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Japan’s economy ministry in dispute with public-private fund over high pay to executives

The Yomiuri Shimbun

JIC President Masaaki Tanaka speaks in Chuo Ward, Tokyo on Sept. 25.

The Yomiuri ShimbunIn connection with the issue of the Economy, Trade and Industry Ministry and Japan Investment Corporation — a newly inaugurated public-private fund — having been at odds with each other over high levels of pay the ministry had earlier proposed to the fund’s top executives but later decided not to approve, Hiroshige Seko, the economy minister, announced Tuesday that he had strongly admonished vice minister Takashi Shimada, the top official of the ministry’s administrative branch.

It has been decided that the ministry will slap Shimada with a 30 percent pay cut for one month while Seko, as minister, will voluntarily return one month’s worth of pay, taking responsibility as supervisor.

The ministry said Monday it will not approve the pay for the top executives that JIC had earlier sought. As the compensation levels sought were too high, the ministry concluded that it would be difficult to win public understanding.

The compensation structure sought by JIC called for annual payments of about ¥55 million each to its president, deputy president and two executive managing directors. The about ¥55 million comprises fixed pay — ranging from ¥15 million to ¥15.5 million — as well as short-term, performance-linked pay of up to ¥40 million. If long-term, performance-linked pay is included, total payment could exceed ¥100 million at the maximum.

This handsome payment plan was presented by the ministry to JIC on Sept. 21, on the grounds that it is necessary to secure global manpower. But when the ministry discussed the pay levels anew, it concluded that they would be deemed too high compared with those at other public-private funds. As there would likely be a public backlash, the ministry informed JIC on Nov. 9 that it was retracting the plan presented earlier.

On Nov. 24, vice minister Takashi Shimada held talks with top JIC executives, including President and Chief Executive Officer Masaaki Tanaka, to coordinate their views, but they had a tough time agreeing. The ministry said Tanaka left halfway through. Tanaka, who previously served as deputy president of Mitsubishi UFJ Financial Group, Inc. (MUFG), only assumed his current post in September.

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  • The Yomiuri Shimbun

Seko apologized at a press conference held after the Cabinet meeting, saying that the ministry had made an administrative blunder in presenting the yet-to-be confirmed amount of payment but later retracting it, thus inviting a situation in which mutual distrust has grown between the ministry and JIC.

On the other hand, Seko said, “I had not received any such report as the ministry presenting any specific amount of pay [to JIC],” implying that liaison and coordination within the ministry was bungled.

As to the remuneration JIC sought, Seko said, “A public-private fund is operated on the assumption that the state’s money is used, making JIC different from general private funds in terms of difficulty in raising funds. It [the pay] is too high.”

Regarding future payments to JIC executives and the corporation’s operation, he suggested that the state handle these matters firmly, saying, “The intention of the state, which holds nearly 100 percent of [JIC] stocks, should be reflected properly.”

Besides Tanaka, those appointed as top JIC executives are Deputy President Yasunori Kaneko, who was involved in investing in a health care products maker when he worked at a U.S. company; Hideaki Tsukuda, an executive managing director who came from the former Sanwa Bank; and Hiroaki Toya, who did stints at both the former Finance Ministry and Goldman Sachs.

Meiji University Prof. Hideaki Tanaka, who is familiar with public-private funds, said: “It appears too high for top executives of a public-private fund — which is financed mostly by government funds — rather than a private company, to get more than ¥50 million. The JIC side should discuss in a level-headed manner with the government, its shareholder, over the amount of pay deemed reasonable.”

JIC was inaugurated in September by reorganizing the public-private fund Innovation Network Corporation of Japan (INCJ). It aims to invest in cases that are deemed difficult for a private fund to invest in, and help them grow. JIC manages funds including the government’s funds and private-sector funds guaranteed by the government. JIC’s functions have been reinforced by enabling it to hold equity in other public-private funds.

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