End of a Rebel Culture? Takafumi Horie Shook Up Stodgy Japan Inc. but the Livedoor Inquiry Could Erode Confidence in Some of Japan's Most Dynamic Firms

Newsweek International, January 30, 2006 | Go to article overview

End of a Rebel Culture? Takafumi Horie Shook Up Stodgy Japan Inc. but the Livedoor Inquiry Could Erode Confidence in Some of Japan's Most Dynamic Firms


Byline: Christian Caryl (With Noriyuki Hirata)

All the elements of scandal were present. Grim-faced prosecutors marching past the television cameras; frantic investors, betrayed believers, exultant enemies. The horror of a suicide. And at the center of it all a crass crusader--a risk-embracing reformer who might also be a crook.

No question about it, Japan has had its share of corporate scandals before. But this past week's story--the latest twist in the colorful career of 33-year-old Takafumi Horie--promises to join the ranks of those select few that end up defining an era. The affair broke upon an unsuspecting Japanese public last Monday night, when Tokyo prosecutors staged a carefully choreographed raid on the headquarters of livedoor, Horie's diversified Internet-services company. In an instant the man whose precipitous corporate rise had transfixed his compatriots, and whose audacious attempt to stage Japan's first true hostile takeover last year changed the country's business culture forever, was yanked unceremoniously off his perch.

Much has been written inside and outside Japan about Horie's prickly hairstyle, his T-shirted defiance of office dress codes, his ostentatious enjoyment of decorative women, expensive food and his Ferrari--all of them vaguely, and inspiringly, sacrilegious in a country where an appearance of modesty and decorum have long been the standard for the corporate elite. But that was precisely what made Horie different--his aspiration to change the way that Japan Inc. does business. The speed and audaciousness of his acquisitions laid the groundwork for an explosive growth story: in a little less than a decade he parlayed a meager $50,000 in start-up capital into a company worth roughly $8 billion at its peak last year.

Livedoor was a symbol of Japan's New Economy promise, until investigators knocked on its doors. Last Wednesday a huge spike in sell orders--mostly tech stocks held by individual investors, including livedoor--practically overwhelmed the Tokyo Stock Exchange (TSE), forcing it to shut down early for the first time in its 60-year history. By the time the market closed on Thursday, livedoor had lost nearly half its value. And seemingly everybody was asking whether this corporate starburst would rob other young Japanese firms of investor favor, sending the improving Japanese economy into yet another tailspin.

A successful investigation could just as well serve as the impetus for a new burst of corporate reform, or signal the beginning of the end for an entire new entrepreneurial culture that has taken root during the Koizumi years. (Both Horie and livedoor have denied any wrongdoing.) At worst, the scandal could threaten Prime Minister Junichiro Koizumi's broad reform program and short-circuit the economic recovery. That's because livedoor was no ordinary firm. In just a few years, Horie had transformed a bankrupt business into one of Japan's most dynamic companies--and along the way declared war on the country's opaque and incestuous corporate culture. "I don't like Horie," says Jeff Kingston, a professor at Temple University in Tokyo. "I think he's an obnoxious twit. But he has been a force for reform. He has forced companies to wake up to their vulnerabilities. He has forced --regulatory changes. And in a sense he has dragged the Japanese business elite kicking and screaming into the 21st century."

Horie has a flair for the dramatic, and he displayed it last year with his hostile takeover bid for Fuji TV, Japan's biggest private television broadcaster. He didn't succeed, but that was almost beside the point. As one, Japanese companies suddenly came to the realization that they should reorganize their operations, strengthen their management and, ultimately, increase shareholder value--or face a similar attack by a corporate raider. Koizumi's team of reformers have been pushing for similar changes at the macroeconomic level for the last few years. …

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