TOKYO -- The Ministry of Economy, Trade and Industry has rejected a budget draft submitted by Japan Investment Corp. (JIC), a public-private investment fund, after deeming its remuneration for top executives, which could top 100 million yen each a year, is too high, ministry officials said.
However, since the high remuneration for JIC executives was originally offered by the ministry, JIC sharply reacted to the decision. As a result, conflict intensified between the ministry and the corporation.
Economy, Trade and Industry Minister Hiroshige Seko told a news conference on Dec. 4 that the ministry had reprimanded Vice Minister Takashi Shimada, the top bureaucrat in the ministry, over what it perceived as a "clerical blunder." Seko and Shimada will also voluntarily give up 100 percent and 30 percent of their monthly salaries, respectively, for a month.
"The ministry made a clerical blunder in which it offered the planned remuneration for the executive team before the amount was finalized, and then retracted the offer, causing mutual distrust," Seko explained.
JIC was launched on Sept. 25 this year with the aim of boosting Japanese companies' competitiveness by reorganizing the now-defunct Innovation Network Corporation of Japan (INCJ). The national government holds more than a 95 percent stake in JIC and part of the remuneration for its executives and others will be covered with taxpayers' money with permission from the government.
In a document sent on Sept. 21 to four representative directors of JIC including President and CEO Masaaki Tanaka, Deputy Vice-Minister of Economy, Trade and Industry Toshihide Kasutani offered the executives 15.5 million yen in annual remuneration plus performance-based pay of up to 110 million yen a year.
In response to news reports in early November criticizing the remuneration for Tanaka and other executives as being too high, Vice Minister Shimada apologized on Nov. 9 and retracted the offer, saying such high remuneration "couldn't win understanding from the public."
On Nov. 24, Shimada offered a new pay plan that would sharply reduce remuneration for Tanaka and others.
The JIC CEO strongly resisted the new, lower offer and walked out of the meeting, even hinting at the possibility of stepping down. "You've betrayed our trust and lack sincerity. Under the current situation, we can't foster the JIC," Tanaka was quoted as telling Shimada at the time.
On Nov. 28, JIC applied with the industry ministry for permission for its budget draft, based on the initial remuneration offer, but the ministry decided to reject it. At the same time, it admitted in retracting its offer of remuneration for executives that it had made a blunder.
"The situation is serious in terms of mutual trust. It's difficult to entrust the organization with public funds amounting to 2 trillion yen," said Keisuke Sasaki, director of the ministry's Industry Creation Policy Division. "It was obviously a clerical blunder."
JIC has defended its practice of hiring those who worked at Japanese and overseas investment funds by offering them high wages.
"We determined salaries for employees at a remuneration committee while considering the average levels of remuneration for executives and employees at private investment funds. They are appropriate levels," said one official.
Despite substantial reductions in their remuneration, Tanaka said JIC executives were determined to work hard to develop Japan's future industries. "We took up our posts not because of the remuneration but because we empathize with the will to develop future Japanese industries," he told reporters on the evening of Nov. 3. "Board members of the corporation will work closely with each other."
(Japanese original by Kenji Wada and Takayuki Hakamada, Business News Department)