In the fall of 1987, I had the privilege of meeting Akio Morita who was then the CEO of Sony Corporation, Japan. I had been invited by the International Federation of Accountants (IFAC) to co-write and present a paper at the XIII World Congress of Accountants which was held in Tokyo in October 1987. Morita-san was the keynote speaker at the event.
Sony Corporation was a key global account of Price Waterhouse (PW). The incoming President of IFAC Richard Wilkes was a partner of PW. UK. He personally knew Morita-san who readily accepted his invitation.
The night before the inauguration, there was a grand party of some 100 people comprising the office bearers of IFAC and the Japanese Institute of Certified Public Accountants (JICPA) and all the presenters. Since Morita-san was the keynote speaker at the inaugural session next, he was the chief guest of the dinner.
Meeting Morita-san was a dream come true for me. He had just published a best-seller titled Made in Japan. He had not only co-founded Sony Corporation, he played a key role in transforming it from a Japanese transistor radio company to a gigantic global corporation in consumer electronics. He spoke fluently in English but with a heavy Japanese accent.
We were chatting over drinks and I was clinging on to every word he uttered like a mesmerized fan. He told us that the turning point of his company was simply this: the courage and wisdom to say ‘no!’ He once refused a large order for transistor radios from the then US giant Sears because they wanted Morita to jettison the Sony brand and sell his products under the Sears store brand. For a fledgling Japanese company, it was a tough decision to decline such a large and profitable order and insist that Sony would sell transistor radios only if the Sony brand was used. He said no to Make in Japan and yes to Made in Japan. The rest, as they say, is history.
Sony was a company which emerged like a Phoenix out of a gloomy Japan devastated by war. Perhaps, that is why his book Made in Japan begins in a bomb shelter where Morita had taken refuge. It was there that he heard of Japan’s surrender on the radio. To most Japanese, the end of war came as a relief. But it was a national humiliation. Emperor Hirohito, considered as god by the Japanese, had surrendered. On August 15, 1945 while declaring that war was over, the emperor urged Japan to look ahead and unite its strength to be devoted to construction of the future.
Entrepreneurs like Akio Morita used meagre resources at their disposal for re-building purposes. With ingenuity, innovation, courage, self-respect and confidence, they set out to conquer markets in Europe and the US with a clear vision of making ‘Made in Japan’ products a hallmark of quality. They built global brands like Sony, Toyota, Nissan, Nikon and Fuji.
Next morning at the inaugural session at the Keio Plaza Hotel in Shinjuku, something weird happened. The President of IFAC Robert L. May who was an American partner of Arthur Andersen made the welcoming speech. He introduced Akio Morita in glowing terms but at the end of his speech beseeched Morita-san to assist in changing the protectionist policies of the Japanese Government. In particular, he talked about non-tariff barriers that the Japanese were putting up to stop imports of rice from California and Texas, cars from America and even baseball bats. While taking such swipes is fine in the US, criticising the keynote speaker’s country policies is considered off-kilter in Japan.
Morita-san rose to speak. The event was in Tokyo with a large number of Japanese delegates. Morita-san surprised everyone by speaking in English and not in Japanese. His subject was not business in general. He spoke on accounting. As a consumer of accounting reports, he posed a problem before the international accounting community. Although I have lost the tape of his speech, I distinctly remember one sentence which summed up the theme of his speech: “Looking at a global consolidated financial statement is like looking at a distorted mirror.” He explained why.
The yen was becoming stronger and stronger against the US dollar every day. Sony Corporation’s largest market was the US. Therefore, although Sony was selling more and more colour TVs and Walkmans in the US in dollars, the sales, when translated into Yen at the end of the year were shrinking. Thus the financial reporting of the growth was distorted, profits were distorted and the consolidated financial statements were distorted as well. He challenged the president of the International Federation of Accountants (IFAC) — his ho¬st — to devise a set of globally consistent accounting standa¬rds. Apart from the exchange variances, different countries had varying accounting principles and standards, the consolidation arguably was an aggregate of apples, oranges and pears.
The sting in the tail was delivered ex-tempore and rather unexpectedly. Akio Morita was not a typical, polite Japanese CEO. His main market was the US and he had learnt to deal with the Americans. He could be combative and aggressive when the situation demanded.
He swung round towards the IFAC President Robert L. May and said, “Bob you have asked me to help you sell American cars, rice and baseball bats in Japan. As a friend, I must try to help you. But you must help me as well. Last month, I was in California and found thousands of your countrymen driving Japanese cars. If you and your government cannot persuade your fellow US citizens to buy American cars, tell me how I can compel the Japanese people and the Japanese government to buy American cars?” There was a standing ovation for Akio Morita, the Japanese CEO who had given a fitting rebuff to a criticism which had breached protocol. I looked around, everyone was clapping, even my American friends.