TOKYO -- The government has begun considering firing President Masaaki Tanaka of the Japan Investment Corp. (JIC), a public-private fund launched to promote innovation in the country, over a controversy between the executive and the Ministry of Economy, Trade and Industry over his pay and organizational structure plan.
JIC was launched in September this year to streamline the investment decision-making process used by its predecessor, the Innovation Network Corporation of Japan (INCJ). Under the new corporation, the old practice at INCJ of seeking the opinion of the minister of economy, trade and industry for each and every investment was scrapped, and the funds preapproved by the minister would receive funding from the JIC and make investment decisions.
JIC executives and employees are required to make their salaries public. Top officials, including Tanaka, could receive more than 100 million yen in remuneration if their base pay and additional rewards linked to JIC's business performance were combined. Officials at the industry ministry believe the amount is "too high."
In addition, the ministry questioned Tanaka's organizational plan for JIC operations. He intended to set multiple layers of investment funds under the corporation, in a bid to increase anonymity for investors, making it easier for them to put money into the funds. But ministry officials say this complicated setup would erode transparency in their performance and executive salaries.
The industry ministry did not envision a multi-tier investment fund structure for JIC, and lower-tier funds have no legal obligation to publicize what they are investing in or how much their executives receive. Ministry representatives say they urged JIC officials to maintain transparency, but they were told that the arrangement is necessary to attract private funds.
The ministry is already considering shaving down the budget for JIC. "Our trust in Mr. Tanaka is lost, and we cannot entrust up to 2 trillion yen of state funds (with JIC)," said a senior ministry official.
JIC explained that it understood that the lower-tier investment funds it planned to place under its wings were not legally obligated to open their books. "We would like to manage state funds properly along with private funds, and return profits (to investors)," a JIC official said.
(Japanese original by Kenji Shimizu and Kenji Wada, Business News Department)