Case 5 Shinsei Bank
Shinsei Bank’s current organizational structure and culture reflect the effects of several defining moments in the bank’s history. When its original incarnation, the Long-Term Credit Bank of Japan, failed in 1998, it set in motion a series of paradigm shifts for the bank. First, the bank was sold to a US private equity group, Ripplewood. This was controversial as, per the case material, “corporate Japan loathed private equity groups, and the government was reluctant to allow a foreign group to control a major local bank.” Thus, right from the start, Shinsei Bank had an uphill climb ahead of it in terms of public acceptance.
Ripplewood smartly chose a highly respected Japanese senior executive, Masamoto Yashiro, as CEO. He had worked for decades in American companies’ operations in Japan, and could use that experience to integrate the new owners’ expectations into the company structure and culture. The “injection” of foreign values and culture cannot be underestimated. Within the first year, Yashiro chose not to support one of its biggest clients during its financial troubles, and the company, Sogo, ended up filing for bankruptcy. This was counter to the historical moral code in Japan that banks support company clients even if they suffer losses, and confirmed the public’s and government’s worst fears of changes that might be wrought by foreign ownership. Furthermore, Yashiro abolished the former rotational assignment system so that employees could specialize. He decentralized hiring and promotion decisions, allocating them to individual groups and disbanding the former Planning Department that handled all such duties. Finally, he aggressively pursued hiring employees from outside the former LTCB in order to increase fee-based revenue. All these choices were significant events that affected the culture and operations of Shinsei Bank. By moving away from the historical moral code of Japanese banks – supporting failing companies, charging small
Ripplewood smartly chose a highly respected Japanese senior executive, Masamoto Yashiro, as CEO. He had worked for decades in American companies’ operations in Japan, and could use that experience to integrate the new owners’ expectations into the company structure and culture. The “injection” of foreign values and culture cannot be underestimated. Within the first year, Yashiro chose not to support one of its biggest clients during its financial troubles, and the company, Sogo, ended up filing for bankruptcy. This was counter to the historical moral code in Japan that banks support company clients even if they suffer losses, and confirmed the public’s and government’s worst fears of changes that might be wrought by foreign ownership. Furthermore, Yashiro abolished the former rotational assignment system so that employees could specialize. He decentralized hiring and promotion decisions, allocating them to individual groups and disbanding the former Planning Department that handled all such duties. Finally, he aggressively pursued hiring employees from outside the former LTCB in order to increase fee-based revenue. All these choices were significant events that affected the culture and operations of Shinsei Bank. By moving away from the historical moral code of Japanese banks – supporting failing companies, charging small