interviewed an American executive in Tokyo who angrily complained that the Japanese boosters like Ouchi rarely talk about how the system there really works. “It is actually fear that moves those managers. There is no tolerance for failure. The penalty for failure is out, finished. It’s the powerful motivation.”

Ouchi scoffs at Theory F. It is generally true, he concedes, that if, say, workers in Japan are rushing out to lunch while the plant manager is walking in, the workers will stand aside, bow and wait until the manager calmly passes. In contrast, the more independent-minded U.S. workers in a similar situation would move rapidly for their lunches and the manager would stand aside or face being crushed by the crowd.

Ouchi argues that the contrasting lunchtime rushes are not overt symptoms of widespread fear of top management by Japanese workers and supervisors. It is simply in the Japanese tradition of respect that is reflected in all of that country’s society, he contends.


Nevertheless, there is clearly less democracy in Japanese firms than in those U.S. companies with new-style union contracts.

While there is mounting evidence that U.S. contracts promoting democracy in the workplace usually succeed, there have been some spectacular failures. The collapse of an exciting experiment at Eastern Airlines was caused by bitter personality conflicts between union leaders and Eastern’s management, demands of banks on the financially troubled company and, mainly, employees’ basic mistrust of Eastern’s outgoing chairman, Frank Borman.

While Japanese workers seem to be more subservient to their bosses than Americans, our top executives more than make up for their relative lack of respect with their huge salaries and bonuses. They earn far more than their workers, compared to the difference between Japanese corporate leaders and workers.

Also, Japanese auto executives earn much less than their American counterparts. For instance, Lee A. Iacocca, Chrysler’s chairman, took $11.4 million last year in salaries and bonuses, and that doesn’t include his book royalties or other income. His earnings are unheard of for Japanese executives and high even when compared to other well-paid U.S. auto officials. GM’s top officers earned only about $1.5 million last year--plus expenses, of course.


If U.S. executives were, among other things, a little more willing to honestly share power and income with their employees, many more American firms could leapfrog the managerial efficiency of the Japanese.