Professor Tangled Up in Red Tape

It’s enough to make Japanese reformers suck air through their teeth in frustration and despair.

In a case that is becoming an infamous symbol of red tape run amok, one of Japan’s preeminent economists has been invited to join the board of Sony Corp. But the national university professor has been informed by his bureaucratic masters that he may not accept the one-day-a-month job because of strict anti-moonlighting rules that apparently apply to all civil servants, from lowliest clerk to loftiest thinker.

Never mind that much of the Japanese establishment thinks the rules are ridiculously rigid. Business leaders and politicians fear that the rigidity deprives recession-ravaged and often insular Japanese corporations access to some of the nation’s top talent.

Never mind that Prime Minister Keizo Obuchi has asked that the personnel rules be changed. Or that the Education Ministry, many business leaders, media pundits and the prime minister’s blue-ribbon commission on deregulation have supported that change.

Never mind that professor Iwao Nakatani of Tokyo’s Hitotsubashi University says he has offered to serve on the board without pay, donate his earnings to his university or take a leave of absence for a year in order to get some hands-on experience at one of the world’s biggest corporations.

Authority to interpret and enforce the civil service laws rests with the little-known National Personnel Authority, and the answer remains no.

Economist Says He Has ‘Given Up Fighting’

“We’ve been arguing this issue for four years. They are so stubborn,” Naohiro Yashiro, an economist at Tokyo’s Sophia University who sits on the deregulation commission, said with a sigh.

“I have given up fighting,” Nakatani said in an interview last week. Nakatani, who earned his doctorate at Harvard University and is known both for his innovative economics textbooks and his work on government study panels, said he intends to resign his post at the university if Sony shareholders approve his appointment next month.

The Nakatani case, which is being followed closely by the Japanese media, spotlights a number of the most contentious issues raised as the nation struggles to regain vitality after a nine-year slump.

These include whether the slow pace of change in this tradition-bound society is crippling economic recovery; how Japan can foster innovation and cross-pollination among industry, government and academia; and the degree to which politicians, even the prime minister, still hold a weak hand in their ongoing power struggle with the nation’s entrenched bureaucrats.

Economist Yashiro said the NPA’s stance that public employees be bound by the same rules, whether they are university professors, Finance Ministry officials or firefighters, reflects an excessive egalitarianism that is stifling innovation at a time when Japan desperately needs it.

“The best and the brightest Japanese scientists are in the national universities,” Yashiro said. While their counterparts at MIT or Caltech commingle with the private sector, these Japanese academics are not only not allowed to start venture firms of their own, they are not permitted to be directors of companies that would develop their inventions, he said.

“This,” he said, “is a waste.”

Only since last year, at government prodding, have many Japanese universities begun to set up technology licensing organizations in order to patent their research, according to the Nikkei newspaper.

To the NPA, however, the issue is one of fairness.

Why should an economics professor, who gained his expertise while being supported by the taxpayer and who, as a civil servant, is supposed to apply his talents for the benefit of the entire nation, be allowed to work for a private corporation, asked Hideki Takahashi, personnel division chief for the NPA.

“These companies are in a sink-or-swim struggle for survival in a competitive environment that is undergoing dramatic change,” Takahashi said.

‘Bureaucrats Rule, . . . Politicians Reign’

Such conflict-of-interest concerns are the main reason why the agency has refused to allow professors to do private-sector work, he said. (Private university professors can and do accept consulting jobs for corporations, although few sit on corporate boards.)

The Nakatani case was seen as important enough to be discussed at a March 30 Cabinet meeting, at which the ministers decided to study the issue with an eye to introducing reform legislation two years from now. In practice, that means that, despite widespread agreement on the need for change, it will take a minimum of two to three years to enact a simple amendment to the personnel rules.

“If they know that in two years’ time there must be a change in the law, why don’t they do it now?” Nakatani asked Wednesday. “Why does it take two or three years, at the earliest?”

“In Japan, bureaucrats rule while politicians reign, as usual,” Yoichi Funabashi, columnist for the Asahi newspaper, concluded in a stinging critique of the Nakatani affair.

Obuchi probably could have insisted that an exception be made for Nakatani, but at the risk of squandering too much political capital, Yashiro said. “If Obuchi-san could be a Mrs. Thatcher, there would be no structural problems in Japan,” he added, referring to the accept-no-guff style of former British Prime Minister Margaret Thatcher.

But Japanese prime ministers have extremely limited powers. And Japanese Cabinet members have little clout. Even the agenda for Cabinet meetings is drawn up a day ahead by the career bureaucrats.

System of Jobs for Life Is Changing

And with each ministry having veto power over the agenda, a consensus on how to proceed must be reached among the bureaucrats before the politicians in the Cabinet are permitted even to discuss an issue. Former Prime Minister Ryutaro Hashimoto actually succeeded in getting this rule changed so as to beef up the prime minister’s office, but, characteristically, that change won’t go into effect until 2001.

Nakatani said he believes that Japan can’t afford to wait.

At the moment, 99% of Japanese corporate directors are insiders who have spent their entire careers at the companies they serve, he said. But the Japanese economy is rapidly globalizing, and companies like Sony, 49% of whose stock is held by foreigners, need outside directors to represent the interests of international shareholders and ensure that the company meets global standards of corporate accountability and social responsibility, he said.

The postwar Japanese system, in which government officials, academics and businesspeople all held their jobs for life, worked in the years of high economic growth, but today’s economy requires more movement of labor and intellectual capital, Nakatani argued.

“Once you become a professor at a national university, you have to stay there until you retire. That concept is still very strong here,” he said. “[A] more mobile society is a prerequisite for a mature economy to prosper. My case symbolizes this basic problem of the Japanese economy.”