Oji Paper has lost moral fiber

By Terrie Lloyd

When one thinks of Oji Paper, Japan’s largest paper manufacturing company (in terms of consolidated sales), the image is of vast green forests in Hokkaido, excellent paper-making technology, and the guiding hand of Eichi Shibusawa. Shibusawa was the father of Japan’s capitalist economy, initially helping to modernize the Ministry of Finance, then going out on his own to found the nation’s first modern bank, one of its first joint stock companies,
and helping around 500 other now major companies (such as Tokyo Gas, Mizuho, the Imperial Hotel, Sapporo Breweries, and Taiheiyo Cement) to get started.

One of Shibusawa’s key philosophies was the promotion of business ethics and that helping others was an intrinsic part of making a business successful. Perhaps this is where the Japanese view that the purpose of companies is to provide for society first and shareholders second, came from. On the philanthropic and education side of his life, Shibusawa engaged in a purported 600+ projects to improve the living standards of those around him.

What a shame, then, that Oji Paper has lost the positive spirit and moral fiber of this great pioneer of modern Japan.

The reason I make this statement is that despite its pedigree, Oji and its group companies have shown that corporate pride and covering one’s back is more important than ethics. The “ethics” I’m talking about here concern Oji’s record on environmental pollution and resulting business decision-making.

As an example, on July 8, the Tokyo District Court ordered Oji Paper to pay 590 million yen in damages to Seiko Epson for selling Seiko Epson a 30,000-sq-meter plot of land in Nagano which turned out to be highly polluted with PCBs and Dioxin. Seiko Epson had to have 8,300 tons of soil removed to remediate the problem. Of course, there was no mention by Oji prior to the sale of the fact that the plot was damaged.

For some reason, almost no foreign media picked up on this law suit, but it shows that Oji has a pattern of lying and covering up pollution and general business problems. You may recall that in January this year, Oji among other paper producers was found to have been a leading culprit in lying about the level of recycled fiber/paper content in their “green” paper products. In many cases the recycled content was only 10-20% of that claimed, and in some cases there was NO recycled material present at all. While the CEO of competitor Nippon Paper stepped down over the industry-wide scandal, the CEO of Oji Paper, true to form, decided to say “sorry” but to otherwise chose to dodge the bullet.

Going back a bit further, to July, 2007, Oji Paper was forced to admit that its Fuji paper plant in Shizuoka had emitted more nitrogen oxide (NOx) than allowed under a local agreement with Shizuoka prefectural authorities. What’s worse, they falsified their emissions data to cover
up the problem and were only found out after the Hokkaido Prefectural government challenged the company up north and did its own inspection of the company’s Kushiro plant. They found that the Kushiro emissions were in some cases twice Japan’s allowable limit. Ironically, NOx is a leading cause of acid rain, which destroys forests.

Go further back still, and there are other instances of similar cover-ups and subsequent court cases. However, the point is that a related Oji company, Oji Real Estate, has now been found to have been engaging in its own form of cover-up that is much closer to home.

It is common knowledge in the expat community that the three Oji Real Estate condominium complexes in Minami-Aoyama: Oji Palace, Oji Homes, and Oji Green Hills are extremely popular with out-of-town CEOs and their young families. Oji Homes in particular draws a long waiting
list of young families thanks to its 20-meter outdoor swimming pool and its convenient location right in the middle of fashionable Omotesando. There are approximately 20
apartments in that complex, and over the last 25 years, I imagine that more than 200 families have lived there.

That’s 500+ tenants who rented their luxury apartments in the knowledge that they had a rock-solid landlord and the building was safe—or so they thought.

About two years ago, Oji started refusing to renew leases with tenants at Oji Homes, on the basis that they wanted to do renovations to improve earthquake standards for the building. This sounded credible, and most of the families have subsequently moved out despite being offered inadequate compensation to find a similar replacement apartment (standard practice in Japan for high-class apartments being renovated or torn down is to offer tenants 1-2 years supplementary rent to move to digs of a comparable level).

However, two families who have been long-term residents decided to dig their heels in and demand from Oji fair and reasonable compensation to move out. Oji decided to ignore
them by starting renovation work around the families, arranging for their utilities to stay connected until a resolution was reached, or until the living conditions became so difficult that the families would eventually move out. By “difficult,” I mean that the building is being jacked up, so as to strengthen the building foundations, and the passage ways are soon to be full of dust, wheel barrows, and workers lugging in and out building materials.

As work progressed, the families became suspicious that Oji may have had another reason for doing the construction work and decided to hire a professional architect to come in and assess the work. To their shock, he pointed out a number of areas fitted with asbestos and worse still, PCBs—perhaps from the same source as those found in the Nagano soil by Seiko Espon.

When confronted by the families, Oji initially denied any presence of either substance and continued their work as if everything was OK. However, the two families persisted and in June, in front of lawyers and staff representing the families and the Minato Ward Office, Oji Real Estate and Takenaka Construction Co representatives admitted that the building does in fact have both substances, with the asbestos being present in significant amounts, and that they’d known for some time about the presence of these substances.

Now, let’s think about this. A luxury apartment full of young kids, top-level international executives, and their guests, and yet Oji had known for possibly up to two years about the presence of asbestos and PCBs. What does this tell you about the company and its ethics?

As far as I know, we’re the first to break this story to the public, but the families are obviously hoping that the media will pick up on the situation and give Oji the coverage that the company obviously still needs in order to get the message: “a quick admission of the problem and proper settlement of tenant claims is the only reasonable outcome.”

In the meantime, if you are living in or have lived in any of the Oji apartment complexes, you may be wondering what the presence of asbestos means. Providing it is inert, probably the buildings have been/are reasonably safe, but the problem with asbestos is that one never knows when it or the binders it is applied with will age and start to flake off. Oji Palace is even older than the Oji Homes facility and there has been no indication at this stage
that Oji plans any investigation or remediation of substances possibly present there. I think this is extremely irresponsible.

I also think it is very irresponsible that there is a public school right next to the building site, with kids running around in the playground every week day. Perhaps the parents of those children are not aware that even a wisp of the stuff inhaled into your lungs can cause
mesothelioma and asbestosis later in life. Oji can and should be taking a lot more precautions and needs to come clean to the public about the work being done. Elsewhere in Japan, when asbestos is removed from schools, the entire school is closed (so it’s normally done during the
summer holidays), to prevent danger to the kids.

From what we’ve heard from the residents, so far the Takenaka workers are taking only the very most basic of precautions, and sophisticated respirators don’t appear to be part of them.

Then of course, there is the matter of the two families and their kids left in the building. I find it incredible that Oji Real Estate is able to engage in such dangerous construction work with tenants still present. This represents a level of bloody mindedness on the part of Oji managers that wouldn’t be tolerated if those families were Japanese. The proper venue for a showdown of this nature is the courts, and if Oji wants the resisting tenants to move, it should take them to court, reveal the levels of compensation being offered, and wait for the
courts to decide before continuing their work.

Terrie Lloyd writes a weekly newsletter for entrepreneurs and business people about business and political opportunities in Japan. You can find the newsletter at www.japaninc.com. For further contact with Terrie, email him at terrie.lloyd@japaninc.com.

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4 Comments

electric2004 at 08:54 AM JST - 16th July

What does one expect from a company, where the same starts the same as "Oji-san"?
electric2004 at 09:03 AM JST - 16th July

Really, I mean, there is no reason to be surprised at all. The moral code of Japanese business ethics seems to be like the 11th commandment: Don't get caught.

And if you get caught, apologize for being caught and therefore having contributed to trouble. Not necessary to apologize for the wrong doing itself. Then continue business as before. Just cover up more seriously.

In the company I work, we have a compliance manual, which explains that one should not do wrong things and try to cover that. And these rules are taken serious. As Terrie pointed out, it is a question of policy rules and these rules have to be applied from the president of the company down to each employee. And they all have to understand not just the words, but the meaning in full context.

The company where I am working has some kind of positive model role, so by its contacts it tries to distribute these rules and the ideas behind it. But, seeing daily business, there are always some bad apples.
GW at 10:21 AM JST - 16th July

Terrie

thx for this one, clearly SOP for Jpn.

But pls CEOs & their families guests are NOTHING special, they are just people yr piece comes off a bit like how dare they do this to rich expats, come on you can do better than that!

Thx for the expose!
ultradodgy at 09:27 PM JST - 24th July

Terrie,

Get a grip. Any 25 year old building in Japan will likely have asbestos and, potentially, PCBs. This is not uncommon. It's also not dangerous, provided that they are properly stored and not disturbed.

I have no sympathy for wealthy tenants who, independently and likely after consultation with knowledgeable parties, agreed to a settlement payment to leave. As I'm sure Terrie knows, tenants on traditional style leases cannot be evicted, so to infer that Oji somehow offered "inedequate" compensation is completely misleading. Oji offered an amount, the tenants (presumably well educated, informed parties) agreed. In any part of the capitalist world this is would be deemed a legally binding contract or agreement. What am I missing here?

Terrie is also taking a dim view of contract law regarding the sale of the Nagano land. Are we really supposed to believe that Seiko Epson bought a 30,000 sqm plot of industrial land without ANY environmental due diligence? What? That boggles the mind. But it's useless to speculate, since we don't know the terms of the sales contract (presumably the land was sold as-is) or the due diligence efforts of S-E.

I am certainly no apologist for corporate Japan, but these sort of wingeing, misinformed articles (while we've come to expect them from Terrie) do nothing to improve the business climate or standards in Japan. And to infer that because the tenants are "top level international executives" this should somehow be a bigger story quite frankly guts the entire "moral outrage" tone of this puff piece.