THE RELATION BETWEEN FAMILY and ENTERPRISE in EARLY MODERN JAPAN Until Today Family and Firm Are Two Closely Intertwined Concept

THE RELATION BETWEEN FAMILY AND ENTERPRISE IN EARLY MODERN JAPAN

— THE HOUSE OF SUMITOMO AS A CASE STUDY —

Until today family and firm are two closely intertwined concepts in the Japanese business world. Firstly, “management familism,” the idea of the company as a family, is often mentioned as a characteristic of Japanese management in postwar business studies. According to this idiom, the company is a family-like environment, encompassing the worker's life. Employees remain loyal to the company all their lives and work hard to achieve the group goals. Management practices like lifetime employment, seniority-based wages, quality-circles and in-company union sustain the feeling of the company as a community of people with a common destiny (ie kyôdôtai). This paternalistic ideology in companies, an attempt to create an emotional identification with the firm, is called “familism” or kazokushugi. Western scholarship however, has criticized this company-as-family metaphor. Researchers have pointed out how, from the 1930's on, company management has used the ideology of familism in order to dismiss government intervention1 or to avoid having to improve working conditions2. Nevertheless, the “familistic” ideal of a benevolent management caring for loyal workers is still very much alive. It is often invoked not only by the direction but also by the employees claiming their rights and full membership of the company- community3. Secondly, “familism” can also be defined as a form of business in which the interests, social position and prestige of the capital owning family are linked to the prosperity and continuity of the firm4. The family has

1 Rodney CLARK, The Japanese Company, Yale University Press, New Haven and London 1979, p. 47. 2 Andrew GORDON, The Evolution of Labor Relations in Japan: Heavy Industry, 1853-1955, Council on East Asian Studies, Harvard University press, Cambridge 1985. See also Dorinne K. KONDO, Uchi no Kaisha: Company as Family? in Jane BACHNIK and Charles QUINN (Ed.), Situated Meaning: Inside and Outside in Japanese Self, Society, and Language, Princeton University Press, Princeton, New Jersey 1994, p. 173. 3 Ibid. 4 For definitions of familism in Japan and the West, see Akio OKOCHI & Shigeaki YASUOKA, Family Business in the Era of Industrial Growth. Proceedings of the Fuji 190 B. GAENS always been a very efficient instrument for business, as a primary source of capital and reliable partners. Many big enterprises built around clans still exist, although the active role of the family members differs5. The goal of this article is to examine the historical roots of familism in Japanese business. These can be found in the concept of ie, an incorpora- tion of both family and enterprise in early modern merchant houses from the Tokugawa period (1603-1868) on. Next, I will take a look at the ideological use of the family-metaphor and the suggestion of continuity in “familistic” management practices such as lifetime employment and seniority. I will focus on the case of Izumiya-Sumitomo6, as they were a typical merchant family since the beginning of the early modern era. Of all the large traditional merchant houses, Mitsui has been studied best and has even been the subject of several books in English7. The Mitsui enterprise has often been referred to as an ideal type of merchant house organization and centralized family management. However, it is my opinion that the case of Sumitomo is more representative for early modern Japan- ese family management. Whereas Mitsui was a conglomerate of nine

Conference (The International Conference on Business History 10), University of Tokyo Press, Tokyo 1984. Leslie HANNAH, From Family Firm to Professional Manage- ment: Structure and performance of Business Enterprise. Akademiai Kiado, Budapest 1982. H.A. MUNTJEWERFF, De spil waar alles om draaide. Opkomst, bloei en neergang van de Tilburgse familie-onderneming Wolspinnerij Pieter van Dooren 1825-1975, Stichting Zuidelijk Historisch Contact, Tilburg 1993, p. 26. 5 In some companies the family's influence in management is still very strong or even increasing (as in Suntory and Toyota) and in others their influence is decreasing or salaried managers have the authority (as in Bridgestone and Yamaha). Matsushita-Pana- sonic is an example of a firm that is coping with an in-company struggle between two factions concerning the role of family members. One faction supports the third generation Matsushita Masayuki, a grandson of founder Matsushita Kônosuke, in his bid to become the next president, while another faction calls for the need to overcome family or dôzoku- controlled management and supports a manager unrelated to the family; see ASAHI SHIM- BUN (Evening Edition), Kazokuteki keiei, dappi e no kakehiki, 19 July 1997. 6 The history of Sumitomo as a zaibatsu after Japan's modernization is fairly well- studied. However, its pre-modern background has been less examined, largely due to the limited access to original Tokugawa period materials. Outlines of Sumitomo's history can be found in the following works: SAKUDO Yôtarô, Sumitomo zaibatsu, Kyôikusha Rekishi Shinsho, Tokyo 1979; MIYAMOTO Mataji, SAKUDO Yôtarô (ed.), Sumitomo no keieishi teki kenkyû, Jikkyôsha, Tokyo 1979; YASUOKA Shigeaki, Zaibatsu no keieishi, Gendai Kyôiku Bunko, Tokyo 1990; Hidemasa MORIKAWA, Zaibatsu. The Rise and Fall of Fam- ily Enterprise Groups in Japan, University of Tokyo Press, Tokyo 1992; MORIKAWA Hidemasa, Nihon zaibatsushi, Kyôiku Rekishi Shinsho, Tokyo 1987. 7 E.g., Oland D. RUSSELL, The House of Mitsui, Little, Brown and Company, Boston 1939; John G. ROBERTS, Mitsui. Three Centuries of Japanese Business, Weatherhill, New York 1973. THE RELATION BETWEEN FAMILY AND ENTERPRISE 191

(later eleven) owner-families who invested in a central joint-stock company (the ômotokata), Sumitomo was an example of an enterprise ruled by one household or ie.

The role of the family in the Sumitomo enterprise First I will illustrate how Sumitomo evolved from an owner-controlled firm to a managerial enterprise, ruled by salaried managers. Sum- itomo's pre-modern history can be roughly divided into three periods, 1600-1700, 1700-1780, and 1780-1894. Masatomo (1585-1652), a Nehan-sect priest who had a book and medicine shop in Kyoto, is traditionally credited to be the founding father (kaso) of what later came to be the Izumiya-Sumitomo house. It is, however, Masatomo's brother-in-law Soga Riemon who is the founder of its business (gyôso). He owned a hardware shop named Izu- miya and his business really took off when he acquired the Nambanbuki, a new technique to extract silver from copper. Riemon's son Ribei (later called Tomomochi) was later adopted by Masatomo and thus became head of the ie. In 1623 he moved the Izumiya business from Kyoto to Osaka, Japan's commercial center at the time. Commercial activities expanded and the house branched out in copper export, international trade, financing and rice dealing for retainers of the Shogunate (fudasashi), and money changing. With third generation Tomonobu as household head (called tôshu during the Tokugawa period), branch shops in Edo were set up. By the end of the seventeenth century the Sumitomo enterprise produced one third of Japanese copper. The family also became Bakufu-appointed (goyô) copper traders after their acquisi- tion of the Besshi mines. The household head was the leader of the ie as well as the manager of the enterprise. As the firm grew, more authority necessarily had to be delegated to employees, but they were not given too much autonomy. During this period the ie (usually translated as ‘house’ or ‘household’) formed the active core of business. Since the beginning of the seventeenth century the ie was the basic unit of Japanese society. It formed an institutionalized household, a corporate body, with the aim of ensuring prosperity and perpetuity8. Although succession of the household head

8 For an analysis of the ie concept as a cultural and social metaphor see MITO Tadashi, Ie no ronri, 2 vols., Bunshidô, Tokyo 1991, and Ie to shite no Nihon shakai, Yûbunkaku, Tokyo 1994, by the same author. In many Japanese scholarly works, an important role 192 B. GAENS was ideally reserved to the eldest son, it could also easily be assumed by another son or even a non-kin successor, like a servant or an employee, adopted into the ie through marriage with a daughter. Adoption was also a strategy to secure the continuation of the main house (honke) if the head and his wife remained childless. Non-succeeding family members were supposed to leave the house and form branch families (bunke). An employee could be given permission to form a non-kin branch (bekke) after a considerable number of years and start his own business, but he had to take the explicite vow not to interfere with the honke enterprise. Inheritance was customarily divided among all sons until roughly the first half of the eighteenth century. Although the primary weight remained on the succession of the main house, each son was given the chance to set up a branch house. For example, in 1662 the second head Tomomochi was succeeded by his eldest son Tomonobu, who as heir to the main business of Izumiya received sixty percent of the profits of the copper trade. His younger brother Tomosada received forty percent, which he used to start an independent bunke and a money exchange business in Osaka9.

The second period (1700-1780) witnessed the centralization of the family business and the enactment of house codes. During the economi- cally unstable period following the Genroku era (1688-1703), the inte- gration of the corporation became a necessity due to a number of causes. After the Kyôhô reforms by shôgun Yoshimune, the Bakufu government refused to accept litigation brought against daimyo who had borrowed money from merchants and declined to pay it back. The Bakufu pres- sured merchants to conform to their low social status through sumptuary laws. While many merchant houses disintegrated, others adopted conser- vative business policies and formed lineage (dôzoku)-groups with a centralized management. The lineage tried to safeguard its central position in meticulous house codes. A house code would contain rules regarding inheritance, succession, relationship with branch houses and an ethical has been attributed to ie in Japan's rapid modernization after the Meiji Restoration (1868), in marked contrast to the industrialization process in the West which allegedly was based on individualism. For a study representative of this approach, see MURAKAMI Yasusuke, KUMON Shumpei, SATO Saburô, Bunmei to shite no ie shakai, Chûô Kôronsha, Tokyo 1979. For an English summary, see MURAKAMI Yasusuke, Ie society as a pattern of civilization, in Journal of Japanese Studies, vol. 10, nr. 2, 1984. 9 SAKUDO Yôtarô, Sumitomo zaibatsu, Nihon keizai Shinbunsha, Tokyo 1982, p. 46-47. THE RELATION BETWEEN FAMILY AND ENTERPRISE 193 code of conduct. Most codes stressed frugality, inventiveness and accu- rate accounting, diligence, obedience to the government, eternal prosperity of the house, consultation through deliberative councils to make business decisions and fix prices, and avoidance of new and unsure investments10. Between 1721 and 1751 more than ten sets of house rules were compiled in Izumiya-Sumitomo. These were necessary to regulate the management of sometimes remote sublets and keeping managers from serving their own interests. House codes therefore emphasize that branch shops should not be ruled by managers (shihainin) but by the bekke, as we can see in Bekke tedai torishimarikata, Sumitomo's shop rules for employees in the branch shops of 175011: “Recently the bekke have come under control of the managers, but from now on the bekke should control and supervise the managers.” It was important that, when a household head or the future successor was of weak health or showed little leadership qualities, he should be replaced. When the fifth head, Tomomasa, turned out to be weak and ill for a long period of time, he kept on ruling in name only. His brother Tomotoshi became his substitute and de facto leader. This Tomotoshi, who had already become independent and had formed his own bunke, reformed the business of the main house after 1750 and compiled six house codes. He reduced the number of employees, introduced a promotion system based more on merit and ability, enforced frugality measures, employed a system of job rotation, and centralized the business around the main house. Blood bonds were not as absolutely necessary as leadership qualities and ability, but were definitely preferred. In order to ensure the continuity of the bloodline Sumitomo held a group of concubines12. In fact, the sixth through the eighth heads (Tomonori, Tomosuke, Tomotada) were illegitimate children13. Only if no able candidate was available an adopted son (yôshi) was to inherit the family estate.

10 MIYAMOTO Mataji, Kinsei shônin ishiki no kenkyû, Tokyo 1977, p. 113-174. A dis- tinction can be made between moral instructions (kakun), stipulations concerning branch houses, adoption, succession and inheritance (kahô), and rules for employees and the management of the shop (tensoku). Although most Sumitomo house codes contain elements of all three categories, the emphasis is on regulations for employees. 11 Art. 15. Quoted from MIYAMOTO Mataji, SAKUDO Yôtarô (ed.), o.c. Translation mine. 12 NAKASE Toshikazu, Sumitomo zaibatsu keiseishi kenkyû, Daigetsu shoten, Tokyo 1984, p. 173. 13 ID., Bakuhanseika ni okeru Izumiya Sumitomo no rekishiteki kenkyû — Sumitomo zaibatsu no genryû to shiteki kôsatsu, Osaka Sangyô Daigaku Gakkaihô, nr. 11, 1978, p. 85. 194 B. GAENS

The difficulties accompanying the centralized control of multiple branches caused most houses to restrict the establishment of new branch houses. They would still grant employees after about thirty years of service the ceremonial title of bekke. However, instead of becoming independent, these continued to commute to the firm as managers (tsûkin bekke), or became mere investors in the business of the main house14. This establishment of ceremonial branch families, who just remained in the firm, was one of the elements that contributed to the formation of a more abstract ie-concept. Despite attempts by the main family to have the final say in management, the tendency to separate between family, home and ownership on the one hand, and shop, management and accounting on the other began to manifest itself from the second half of the eighteenth century on. The owner's family more and more left the management of the main shop and the branches to skilled supervisors. Although the family-owners in name remained in charge, the enterprise was actually run by head clerks (bantô) and managers (shihainin), and the role of the household head became purely representative. In the case of Sum- itomo, an in-house conflict was the direct cause of the start of managerial control. As mentioned above, in 1758 the household head Tomomasa was of weak health and his son Tomonori still being too young, a guardian (kôken), in casu Tomomasa's brother Tomotoshi, had the real power and ruled the enterprise instead. However, when Tomonori (an illegitimate son of Tomomasa), claimed his rightful position as heir, his uncle Tomotoshi was reluctant to yield power. An in-house struggle ensued, dividing all employees into two factions, each supporting one candidate. Backed by most employees and bekke, Tomotoshi petitioned the Bakufu and repeatedly tried to force Tomonori into retirement. This first serious house crisis eventually ended in 1780, when the Osaka City Magistrate's office (machi bugyô) ruled that Tomonori had to retire, that Tomotoshi was to step back as manager, and that the business had to be run by the family head and a head manager (kasai)15. This ruling meant the de facto start of bantô management16.

14 See YASUOKA Shigeaki, Zaibatsu keiseishi no kenkyû, Minerva Shobô, Tokyo 1970, p. 140-192, for the case of the Kônoike house. 15 Merchant equivalent of the karô, or chief retainer of the samurai-class. 16 NAKASE, Izumiya Sumitomo, p. 82. THE RELATION BETWEEN FAMILY AND ENTERPRISE 195

From the beginning of the third period (1780-1894) on, managers unrelated to the owner-ie were running the business affairs. This marked the beginning of a complete separation between management and ownership. Not concerning himself too much with business anymore, the head would increasingly adopt a luxurious lifestyle. Thus the family his- tory17 describes the ninth head Tomohiro as somebody who liked to deceive people, drank too much and lead a glamorous life, thereby bringing the ie management in difficulties and the main house in danger. His behavior was a bad example to employees. To avoid this kind of sit- uation and to restrain excessive family spending, the managers decided on a livelihood allowance for the household head and his family. Any surplus financial needs on his part would be considered a loan. In this way the household head became a salaried worker, who only had to function as an example and symbol, performing ritual inspections of the shop and giving his final approval to decisions made by managers. Moreover, excessive spending or other inappropriate behavior by family members was reprehended in official notifications, so-called loyal admonishments, chûkangaki. In 1861 Takawara Genbei submitted his first letter of warning to his master, the eleventh household head Tomonori, who, so he said, liked to spend his days visiting houses of ill- fame and hanging out with certain infamous geisha, and wasted his time attending wrestling matches and horse racing. He told him to come to the shop every day and work in order to secure the harmony between master and employees and for the eternal continuity of the ie18. In 1863 again manager Hirose Saihei and others admonished Tomonori because “he spends too much time in the entertainment quarters and is only concerned with useless amusement, thus giving a bad example to the employees”19. If the household head despite the warnings did not adjust his behavior, or if he was just generally unsuited for the role of tôshu, the chief managers had the authority to force him into retirement. As an example we can cite the second major family strive of 1842. A branch shop in

17 The Sumitomo family records, called Suiyû meikan, were compiled in 32 volumes up to the year Meiji 24 (1891). However, until today the Sumitomo family refrains from making their archives available for research purposes. Only an abbreviated copy, the Sumitomo kashi, Suiyû meikan shô, can be consulted. Several excerpts of the original however, have been published in NAKASE, Sumitomo zaibatsu. 18 NAKASE, Sumitomo zaibatsu, p. 316-8 19 Ibid., p. 332. 196 B. GAENS

Bungo, owned by Jinjirô, son of household head Tomohiro, was in financial difficulties after the shop burned down. Since Jinjirô was unable to pay back his debts, Takawara Genbei advised to force the master into retirement. “Because the tôshu is incompetent, the shop is mis- managed and thus it is impossible to bequeath it as an inheritance, leaving no alternative but to close the business. Therefore Jinjirô should retire. The shop shall be made a direct branch shop of the main house with (his daughter) Sachi as nominal owner.” Takawara himself became the substitute leader (daihan)20. In the same year, Takawara Genbei appealed for the retirement of household head Tomohiro. He wanted to implement a house reform, including a reduction of the livelihood costs for relatives and a decrease in the interest rate paid on bekke salary, which was kept in the business as working capital for the enterprise. While experiencing strong resistance from Tomohiro, he finally got his way in 1845, when the master resigned and the tenth head Tomomi (Mantarô, later Kichijirô) succeeded him21. In addition, the general manager could also decide on a competent successor to the position of tôshu or kachô, as he would be called from the Meiji period on. Between 1865 and 1890 Hirose Saihei consecu- tively hand-picked the twelfth, fourteenth and fifteenth head of the family. In 1865 the deceased family head Tomonori did not have a successor. Upon consultation with the general manager of the Besshi Mines, Shimizu Sôemon, it was decided that Tomonori's brother, who in fact had already been given into adoption at Shimaya Ichigorô of the Asada family, should return to Sumitomo in order to become the twelfth head Tomochika. Then in 1890, after the death of Tomochika and his successor Tomotada, who died shortly after him, Hirose appointed the latter's widow to become the next head. Thereupon he chose Tokudaiji Taka- maro, son of an aristocratic family and brother of Saionji Kinmochi, a Meiji Government member, to become the adopted heir and fifteenth head of the family. He took the name of Tomoito22. Since the Meiji Restoration Hirose had secured useful connections to the new government. It was due to his close links to people like Iwakura Tomomi that Sumitomo avoided confiscation of its Besshi Mines by the Tosa domain and that the business was able to survive.

20 Ibid., p. 162-3 21 Ibid., p. 173-177 22 MORIKAWA, Zaibatsu, p. 49 THE RELATION BETWEEN FAMILY AND ENTERPRISE 197

Finally, the steadily increasing power of the salaried manager is also visible in the codification of house rules. It was no longer the family but the managers who were responsible for their compilation. In the 1891 (Meiji 24) House Constitution Hirose Saihei abolished the rule calling for an able family head, further reducing the latter's role to a symbolic one. The shihainin even got a say in internal family affairs, deciding on their expenses, and compiling House Codes23. In short, the family evolved from the actively managing core to a symbolic existence, and the firm gradually turned into a managerial enterprise. However, the concept of ie as a larger corporate unit survived and offered the salaried managers an ideological framework.

“Familistic” characteristics of Japanese management and continuity The idea of the continuity of Japanese management practices was already suggested by James Abegglen24 in the 1950's. He argued that Japanese-style management was based on traditions from Japan's feudal past. This idea has subsequently been widely propagated in Japan as part of the nihonjinron, or theories about the Japanese, especially after Japan's economic success, through the works of Hazama Hiroshi25, Odaka Kunio26 and Sakudô Yôtarô27. Their work states that Japanese- style management has its antecedents in the commercial practices of Tokugawa period merchant houses: two of the so-called pillars of Japan- ese-style management, lifetime employment and seniority based promotion, are said to be rooted in merchant house management practices; house rules (kahô) are seen as early predecessors of the contemporary corporate slogans; employees working and living at their employer's ie

23 Sumitomo kaken (“Sumitomo Constitution”) art. 11 “Important family matters should be dealt with by consultation between the general director and the managers”. art. 12: “All expenses by the family should be approved upon consultation with the general director and managers”. art. 14: The family head may not increase, decrease, or alter any articles in the family constitution and laws without obtaining permission from the general director and managers.“ 24 James C. ABEGGLEN, The Japanese Factory, Free Press, New York 1958. 25 HAZAMA Hiroshi, Nihonteki keiei no keifu, Bunshidô, Tokyo 1989. 26 ODAKA Kunio, Nihonteki keiei, Chûkô Shinsho, Tokyo 1989. 27 SAKUDO Yôtarô, Edo jidai ni okeru Sumitomoke no kakun. Sumitomo zaibatsu no genryû wo motomete, in MIYAMOTO Mataji, SAKUDO Yôtarô (ed.), o.c., Tokyo 1979, p. 79-128. For an article in English by the same author see his The Management Practices of Family Business, in NAKANE Chie and ÔISHI Shinzaburô (ed.), Tokugawa Japan: The Social and Economic Antecedents of Modern Japan, University of Tokyo Press, Tokyo 1990. 198 B. GAENS gave birth to the modern system of company housing. Finally, the idea of the company as a family is based on the “familism” in early modern enterprises. It is especially the codified house rules of merchants that have been used extensively to corroborate the suggestion of continuity in Japanese business culture. Sakudô Yôtarô for one suggests that “many [house laws] contained specific regulations covering the theory and practice of long-term employment, seniority, good treatment of employees, and ‘familyism', in effect the elements of ‘family-style management princi- ples' that constitute the historical roots of Japanese-style management as implemented widely from late Meiji onward”28. However, it is necessary to take into account the reality behind “family-style management princi- ples” as expressed in house codes. Next I will point out a few facts concerning the Japanese-style management practices of seniority, lifetime employment and the company-as-a-family ideology in the Sumitomo employee-system, that seem to contradict this thesis and suggest that the existence of so-called characteristics of Japanese-style management has been overestimated. The Sumitomo house codes continually accentuate competence and ability (nôryokushugi), rather than seniority (nenkô joretsu) as the main factor for promotion of employees (hôkônin)29. Codes likes the 1760 Bunyo bekke shiki further stressed the fact that diligence and ingenuity would be rewarded. While emphasizing that the difference in position between apprentices and clerks should be respected, both new workers and those who have been there all their lives were to be treated on an equal basis and given equal chances with respect to promotion based on their ability30. An examination of the personnel practices of the house showed that seniority and ranking were of course important factors. The employee system contained a complex system of ranks, further modified by the status of the shop in the enterprise hierarchy. Nevertheless, it can be assumed that ability was in effect equally as important in determining promotion, especially for higher ranked clerks. Ability based promotion

28 SAKUDO, Management Practices, p. 164 29 cf. Sôtedai tsutomekata kokoroe (“Instructions relating to the work of all clerks” ), art. 11. A translation of this house code can be found in Mark RAMSEYER, Thrift and Dili- gence. House Codes of Tokugawa Merchant Families, in Monumenta Nipponica, vol. 34, nr. 2, 1979, p. 209-230. 30 “Promote new employees who do excellent work as you would those who have always worked for the house.” (art. 11) Ibid. THE RELATION BETWEEN FAMILY AND ENTERPRISE 199 was definitely the rule to award the bekke or branch shop status to non- blood related employees, regardless of their seniority. The employee would be given the privilege of norenwake, or sharing of the shop curtain by setting up a branch shop. However, a system of job rotation, to acquire experience in several posts, ruled out fast promotion for lower ranked employees. In the Meiji period headmanager Hirose Saihei made great use of ability based promotion, appointing engineers from outside Sumit- omo to high ranks in order to carry out the modernization of the company. Child-apprentices (detchi) were typically employed at the age of twelve to thirteen from families with ties to Sumitomo, on a contractual basis. The Sumitomo houserules constantly emphasize the importance of child-apprentices31. The new employees were made to submit an official document stating their background, parents and a guarantor. This contract-like letter of acceptance (ukejô) mentioned salary and period of employment for a maximum of ten years. Promotion and contract renewal depended on ability and performance. Apprentices without future prospects were to be discharged immediately. A lot of effort was put in their education and they were not to be treated too strictly. After coming of age (genpuku) at about fifteen to sixteen years old, child- apprentices would get to learn and try out several functions for a few years, after which they were sent to their definite posts and became jour- neymen or clerks (tedai). Those who joined the company after genpuku were called mid-career recruits (chûnen mono). They were to be treated on the same criteria as employees that had worked their all their lives32. Only the very best, about one in ten employees, made it to the top and were allowed to establish a branch after more than twenty years of labor. In fact, a lot more employees left the company, or were made to leave. One of the opportunities to dismiss workers was nakanobori. After five to seven years the worker was allowed to return to his native home for the first time, the second time being after another two years. This occasion also coincided with contract renewal33. Hence, based on performance, the

31 Ibid., art. 14. “(Apprentices) are important to a merchant house and should be treated kindly so that they too will be loyal to the house. Teach them carefully to write and to use the abacus, and when they are sick, take good care of them.” 32 Ibid., art. 10. “Encourage each other to treat all loyal clerks equally, regardless of whether they have worked for the house all their lives or have been hired only recently.” 33 In some companies the nobori-system of temporary leave and re-employment was still in existence during the Shôwa period. KITAJIMA Masamoto, Omi shogyô to Ise shônin, momendon'ya Hasegawake no keiei wo chûshin toshite, Yoshikawa Kôbunkan, Tokyo 1962, p. 603. 200 B. GAENS house would decide whether to re-employ and promote the worker or simply to dismiss him. According to a survey by Imai Noriko34, in the Hôreki and Meiwa periods (1751-1771) the majority of employees were given their “leave” (itoma). Others left the company out of free will, to return to their region of birth and apply their acquired skills in a business of their own. One out of three became ill or passed away. Furthermore, when the Nakahashi shop was forced to close in 1849 only half of all employees were kept in service, illustrating the unstability of hôkônin employment. Out of a total of 140 employees working for Izumiya in the seventh year of the Meiwa period (1770), 76 child-apprentices accounted for 54.3%, indicating the importance of mid-career employees35. Further, looking at the average length of service, 60.9% of the employees at the Osaka Main Shop worked between one and ten years36. In short, already in the Tokugawa period lifetime employment may have existed as an ideal, but it was more the exception than the rule. Theft and other unruly behavior was of course not uncommon in Tokugawa Japan, so many were dismissed. Evidently some servants stayed with Sumitomo all their lives, or at least until they were forced into retirement, but the number of people leaving or being discharged under a strict selection system exceeded them by far. It has been widely held that around the end of the nineteenth century a new generation of university-educated managers introduced the family-ideology. The idea of familism, as Clark37 explains, was a powerfully pervasive doctrine that, while harking back to the Tokugawa tradition, was well adapted to interpret employment practices forced on laborers by the labor market. It provided the managers with the means to avoid government intervention and was consistent with one of the central political concepts of Meiji Japan, the nation as one big family with the emperor as head. However, it should be taken into account that already in the early modern predecessors of the modern company the family was often reduced to a mainly symbolic role and that a complete separation between management and owning family was established.

34 IMAI Noriko, Hôreki, Meiwaki ni okeru Sumitomo no ten'in ni tsuite, in Sumitomo Shûshishitsuhô nr 6, Oct. 1981, p. 27-44. 35 Ibid., p.31. 36 Ibid., p. 37. 37 CLARK, o.c., p. 40-41. THE RELATION BETWEEN FAMILY AND ENTERPRISE 201

Historians have been puzzled by the role the ie-concept played in early modern Japan. Does it just refer to the central family unit or were all employees considered members of the ie? It is probably more correct to see the ie as a concept with a double meaning, as a stem family engaged in an enterprise and, on a more ideological level, as a incorpo- ration centered around a family but incorporating all the employees. In the previous section I illustrated how the active role of the Sumitomo lineage was reduced throughout its pre-modern history and how salaried managers gradually came to rule the firm. Together with this evolution a more ideological ie-concept came into being, which was used by managers already in the nineteenth century. It is very unlikely that before that all employees were considered part of the ie. Instead it was stressed that working hard for the Sumitomo ie would be to the employee's own benefit, as we can see in the Sumitomo house code Sôtedai tsutomekata kokoroe of 1750: “By displaying loyalty to the household head, the house shall prosper and that will mean your own benefit too”38. 95 percent of the employees worked on a temporary basis (nenki hôkô) and could be fired at will. Working conditions were bad and especially in Sumitomo's Besshi copper mines on several occasions the workers muted or went on a strike, indicating the lack of a firm-family analogy. Even the core employees or tedai were not permanently employed, but, as mentioned before, sent on a temporary leave at fixed intervals and rehired or dismissed afterwards. It was first pointed out by Nakano Takashi that actually from the latter half of the Tokugawa period on, the business was not a part of the extended family organization. In other words, the family (symbolized by the family crest or mon), and the enterprise (symbolized by the shop-curtain or noren) were separate entities. The noren shops only took the same structure as the dôzoku (and thus was modeled after the honke — bunke — bekke structure), but were in effect unrelated to the lineage: “the division of the curtain” (norenwake) or the establishment of a branch shop, was a branching of the shop, not the family. The tendency to integrate business into the ie lead to the creation of an ie ideology39.

38 Art. 19. Translation mine. 39 NAKANO Takashi, Shôka dôzokudan no kenkyû, 2 vols., Miraisha, Tokyo 1978, 1981. 202 B. GAENS

The business was centered around the honke, with bunke and bekke functioning as providers of capital. Branch shops of employees were expected to obey and cooperate with the main house, as the house instructions of Sumitomo show. A newly formed branch had to submit a letter to the honke, pledging to follow its guidelines, present their accountancy for inspection, and consult with the main house concerning important matters such as succession and marriage. It further promised to send money if the main house should get into financial difficulties. Yet, in reality the branch houses enjoyed ample independence as far as daily management was concerned. They held their own accounts and could act as separate corporate units. Every branch shop was nominally owned by its manager (shihainin), so that in case of liability the damage was limited to that shop without involving the owner-family40. In fact, sometimes the headmanager existed in name only. The honke functioned as some kind of a general supervising organ, to which the branches were forced to send profit at fixed times41. If it was not possible for them to do so, they were obliged to take a loan from the main house at an interest rate of seven to eight percent in order to complete repayment. The main house would usually supply financial aid to a branch house in difficulties. Examples of a branch house providing financial support to the main house however, are very rare42. The rise of an ie-ideology can be linked to the evolution towards a separation between family and management and the establishment of an early modern family-based corporate system. From the nineteenth century on, Sumitomo kasai and bantô managers start to use ie to justify measures to enhance business. Reforms, dismissals and cutbacks were done in the name of the prosperity and continuity of ie. For example, in 1843 ie-continuity was used to justify the dismissal of several thousands of employees of the Besshi mines, lower their wages, and raise the price of rice. Closing the mine would be inexcusable to the ancestors. “Rationalization” had to

40 It is the opinion of Yasuoka Shigeaki, that in the Tokugawa Period some kind of a system of limited liability came into being through the dôzoku shop-name system, although it remains to be examined to which extent this was the case. YASUOKA Shigeaki, ISHIKAWA Kenjirô, Shônin no tomi no chikusekito kigyô keitai, in YASUOKA Shigeaki et al. (ed.), Kinseiteki keiei no tenkai, Nihon Keieishi 1, Iwanami Shoten, Tokyo 1995. 41 SUMITOMO SHUSHISHITSU, Fudasashigyô to Sumitomo — Kinsei ni okeru Sumitomo no kin'yûgyô, Izumiya Sôkô 16, 1976, p. 29-33. 42 YASUOKA Shigeaki, Kinsei shôka koyô seido no kaitai katei, in NAKAGAWA Kei- ichirô (Ed.), Kigyô keiei no rekishiteki kenkyû, Iwanami Shoten, Tokyo 1990, p. 48. THE RELATION BETWEEN FAMILY AND ENTERPRISE 203 be carried out so the ie-name could live on and for the benefit of posteri- ority43. The shihainin considered the Sumitomo ie his own, and justified management decisions in the name of the continuity of the ie, which all employees should feel part of. Loyalty was forced on the employees by making them pledge their fidelity to “our Sumitomo family” in a written statement44.

Conclusion The traditional ie-structure as it was in use during the Tokugawa period was definitely a very convenient instrument for business. The owner-family at the core of the enterprise was obliged to take a long- term view and strive for the perpetuity of the house by making the enterprise prosper. Ie-continuity at the same time justified the making of profit. However, management and ownership came to be separated at a relatively early stage. The activity of individualistic managers who were in charge of the modernization in Japanese companies after the Meiji Restoration can be related to the appearance of powerful bantô and shihainin during the Tokugawa period. This was also the case in other Japanese merchant houses, but the Sumitomo family feud at the end of the eighteenth century probably caused the gap between family and managers to become wider than in other family enterprises. Salaried managers turned the existence of the household head into a symbolic one. Tokugawa tradition has been used before to look for the roots of Japanese-style management: the so-called pillars of Japanese-style familistic management, lifetime employment and seniority-based promotion, are said to have their antecedents in the commercial practices of Tokugawa period merchant houses. Rather, it should be noted the employees were not directly part of the ie. The family only emphasized their self-profit and chances for promotion through loyalty and hard work. However, from the 1800's on, a one-sided ie-ideology originated, not from the owning family but from the salaried managers who justified and rationalized cutbacks and dismissals in the name of the continuity of the house. The doctrine that the whole firm should be like a great family was an invention of university graduated managers during the Meiji

43 NAKASE, Sumitomo zaibatsu, p. 165. 44 Ibid., p. 413. 204 B. GAENS period but was based on this “ie-ideology of a previous generation of individualistic managers.

43-39 Gondenchô, Kawashima, Bart GAENS Nishikyôku, Kyôto 615 (Japan)