In Chapter 3, we briefly discussed post-war reforms that were taken by the General Headquarters (GHQ) of the Allied Power under the name of the 'Economic Democratization Policy'. Here we will discuss some of these reforms in more detail, as their influence on the formation of the present Japanese management system cannot be ignored.
For GHQ, one of the major aims of the policy was to reduce concentration of economic power. Hadley ( 1970) documents this reform in detail. In addition to the enactment of the Act Concerning Prohibition of Private Monopoly and Maintenance of Fair Trade (usually abbreviated as the Antimonopoly Law) in 1947 and the creation of the Fair Trade Commission(FTC) to enforce the Law, GHQ ordered all zaibatsu to be dissolved and a number of large firms to be split.
Zaibatsu dissolution was mainly targeted at the Big Four and six New Zaibatsu although its effect extended to many other firms. Four measures were taken for this purpose. First, to sever the ownership ties, forty-two holding companies including, of course, the Big Four, were forced to liquidate and their shares confiscated by a special committee called the Holding Company Liquidation Commission (HCLC). The shares held by designated zaibatsu families were also confiscated with only nominal compensation paid. HCLC also ordered forty-one additional companies, including Japan Iron and Steel, Hitachi, Toshiba, and Kawasaki Heavy Industries, to dispose of their shareholdings.
Secondly, 1,575 executives from more than 400 companies (including, but not limited to, zaibatsu companies) were purged from their jobs and prohibited to take any managerial position. 1 Thirdly, Mitsui Bussan and Mitsubishi Shoji, the two largest trading companies (sogo shosha) and main members of, respectively, Mitsui and Mitsubishi Zaibatsu, were forced to be broken up into 220 and 130 companies, respectively.