Shoei Utsuda
1943–

President and chief executive officer, Mitsui & Company

Nationality: Japanese.

Born: 1943, in Japan.

Education: University of Tokyo, BS, 1967.

Career: Mitsui & Company, 1967–; 2000–2002, senior executive managing officer; 2002–, president and chief executive officer.

Address: Mitsui & Company, 22-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-0004, Japan; http://www.mitsui.co.jp/tkabz/english/index.html.

■ Shoei Utsuda found himself unexpectedly thrust into the leadership of Mitsui & Company, Japan's second largest conglomerate, in September 2002, when scandals fomented a dramatic shakeup in the company's upper management. At age 59 Utsuda had seemed likely to reach retirement age before the offices of president, CEO, or chairman of the board became available. Yet in a matter of a few weeks, he was in charge of a vast organization with almost 900 member companies and subsidiaries with multimillion-dollar international businesses in foods, textiles, mining, petroleum, natural gas, chemicals, electronics, energy, machinery, metals, and information technology. Utsuda wasted no time in making his imprint on Mitsui & Company. Within a month he was making sweeping changes in the outlook and goals of the company. Utsuda was a stern leader who demanded that business be conducted in a disciplined manner.

MITSUI ZAIBATSU

The story of Mitsui & Company was part of the story of Japan. Mitsui began with the rise of the Fujiwara family in the 600s, a period almost predating recorded Japanese history. The Fujiwaras intermarried with the royal family, and for approximately four hundred years they helped rule Japan. In 1100 one of the Fujiwaras, a samurai, visited Omi province, and there he found three wells. In one was a treasure trove. He renamed himself Mitsui ("three wells"), founding a new branch of the Fujiwara family. The discovery of the treasure launched the Mitsuis into mercantile businesses. In the 1600s the head of the Mitsui family, Sokubei Mitsui, observed that the fortunes of samurais were waning and that commoner businessmen were often prospering. He renounced his samurai status, proclaimed himself a commoner, and declared that he and his family would focus on being merchants.

Sokubei Mitsui's youngest son, Hachirobei, launched the Mitsuis into a new era of prosperity. Hachirobei's father had died young, but his mother had held together the family businesses of sake and sauce brewing and taught her children how to be thrifty. Hachirobei set up business in Edo (later called Tokyo) and quickly established the hallmarks of the Mitsui business. First, he refused to sell to members of the nobility, because nobles often failed to pay for what they bought. Second, he refused to sell on credit; every transaction was cash only. This practice allowed Mitsui to sell his wares for a lower price than his competitors, who had to finance the credit they had extended, mostly to noblemen. Third, Mitsui tracked every purchase of supplies he made and every sale he made, to see what was profitable and what was not. Furthermore, he charged only one price for each of his wares. There was no haggling; what a shopper saw was what a shopper got. Finally, Mitsui introduced customer service. In his huge main shop, where from his time onward a Mitsui building always stood, Mitsui had numerous employees available to wait on customers, and he focused on customer needs. For example, unlike his competitors, Mitsui did not insist that cloth be sold in one 12-foot-long size suitable for kimonos. Instead, his cloth was cut to order, so someone wanting to sew a small item did not have to spend a fortune on cloth.

Mitsui codified his principles for commerce in his will, and one of his sons transcribed the principles, calling them a family "constitution," to which every Mitsui for 200 years had to swear obedience. By 1900 the Mitsui family owned hundreds of companies, all united by family rather than formal agreements. This system was known as a zaibatsu. The Mitsui zaibatsu was huge. Historians disagree about its exact size, but by World War II, Mitsui controlled approximately 15 percent of Japan's economy and employed approximately 3 million people. During World War II the Mitsui zaibatsu profited from sales to Japan's military, and it used tens of thousands of conscripted Chinese and Korean laborers in its coal mines. After Japan's defeat the Allies were determined to break up the huge Japanese corporations that had used war as an excuse to make money. The huge Mitsui zaibatsu was broken into hundreds of parts. The new Japanese government then instituted a stern property tax that forced Mitsui family members to sell most of their possessions.

During the 1950s former member companies of the old Mitsui zaibatsu bought shares in one another. By the 1960s the interrelated companies had formed Mitsui & Company, which was a keiretsu, a gathering of companies that owned parts of each other, although most of Mitsui's leaders thereafter insisted that Mitsui & Company was just a sogo shosha, a trading company. Mitsui & Company was remarkable among Japan's keiretsu because it remained profitable through the 1990s and 2000s, even though Japan's economy was flat and other keiretsu were suffering losses. By then, Mitsui & Company was the second largest private corporation in Japan, after Mitsubishi Corporation.

REORGANIZATION AND SCANDAL

In 1999 Mitsui & Company built an off-shore petroleum drilling platform near Sakhalin. The Sakhalin project was complex because the region was in the possession of Russia but claimed as a possession by Japan. This situation required Mitsui & Company to go through two government bureaucracies for licensing. That year Mitsui & Company grossed $4.789 billion. In spite of the promising Sakhalin project, Mitsui & Company found itself at a competitive disadvantage because of the difficulty it had in responding to rapid changes in the global marketplace. Thus in 2002 Utsuda was put in charge of reorganizing the vast holdings of the Mitsui keiretsu.

Utsuda had a daunting task. Mitsui & Company had 857 subsidiaries and affiliates, 390 in Japan and 467 overseas. From 2000 to 2002 Utsuda organized Mitsui & Company's vast holdings into five units: one unit encompassed petroleum and natural gas; one encompassed information technology, electronics, and power plants; one encompassed chemical production; one encompassed minerals and metals; and one encompassed consumer services such as food and textiles.

Mitsui & Company grossed $5.22 billion in 2000. A sign of troubles to come, however, arrived in October 2000, when a Mitsui & Company employee was arrested in China for bribing with $35,000 the director general of the state power company to win a contract to build a power plant. In 2001 Mitsui & Company's revenues plummeted to $4.541 billion. In April 2002 Utsuda's reorganization reached the top of Mitsui & Company when he reduced the size of the company's board of directors from 38 to 11.

Even as his reorganization began to take hold, events outpaced Utsuda. Journalists revealed that Mitsui & Company had been involved in bribery and other illegal activities at least since 1997. On July 3, 2002, prosecutors arrested three Mitsui executives for rigging bidding on a government contract to build a project on Kunashiri, an island possessed by Russia but claimed by Japan. The employees were accused of bribery and of possessing secret information that showed what the government regarded as an acceptable bid on the project. On July 24, 2002, two of those arrested were indicted. Mitsui & Company's top executives, the chairman of the board, Shigehi Ueshima, and the president and CEO, Shinjiro Shimizu, offered to take 20 percent pay cuts for three months to take responsibility for being in charge when the crimes were committed.

By September 2002 upper management at Mitsui & Company was in chaos. Matters worsened in August, when Mitsui & Company employees bribed officials in Mongolia to win a power plant contract. The outcry in the press and the anger of shareholders were so great that on September 4, 2002, Ueshima and Shimizu were forced to resign, effective September 30, 2002. In a major reshuffling of executives, Nobuo Ohashi became chairman of the board, and Utsuda was named president and CEO. When asked why he did not resign with his former bosses to show his responsibility as their advisor, Utsuda declared that he believed he was fated to lead Mitsui & Company.

On September 16, 2002, Utsuda told a press conference, reported in Asian Economic News, "There was an absence of a strong sense of morality and of high ideals" in Mitsui & Company's management, and he intended to introduce ethical behavior to the company. What Utsuda had in store for Mitsui & Company was more than a code of ethics: He would try to change the keiretsu 's entire view of its place in the world. On October 8, 2002, Utsuda forbade Mitsui & Company from bidding on contracts that involved grants-in-aid from the Japanese government. He then doubled the number of outside auditors and members of the board of directors and directed that transactions be made public to achieve transparency in Mitsui & Company's finances. Furthermore, Utsuda reorganized the structure of corporate management so that the leaders of the company's five divisions reported directly to him. He also created a new subsidiary, Carbon Nanotech Research Institute, to manufacture molecules called "nanotubes," which could be used in medicine, lubricants, and electronics.

PRESIDENT AND CEO

In 2003 Utsuda began articulating his vision for what he wanted Mitsui & Company to become. He laid out three goals. The first was to expand Japan's economy and the global economy. The second was to develop both sound businesses and sound local communities. The third was to make day-today life better around the world. He also wished to give new life to an old Mitsui & Company slogan, Hito no Mitsui, roughly meaning "Mitsui's strength lies in its people." In January 2003 Utsuda created the service business unit. Its mission was to change Mitsui & Company's outlook from that of a trading company focused on acquisition and delivery of goods to that of a full-service company that identified the needs of customers and then created complete packages of goods and services to satisfy those needs.

By the end of March 2003 Utsuda's reorganization of Mitsui & Company had reduced the overall number of subsidiaries and affiliates to approximately 750. These 750 companies had approximately 100,000 business partners around the world. Utsuda was especially proud of Mitsui & Company's work in China, where his company had established eight subsidiaries and was the largest trading company. In the fiscal year ending March 31, 2003, Mitsui & Company grossed $4.829 billion (an increase of 15.9 percent) and netted $264 million (an increase of 36.5 percent). Mitsui & Company had 37,734 employees (an increase of 4.5 percent). In June 2003 Utsuda increased outside oversight of Mitsui and Company by introducing an outside auditor.

On May 15, 2003, Utsuda gave his approval for the building of a massive liquid natural gas facility on Sakhalin Island that would produce 9.6 million tons of liquid natural gas per year, to be sold in Asia. Through its subsidiary Mitsui Sakhalin Holdings, Mitsui & Company was a partner in the production company Sakhalin Energy Investment Company with Shell Sakhalin Holdings and Diamond Gas Sakhalin (Mitsubishi Corporation). The project was expected to cost $10 billion. Mitsui and Company owned 25 percent of the Sakhalin project. That month the Sakhalin project already had signed contracts for 25 percent of its anticipated production, scheduled to start in 2006. In early 2004 Brazil was negotiating a free-trade agreement with the European Union, and Japanese trade with Brazil was expected to suffer. With 1.4 million people of Japanese ancestry, Brazil had strong ties to Japan. On May 19, 2004, as chairman of the Japan-Brazil Economic Committee, Utsuda asked the Japanese government to negotiate a Japan-Brazil economic partnership agreement that would be a step toward making South America a free-trade area for Japanese businesses.

See also entry on Mitsui & Co., Ltd. in International Directory of Company Histories.

sources for further information

"New Mitsui President Vows Change in Company Mentality," Asian Economic News, September 16, 2002, http://www.findarticles.com/p/articles/mi_m0WDP/is_2002_Sept_16/ai_91757598.

Utsuda, Shoei, "Mitsui Moving Forward with People and Society," Sustainability Report 2003, 2003, http://www.mitsui.co.jp/activity/sustainability/sr2003e.pdf.

Weston, Mark, "The House of Mitsui: Merchants for Four Centuries," in Giants of Japan: The Lives of Japan's Greatest Men and Women, New York: Kodansha International, 1999, pp. 3–11.

—Kirk H. Beetz