A brilliant idea for a business, if you don’t mind racketeering

I’m reading through my management textbook this afternoon and came across a most amazing comment therein: “The sokaiya commonly disrupted annual shareholders’ meetings by jeering unless the firm made payments to them not to attend the meeting.” This sounds more like something out of Monty Python (specifically, the Piranha Brothers) than anything else, but digging around on Google reveals that not only do these folk continue to exist, but that they’re quite a plague on Japanese corporate life.

It’s a rather amazing and intriguing story….

There’s even a book written about this: Sokaiya: Extortion, Protection, and the Japanese Corporation. Who would have thought? It’s not exactly a best-seller, however, with an Amazon ranking of 1,861,319.

The English-language Japanese paper Mainichi Daily had an extensive story about sokaiya (dated 1999) wherein they stated, in part:

“Five of Japan’s biggest financial institutions were brought to their knees by a single racketeer. Of the five, DKB’s [Dai-Ichi Kangyo Bank] crime is probably the worst. It reportedly provided 52 illegal loans worth 11.7 billion yen to [racketeer Ryuichi] Koike between July 1994 and September 1996 to ensure that its shareholder meetings remained free of disruption.

Loans from DKB gave Koike a pool of funds to expand his extortion targets. [Dai-Ichi Kangyo Bank Chairman Tadashi] Okuda is among 11 DKB executives indicted for providing payoffs to Koike and was the bank’s president when the unlawful loans were made.”

The extortion continues, too. Here’s an excerpt from another Mainichi Daily story from June 2002:

“Two corporate racketeers who tried to extort payouts from a top nonferrous metal manufacturer, Mitsubishi Materials Corp., were arrested Friday, police said.

Seiko Yoshida, 64, from Tokyo’s Nakano-ku, and Kaoru Yuki, 39, from Tokorozawa, Saitama Prefecture, are top members of the Komine group, one of the largest organizations of corporate extortionists or sokaiya.

Yoshida and Yuki contacted an employee of the Mitsubishi Materials’ general affairs division in February this year, saying that they are interested in the company’s project to construct an industrial waste disposal facility.

Two months later, they sent a letter in the name of the head of the Komine group to the president of Mitsubishi Materials. The letter said that the sokaiya group wanted to talk with the president about the disposal facility project.

“We don’t necessarily want to raise questions at the (Mitsubishi Materials’) shareholders’ meeting,” police quoted the letter as saying.

Police accuse Yoshida and Yuki of trying to extort money from Mitsubishi Materials by hinting in the letter that they would make a scene at the shareholders’ meeting of the company if it refuses to pay them.

And one more article, from The Hong Kong Evening Standard, December 2002:

“…the wider shock was that the sokaiya were still in action, targeting big companies, despite many promises by the authorities to clean up Japan’s corporate sector.

Once simply musclemen who asked for money, ‘or else’, sokaiya and those behind them have evolved into sophisticated analysts. The money made by their fathers enabled the sons to attend the same business schools as heads of industry and top bankers. They can now attack corporations using spreadsheet analysis rather than clumsy blackmail.

The scam has become more sophisticated over the years, say investigators. Sokaiya now study profit and loss accounts and balance sheets looking for management incompetence. They also investigate private lives of directors, including the names and addresses of their mistresses.

The weapon most favoured by the sokaiya to enforce their demands is not the club or gun, it is public humiliation. Companies which do not pay up find their annual general meetings deteriorating into mayhem as hordes of sokaiya fire volleys of embarrassing questions about companies’ shortcomings and the private lives of directors, extending meetings for hours…”

I’m hardly a fan of racketeering or other extortion, but somehow this seems like an amazingly ingenious way to extort money from corporations. What do you think? Could someone pull this off here in the United States??

One comment on “A brilliant idea for a business, if you don’t mind racketeering

  1. It is interesting, but I think security would simply escort them out, no?
    Yes, they could get in as shareholders, but if they cause a racket I doubt the company has to let them stay, by law. The company is still running the meeting, right?
    I’ve never been to a shareholder’s meeting, but in Michael Moore’s witty “Roger and Me” you see one in action, and if Michael Moore can’t even manage to get in a word edgewise, I’d imagine it’s reasonably hard.

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