Japanese Yearbook on Business History-1993/10

Owners and Salaried Managers in Hitachi Engineering Works Namihei Odaira's Management Style

Masaru UDAGAWA

and then developed under his leadership.This is a matter HITACHIof commonENGINEERING knowledge.WhatWORKS was foundedis less commonlybyNamihei knownOdaira is that Odaira was not the owner of the company,but a salaried man ager.Prior to World War II,Hitachi Engineering Works was a subsidiary within the Kuhara zaibatsu(later the Nissan combine,then the Manchuria Heavy Industries Development Corporation[Mangyo]).1 Accordingly,during the Kuhara zaibatsu period the owner of the com pany was Fusanosuke Kuhara,while in the Nissan/Mangyoóperiod the owner was the controller of the combine,Yoshisuke Aikawa.2Both of

1 For more on the move to Manchuria,see my article,•gThe Move into Manchuria of the Nissan Combine,•hJapanese Yearbook on Business History,vol.7,1990,pp.3-29,and for the business history of the Kuhara zaibatsu and Nissan combine,see chap.1of my book,Shinko zaibatsu[The new zaibatsu](Nihon Keizai Shinbunsha,1984). 2St rictly speaking,the relationship between Yoshisuke Aikawa and Namihei Odaira at the time of the Nissan/Mangyo combines was that of the manager of a parent firm and the manager of a subsidiary firm.Still,Aikawa's authority within both combines was absolute;he ran things completely from an owner's position.In this study I am there fore considering their relationship to be one between owner and salaried manager. 28JAPANESE YEARBOOK ON BUSINESS HISTORY-1993/10 these owners were autocraticmanagers of the field-generaltype.In spiteof thisfact,though,rightfromHitachi Engineering Wbrks'sfbun dation,the managerial activitieswere consistentlyin the hands of a team of salariedmanagers headed by Odaira.Since ownership and management were separatedin HitachiEngineering Works,the com pany was a managerial enterprise. The objectof thispaper is to study the primary factorsat work in the establishment and growth of Hitachi Engineering Works as a managerial enterprise within the Kuhara zaibatsu and Nissan/ Mangyo combines,with particularattention to the relationships between owners and salariedmanagers as regardsthe decision-making Process.

I.HITACHI ENGINEERING WORKS AS A MANAGERLAL ENTERPRISE

1.A SHORT HISTORYOF HITA CHIENGINEERING WORKE3 n1908Namihei Odaira wasI the head of the engineering sectionat Hitachi mine,which was a part of Kuhara Mining.Eager to produce electricalmachinery domestically,Odairabuilt an electricalmachin ery repairshop as a subsidiaryfacility within the Hitachi operations. This repairshop developed into a manufacturing plant in1910,and itwas given the name Hitachi Engineering aWorks.InJanuary1912 it separated form the Hitachi mine engineering section.In September of that same year,when Kuhara Mining was reorganized as the Kuhara Mining Company,Hitachi Engineering Works became a businessestablishment of the lattercompany. Inspired by the ideal of developing Japan's own technology, Hitachi Engineering Works would encounter various technical diffEcultiesright fromthe outset.Still,itwould solveeach of them in due course and go on to solidifyits operational fbundations when the importing of electricalmachinery was banned fbllowing the out break of World War I and orders began to pour in for itsmachinery In1918Hitachi EngineeringWbrks absorbed the Tsukudajima. man plant,whichwas manufacturinggeneral machinery forufacturing Kuhara Mining,made itthe Kameido plant,and took the firststeps toward 3M y discussioninthis section isbased principally material on found in Hitachi Ltd, ed.,Hitachi Seisakusho shi(1)[The history of Hitachi(1)](1960). UDAGAWA:Owners and Salaried Manager in Hitachi29

diversified operations by uniting the manufacture of electrical machinery and general machinery.In February1920Hitachi Engineering Works separated from Kuhara Mining Company(here after,Kuhara Mining)altogether and became an independent com pany with capitalization of••10,000,000. In February1921it bought up the Kasado shipyard,which had been run by Nippon Steamship Company,a subsidiary of the Kuhara zaibatsu,and converted it into an electric locomotive manufacturing plant.Having thus firmly established a three-factory structure with plants in Hitachi,Kameido,and Kasado,Hitachi Engineering Works was the only establishment within the Kuhara zaibatsu to achieve steady progress in the recession that followed World War I,while the

other firms were experiencing serious difficulties,so that by the end

of1920it ranked among the top four heavy electric machinery mak ers,along with Shibaura Engineering Works,Mitsubishi Electrical Engineering Co.,and Fuji Electric Manufacturing Co.(three com

panies with foreign-capital tie-ups).Finally,in December1922,when the Kuhara zaibatsu,facing the threat of bankruptcy,was reorga

nized into the Nissan combine(the core of which was Nippon

Industrial Company,an open holding company)by Fusanosuke Kuhara's brother-in-law Yoshisuke Aikawa,Hitachi Engineering

Works also became a subsidiary of the Nissan combine. It is common knowledge that the Nissan combine adopted the open

policy of subsidiary enterprises,that in October1933it made a pub lic offering of stocks in Hitachi Engineering Works,which was enjoy

ing a very good business track record.This public sale enabled Hitachi Engineering Works,which had hammered out a policy of major

expansion in the midst of a sudden increase in heavy chemical man ufacture following the outbreak of the Manchurian Incident in

September1931,to raise capital from the stock market.Able to allot new stocks to shareowners in November of the same year for the first

time since its operations became independent,it went on to make repeated new stock allotments in rapid succession,and by1940it had

expanded its capital shares to\204,500,000.Making best use of new

stock allotments and its increased capital,Hitachi Engineering Works pushed forward with the expansion of its three plants and the

diversification of its products,so that in March1936,acquiring the right of management of Osaka Ironworks,a Nissan combine subsidiary, 30JAPANESEYEARBOOK ONBUSINESS HISTORY-1993/10 it moved into shipbuilding.In May of the next year Hitachi Engineering Works absorbed Kokusan Industries,founded by Aikawa.By the absorption Hitachi Engineering Works acquired7new plants,so that in one stroke it moved from a3-plant organization to a10-plant organization.When in May 1939Hitachi Engineering Works purchased Tokyo Gas and Electric Industrial Company,it sep arated its manufacturing divisions and established three subsidiary companies:Hitachi Aircraft,Hitachi Ordnance,and Hitachi Machine Tools. In the meantime,in December1937,the Nissan combine's par ent company,Nippon Industrial Co.(hereafter referred to by its pop ular name,Nissan),moved to Hsinking(present-day Changchun)in Manchuria and reorganized itself as a Manchurian juridical person under the new name of Manchuria Heavy Industries Development Corporation(popularly known as Mangyo).At the same time Hitachi Engineering Works became an affiliated enterprise of that same com pany. 2.SPECIALFEATURES OF A MANAGERIAL ENTERPRISE Alfred D.Chandler,Jr.,defines a managerial enterprise in the following terms:

Firms in which representatives of the founding families or of finan cial interests no longer make top-level management decisions- where such decisions are made by salaried managers who own little of the companies'stock-can be labeled managerial enter prises.4 Chandler also stresses the development of managerial hierarchies as the primary factor making it possible for managerial enterprises to exist,regardless of the type of ownership involved.One reason for this is that founder-owners,unable to provide sufficient numbers of the capable personnel needed to fill the managerial hierarchies that develop in response to the expansion of their enterprises,are even tually forced to entrust top management to salaried managers who have specialized knowledge.Another reason is that the fine tuning

4See Alfred D.Chandler,Jr.and Herman Daems,eds.,Managerial Hierarchies (Harvard University Press,1980),p.4. UDAGAWA:Owners and Salaried Manager in Hitachi31

Table1.Makeup of Hitachi Engineering Works's Board of Directors Unit:number of people) (

Year Owners Salaried managers Total

1920 2 3 5

1925 2 4 6

1930 4 4 8

1935 3 5 8

1940 3 15 18

Notes:Those participating in the board of directors as representatives of the parent company(Kuhara Mining,Nissan,or Mangy)arc considered owners. Source:Hitachi Ltd,ed.,Hitachi Seisakusho shi(2)[The history of Hitachi(2)](1960).

of the flow of raw materials and finished products and the monitor ing activities carried out by the salaried managers through such a management structure make possible an accumulation of Internal capital,which reduces dependence on the owners for capital.One further reason is that the profitable results achieved through the business skills of the salaried managers make it possible to widen cap ital supply routes.5 In the light of Chandler's definition,it is clear that Hitachi

Engineering Works fully satisfied the conditions of a managerial enterprise,regardless of whether it was subject to the financial con trol of Kuhara Mining or Nissan or Mangyo.When one looks at the constitution of membership in the boards of directors,which is an indicator of the form of top management existing in the company, one finds,as in Table1,that,except for1930,when the number of owners and the number of salaried managers were the same,the num ber of managers exceeded that of owners,and that by1940the for mer had increased remarkably.Next,what Table2tells us is that the position of salaried managers was quite favorable:of the ten people

5O n the causes for the genesis of managerial enterprises and their special charac teristics,see Alfred D.Chandler,Jr.,•gThe United States:Seedbed of Managerial Capitalism,•hin Chandler and Daems,op.cit.,pp.9-40. 32JAPANESE YEARBOOK ON BUSINESS Table2.DirectorsHISTORY-1993/10 of Hitachi Engineering Works,Executive-Director Level or Above

Names Last Academic Education Graduation Hired by Hitachi Career Highlights after Entering Hitachi Yoshisuke Aikawa Tokyo Imp'l U.(M)1903 1927,director;'28,chairman of the board Namihei Odaira Tokyo Imp'l U.(E)1900 1906head,eng'g section ,Hitachi Mine; superintendent, Hitachi, then chief superintendent,then plant head; 1920,man.director;'29,president Saburo Rokukaku Tokyo Higher Tech'l School(M)1895 1906 Chief clerk,machinery,eng'g section, Hitachi Mine; head, Kameido Plant; 1920,dir.;'29,exec.dir.;'36, director Ishinosuke Furuyama Tokyo Imp'l U.(M)1902 1921 1921, director&head of Kasado Plant;'22,exec.director; '36 , director Naosaburo Takao Tokyo Imp'I U.(E) 1909 1909 Chief clerk,production ,Hitachi;chief clerk, plant; head, plant;1921,director;'29,exec. director;'36,man.director Kumeo Baba Tokyo Imp'l U.(E)1910 1910 Chief clerk,planning,Hitachi;head,planning section;asst head,plant;1934,director;'36,exec.dir.; '40,man.director Masaichi Akita Tokyo Imp'l U.(M)1910 1912 Asst chief clerk,plant,Hitachi;asst head ,manufacturing; asst head,plant;head,Kameido Plant;1934,director;'36, exec.director;'40,man.director Teiichi Morishima Tokyo Imp'l U.(E)1912 1912 Asst chief clerk,planning,Hitachi;asst head,plant; head, rotary machine division;1936,director;'40,exec.director Manpei Oniwa Tokyo Imp'l U.(E)1909 1917Manager,sales,main office,Hitachi;asst section head , business operations;asst business manager;head,electric division;1936,director;'40,exec.director Ryoji Ikeda Tokyo Imp'l U.(E)1912 1913 Chief clerk,sales,Hitachi;asst head,sales;head,Osaka office;1936,director;'40,exec.director

Notes:In the education column,(M)stands for mechanical engineering,and(E)for electrical engineering.In the last column,for positions at the Hitachi plant,the name Hitachi is omitted,and just•gHitachi•hby itself stands for Hitachi Engineering Works;dates in parentheses indicate when the

person began that position.

Sources:Hitachi Ltd,ed.,Hitachi Kojo50nen shi[Fifty-year history of Hitachi Plant](1961),and similar materials. UDAGAWA:Owners and Salaried Manager in Hitachi33 who had risen to a position of executive director or higher by1940, all(with the exception of Aikawa,who had been serving as chairman of the board ever since1928)were salaried managers who only owned a nominal holding of stocks.A special feature of this list is that all of the directors of executive-director level and above were engi neers,and all except Saburo Rokukaku had a Bachelor of Engineering degree from Tokyo Imperial University.Also,except for Ishinosuke Furuyama,who moved from a director's position at Nippon Steamship's Kasado shipyard to being a director at Hitachi Engineering Works when the Kasado shipyard was amalgamated with the latter,the other eight salaried managers had entered Hitachi Engineering Works either directly from university or within ten years of graduation from university,and had worked their way up through middle management to membership on the board of directors.

When one looks at the formation of the managerial hierarchy that Chandler stressed as a prerequisite for the emergence of a manage rial enterprise,one sees the first step within Hitachi Engineering Works when in1918,on the occasion of its absorption of the Tsukudajima manufacturing plant,it moved its head office to Tokyo to serve as a control headquarters,and at the same time concentrated business operations in this head office.Then,when it separated from Kuhara Mining in1920to operate independently,it reorganized managerial functions by locating the three sections of business affairs,general affairs,and sales in the head office.Beginning in 1929these sections were in due course raised to the status of divisions. Later,in line with the larger scale of its business and greater diver sification in operations,there was a succession of promotions of offices and sections to the level of sections and divisions,as well as newly created sections,so that by April1939the head office boasted a hierarchical structure made up of13divisions and35sections (figure1).

‡U.OWNERS AND SALARIED MANAGERS IN THE DECISION-MAKING PROCESS

Hitachi Engineering Works,we have seen,had all the formal prerequisites of a managerial enterprise.When one is discussing the existence and activities of a managerial enterprise as a case study,however,it does 34JAPANESE YEARBOOKON BUSINESSHISTORY-1993/10

Figure1.The Managerial Organization of the

Hitachi Engineering Works Head Omce,As of Aprl1939

BoardofDirectors

BusinessSection

A・mySecti・np ,諮 謝 。ntG・ ゾt・fhce・Secti・n NaWSecti・nDi・i・i・n撫 器 資1C・tt・ ・elSecti・n

TechnologySectlon

BusinessSectionExp・ ・tSuw・ySecti・n

Suw・ySecti・nDi・i・i・n

MachineSection 諜 業1慧慧 告階 糠 誹 綜1≡iill

SuweySecti・nTechn・1・ 剖Secti・n

AuditSectionRolling

Imp・・vem・ntSecti・n鑑 喘 認n

ConstructionSectionMotorScctioh

ProductTransfbrmerScction

Ca畿 壽 器nAcc。unt,Di・i・i-M・t・ ・Secti・n Divisi6nTcchnologySection CreditSalesSection

ElectricBusinessSection

BusinessSectionCable Gcnera董DivisionSurveySectionSt ocksSectionM anagement DocumentsSectionDi・i・i・nI ,。nwa,cCa・tingSecti・n G・n・ ・al漁i・ ・Secti・nDi・i・i・nSpccia1SteelSecti・n

Electric ApplianceTelephoneSection

Division

Source:Hitachi Ltd,ed.,Hitachi Seisakusho shi(2),p.21.

not suffice merely to point out the existence of formal prerequisites. To demonstrate the existence and activities of such an enterprise it is necessary to show the degree to which the salaried managers'wish es are carried out in the top-level decision making of that enterprise. For this reason,I shall take up some actual instances of important decisions,decisions that marked important stages in Hitachi UDAGAWA:Owners and Salaried Manager in Hitachi35

Engineering Works's business history.In those decisions I shall con sider the mutual relationships between the owners Fusanosuke

Kuhara and Yoshisuke Aikawa and the top salaried manager , Namihei Odaira,and try to pinpoint the extent to which Odaira's man agerial wishes were carried out,and in what form .

1.THE EARLY YEARS

When Odaira graduated from the electrical engineering course at Tokyo Imperial University in July1900,he entered a firm called Fujita Company and worked in that company's Kosaka mine in Akita Prefecture,which was headed by Fusanosuke Kuhara,the nephew of the company's founder,Denzaburo Fujita(later his family was called the Osaka Fujita).Kosaka mine was experiencing a severe business slump at the time,and it was trying to ride out the slump by using a pyritic smelting method and by electrification of the mine.Odaira was engaged in carrying out these activities along with Korehiko Takeuchi,head of the smelting section.As a result of their efforts , the pyritic smelting method was perfected in1902,while electrification of the mine also was progressing well,so that Kosaka mine extricated itself from danger.After its recovery a dispute arose , however,among the owners of Fujita Company in regard to the run ning of the mine,and in January1904Kuhara resigned as head .At the same time Odaira also quit the Fujita Company. Odaira was to go on and work for a time at Hiroshima Hydroelectric Co.,and then at Tokyo Electric Light Co.as head of the power supply section,but in October1906,in response to an invi tation from his former boss,Fusanosuke Kuhara,who had in the pre vious year founded his own company,Kuhara Mining's Hitachi mine in Ibaraki Prefecture,Odaira joined Kuhara and took up the position of head of the engineering section.The reason Odaira gave up his position as head of the power supply section in Tokyo Electric Light Co.to work for an unknown company like Hitachi mine was that he saw it as an opportunity to realize,with the financial assistance of the Kuhara family,his dream of producing domestically electrical machinery,a dream he had cherished from his university days.6

6See Masaru Udagawa ,•gNissan zaibatsu seiritsu zenshi no ichikosatsu(2)•h[A study of the formative process of the Nissan zaibatsu(2)],Keiei shirin[The Hosei Journal of Business],vol.9no.4(March1973),pp.90-91. 36JAPANESE YEARBOOKON BUSINESSHISTORY-1993/10

Given responsibility for electrification operations at Hitachi mine,

Odaira completed one power plant after another,much to Kuhara's satisfaction.Meanwhile,he advised Kuhara to hire a large number of engineers,especially graduates of Tokyo Imperial University's engineering faculty,and he had them assigned to work in his engi neering section.To these young engineers Odaira expressed his dreams of producing electrical machinery domestically through the development of independent technology.When he had gained their sympathies,in1910he devised a plan for converting the engineer ing section's repair plant into an electric machinery manufacturing plant,and he approached Kuhara for his approval of the project.But Kuhara's reply was,•gA miner should stick to digging out mountains, and there's no need to get involved in making machines.It doesn't make sense to do work that only costs money and doesn't make a decent profit,•h7and he rejected Odaira's plan.Also,except for personnel in the engineering section,the general atmosphere in the Hitachi mine was one of coolness towards Odaira's plan.At this juncture a colleague of Odaira from his Kosaka mine days and at that time the chief man ager of the Hitachi mine,Korehiko Takeuchi,gave his support to Odaira's plan.Figuring that getting Kuhara's approval by the normal channels would be difficult,with tacit approval of Takeuchi,Odaira submitted a budget proposal for repair-plant facilities amounting to \90,000,in which were included funds for constructing an electrical machinery manufacturing plant.This proposal was given Kuhara's approval, and on November1910Odaira went ahead and built the manufac turing plant.8

When Kuhara learned of this administrative•gtrick•hafter the man ufacturing plant was completed,he was furious and called Odaira to

task.But Odaira managed to win over Kuhara by his unwavering

determination,and because the plan had been supported from

beginning to end by Takeuchi as well,Kuhara grudgingly gave his assent;

in other words,he agreed to the founding of Hitachi Engineering Works.

7Konosuke Kono,Kurata Chikara no hanseiki[Half a century of Chikara Kurata](Nihon Jihosha,1962),p.100. 8Hitachi Seisakushoshi(1) ,p.14. UDAGAWA:Owners and Salaried Manager in Hitachi37

2.THE PROBLEM OF INDEPENDENCE

Hitachi Engineering Works separated from Kuhara Mining's Hitachi mine in January1912and embarked on an original type of organi zation.The negative attitude of Kuhara and others in the parent company towards the manufacturing operations remained un changed,and Hitachi Engineering Works continued to be at a dis advantage,administratively and business-wise,compared to other parts of the Kuhara business organization such as Hitachi mine. As a result,Odaira was convinced that,in order to realize autonomous management at Hitachi Engineering Works,it was nec essary to become completely independent of Kuhara Mining.The boom that accompanied World War I enabled Hitachi Engineering Works to establish a solid business foundation,and Odaira consequently twice appealed to Kuhara to put Hitachi Engineering Works on a separate footing independent of Kuhara Mining.On both occasions Kuhara turned down Odaira's request on the grounds that independence was still premature.To placate Odaira,however,Kuhara gave approval to his plans for expanding Hitachi Engineering Works,and in October 1918Kuhara entrusted Odaira with the management of the Tsuku dajima manufacturing plant. Changing his approach,Odaira discussedthe problem of independence with Korehiko Takeuchi,who was now managing director of Kuhara Mining and who had shown an understanding of management mat ters at Hitachi Engineering Works,and enlisted Takeuchi's support. After the two of them discussed the suitable time and manner of achiev ing independence,Odaira entrusted Takeuchi with the task of nego tiating with Kuhara.As a result of a strong appeal from Takeuchi,Kuhara tentatively gave approval for Hitachi Engineering Works to become independent.It was on one condition,however:that Hitachi Engineering Works tie up with the German company Siemens,which at the time was looking for a tie-up with some Japanese company.But Odaira,whoselong-cherished desire was for completely autonomous management at Hitachi Engineering Works,would not accept this con dition.In July1919Odaira and Takeuchi came up with a plan that: a.set Hitachi Engineering Works's post-independence capi tal at\10,000,000(payment in half); 38JAPANESE YEARBOOKON BUSIIVESSHISTORY-1993/10

b.would buy up with that paid capital Kuhara Mining's Hitachi Engineering Works assets.

This plan they formally submitted to Kuhara and requested that it be discussed,and decided upon,at a top-management meeting of the Kuhara zaibatsu.9 The final deliberations on the independence of Hitachi Engineering Works took place on29January1920.During the meet ing opinions were voiced that independence was premature,that concerns remained regarding funds and technology,that if Hitachi Engineering Works was to become independent it ought to tie up with some foreign company,etc.,etc.But because Takeuchi steadfastly sup ported independence,in the end the final decision was left up to Kuhara.10 As a result,Kuhara gave approval for independence,and in February 1920Hitachi Engineering Works separated from Kuhara Mining and became a completely independent company,with Odaira appointed its managing director.

3.REQUESTS FROM KUHARAFOR FINANCING

After World War I,Kuhara Mining,which was the heart of the Kuhara zaibatsu and at the same time the parent company of Hitachi Engineering Works,encountered a slump in the demand for copper and fell into serious financial straits.As a result,Kuhara Mining was unable to collect unpaid moneys or carry out an allotment of new shares.It suffered reverberations,too,when Kuhara personally took over the huge debt of Kuhara Trading Company,which went bank rupt in the panic reaction of March1920,so that Kuhara faced a sit uation in which he could not obtain financing from financial insti tutions.11 Of all the companies that were affiliated with the Kuhara zaibat su,only the operations at Hitachi Engineering Works were doing well in the continuing recession after the war.When most of the electric

9•gOd aira Namihei o denki shiryo•h[Biographical materials on Mr Namihei Odaira], in the archives of Hitachi Ltd(pages are unnumbered). 10Ibid . 11M asaru Udagawa,•gNissan kontserun•h[Nissan combine],in Shoichi Asajima,ed., Zaibatsu kin'yu kozo no hikaku kenkyu[Comparative studies of zaibatsu financial structures]

(Ochanomizu Shobo,1987),p.244. UDAGAWA:Owners and Salaried Manager in Hitachi39 manufacturing plants in the Tokyo and Yokohama region were destroyed in the September1923in the Great Kanto Earthquake,orders poured into Hitachi Engineering Works.In order to take advantage of the favorable opportunity,Odaira made plans for expansion.What he needed was\3,500,000.Because of the poor business results of the parent company,however,he could not raise the funds by an allot ment of new shares.Nor could he finance it from Hitachi Engineering Works's own internal capital. Odaira was forced,therefore,to go around to financial institutions and negotiate financing support.Banks' assessments of Hitachi Engineering Works,which had become independent only three years before,were tough,and he did not have an easy time obtain ing funds.His careful efforts paid off,however,and in January1924 he succeeded in borrowing\1,000,000from Dai-Ichi Bank, an 2,000,000from The Industrial Bank of Japan.12 d\ Immediately after the contracts for the loan were completed,how ever,Odaira was to have a head-on confrontation with Kuhara,one that would lead to Odaira's submitting his resignation to the latter.

The cause of the run-in was a request from Kuhara to Odaira to tem porarily divert to Kuhara Mining a portion of the funds Hitachi Engineering Works had borrowed from the banks,to be used as working capital.Odaira believed Kuhara's promise that it was to be a•gtemporary diversion,•hand before the end of January1924he passed over to Kuhara Mining90%of the\900,000he had received as a first instalment from The Industrial Bank of Japan.But then Kuhara repeated the same request again later.And in February he asked if Hitachi Engineering Works would issue a check for\500,000 so he could repay a loan from a loan shark.Odaira came to the conclusion that,if he were to let this situation go on,not only would Hitachi Engineering Works be unable to expand,the operations of Hitachi

Engineering Works itself would go into the red as well.He therefore told Kuhara he could not comply with such a request's13

12See•gBiographical materials ...,•hand Masaki Yoshida,•gSenzen ni okeru wagakuni denki sangya no kigyösha kodo•\Odaira Namihei o chiishin ni•h[Entrepreneurship in the Japanese electrical industry before the war,focusing especially on Namihei Odaira], Mita shogaku kenkyu[Mita Business Review](Keio University),vol.22,no.5(Dec.1979), p.66.

13•gBiographical materials ....•h 40JAPANESE YEARBOOKON BUSINESSHISTORY1993/10

Relations between the two became strained.On1March Odaira

decided that he had to resign,and accordingly submitted his resig

nation to Kuhara.Kuhara,however,refused to accept it,and one week

later the two met again to discuss the matter.As a result,Odaira with

drew his resignation,saying•gan agreement has been arrived at

regarding Hitachi Engineering Works's independence and healthy

development.•h14

Kuhara Mining's problems continued,however.To overcome

them once and for all,Kuhara planned to collect the unpaid mon

eys of Kuhara Mining that had not been followed up since1918.

From March1926he had another managing director of the compa

ny,Settaro Nakayama,set about jacking up stock prices.The tactic ended in failure,however,and in December of1926Kuhara Mining

faced a real crisis:that of raising money to repay the funds used to jack up stock prices,and raising money for the end-of-year divi dends.15In order to ride out this crisis,Kuhara once again thought

of using Hitachi Engineering Works as a means of raising funds . Through Takeuchi he asked Odaira to put all the Hitachi

Engineering Works factories up as security and obtain funds from finan

cial institutions.Odaira's reply to Takeuchi was:•gI already discussed

the matter of finances with Kuhara three years ago and there is no

room for further discussion now.I cannot agree to his request.•h16But

the efforts of Kuhara and Takeuchi to persuade Odaira continued. Odaira,taking into account the fact that,if Kuhara Mining went

bankrupt Hitachi Engineering Works would also suffer heavily , finally had a change of mind.But because he felt that accepting

Kuhara's proposal as it stood was tantamount to carrying out Hitachi

Engineering Works's self-destruction,he did not accept it;instead,

he sent word to Kuhara that he would finance Kuhara Mining no more than\2,000,000,to be taken from the company's employees'

deposits and its reserve funds.17

14Ibid .

15Udagawa ,•gNissan kontserun,•hpp.247-48. 16•gOd aira Namihei nikkisho•h[Namihei Odaira's diary],archives of Hitachi Ltd ,under the date16Dec.1925(pages not numbered).

17 •gBiongrphicaliographical materials....•h UDAGAWA:Owners and Salaried Manager in Hitachi41

At the end of December1926,however,Kuhara,unable to dispose of the huge amount of cumulative debts of Kuhara Mining on his own responsibility•\debts that abruptly surfaced as a result of his unsuc cessful attempt to manipulate stock prices•\entrusted the debt prob lem and the rebuilding of the Kuhara zaibatsu to his brother-in-law, Yoshisuke Aikawa.In February1927Aikawa gathered all the family heads and the executives of Kuhara zaibatsu and held an•gemergency conference,•hat which he explained the policy he wished to follow for repaying the debts of Kuhara Mining and his plan for rebuilding the Kuhara zaibatsu.When he obtained the agreement of those present, he requested from them financial assistance.Odaira was one of those present at the conference.After he extracted from Aikawa a firm promise that Hitachi Engineering Works would not become a victim for the sake of Kuhara personally,nor for Kuhara Mining,he offered 140,000of his own money and\1,640,000that he would take \ from

Hitachi Engineering Works's employees'deposits and its reserve funds,as he had promised to Kuhara.18

4.TAKING ON THE MANAGEMENT OF OSAKA IRONWORKS19

In the course of World War I the Kuhara zaibatsu had acquired man agement rights to Osaka Ironworks,a firm founded in1881by the English merchant Edward Hazlett Hunter.During the slump in ship building after the war its results deteriorated;of the18half-yearly periods from the first half of1925to the second half of1933,the company had declared a dividend only twice.In1934Aikawa took decisive action to do something about Osaka Ironworks,and he made it an affiliate of the Nissan combine.Management of the firm did not improve,however. In February1936,its president,Rokuro Harada,was struggling to rebuild the ironworks when he suddenly died.Aikawa made a tough decision.He knew that managing the plant after Harada's death would be a formidable task.He asked Odaira to take over the run ning of Osaka Ironworks as a part of the Hitachi Engineering Works group.Odaira immediately called a meeting of Hitachi Engineering

18•gBiographical materials ....•h

19For the data in this section I am relying principally on the•gBibliographical mate rials...•han•gNamihei Odaira's diary.•h 42JAPANESE YEARBOOKON BUSINESSHISTORY-1993/10

Works executives,and it was decided to take on the management of the ironworks on the following conditions: a.that Osaka Ironworks be bought up for no more than\60a share; b.that Saburo Rokukaku(then an executive director at Hitachi Engineering Works)be appointed president of Osaka Iron works;and c.that the calling in of Osaka Ironworks shares be in cash .

Aikawa readily agreed to making Rokukaku president and to calling in the shares in cash,but in regard to the purchasing price of the shares he asked that the shares be given a face value of\60,but that for each share\20be paid separately to Godo Real Estate.Now,Godo Real Estate was a company that Aikawa had used to take over the bad assets of Kuhara Mining when he reorganized Kuhara Mining into Nissan. So what Aikawa was hoping to do was to use Godo Real Estate as a

tunnel company•hwhen Hitachi Engineering Works bought the •g shares of Osaka Ironworks(which was owned by Nissan),so he could pay\20per share,or a total of\4,800,000,into that same company, and use the capital to clear away the bad assets. Odaira argued that a total cost of\80per share made it impossi ble for Hitachi Engineering Works to accept management of Osaka Ironworks.He also rejected as too difficult for budgetary reasons Aikawa's next proposal,that the purchase price of Osaka Ironworks shares be 60each,but that once Osaka Ironworks began to turn a profit\ 4,800,000be paid in instalments over five years to Godo Real Estate\ . The upshot was that the problem of finding someone to take over management of Osaka Ironworks bogged down over the question of the amount of money to be paid separately to Godo Real Estate.The issue finally headed towards a solution when Aikawa put up a com promise plan,according to which the separate payment to Godo Real Estate would be\10per share,for a total of\2,400,000,to be paid from Hitachi Engineering Works's operating expenses.Odaira immediately called another meeting of Hitachi Engineering Works executives,where he explained how Aikawa had come up with a com promise proposal halving the amount of the separate payment and that it would also be to Hitachi Engineering Works's advantage to be conciliatory.The meeting decided to take on the management of Osaka Ironworks. UDAGAWA:Owners and Salaried Manager in Hitachi43

Thus it was that,in March1936,Hitachi Engineering Works took over all the shares of Osaka Ironworks that were in the possession of Nissan,and through the acquisition of Osaka Ironworks entered into the business of shipbuilding.

5.AMALGAMATION WITH KOKUSAN INDUSTRIES

In1910Aikawa had founded a company called Tobata Casting,which

was renamed Kokusan Industries in 1935.The company had consis

tently achieved good results.Its range of operations was wide:besides its main product,malleable cast iron,it also manufactured commu nications machines,electric-power tools,and general machinery.

Throughout the business slump that followed World War I it had a

record of never once not paying dividends to its shareholders.The company was not,however,a paying company of Nissan's;rather,it

belonged to the family of Kotaro Fujita(popularly known as the Tokyo Fujita,Kotaro was the nephew of Denzaburo Fujita).Aikawa's

younger brother had been adopted into this family when he married one of Kotaro's daughters.In1933Aikawa had retired from the posi

tion of president of the company,and then in1934from the posi tion of chairman of the board,remaining on in an advisory position.

Still,as the founder of the company,he carried immense weight when he spoke,and he was the one who was really in control of Kokusan Industries.

Taking advantage of this position of his,Aikawa broached the sub ject of an amalgamation of Kokusan and Hitachi Engineering Works to Odaira in November1936.In January the next year the two com

panies drew up a tentative contract,and in May Kokusan was amal gamated with Hitachi Engineering Works. The direct impetus for the amalgamation came as a result of a plan by Aikawa to shift Masasuke Murakami from his presidency at

Kokusan to the presidency of Nissan Automobile Company.20The lat ter company was created in1933by joint financing from Nissan and

Tobata Casting.Now,Aikawa had taken on the presidency of Nissan

20Sh unsaku Imajo,•gHitachi Seisakusho ni kansuru ichikasatsu•\shu to shite Hitachi Seisakusho to Kokusan Kogyoöno gappei ni kanshite•h[A study on the history of Hitachi Ltd,chiefly in relation to the amalgamation of Hitachi Engineering Works and Kokusan Industries],Daiichi Kei Dai ronshu[The economic review of Daiichi Keizai University], vol.6,no.2(Sept.1976),p.48. 44JAPANESE YEARBOOKON BUSINESSHISTORY-1993/10

Automobile in addition to his other jobs.At the time,however,the government was pushing a policy of domestic production of automobiles, and in order to comply with this policy promptly it was necessary to appoint a full-time president.Aikawa's first choice was to appoint his old confidante from Tobata Casting days,Murakami,to the post,but to do this he needed to find a successor to the presidency of Kokusan. The first candidate to be mentioned was his younger brother, Masasuke Fujita,who was then the head of the Tokyo Fujita family. But Masasuke,a graduate of the Faculty of Science of Kyoto Imperial University,aspired to become the top man in the chemical engi neering division of the Nissan combine,and he turned down the pres idency of Kokusan.Likewise,Haruto Kudo,managing director of Kokusan, was an able engineer,but he was considered unsuitable to be presi dent.Finally,it would be unwise to appoint the executive director, Yano Yoshiaki,because that would be promoting him over the head of Kudo. There were,besides,other reasons for amalgamating Kokusan and Hitachi Engineering Works at that particular point in time.First of all,following the Manchurian Incident,the machinery-related products of both companies came to be competing against each other in the marketplace.The second reason was that Aikawa had been looking for an opportunity to recover the sales rights in Kokusan that were held by Mitsubishi Trading Company.The third reason was that Aikawa was hoping to move Kokusan completely into the Nissan com bine.21 This,therefore,is why,faced with the problem of a president to succeed Murakami at Kokusan,Aikawa came up with a strategy that would solve in one stroke all the above pending problems:amalga mation of Kokusan and Hitachi Engineering Works.And this is why he would ask Odaira to help make the strategy work. Odaira had a high opinion of Kokusan's technological capabilities; further,he had been planning an expansion of Hitachi Engineering Works's raw material division.He thus had no reservations about Aikawa's plan,and he replied to Aikawa that he would obtain the agreement of Hitachi Engineering Works's managing board,and that he would accept the management of Kokusan on condition that Hitachi

21Ibid .,pp.50-52. UDAGAWA:Owners and Salaried Manager in Hitachi45

Engineering Works's authority over Kokusan top officials was recog nized.The reason for this latter condition was that he wanted to retain unchanged,even after an amalgamation of this nature,the top-management structure he had kept in place at Hitachi Engineering Works from its inception,with men like Naosaburo Takao,Kumeo Baba,and Masaichi Akita figuring as key men. On the other hand,Odaira would leave the final decision on the amalgamation ratio between the two companies entirely in Aikawa's hands.Aikawa set the share-exchange formula at the time of amal gamation at100Kokusan shares for every93Hitachi Engineering Works shares.When one weighs in the balance the business results,assets, and share prices of the two companies at the time of amalgamation, one must say that this amalgamation ratio slightly favored Kokusan Industries.Odaira did not,however,voice any objection whatsoever to the arrangement.

III.FACTORS ENABLING HITACHI ENGINEERING WORKS TO BECOME A MANAGERIAL ENTERPRISE

As is clear from the various considerations discussed above, Fusanosuke Kuhara and Yoshisuke Aikawa were deeply involved in the Hitachi Engineering Works decision-making process at the top level in their positions as owners.Still,in that decision-making process they were unable to ignore the opinions of the salaried manager team of which Namihei Odaira was the key figure,or set aside their opposi tion and push through their own views or wishes.The initiative in deci sion making was always in the hands of Odaira,who headed the team of salaried managers;using that initiative role,Odaira had to convince Kuhara and Aikawa,or work out compromises with them,while maintaining the autonomy of Hitachi Engineering Works.In this sense,Hitachi Engineering Works was not a managerial enterprise only in outward form but also in substance.

1.FORMATION OFA TEAM OF SALARIEDMANAGERS

The first factor contributing to Hitachi Engineering Works's being a managerial enterprise was Odaira's establishment,from very early on, of a team of salaried managers,the core of which were people with 46JAPANESE YEARBOOKON BUSINESSHISTORY-1993/10

a background in engineering.I have already mentioned that,after

he became head of Hitachi mine's engineering section,Odaira

advised Kuhara to hire a large number of engineers,particularly from the same engineering faculty of Tokyo Imperial University that

he had graduated from,and to place them in his engineering sec

tion.The same policy was continued in Hitachi Engineering Works when it was established;when it separated from Kuhara Mining and

became an independent company in1920,it already had nineteen

bachelors of engineering on its staff.Most were people who•ghad come to Kosaka mine or Hitachi mine for practical training when they were university undergraduates,and had entered the company

because they were taken by Odaira's personality and astuteness.•h22While implanting in these young engineers the idea of domestic produc

tion of electrical machinery through self-development of technolo

gy that had formed the philosophy behind the founding of Hitachi Engineering Works,he appointed them to middle management,and then in due course raised them to top management(see Table2).As

a result,in Hitachi Engineering Works a homogeneous team of salaried managers with a common set of strongly held aspirations was

formed at a very early period. The existence of such a team of salaried managers provided a

strong backup to Odaira when he had to convince Kuhara and

Aikawa and obtain their approval for Hitachi Engineering Works's autonomous business operations.The two owners were unable to refuse

flatly any requests from Odaira,who had the complete support of the

team of salaried managers.If they persisted in turning down his requests and he were to resign in consequence,most likely most of

the engineers,particularly those from Tokyo Imperial University, would join him.Kuhara in particular was afraid of such an eventual ity,since the responsibility for electrification of the mines,so vital to

Hitachi mine's development,rested almost squarely on the shoulders

of the engineers from Odaira's engineering section.Hence,when Odaira broached to Kuhara his desire to operate an electric machinery man

ufacturing business,Kuhara at first opposed the idea,but when

Odaira steadfastly persisted in trying to gain Kuhara's support,

22Yasuo Okamoto ,Hitachi to Matsushita(I)[Hitachi and Matsushita(1)](Chuo Koronsha,1979),p.16. UDAGAWA:Owners and Salaried Manager in Hitachi47

Kuhara finally had to give his approval.

2.FRIENDSHIP AND TRUST BETWEEN OWNERS AND TOP MANAGEMENT

The second factor was the friendship and relationship of trust that existed between Odaira and Kuhara/Aikawa,and the overall support given to Odaira's courses of action and Hitachi Engineering Works's operations by the senior executive Takeuchi.Odaira was five years younger than Kuhara and six years older than Aikawa.Though their ages were comparatively close,it must be remembered that,before Odaira took up employment at Kuhara Mining's Hitachi mine,he worked under Kuhara in Kosaka mine.Also,Odaira and Aikawa were both graduates of Tokyo Imperial University's engineering faculty;Odaira first met Aikawa when the latter came to Kosaka mine in1903to do some practical training for his graduation thesis,and later they used to talk over ideas on operations at Hitachi Engineering Works and Tobata Casting.23

Thus,even before their relationship as owners and salaried man ager,the three men had a long personal acquaintance on which to form a relationship of friendship and trust.It was precisely because the relationship betwen Kuhara and Odaira went beyond that of a simple owner-salaried manager relationship to one of friendship and trust that Odaira was able to venture so far as to use a•gtrick•hon Kuhara in order to get approval from a reluctant Kuhara for construction of the Hitachi plant.As far as Odaira was concerned,he was sure that his friendship with Kuhara and the trust between them would not be endangered by such an action,and he felt confident,too,that

Kuhara would be sure to approve,seeing that Odaira's plans had the solid support of the younger engineers.

As it turned out,Odaira was right:for a while Kuhara was angry, but eventually he agreed to Hitachi Engineering Works's development along those lines.And later,even though there were clashes between Odaira and Kuhara over the independence of Hitachi Engineering Works and over funding problems,in every case the eventual solution went in Odaira's direction,with Kuhara recognizing the validity of Odaira's arguments,and there was no rupture in the friendship and

23Namihei Odaira Memorial Society ,eds.,Odaira san no omoide[Memories of Mr. Odaira](Hitachi Ltd,1952),p.59. 48JAPANESE YEARBOOK ON BUSINESS HISTORY-1993/10

trust each had for the other. The relationship between Aikawa and Odaira also remained cor dial to the end.After Hitachi Engineering Works came under the umbrel la of the Nissan combine,at the annual general meeting of Hitachi Engineering Works stockholders Aikawa always•gturned over all his proxy votes[to Odaira],thus showing his respect for Odaira.•h24 We can also look at the reasons why Takeuchi supported Odaira so strongly.Both were born in1874,and both entered the Faculty of

Engineering of Tokyo Imperial University in1896at the same time.

After graduation,both entered Fujita Company and worked at the Kosaka mine,and both later moved to Kuhara Mining's Hitachi mine.However,within Kuhara Mining,Takeuchi's mining engineer background enabled him to advance up the mainstream of mine management in the Kuhara family organization,so that in1907he became mine boss at Hitachi mine,in1912he joined the manage ment staff of the Kuhara head office,and in1918he was promoted to managing director at Kuhara Mining.But the friendship that had been nourished during their days together at university and at Kosaka mine remained unchanged,and the two continued to be

the closest of friends.•h25 •g

Takeuchi rated Odaira's ability as an engineer and his manageri al skills high,and did not want to lose someone of his caliber from the mine.Therefore,when Odaira came to him and told of his desire to run an electrical machinery manufacturing plant within the

Kuhara family organization,he immediately agreed with the plan and promised his cooperation.To make Odaira's wishes come true,he voluntarily took upon himself the role of persuading Kuhara,the owner of the parent firm,to buy the idea.

After Hitachi Engineering Works was established and running smoothly,Takeuchi continued to support Odaira whenever there were complaints and criticisms from Hitachi mine over Hitachi Engineering Works's products.And,as mentioned earlier,in connection with Odaira's moves to have Hitachi Engineering Works split from Kuhara Mining and become independent,Takeuchi did not hesitate to give Odaira full support.

24Yoshida ,•gEntrepreneurship in the Japanese electrical industry...•h,p.73. 25Odaira san no omoide,p.158. UDAGAWA:Owners and Salaried Manager in Hitachi49

In January1918Kuhara Mining had held a reelection of directors;

besides retiring some brothers of Fusanosuke Kuhara,the meeting also promoted Takeuchi to managing director and appointed some

fresh blood from outside the company:Settaro Nakayama and Chozo Koike.Takeuchi was unhappy with the results,since in this reelection

Odaira,who was next in line after him among the salaried managers in the Kuhara organization,had been passed over in the appointment

of directors.Hence,realizing that,as long as Hitachi Engineering Works remained a branch operation of Kuhara Mining,its development would be limited and chances for Odaira's promotion would get slimmer and slimmer,Takeuchi supported Odaira's plan to make Hitachi Engineering Works independent and overcame the opposition of Kuhara,

Nakayama,and others in order to make it possible for Odaira's wish es to be fulfilled.

3.FAVORABLE BUSINESS RESULTS AND THE FISCAL FRAGILITY OF THE PARENT COMPANY

The third factor was the good operating results of Hitachi Engineering Works.Odaira knew he had to be very cautious in his management of Hitachi Engineering Works because he had started it up in the face of opposition from Kuhara,and he prudently aimed at stable improvement.The result was a steady increase in sales figures as product diversification advanced,so that between1912 and1918turnover grew from\530,000to\4,700,000.Even after the company separated from Kuhara Mining its results were good,and through all the years of the recession that followed World War I it never failed to declare a dividend.For this reason,Hitachi Engineering Works took on the character of a•gcashbox•has far as the parent company was concerned,for Kuhara Mining had fallen upon hard financial times during that recession,and,as mentioned above,it often made use of

Hitachi Engineering Works as a means to obtain badly needed funds. Nissan,also,was to acquire over\4,200,000in capital in October1933 by selling Hitachi Engineering Works shares to the public at a pre mium.

The stable good results achieved by Hitachi Engineering Works and the financial contribution it made to the Kuhara zaibatsu and the Nissan combine was a factor in convincing the two owners,Kuhara and

Aikawa,of Odaira's managerial skills and the solid capabilities of the 50JAPANESEYEARBOOK ONBUSINESS HISTORY-1993/10 company.This is what led Kuhara to entrust to Hitachi Engineering Works the running of the Tsukudajima manufacturing plant and Nippon Steamship's Kasada shipyard,and Aikawa to entrust to it the running of Osaka Ironworks and Kokusan Industries.On the other hand,taking on the running of these companies enabled Hitachi Engineering Works to expand its scale of operations,diversify the types of products it manufactured,and enjoy abundant use of the top-level management posts in those firms.By putting university graduates into middle-management positions and training them in administrative managerial skills,then promoting them in due time to top manage ment positions,Odaira was able to strengthen Hitachi Engineering Works's status as a true managerial enterprise. A fourth factor was the fragility of the parent company's financial base.Despite the scale of its operations and the diversification of its activities,Hitachi Engineering Works's capital remained at 10,000,000from the time of its split from Kuhara Mining in1920\ until November1933.The reason is that Kuhara Mining and Nissan could not respond to Hitachi Engineering's allotment of new shares, because of their business slump.As a result Hitachi Engineering Works was forced during this time to rely on financial institutions and internal reserves for the funds it needed. All negotiations with financial institutions were handled by Odaira.26It was when the company had just separated from Kuhara Mining to become independent that Odaira had the greatest difficulty in negotiating with financial institutions.But once these insti tutions became aware of the sound management being exercised at Hitachi Engineering Works(and the company's favorable results were no small help in this regard),Odaira found it easier to negoti ate loans,and the company was able to borrow needed funds from banks like Dai-Ichi Bank and The Industrial Bank of Japan. At the same time,immediately after becoming independent, Hitachi Engineering Works adopted financial policies to expand internal funds:from the second half of1924,after business condi tions had stabilized,it shifted over50%of its profits into reserve funds and the like,in an effort to build up its internal funds.Thus,the weak ness of the parent company forced Hitachi Engineering Works to go

26 Yoshida,•gEntrepreneurship in the Japanese electrical industry...•h,p.67. UDAGAWA:Owners and Salaried Manager in Hitachi51

through very troubled times as far as procuring of funds went,but the other side of the coin was that,by solving this problem on its own,

it was able to hold financial control by the parent company down to

a minimum,and this enabled it to develop its own independent busi

ness activities.

CONCLUSION

In August1933Namihei Odaira was asked by Yoshisuke Aikawa to take

over the presidency of Nippon Mining Company when Korehiko Takeuchi became ill.27Odaira turned down the offer.His reasons are

given in a memorandum of his.

My attachment to Hitachi cannot be transferred to anything else. Hitachi is my life,my everything....I have made up my mind

that when I leave Hitachi it will be when I retire from all busi ness activity altogether.I cannot bear the idea of deserting

everybody at Hitachi and running off to some other place.28

For Odaira,Hitachi Engineering Works was his whole•glife,•hit was

the be all and end all of his business activities.For this reason,when ever there had been any danger of its losing its autonomy or its

healthy development,he had steadfastly refused to be swayed even

by the demands of the owners.Odaira's refusal to agree to Kuhara's

proposal for a tie-up with a foreign company as a condition for grant ing the company independence,is only one example of this.Another

example occurred when Kuhara Trading Company,which was

founded in1918,fell into a business slump after World War I ended, and Kuhara demanded that Odaira turn over Hitachi Engineering

Works's sales rights to Kuhara Trading.Odaira,firm in the belief that•g

the work of a manufacturing concern....cannot succeed unless it is closely linked with sales activities,•h29twice rejected Kuhara's

demands.

27Ni ppon Mining was established in April1929when it inherited the mining divi sion of Nissan.At the time it was the largest company in the Nissan combine. 28•gBibliographical materials ....•h 29Hit achi Seisakusho shi(1),p.46. 52JAPANESE YEARBOOK ON BUSINESS HISTORY-1993/10

At the same time that he adopted such a fearless stance,Odaira was quite aware of his position as a salaried manager,and he worked hard at maintaining amicable relations with the owners.When he did accede to the demands of Kuhara and Aikawa,it was because he judged Hitachi Engineering Works's autonomy could be preserved, and he agreed to their demands as far as he could.The cases described in the course of this study,of his agreement to some of Kuhara's requests for the distribution of Hitachi Engineering Works's funds, and his qualified acceptance of Aikawa's requests that he take on the management of Osaka Ironworks and Kokusan Industries,are exam ples of this.In addition,when the demands of the two owners did not have a bearing,even indirectly,on the business activities of Hitachi Engineering Works,he almost always gave complete agreement to their demands.An example of this occurred in October1935,when Hitachi Engineering Works had its second allotment of new shares; Kuhara was deeply concerned about funds,and in order to help him

out,Aikawa told Odaira to present Kuhara with30,000bonus shares. But a distribution of50,000bonus shares to the company's directors and employees had already been decided.If30,000bonus shares were

given to Kuhara,Aikawa and Odaira would have to forgo theirs. Nevertheless,Odaira acceded to Aikawa's instructions.30 In short,for Odaira,assuring the autonomy of Hitachi Engineering Works was of more importance than his personal

benefit.What he was afraid of was that,if,by rejecting Aikawa's demand,relations between himself and Aikawa and Kuhara worsened, this would have a detrimental effect on the business activities of Hitachi Engineering Works.In other words,he had to tread a thin line:in order to let Hitachi Engineering Works,his•gbaby,•hgrow and develop as a managerial enterprise,he had to hold on to its autono my,even if it meant opposing the owners.Yet,in order to make this

possible,he also always had to maintain good relations with the owners. Hosei University

30•gBibliographical materials ....•h