Japanese Yearbook on Business History•\2002/19

How Eiichi Shibusawa Offered Models of Investment and Management to Introduce Modern Business Practices into Japan

Masakazu SHIMADA Bunkyo Gakuin University

sawa in any discussion of business managers who had a hand in ITstartingWOULD upBE modernunthinkable businessto leave in Japan.Thisoutthe name is ofbecauseEiichi he Shibu was there in the thick of the action,whether it was connected with the establishment of a modern banking industry,the transplantation into Japan of modern industries making use of the joint-stock com

pany system,the laying in place of a solid foundation for business ethics,or the formation of a financial world.And yet,despite such a

position at the heart of the business world,he has been acclaimed less for his activities in the private sector and more for his activities as a public person,as a quasi member of the government.As can be seen from the descriptive labels that have been attached to him

(such as•gthe mastermind of Japanese capitalism,•h•gthe organizer of the financial world,•hand•gthe bourgeois ideologue•h),it is his role as the guiding light of the financial world as a whole in the absence of anybody else who could do the job,rather than for his actual contri

butions to business as a manager,that has been acclaimed.1

For the standard Japanese treatments of Shibusawa's achievements,see1 Kiyoshi 10JAPANESE YEARBOOKON BUSINESSHISTORY-2002/19

Nevertheless,the overwhelmingly major part of Shibusawa's ordinary daily schedule was occupied by the monitoring of the numerous companies that he was involved in as an executive official,and by planning for the establishment of even other compa nies.2Despite the astounding fact that he invested staggering sums of money in large numbers of companies,hardly any research on Shibusawa has dealt with the aspect of his investments and manage ment.For this reason,I propose in this paper to look at the kinds of business frameworks Shibusawa selected,adapted,and tried to apply to Japanese conditions in order to have modern business take root in Japan,and how he himself used those frameworks,with my main attention focused upon the aspect of his investments .

A PROFILE OF EIICHI SHIBUSAWA

He was born in1840in a small village about80kilometers outside

Tokyo,in what is now Fukaya City in .His father was a progressive,wealthy farmer who carried on a big business in

farming and the processing and selling of indigo dyestuffs,and who

consequently took on the status of a leader in the community.3In

his youth he learned the rudiments of the Chinese classics from an

older male cousin who was a Sinologist,and in this way he acquired

a better-than-average cultural training.Still,he sensed the contra

Oshima,Toshihiko Kato,and Tsutomu Ouchi,Meiji shoki no kigyoka[Early Meiji- entre

preneurs](University of Press,1976);Mariko Tatsuki,•gShibusawa Eiichi to Godai Tomoatsu•h[Eiichi Shibusawa and Tomoatsu Godai] ,in Kindai Nihon keieishi no kiso chishiki[A basic knowledge of modern Japan's business history],ed.Keiichiro Nak agawa,Hidemasa Morikawa,and Tsunehiko Yui(Tokyo:Yuhikaku ,1974);and Takao Tsuchiya,Shibusawa Eiichi(Tokyo:Yoshikawa Kobunkan,1989).The works available in English include Johannes Hirschmeier,•gShibusawa Eiichi:Industrial Pioneer,•hin The State and Economic Enterprise in Japan,ed.W.Lockwood(Princeton University Press , 1965);and Etsuo Abe,•gShibusawa Eiichi,•hin The International Encyclopedia of Business and Management,ed.M.Warner(London and New York:Routledge ,1996). 2See my contribution•gKindai kigyo oruganaiza no joho kodo:Shibusawa Eiichi

[The information activities of modern enterprise organizers:The case of Eiichi •hShibu sawa],in Joho to keiei kakushin[Information and business reform],ed.Satoshi Sasaki and Nobuyuki Fujii(Tokyo:Dobunkan,1997),pp.114-22.

3There is an English version of the life of Shibusawa that can be useful:The Autobi

ography of Shibusawa Eiichi:From Peasant to Entrepreneur,trans.T.Craig(University of Tokyo Press,1994). SHIMADA:Shibusawa and Modern Business Practices11 dictions in the class society that existed in the Edo period,when everyone had to submit without objection to the outrageous demands of the warrior class,and took part in the political move ments that bubbled over after Perry's visit to Japan.He would go so far as to plan such direct action against the foreigners as taking over castles controlled by the shogunate and torching the open port in ,but just before the plan was initiated he realized how reckless it was and abruptly called it off.He went into hiding in to escape the shogunate's search for the plotters.He entered the services of Yoshinobu Hitotsubashi,a man of whom people had high expectations as being the most enlightened person in the shogunate(and the man who later would become the fifteenth shogun),and for his services Shibusawa acquired the status of a war rior.After Yoshinobu became the shogun,the government sent a group to represent it at the Paris Exposition,and Shibusawa was chosen to accompany the group.This enabled Shibusawa to see with his own eyes the advanced world of Western Europe. During his absence the shogunate fell.Upon his return to Japan, Shibusawa had an opportunity,albeit a very short one,to experi ment with a modern business in Shizuoka Prefecture,where Yoshi nobu was living in seclusion.Later he was promoted to a position in the government,and,in the Ministry of finance,he was engaged in enlightening businessmen and in other activities aimed at smooth ing the way for the introduction into Japan of banks and companies. Caught up in political maneuverings,he resigned his government post and became the president of Dai-Ichi National Bank,for whose establishment he had been lobbying and other wealthy mer chants while working for the government. With a foothold in Dai-Ichi National Bank,Shibusawa then went on to become involved in a whole host of companies.He acted as the chairman of the board of ,Nihon Renga Seizo K.K. (Nihon Bricks Corporation),Tokyo Rope Mfg.Co.Ltd.,Kyoto Ori mono,Tokyo Jinzo Hiryo(Tokyo Artificial Fertilizer),Tokyo Ishikawajima Shipbuilding Co.,The Imperial Hotel,Oji Paper Co., Ltd.,Iwaki Tanko K.K.(Iwaki Coal Mining),Hiroshima Suiryoku Denki K.K.(Hiroshima Hydro-Electricity),and Sapporo Beer Com pany,among others.He also provided financial assistance toward the establishment of several of Japan's largest companies,such as 12JAPANESE YEARBOOKON BUSINESSHISTORY-2002/19

Osaka Boseki Kaisha(Osaka Mill),Nihon Railway,the Tokio Marine and Fire Insurance Co.,Ltd.,and Nihon Yusen Kaisha(NYK) ,and he served as an executive at each of these companies . In1909,on the occasion of his seventieth birthday ,he resigned from almost all of these positions,remaining only as the president of Dai-Ichi Bank.Then in1916,at the age of77 ,he also gave up his position as president of Dai-Ichi Bank,the base of all his business activities,and retired entirely from the front line of the business world.He still continued to be active,however ,promoting private sector diplomacy,spreading dedication to business virtues ,and encouraging new ways to handle labor problems .In1931,his long life came to an end with his passing away at the age of92 .

SHIBUSAWA THE INVESTOR

The Shibusawa Memorial Museum has in its possession two source materials that have been completely overlooked in the past:the

Shibazaki-ke monjo[Shibazaki family records]and the Shibusawa dozoku-kai kaigiroku[Records of meetings of the Shibusawa family] .4 The former consists of fragments of disconnected memos that are thought to have been jotted down by Kakujiro Shibazaki ,a secretary in charge of keeping the accounts of the Shibusawa family ,when he was preparing the ledgers.The latter is a record of the meetings held monthly from1891on,at which a report was presented to Eiichi Shibusawa and the families of his sons and daughters in regard to all the fluctuations in the assets owned by them.From the former it is possible to get an idea of the funds available to the Shibusawa family and how their assets moved in the one year1891 .From the latter it is possible to see long-term trends in the movement of funds and assets held by the Shibusawa family from1891on . To help analyze these documents and form an accurate picture of Eiichi Shibusawa as an investor,I have compiled two tables based on what is found in Shibazaki Family Records.The first(Table1)

4Both the Shibazaki Family Records and the Records of meetings of the Shibusa wa Family are kept in the Shibusawa Archives established by Ryumonsha ,The Shibusawa Eiichi Memorial Foundation.For a treatment of the former ,see Takashi Igarashi,•gShibazaki ke bunsho ni tsuite•h[On the Shibazaki Family Records],in Shibusawa kenkyu[Shibusawa studies],ed.Shibusawa Studies Association(Tokyo:Shibusawa Archives ,1990,no.2). SHIMADA:Shibusawa and Modern Business Practices13

shows an account of the Shibusawa family finances for the year 1891.The second(Table2)shows the gains and losses in family assets in that same year.5

An analysisof incomeand expenditure

From Table1we can see the family income and expenditures for 1891.Budget control was exercised in regard to both.The actual amounts of expenditure found in the books were in almost all cases within the amounts allotted within the budget,and the overall expenditure fell within the budgeted amount. Dividends from shares owned provided more than60%of the family's income.The Shibusawa family was receiving dividends from thirty companies whose shares they owned,as well as interest from government bonds;the largest amount of money came from divi dends declared by Dai'Ichi National Bank. The second largest source of income(18%)was from interest on money lent out.Most of the loans were to Ichibe Furukawa and Asano Kaisoten[Asano Sea Transport Co.].The relationship between Shibusawa and Ichibe Furukawa and Soichiro Asano has frequently been pointed out,but the fact that Shibusawa not only invested money in their business ventures but also loaned them large sums of money makes it clear that he had a close personal rela tionship with these two businessmen. Surprisingly enough,salaries and bonuses accounted for no more than10%of Shibusawa's total income.Although he was the chairman of the board or some other member of the board of sev eral companies,almost none of these were paid positions,and his salaried income was derived mainly from Dai-Ichi National Bank . What bonuses and remunerations he received from companies where he held executive positions were in the nature of special bonuses for officials,but the total of all these did not amount to much.

5I have looked at this point in detail in two recent works so I shall limit myself to

giving only a summary outline here.The works are:•gEiichi Shibusawa,Industrialist,As Viewed through the financial Documents of the Shibusawa Family ,•hKeiei ronshu(of Bunkyo Women's University),vol.7no.1(1997),and(in Japanese)•gSangyo no soshutsusha/shusshisha keieisha•h[The founder investor-manager of industries],in Kigyoka no gunzo to jidai no ibuki[A tableau of entrepreneurs and the spirit of an age], ed.Yoshiyuki Itami et al.(Tokyo:Yuhikaku,1998). Grand total186,336.690

Note:Amounts are given in yen and(after the period)sen and rin(0.01yen=1sen=10rin). ource:Compiled from information in Shibusawa Family1891PeriodS and Loss Ledger;Fiscal 1891Budgeted Expenditure,and Fiscal1891Budgeted Income Ledgers.

14JAPANESE YEARBOOK ON BUSINESS HISTORY-2002/19TABLE1.Shibusawa Family Financial Account for Fiscal1891:IncomeCategoryltemAmountSub-totalTotalEarningscarriedoverfromfiscal189037,345.88737,345.887Categoryl136,507.305136,5073051t・m1囎認i翻lt,、h、,e、g・'233・6・61tem21nterestonloans27,267.3971tem3Realestaterentalincome2,305.0161tem4Salaries&bonuses15,643.5071tem51ncometaxfund916.1801tem6Fishfarmincome141.599Categoryll12,483.49812,483.4981temlRealestatedeals200.0001tem2Saleofstocks&bonds12,133.4981tem3Miscellaneousincome150.000 SHIMADA:Shibusawa and Modern TABLE1.ShibusawaBusiness Practices15 Family Financial Account for Fiscal1891:Expenditures

CategoryltemAmountSub-totalTotal

Transferredtoassets37,345.88737,345.88737,345.887

CategoryI58,760.909

1temlHouseholdexpenditure10,800.000

1tem21ncometax3,782.988

1t・m3臨 、鷲 繋son42'24…97

1tem4Mitsuirealestateleaseplan1,132.224

魏 臨 灘t。w、,d8・5・6・ ・

CategoryII6 ,254.5936,5015.502

1tem101igardens1,600.000

NewconstructionO.000

1tem2RealestatepurchasesO.000

1t・m3雛 鼎 瀦 ,智 「儒2,756・818

1tem4Contributions&gifts1,230.975

1tem5Furnishings466.800

1tem6Entertainmentexpenditure200.000

1tem7Maintenance&repairsO.000

C・t・g・・y"1識 艦hold1・,398・193

C・t・g・・ylVl號 朧ousehold2,222・1・8

C・t・g・・yV蟄1き 朧sehold3,193 ・7921,5814・ ・93

Transferredtofirsthalfperiodprofits8,211 .9488,211.9488,211.948

Netincome59,859.26059,859.260

Reservefund12,000.000

MainFamiiydividends38,359.408

HozumiFamilydividends4,749.926

SakataniFamilydividends4,749.926

GrandTotal186 ,246.690 16

JAPANESEGainsinAssets YEARBOOK ON BUSINESS HISTORY-2002/19TABLE2.Shibusawa FAMILY Assets:Gains and Losses(Units:yen,sen,rin)

ltemAmount

lshikawaK6gy6DormantPartnershipfinancing500.000

AsahiYakiDormantPartnershipfinancing800.000

AsanoK6gy6DormantPartnershipfinancing32,875.000

HiraokaPlantofAξanoDormantPartnershipfinancing4,000.000

MeiliKasaiHokenfinancing3,750.000

ShinagawaGlasspaid-upcapital75.000

NihonRailwaypaid-upcapital850.000

Chikuh6Railwaypaid-upcapital1,500.000

NihonSeib6paid-upcapital4,000.000

TeikokuHotelpaid-upcapital1,000.000

AoyamaSeihy6paid-upcapital1,000.000

TokyoDent6paid-upcapital1,142.500

SangORailwaypaid-upcapital5,500.000

SapporoBreweryonesharepurchase963.333

Bankofjapanonesharepurchase240.000

Hokkaid6Tank6Railwaypaid-upcapital6,400.000

TokyoDentopaid-upcapital2,490.000

Tokyolinz6Hiry6paid-upcapital1,650.000

Tokyolinz6Hiry61edgerentry2,000.000・

Sub。tota170,735.833

AsanoKais6tennewcapitaltransferpayment19,250.000

AsanoKais6teninterest÷ndstransferloan4,106.349

AsanoKais6teninterest÷ndstransferloan7,875.000

Sanbongidevelopmentcost3,150.000

KatsujyoHamaguchiloan3,000.000

Sakutar6ShibusawainterestadvanceIoan1,125 .997

NihonRengacorporatebondloan10,000.000

Y6gyofinancing100.000

1mbalandfillcost300.000

YokkaichiSejshiCorporatebondfinancing450.000

Totailoansoutstanding13,995 .000

Tuitionadvance205.475

TransferfromYoshioka'sGovemmentBondAccount1,300.000

Augustoverdraft4,966.696

Totalgainsinassets140,560350

Di仔erencebetweentotaIgainsandtotallosses227,948344

TotalofgainsandIossesinassets368,508.694

Note:Some figures and sub-totals calculated on the basis of available documentary

resources.Amounts given in yen,sen,and rin.

Source:Shibasaki Family Papers in the Shibusawa Memorial Museum. SHIMADA:Shibusawa and Modern Business Practices17TABLE2.Shibusawa Family Assets:Gains and Losses(ctd.) LossesinAssets

ltemAmount

Proceedsonsaleof60Bankofjapanshares10 ,255.000 Proceedsonsaleof50Dai。lchiBankshares4 ,000.000

Proceedsonsaleof200NihonYOsenshares10 ,000.000 Proceedsonsaleof1000sakaB6sekishares10 ,000.000 Proceedsonsaleof60Sanjy〔i-sanBankshares3 ,240.000 Proceedsonsaleof100Hakkaid6Tank6Railwayshares6 ,400.000 Proceedsonsaieof50NanajyO-nanaBanksharesg ,000.000

Sub-total52 ,895.000 BalancepaymentonFurukawa1890Decemberinstalmentpayment5 ,000.000 LedgerDeficiencyresultingfromre-pricingofDai。lchiNationalBankshares1 ,057.000 TransfbrCh'ingIoantoHiraoka3 ,000.000 Furukawafirsthalfperiodinstalment25 ,000.000 AsanoKais6tenloan&interest,1890secondhalfperiod4 ,106.349 AsanoKais6tenoriginalcapitalfundingtransferredtonewcapitalfunding19 ,250.000 TemporaryfundingforFurukawa225 ,000.000

ReimbursementforSanbongidevelopmentcosts500 .000

Governmentbondredemption1 ,825.000

RealizationbyNihonSuisandisbanding375 。000

Dai-lchiNationalBank,50sharestransferredtothreepersons2 ,400.000 Paymenton60individua日oans2 ,3053.149

Repaymentontuitionloan80 .500

0ther

DaトlchiNationalBankaccountSeptemberbalance4 ,966.696

Lossesinassets368 ,508.694

LossesinAssets368 ,508.694 18JAPANESE YEARBOOKON BUSINESSHISTORY-2002/19

When we look at expenditures,we find that only about one-third of the total amount were daily outgoings such as living expenses. The overwhelmingly largest proportions of expenditures took the form of deposits in banks or other financial institutions and the pay ment of interest on borrowed money.

An analysis ofgains and lossesin assets Table2brings together assets such as securities,money lent out, and money deposited,but it does not include assets like land or real estate. If you look at the section headed"Gains in Assets,"the first thing you will notice is that there is more investment in[ctd.on p.16] partnership companies(called tokumei kumiai in Japanese,lit. "anonymous associations")than there is in joint -stock corporations . There is little that is known about the inner workings of these dor mant partnership companies.What we do know is that the Asahi Yaki and Asano Kogyo concerns listed in the table were enterprises connected with Soichiro Asano,and Asano-related enterprises took the lion's share of Shibusawa's financing of dormant partnership companies.The widely held image of Shibusawa is that of someone who strongly advocated the principle of incorporation and devoted his energies to publicizing and spreading systems of joint-stock incorporation.What we can see here,however,is a different image of someone who,while he was promoting joint-stock incorporation, was himself making use of other types of companies to provide assis tance to people starting out as entrepreneurs. Let us look more closely at his financing of/investing in joint stock companies.We see that investment in such companies took the form of paid-up capital in the case of eleven of them and share purchases in the case of two of them,amounting to a total of32,560 yen for the thirteen companies(Table2,from Meiji Kasai Hoken down to Tokyo Jinzo Hiryo).I think we can assume that there was little subscribing in newly issued shares in1891because of the repercussions of the recession in1890. In contrast to the allocation of financing to dormant partnership companies,the paying up of capital tended to be dispersed more evenly over a comparatively wider spectrum.Thus we see that, because the recession was adding problems to the usual teething SHIMADA:Shibusawa and Modern Business Practices19 problems of joint-stock companies that were just starting up,not all of the companies that Shibusawa was involved with at this time were successful. Another thing that stands out is the large number of loans.When you add together corporate bonds and loans to individuals you find that almost as much was invested in this form as in other forms of investment.In1891,the first year of the rise of enterprise in Japan, it apparently was necessary to provide funds in a variety of ways: investment in joint-stock companies,investment in dormant part nership companies,and lending to individual entrepreneurs.

Next let us look at the losses in assets.Here we see the prices obtained from the sale of shares owned by the Shibusawa family.

According to a notation given in the Records of Meetings of the Shibu sawa Family,the reason for selling such shares was•gappropriation for debt reduction.•hThe Shibusawa family budget,however,did not have a sizeable debt,so the most likely meaning of the annotation is that the money was used to supplement the funds used to subscribe to other shares. The most lucrative(in terms of the amount of money obtained from the sale of the shares,and the largest profit on such sales) were the shares of the Bank of Japan and of the Thirty-Second National Bank(Dai-Sanjuni Ginko).The other shares did not bring in much profit,and this would most likely be the result of the reces sion.What is most surprising is that the shares of Dai-Ichi National Bank and Hokkaido Tanka Railway were sold at almost no profit whatsoever. Of the shares sold,those of Nihon Yusen and Hokkaido Tanko Railway were officially to be handled at the Tokyo Stock Exchange. It is not certain whether Shibusawa was buying and selling these shares at the stock exchange or not,but we do know that the selling price per share was below that of the average yearly price at the Tokyo Stock Exchange.6We can see that the market conditions in 1891were at a low ebb overall,and that Shibusawa was not always able to sell his shares at favorable prices.

6See Yoshinori Hiraga ,ed.,Tokyo Kabushiki Torihikijo50nen shi[fifty years of the Tokyo Stock Exchange](Tokyo:Tokyo Stock Exchange,1928),pp.153,212. 20JAPANESE YEARBOOK ON BUSINESS HISTORY•|2002/19

LONG-TERM TRENDS IN THE SHIBUSAWA FAMILY'S FUNDS AND ASSETS:1891-1931

We are able to see the trends in share sales made in order to gain funds to invest in various types of businesses over the forty years from1891until Shibusawa's death in1931.This information,gar nered from the Records of Meetings of the Shibusawa Family,is collated in Table3,which shows, year by year,the investments and share sub scriptions that were reported to the meetings of the Shibusawa fam ily, beginning in1891and ending in1931.The supply of funds to companies and so on needs some explanation.The table includes subscriptions to the shares of new companies;subscriptions to shares(both new shares and repriced shares)of companies the fam ily already owned shares in;subscriptions by way of financing lim ited partnership,unlimited partnership,and dormant partnership companies;and the acquisition of shares through purchases on the stock market or from certain individuals.Now,while the totals given in Table3for all other items except•gsubscriptions to the founding of a company •hand•gsubscriptions to new shares or increased shares•h are exactly as they are recorded in the original source,the above two•gsubscriptions•hcolumns do not as a rule record amounts of money but the numbers of shares,thus making an immediate com parison impossible.Therefore,to obtain monetary values for the aforementioned two items,I calculated the value of each set of shares by multiplying by50yen apiece,taking the face value that was commonly used at the time.But it has to be kept in mind that shares were generally paid for in instalments,so clearly the total figures I give for a particular year may be much larger than what the

Shibusawa family actually paid out that year.7 Of all the items listed in the table,the greatest proportion of money was outlayed to subscribe to the shares of new companies and to take up additional new shares allocated to people who were already shareholders in a company.The Records of Meetings of the

Shibusawa Family has an entry entitled•gSubscriptions to new shares or increased shares,•hbut in most of the cases it is impossible to dis

7The commercial law in force in1893prescribed that at least one-fourth must be paid up.See Masaho Noda,Nihon shoken shijo seiritsu shi[The history of the establish ment of Japan's securities market](Tokyo:Yuhikaku,1980),pp.208-9and212 . TABLE3.Annual Share and Investment subscriptions(Units:yen)

Year Limited Unlimited/Dormant Bonds Co. founding New,IncreasesPurchase,etc.Totals

1891 - 10,000 - - - 1 ,650 11,650 1892 - 5,000 9,940 - 14 ,405a 25,000 54,345 1893 - 15,000 0 106,150 67,900 50 ,265 239,315 1894 - - 13,000 61 ,500 32,750 - 107,250 1895 - - - 157,500 155,850 10 ,018 323,368 1896 30,000 8,250 - 219 ,150 340,950 32,900 631,250 1897 231,200 110,125 - 140,500 419 ,200 35,024 936,049 1898 105,000 5,000 - 5,000 20,620 3,830 139 ,450 1899 22,600 175,000 8,600 85,750 261 ,850 7,500 561,300 1900 12,000 70,400 - 25,000 120,750 5,728 233 ,878 1901 13,200 1,700 - - 31 ,850 1,600 48,350 1902 - 0 - 40,200 10,000 - 50 ,200 1903 - 3,000 18,600 - 38 ,200 400 60,200 1904 - - - 100,000 113,850 2 ,200 216,050 1905 2,500 5,000 - 15 ,000 551,050 1,704 575,254 1906 - 1,250 30,000 541,500 334 ,170 120,650 1,027,570 1907 435,000 - - 335 ,000 480,700 8,797 1,259,497 1908 - 4,000 - 234,000 40 ,400 23,360 301,760 1909 3,000 - - 607,500 63,900 5,400 679 ,800 1910 8,350 - - 116,000 89 ,000 34,493 247,843 1911 140,000 3,000 - 227 ,500 85,000 29,340 484,840 1912 183,900 17,750 - 897,200 13 ,000 23,251 1,135,101 1913 12,500 6,000 - 282,750 732,250 14,621 1,048,121 1914 5,000 106,500 - 107,250 238 ,750 10,000 467,500 1915 - 1,900 - 83,250 237,500 10,000 332 ,650 1916 - 12,000 - 510,000 274,500 100 796 ,600 1917 - - - 467 ,800 1,769,100 - 2,236,900 1918 - 122,500 150,000 841,300 611,050 - 1 ,724,850 1919 - 25,000 5,000 609,700 3 ,477,450 - 4,117,150 1920 - 30,000 32,000 626,650 3,576,450 - 4 ,265,100 1921 - 5,000 - 71,000 264 ,700 49,246 389,946 1922 - 4,000 - 141,650 762,165. 20,000 927 ,815 1923 - 3,000 - 83,000 241 ,150 40,520 367,670 1924 - 3,000 - 255,400 1,002,750 92,184 1,353,334 1925 - 6,580 - 408,100 370 ,350 - 785,030 1926 - 24,000 - 1,719,000 6,426,220 267,500 8,436,720 1927 - - - 189,000 462 ,500 - 651,500 1928 - 10,000 - 267,500 336,500 - 614 ,000 1929 - - - 170,500 21 ,250 - 191,750 1930 - 2,500 - 30,000 100,000 704,670 837 ,170 1931 - - - 37,500 29 ,000 - 66,500

a.As subscribed prices of some items are known,the prices are used to calculate this figure . Note:Full headings:Limited partnership companies,Unlimited partnership/Dormant part nership companies,Corporate[Company]bonds,Subscriptions to the founding of a company,Subscriptions to new or repriced shares,Purchases,Transfers,Inheritance,etc. Source:The table is compiled from Records of Meetingsof the Shibusawa Family.Fractions of a yen (sen and rin)were not rounded upwards but disregarded. 22JAPANESE YEARBOOKON BUSINESSHISTORY-2002/19 tinguish whether this means the subscription to new shares issued by a new company or investment in additional shares by a company they already own shares in.For this reason I judged that,wherever there was more than one subscription to shares in the same com pany,the transactions from the second time onward were purchases of additional shares in an already existing company.8 I would like to begin the discussion of share subscriptions in new and existing companies from the two aspects of fluctuations in absolute quantity and changes in the ratios of the two types.To begin with absolute quantity:there is no significantly large differ ence from year to year in the subscriptions of shares in new compa nies,but in contrast there are several years(1917,1919,1920,and 1926)in which extremely large sums are spent to purchase addi tional shares in companies whose shares the family already owned. In1917the family subscribed to nearly17,000Asano Cement Co. shares;in1919the main reason for the large sum spent was that the family subscribed to Shibusawa family companies'shares worth 1,700,000yen,and they also subscribed to20,000Dai-Ichi Bank shares.In1920the largest outlays were for24,000Asano Cement shares,15,000Shibusawa Warehouse Co.shares,and9,000Den'en Toshi shares,while in1926the major factors were a capital increase of5,000,000yen in Shibusawa family companies and a subscription to10,000shares in Asano Cement and5,000shares in Chichibu Railway.Almost all the above-named companies are companies well known for their close association with Shibusawa. One of the things that are often mentioned as a feature of prewar

companies is•gthe continual imposition of further paid-in capital on shareholders through allotting to them newly issued shares.•h9

Whenever a company contemplated an increase of capital,the first

8 As regards the meaning of the annotation•gshinkabu•h,Noda(cited in note7 above)says that the general practice was the use of the expression•gshareholder alloca tion based on the face value of the new share,•h(Noda,p.106),and there is a high

probability that•gnew share subscriptions•hcorresponded to this.As regards the annota tion•gzokabu,•hNoda writes that sometimes there was•gan increase of capital using instalment payments•h(p.112)or•gan increase of capital through a change in the face value of a share•h(p.115).He does say that the latter type of capital increase was not widespread,but still it is difficult to establish which type of capital increase is referred to by the annotation•gzokabu. 9Noda •h ,ibid.,pp.iii and106. SHIMADA:Shibusawa and Modern Business Practices23

thing its management thought of was obtaining more funds from its existing shareholders.As far as the existing shareholders were con cerned,too,this was a good move,because being given priority in acquiring new shares at face value was an opportunity for further profits as long as share prices stayed high.Because Shibusawa was subscribing to a large number of companies of which he was one of the founders,he was being asked,the same as other shareholders, to provide additional funds for new share issues. Next let us see what we can learn from the changes in ratios of the two types of subscriptions(in new and in existing companies). The two periods in which the ratio of subscriptions in new company shares was comparatively high were the first half of the1890s and the seven-year period from1906to1912.The first of these,the first half of the1890s,was called the share boom period,while the decade from1907was known as the third enterprise surge period. In Shibusawa's case there was no single year in which share sub scriptions in new companies stood out,but(as one might expect) the ratio of companies that he became a shareholder in rose to high levels in periods in which there was a boom in shares or in periods in which the economy in general was booming.

The most desirable investors were•gpeople who had assets and a big name,•hand the structure was such that the powerful financiers

who lent weight to the list of a company's founders also subscribed

to large amounts of the shares.10The Records of Meetings of the Shibu sawa Family do not report on subscriptions by founders(presumably

because such a matter was not discussed in the proposals at these meetings,since at those stages financing was not an issue).We can

not tell,therefore,if Shibusawa went on from accepting the respon

sibility of being a founder of a company to becoming a shareholder in the newly established company.What sources such as the Shibu

sawa Eiichi denki shiryo[Eiichi Shibusawa biographical materials]tell

us,though,is that almost without exception Shibusawa right from the beginning lent his name as a founder to every company in which he was a large shareholder and/or was in an executive posi tion.In the case of most of the companies appearing in this table,

10See Toshimitsu Imuta ,Meijiki kabushiki kaisha bunsekijosetsu[An introduction to an analysis of Meiji joint-stock companies](Tokyo:Hosei University Press,1976),p.93. 24 JAPANESE YEARBOOKON BUSINESSHISTORY-2002/19

too,I think we can assume that he was involved in them right from the founding stage as well as in their financing.

What about the years1898to around1907•\years in which the country was in recession and the Shibusawa family's subscription to

shares was at a low ebb? During this ten-year period ,subscriptions to new shares was extremely low from1898to1905.This no doubt was a response to the country's deep recession and the outbreak of the

Russo-Japanese War(1904-1905),which produced an extremely

adverse economic environment for business operations .In1906 and1907,however,the economic environment took a turn for the better,and occasions for Shibusawa to become involved in the

founding of new companies increased.Among the large purchases of shares were the1,000shares in Chuo Seishi,1,000 shares in Kei

han Denki,1,000shares in Teikoku Gekijo,800shares in Teikoku Boshoku,700shares in Tokyo Keorimono,and700shares in Nikkan

Gas,to name but a few.What we can see is that,except for busi

nesses that were highly regional(such as railways and mining) , Shibusawa tended not to be involved in more than one company

within the same type of business.We also see during this period signs of a tendency,slight though it may be,to assist in the establish

ment of companies that would compete with companies that he himself had been nurturing till then.11 Also,whereas the enterprise surges till then had leaned heavily toward the railroad and spinning industries, now completely new types of business were increasing in numbers.One example of this was the expansion in electric power operations with the appearance of such companies as Nagoya Denryoku(Nagoya Electric Power Co.),Keihan Denki(Keihan Electric Co.),Eiko Suido Denki ,and Joban Suiryoku Denki(Joban Hydro-Electric Co.).Another growth area was foodstuffs,with the appearance of Toa Seifun(Toa flour Milling Co.),Meiji Seito(Meiji Sugar Mfg.Co.),Nihon Seiseito (Nihon Sugar Refining Co.),Manshu Mamekasu Seifun(Man churia Bean Meal&flour Milling Co.),and Nihon Anzen'yu .Com panies involved in heavy industries also began to thrive,such as Toyo Aen Renkojo(Toyo Zinc Refinery),Nihon Chuo Seiren

11 Masakazu Shimada,•gShibusawa Eiichi no kigyosha katsudo to kankei kaisha•h [Eiichi Shibusawa's entrepreneurial activities and related companies],in Kakushin no keiei shi[The business history of innovation](Tokyo:Yuhikaku,1995) ,p.16. SHIMADA:Shibusawa and Modern Business Practices 25

(Nihon Central Refining),Nihon Kagaku Kogyo(Nihon Chemico Industrial Co.),Nihon Jidosha(Japan Automobile Co.),and Toyo

Denki(Toyo Electric Machinery Co.).One noticeable feature among these new companies is the large amount of investment being made in China and the Korean Peninsula.No doubt invest ment in these new ventures would have caused an ordinary investor to feel a big risk was being taken.Hence,the fact that Shibusawa was taking part in these businesses would have had the effect of greatly

minimizing the investment risk•hfor the ordinary investor.Another •g thing that is worth noting is that in this period(1898-1907)Shibu sawa's approach to participating in the founding of a company went no further than adding his name to the roster of founders,or at most to accepting a position as adviser.

Investment in limited,unlimited,and dormant partnership companies

Next I would like to move from investment in joint-stock companies to a discussion of Shibusawa's investments in other forms of enter prise organizations.The types of enterprise arrangements towards which he could invest money in his day were limited partnership companies,unlimited partnership companies,and dormant part nerships,and investment could be made through subscriptions to shares and for subscriptions to corporate bonds or debentures.As we see in Table3,investment in limited partnership companies was comparatively constant until1914;investment in unlimited partner ships and dormant partnership companies continued until the last years of his life.We can also see that in some years his investments in these forms of enterprise exceeded his investment in joint-stock companies.Many of his investments were in dormant partnership companies whose names would not have been familiar to most people. Limited partnership companies were made up of two types of investors:those who had unlimited liability(active partners)and those who had limited liability(limited partners).The former held the authority to manage the business and in return bore unlimited liability,while the latter,because they did not have the right to man age the business,had no more liability than the amount of money they had invested in the company. In an unlimited partnership,on the other hand,all the investors held the authority to manage the business,and all of them were 26 JAPANESEYEARBOOK ON BUSINESSHISTORY-2002/19

•g active.•hAll the investors jointly bore unlimited liability.•gUnlimited

liability•hmeant that,should the company have an external debt and

be unable to repay it out of its capital,then the debt had to be repaid by all of the investors even if they had to use their own pri

vate assets.12 Foremost among the investment targets with these two types of organization were Asano Cement Co.,an enterprise controlled by Soichiro Asano,a close associate of Shibusawa,and Tokachi Kaikon Co.,Ltd.,staunchly supported by Kisaku Shibusawa,an elder cousin of Eiichi's.Then there were individually run businesses like Fuji wara Tanko Co.and Katsuzo Nishimura's Sakura Kumi Co.In Asano Cement Shibusawa was an investing partner with limited liability, while in Tokachi Kaikon he was an active partner with unlimited lia bility.13We can see that,when it came to businesses that came close to being individually run businesses or businesses that did not require very large amounts of funding,Shibusawa was choosing to invest in those that were incorporated as companies.We can also see that he invested,for a variety of reasons,in businesses that were quite far from being transplants of modern industries. Of particular interest is the frequency with which companies

named•gdormant partnership•happear.In1901,for example,men

tion is made of Shibusawa's participation in Higashi Yogyojo

(Higashi Fish-Breeding)Dormant Partnership Co.,and again in 1905mention is made of his investment in Keizai Zasshisha(Eco nomic Journal Co.)as a dormant partner.In the case of some of

these companies more information is available about them than the mere mention of their names in Eiichi Shibusawa Biographical Materi

als.Higashi Fish-Breeding's name appears several times,and it is believed to be connected with a business begun by Naoyuki Seki

and run by him in tandem with his management of the fish farm business in Fukagawa owned by the Shibusawa family from1890on.

The biographical materials only list one company as being run by

12Naosuke Takamura ,Kaisha no tanjo[The birth of a company](Tokyo:Yoshikawa Kobunkan,1996),pp.13-14. 13See Ryumonsha ,The Shibusawa Eiichi Memorial Foundation,ed.,Shibusawa Eiichi denki shiryo[Eiichi Shibusawa biographical materials],58vols.(Tokyo:The Shibusawa Eiichi Biographical Materials Publication Committee,1960),vol.11,p.569 and vol.15,p.536. SHIMADA:Shibusawa and Modern Business Practices 27

Seki:a Suzaki Yogyo(Suzaki Fish-Breeding)Co.,Inc.,established in 1897,but we can see that he was running another fish-breeding enterprise,as a dormant partnership company.14

Aoki Gyoryo Kumi was an enterprise engaged in the hunting of fur seals in Hokkaido that had been founded in1894by Takashi Aoki.There is an entry for sometime around1896stating that,with a view to increasing the number of his seal-catching vessels,Aoki consulted Eiichi Shibusawa and was given the okay •g to increase investment and expand,so he requested the cooperation of the other partners,•hand Shibusawa's investment of8,250yen in1896 shown in Table3is believed to be his response to Aoki's request. The business got off the ground after that and Aoki even was able to set up a sales outlet in Tokyo.15 Now,limited and unlimited partnerships are forms of company organization that many people are generally familiar with,but the dormant partnership is not so well known.There are very few stud ies that have referred to dormant partnerships,and they usually define such partnerships in terms of a form of joint-investment busi ness operation made up of•glimited-liability•hinvestment by•gsilent•h partners and management of the operations by those running the business.In this they resemble limited partnerships,but only those running the business appear to the outside world as bearers of the rights and obligations,while the names of those who are investing partners remain unknown(secret)to outsiders.16In other words, they have been explained as prototypes of the company organiza tion,originating in the Edo period as a kind of commenda. Among these rarely discussed studies of dormant partnerships is one by Chonosuke Yoshikawa.17At the risk of seeming to devote too much attention to this topic,I would like to make use of this valu able work to inform readers of the special characteristics of these dormant partnerships. First of all,according to Yoshikawa•ga dormant partnership is a

14Ibid .,vol.15,pp.664-67and675-77. 15Ibid .,vol.15,pp.671-74. 16Takamura ,The Birth of the Company,pp.19-20. 17Chonosuke Yoshikawa,Tokumei kumiai no hanashi to gakusetsu[Talks about dor mant partnerships and academic theories on them](Tokyo:Kyorakusha,1924).All the quoted material in the next three paragraphs is found in pp.1-7. 28 JAPANESEYEARBOOK ON BUSINESSHISTORY-2002/19

kind of partnership that comes about as the result of a contract by which a financier participates in the business of a businessman by making an investment in that business and receives a share of its profits.A partner in a dormant partnership corresponds to a lim ited liability partner in a limited partnership company,while the businessman closely resembles an unlimited liability partner in such a company...and originally it was considered the same as a limited partnership company.•hIn one point it differed, however:•gbecause a person who makes an investment in it bears no direct liability should the businessman running the operations owe a debt to a third party,and is merely in the position of receiving a share of the profits,the investor's name is not revealed.•h Furthermore,as Yoshikawa observes,•gthe business assets are the assets of the busi nessman•h•\in other words,what is invested belongs to the personal business of the one running that business.

Another organization that resembles the dormant partnership is the association recognized in the Civil Code,but•gan association recognized in the Civil Code is a joint business body made up of all members of the association,there exists a mutual connection among the members, and the assets of the association are shared by all the members,•hwhereas the big difference from a dormant part nership is that in the latter the businessman concludes completely separate individual contracts with each of the dormant partners. Yoshikawa lists the following five points as the special characteris tics of dormant partnerships: 1.The business profits are distributed among the investing part ners without any complicated or troublesome procedures; 2.Unlike juridical bodies and associations,the business can be carried out quickly and without waste,resulting in greater profits; 3.Because the names of the investors are not made public(they remain anonymous),anyone can invest and become a dormant partner,regardless of status or occupation; 4.One does not need any experience at all to become an invest ing partner; 5.Should the businessman incur a loss,the financier(investing partner)is bound by no relation of right or obligation with regard to a third party for that loss. SHIMADA:Shibusawa and Modern Business Practices29

Yoshikawa adds that•gthe dormant partner is a financier who invests money so that the businessman can carry on the business,and, aside from having the right to receive a distribution of the profits that arise from that business,he has no other troubles whatsoever, and is in the very advantageous situation of gaining a profit without having to leave the comfort of his own home.•h

While there is not much about dormant partnerships in the Eiichi

Shibusawa Biographical Materials,it does contain the bylaws of one dormant partnership that Shibusawa was involved with:Horikoshi

Shoten.Let me quote from a portion of it.

Article8.The amount of money each dormant member is to pay by way of investment must be paid any time during the fifteen days prior to the commencement of this partnership's business in response to notification by the businessman...in the event the money is not paid in by the pay-in date,an arrears interest will have to be paid at the rate of three sen per day per every hundred yen in arrears.... Article13...the liability of the dormant partner does not go beyond the amount of that person's investment.

It is interesting to see the bylaws explicitly stating the limited liabil ity of the investor.18 Up till now dormant partnership companies have been catego rized as very similar to limited partnership companies because they specified two types of members:unlimited liability and limited lia bility.There are many instances among the large number of compa nies Shibusawa was involved in of a dormant partnership being used in combination with an unlimited partnership.Shibusawa was requested to invest in mining,agricultural,and marine businesses and other businesses that basically are individual business opera tions or businesses that have high risks.In such cases,it is believed, he tried to secure a limited liability after his investments by conclud ing dormant partnership contracts,because direct investment in an unlimited partnership would mean he would have to assume unlim ited liability.

18Ryiimonsha,Eiichi Shibusawa BibliographicalMaterials,vol.14,pp.417-18. 30JAPANESE YEARBOOKON BUSINESSHISTORY-2002/19

CONCLUSION

By turning the spotlight on the investment side of Eiichi Shibusawa and analyzing the types of companies he took part in,we have been able to see an image of Eiichi Shibusawa the entrepreneur that is very different from the Shibusawa-as-public-figure image that peo ple might have held until now. In analyzing the trends over the period of a year in the funds and assets of the Shibusawa family,we have seen that his personal family budget had as its principal source of income the dividends from companies in which he held shares,and that profits from his sales of shares provided the wherewithal to satisfy requests for some next investment.This itself showed that he was an investor-entrepreneur interested in maintaining the family budget in a healthy state. When we combined long-term movements in funds and assets with those over the one-year period,we found an industry-fostering model that differs from the general understanding of his efforts widely held previously,namely that he went on promoting modern industry mainly by fostering joint-stock companies.In other words, what Eiichi Shibusawa was doing was molding the joint-stock com pany format to companies that had a high public-interest character and required large amounts of capital;the limited partnership for mat to high-risk high-return situations;and the unlimited partner ship format to small-scale,individual businesses,combining this last with a dormant partnership format in order to put a limit on the investor's risks.Instead of thinking only of joint-stock companies as the infrastructure for business,he was choosing organizational forms that suited the scale of operations and the objectives of the business involved.At the same time Shibusawa was mindful of dis persing investors'risks,and at a time when Japan was trying to mod ernize and yet the number of investors was to a certain extent lim ited,a safety net like this was an indispensable means of allaying the fears of investors and attracting them. As we have seen,then,Eiichi Shibusawa the entrepreneur him self owned shares,lived off their dividend payments,added to his pool of investment funds from the profits gained by selling off shares as needed,and used various combinations of company for mats(depending on scales of operations,objectives,and the nature SHIMADA:Shibusawa and Modern Business Practices31

of the entrepreneur running the business)for the different compa nies he was nurturing and investing in.The assessment of Eiichi

Shibusawa as a person who built up in Japanese society a modern business structure at a time when a modern economic system was being introduced into Japan is the commonly shared perception of the man,yet what we have seen from studying him as an entrepre neur is that he was not content to play the role of fashioning a grand design for the introduction of a modern economic system but himself led the way by setting an example of how it would work. To put it another way,he should be thought of as the person who designed the framework for producing a fair profit in a new society and who showed the way to do so in his own person.I do not think it is far-fetched at all to suppose that it was precisely because people could see in him a concrete picture of what an entrepreneur was, that his words had such a persuasive power about them and that he was able to shoulder so effectively the roles of ideologue and orga nizer. I was unable to enlarge upon this in the above study,but Shibu sawa understood the need for a variety of types of entrepreneur.He knew that nurturing a large number of different types•\from the managers of large enterprises to whom daily business could be entrusted if financial matters were continually monitored,to ven ture entrepreneurs who want to get rich quick by sticking to their own little business•\would inject energy into modern business and was linked to attracting additional funds and talented personnel. Through the organization Ryumonsha Shibusawa was engaged in nurturing entrepreneurs of many different types,and he was pro viding a place where personnel could be formed who were of a dif ferent stamp from those found in the zaibatsu.19

19For more on Shibusawa's training of personnel ,see my articles•gShibusawa Eiichi no kigyosha katsudo to sono shuhen keieisha•h[Eiichi Shibusawa's entrepreneurial activities and the business managers surrounding him],Keiei ronshu(of Meiji Univer sity's Business Institute),vol.45nos.2-4(1988)and•gMeiji kohanki ni okeru keieisha so no keimo to soshikika•\Shibusawa Eiichi to Ryumonsha•h[The enlightenment and organization of a managerial stratum in the latter half of the Meiji Period:Eiichi Shibusawa and the Ryumonsha],Keiei ronshu(of Bunkyo Women's University),vol.10 no.1(2000).