01 Jan 2004
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Minoru Makihara, 75th AMP, 1977

2004 Alumni Achievement Award Recipient
Re: Minoru Makihara (AMP 75)
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Senior Corporate Advisor, Former Chairman, President & Chief Executive Officer, Mitsubishi Corporation

When Minoru Makihara was named president and CEO of Mitsubishi Corporation in 1992, Japan's largest trading company faced a number of challenges. The country had fallen into recession, and the company was saddled with bad debts, slim profits, and a management style that looked inward in the midst of a global economy. His role was to set the organization on a change of course.

In Japan, a land especially mindful and respectful of tradition, certain enterprises have long held a special place in society, and none more so than Mitsubishi. Its origin goes back to the 1870s, when three sailing ships transported raw materials to Japanese manufacturers and carried exports to markets overseas. In the decades that followed, Mitsubishi not only grew into Japan's most famous, prestigious, and powerful collection of companies (or keiretsu), offering a wide array of products and services, but in the early nineties, Mitsubishi Corporation, the general trading company within that group, reached the top of the Fortune Global 500—"the world's biggest company"—with revenues of more than $170 billion.

That said, the Japanese economy was showing signs of serious weakness at the beginning of the last decade of the 20th century. Management practices such as lifetime employment guarantees that had long been lauded were instead being called into question. Japan's reliance on industrial policy had already triggered a backlash in the United States with cries of unfair trade practices. With its emphasis on size and dominant market share, Mitsubishi Corporation may have topped the Fortune charts, but profitability was another story altogether, with earnings a minuscule percentage of sales.

In this environment of change, Mitsubishi Corporation was ready to select a new leader in 1992. The choice was Makihara, who had just returned from a posting in New York City as head of U.S. operations. Thirty-six years earlier, he had started out in the company's marine products department, watching over the export of salmon and crab.

Makihara's credentials were far from traditional by Japanese standards. Although his late father had been a Mitsubishi manager and his wife was the great-granddaughter of the company's founder, Makihara had been born in England and had studied for a year at St. Paul's, a prep school in New Hampshire, before graduating Phi Beta Kappa from Harvard College in 1954. In a system where career advancement could often be hindered by assignments outside Japan, he had spent more than twenty years in positions that took him not only to New York but to London, Seattle, and Washington, D.C., where his perfect English and cosmopolitan outlook helped make him a very effective representative of Mitsubishi abroad.

The significance of Makihara's appointment was not lost on the business press. "With U.S.-Japan relations at an all-time low," wrote BusinessWeek, "his U.S. experience [worked to his advantage]. He argues against the closed world of the keiretsu."

Makihara had a full agenda when he took office. "Much of Japan's growth in the past decade had been based on a bubble economy," he explains. "The Japanese economy depended on bank loans instead of equity, creating the illusion that money was in infinite supply. That led Mitsubishi and other Japanese companies to make bad investments. I decided we should do something about them immediately." As a result, Makihara's initial order of business was to write down those losses, improve his finance department with the help of a Wall Street private equity firm, and make it a matter of policy to pay closer attention to managing the balance sheet.

Makihara then turned his attention to improving Mitsubishi's ability to compete in the world economy. Under the rubric of a program known as "Sound Global Enterprise," he undertook a series of wide-ranging initiatives that permeated every corner of the company, from improving corporate governance and restructuring the corporation to improving the management of human resources. "The CEO has to elicit ideas by talking to employees at every level of the organization," says Makihara, who instituted an open-door policy to make good on what was then a revolutionary idea among Japanese executives.

Emphasizing the importance of adopting new technologies, he named himself chief information officer, provided every worker with a laptop computer, and joined the board of IBM. To expand Mitsubishi's horizons, he pressed for the development of new business in emerging markets such as China and Southeast Asia. "Having taken these and other actions," observed HBS professor emeritus Michael Yoshino, "Makihara-san laid the foundation for Mitsubishi's transformation into a 21st-century company."

At the end of his term as president and CEO in 1998, Makihara became Mitsubishi Corporation's chairman for six years, a position that enabled him to be a strong voice in the halls of the nation's government and in international business affairs. As vice chairman of the Keidanren, Japan's most influential business organization, he specialized in trade issues. At the same time, he fostered understanding and cooperation with the United States as chairman of the Japan-U.S. Business Council and through his work with other prominent citizens of Japan, Europe, and North America who served on the Trilateral Commission.

Sitting in Cambridge last June before receiving a Harvard Medal in recognition of his efforts in behalf of the University in Asia, Makihara remembers his surprise twelve years ago when he was called "unexpectedly" into the CEO's office and named his successor. "I thought I was going to be put in charge of corporate planning," he says with a smile. With admirable prescience and wisdom, however, Mitsubishi Corporation clearly got the right person for the right job.

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