Osaka and Niihama: Part 2 | Sumitomo’s Journey from Past to Present | About Sumitomo

Modern employment system established by Kinkichi Nakada

In 1925, Kinkichi Nakada, the fourth director-general, introduced mandatory retirement ages for the first time at Sumitomo: 55 for employees and 60 for directors. On the very day on which the mandatory retirement rules he had introduced came into force, Nakada retired from his position as director-general, having served for just 2 years and 10 months. He set an example for others to follow by observing the rule.

Teigo Iba, the second director-general, who had cautioned against “domination of the old,” retired at the age of 58. Nakada, who had the same concerns as Iba, institutionalized this practice. Since the sound development of an enterprise may be jeopardized without a mandatory retirement age, Nakada’s introduction of the rule is significant.

After graduating from Tokyo Imperial University in 1890, Nakada pursued a career in the judiciary. He served as a judge of the Tokyo Court of Appeals, and a division head at the Yokohama District Court. In 1900, aged 36, while serving as a division head at the Tokyo Court of Appeals, Nakada decided to join Sumitomo on the recommendation of Masaya Suzuki who had been his senior by three years at university (and later became the third director-general). Since his hometown of Odate City, Akita Prefecture, was near Kosaka Mine, Nakada was well aware of the role that the mining industry could fulfill in furthering the national interest. Above all, the business philosophy prioritizing the alignment of business interests with the public interest, advocated by Suzuki, resonated with Nakada, exerting a strong attraction. Upon joining Sumitomo, Nakada was appointed assistant manager of Besshi Mine Office where he was mainly concerned with internal affairs as an assistant to Suzuki. Given that, starting with Saihei Hirose, all Sumitomo’s director-generals had been assigned to the Besshi Copper Mines, Nakada was undoubtedly viewed as an up-and-coming man since he was assigned to Besshi as soon as he joined Sumitomo.

For 22 years until he was appointed the fourth director-general, Nakada served in various positions, including general manager of Besshi Mine Office; director of the Osaka Head Office; managing director, effectively the chief executive, of Sumitomo Bank (present-day Sumitomo Mitsui Banking Corporation); director of Sumitomo Steel Foundry (the predecessor of Sumitomo Metal Industries); and director of The Sumitomo Electric Wire and Cable Works (present-day Sumitomo Electric Industries). During these years, he was exposed to the cut and thrust of corporate life.

Machinery yard of the Toen Inclined Shaft (late Meiji era)
Photo courtesy of Sumitomo Historical Archives
An example of the modernization of the Besshi Copper Mines, this shaft reaches the rich ore zone at the level of the eighth gallery.
The riot occurred here.

In September 1906, Nakada established the Mining Camp Control Regulation. The Besshi Copper Mines retained the mining camp system that had persisted since the Edo period. There were 17 camps, each consisting of about 100 miners and managed by a camp boss. The miners were not directly employed by Sumitomo but hired by camp bosses. Sumitomo’s Mining Department paid wages and provided rice to the camp bosses who often exploited their miners. Under the Mining Camp Control Regulations, the number of mining camps was fixed at 20 and Sumitomo paid wages directly to each miner and dismissed exploitive camp bosses.

Disgruntled camp bosses opposed to Nakada’s reforms spread a rumor that the miners would dynamite the mineshafts and other facilities, thus wrecking the mines. In a letter sent to Director-General Masaya Suzuki, Nakada wrote, “If we are cowed by this rumor, we will fall into their trap,” and expressed his determination to deal with the situation resolutely. However, the discontented camp bosses and some 300 miners that they had incited resorted to violence, setting fire to offices and company housing. Nakada conferred with Director-General Suzuki and requested mobilization of troops through the governor of Ehime Prefecture. Unnerved, the mob dispersed before the troops arrived. This appalling dispute was a wakeup call and thereafter employment relations at Besshi Copper Mines were conducted on modern principles.

Nakada experienced another major dispute. In April 1908, Nakada, who was a director of the Osaka Head Office, visited the areas of the Toyo region (Imabari, Nyugawa, etc.) affected by the smoke pollution originating from the Shisakajima Smelter together with the general manager of Besshi Mine Office. When a thousand angry farmers, furious about the pollution and clamoring for compensation, besieged the inn where they were staying, Nakada and the people accompanying him were fortunate to escape with their lives. Mr. Teruaki Sueoka, Deputy Director of Sumitomo Historical Archives, says: “Nakada’s father was a loyal retainer of the Akita Domain, which had fought on the government’s side in the Boshin War when all other neighboring feudal domains were pro-shogunate. Very much his father’s son and imbued with the Sumitomo Spirit that is unfazed by challenges, Nakada jumped into the uproar. It is a heroic tale. Unintimidated, he listened attentively to the farmers and devoted himself to finding a definitive solution to the issue of compensation.”

Sumitomo’s trajectory changes under Kankichi Yukawa’s leadership

Kankichi Yukawa, the fifth director-general, was a keen golfer. Indeed, he was a pioneer of golf in the Kansai region and became the first president of Ibaraki Country Club, which exists to this day. He was a rival of Kaishu Katsu, a man best known for his role in negotiating the bloodless surrender of Edo Castle, for the charms of a popular geiko, a traditional female entertainer. There are many amusing anecdotes about Yukawa.

Mr. Teruaki Sueoka, Deputy Director of Sumitomo Historical Archives, explains: “Yukawa was a sophisticated, elegant, urbane gentleman. He was fluent in German and played golf on weekends, at a time when the game was a rarity in Japan. He was known for his generosity of spirit and frankness.”

Yukawa became the director-general in 1925 following his predecessor Kinkichi Nakada’s retirement in accordance with the mandatory retirement age he himself had introduced. Yukawa was born in 1868, the eldest son of a physician who was a retainer of the Kishu Shingu Domain (present-day Shingu City, Wakayama Prefecture). He did not wish to follow in his father’s footsteps as a doctor. Upon graduating from the Faculty of Law of Tokyo Imperial University in 1890, he joined the Ministry of Communications. He was promoted to director-general of Tokyo Post and Telegraph Administration Bureau, but joined Sumitomo in 1905 at the age of 38.

Similar to Kinkichi Nakada, Yukawa joined Sumitomo on the strong recommendation of Masaya Suzuki who had been Yukawa’s senior at university and subsequently served as the third director-general. When Suzuki was in the top post, Yukawa assisted him as No. 3 in the corporate hierarchy, with only Suzuki and Nakada ranked higher than him. Drawing on the abundant experience he had gained through service at the Ministry of Communications, including overseas business trips, as well as the foresight and ingenuity he had cultivated as a counsellor of the Ministry of Foreign Affairs, Yukawa brought his capabilities into full play at Sumitomo.

Sumitomo Copper Plant’s seamless pipes in 1926
Photo courtesy of Sumitomo Historical Archives

Notice of the issuance of Sumitomo’s Business Rules on June 14, 1928
Photo courtesy of Sumitomo Historical Archives
The reference to the Besshi Copper Mines was removed from the Business Principles.

In May 1910 Yukawa also became general manager of Sumitomo Copper Plant (the predecessor of Sumitomo Metal Industries, Sumitomo Electric Industries, and Sumitomo Light Metal Industries). Initially, he focused on the pipe-making business. At the time Japan lacked the expertise to manufacture high-grade items, such as boiler pipe and condenser tubes, being reliant on imports. Yukawa wanted to manufacture such items in Japan. He invited engineers from the British Naval Ordnance Department and in 1912 Sumitomo became the first Japanese company to manufacture seamless pipe successfully. In 1920, with an eye to communication cables, Sumitomo took an equity stake in Nippon Electric. In 1925, Sumitomo Steel Foundry (the predecessor of Sumitomo Metal Industries) began manufacturing steel products, such as hubcaps, wheel axles, gears, and bogies for naval and railway use. Drawing on that experience, Sumitomo was able to play an important role as a supplier of the principal elements of Shinkansen bullet trains during Japan’s postwar period of high economic growth.

Yukawa’s achievements were linked to the radical reforms he launched that changed the trajectory of Sumitomo.
Mr. Sueoka explains: “In the Rules Governing the House of Sumitomo (Article 3 of the Business Principles) formulated by Saihei Hirose, the first director-general, the Besshi Copper Mines are referred to as the ‘eternal asset for successive generations of Sumitomo.’ Nevertheless, the second article of the Business Principles states: ‘Sumitomo’s business interests must always be in harmony with the public interest; Sumitomo shall adapt to good times and bad times…’ At a meeting of executives shortly after taking office as the fifth director-general, Yukawa stressed the need to improve existing businesses and pioneer new ones in view of the domestic and international situations prevailing in the early 20th century, while proceeding in accordance with the Rules Governing the House of Sumitomo. His contemplated shift in policy garnered support. Yukawa removed the Besshi Copper Mines from the direct control of Sumitomo and repositioned them as an affiliate. In formulating the Business Rules of Sumitomo General Head Office, he removed the reference to the Besshi Copper Mines from the Business Principles. Yukawa changed Sumitomo’s trajectory from that of an enterprise reliant on copper mining to a comprehensive enterprise comparable to Mitsui and Mitsubishi. Since, as a result of Yukawa’s decision, Sumitomo was able to lay the foundation of its current prosperity, Yukawa’s contribution was clearly outstanding.”

In an inaugural speech at the meeting of executives, Yukawa expressed his resolve thus: “The House of Sumitomo’s policy emphasizes the need for the most careful consideration when contemplating embarking on a new business. Nevertheless, I urge you to be energetic in proposing improvements to existing businesses and in identifying sound and beneficial new businesses.” Yukawa, however, did not neglect to remind people of Sumitomo’s overarching purpose: “Although Sumitomo is a profit-seeking enterprise, our longstanding commitment to benefiting the nation and society must inform everything we do.”

Masatsune Ogura, inheritor of Sumitomo’s business philosophy

Masatsune Ogura was born in 1875, the eldest son of a judge at Daijyume in Kanazawa City, Ishikawa Prefecture. Studying the Chinese classics since childhood with his grandfather gave him a solid intellectual grounding, which he drew on to good effect in later life when serving as the sixth director-general of the House of Sumitomo and subsequently as Home Minister and Minister of Finance in the Konoe cabinet.

Among his classmates at Kanazawa Yosei Elementary School were Kyoka Izumi and Shusei Tokuda, both of whom achieved distinction as novelists in years from late Meiji to early Showa. Originally aspiring to become a man of letters, Ogura’s enthusiasm for literature was partly attributable to the influence of these two schoolfellows. However, he entered the Faculty of Law of Tokyo Imperial University in 1894. Masatsune’s favorite book was Records of the Grand Historian or Shiki by Sima Qian. Inspired by that author’s pithy observations, Ogura was particularly fond of saying, “According to Sima Qian, one develops through encounters with distinguished individuals.”

Masatsune Ogura and Sumitomo executives in 1911
Photo courtesy of Sumitomo Historical Archives
Masatsune Ogura is at the center at the back. Kinkichi Nakada is to Ogura’s right. Tomoito Sumitomo (right) and Masaya Suzuki are in the foreground.

Inauguration of Konoe’s third cabinet in 1941
Photo courtesy of Sumitomo Historical Archives

Ogura left the Home Ministry for Sumitomo in May 1899 at the age of 24. Embarking on a career in business and taking “one develops through encounters with distinguished individuals” as his watchword, he took every opportunity to meet distinguished people so as to learn from them and emulate their qualities. In August 1930, Ogura assumed office as the sixth director-general, succeeding Kankichi Yukawa. In an inaugural speech, Ogura declared his determination to shoulder his responsibilities as the inheritor of Sumitomo’s business philosophy nurtured by his distinguished predecessors and “to serve not only for the benefit of Sumitomo but also for that of the nation and society.”

Regarding development of human resources, Ogura addressed new employees thus: “As you are entering the world of business, you must understand that there is far more to business than moneymaking. You have to be a person of integrity, one who painstakingly cultivates his personal qualities.” Among the young men who were moved by the high expectations Ogura expressed in his speech were Housai Hyuga, who later served as president of Sumitomo Metal Industries and as chairman of Kansai Economic Federation, and Masao Kamei, who later served as president of Sumitomo Electric Industries and as chairman of the Japan National Railways Reconstruction Supervision Committee.

Mr. Teruaki Sueoka, Deputy Director of Sumitomo Historical Archives, says: “Ogura was an inspiration to these distinguished individuals. The values Ogura emphasized helped them accomplish projects of national importance, such as the construction of Kansai Airport and the privatization and reorganization of Japanese National Railways, which had massive debts amounting to 34 trillion yen.”

During Ogura’s tenure as director-general, Sumitomo promoted reorganization of group companies. In March 1937, Sumitomo Goshi Kaisha (Limited partnership) was reorganized as Sumitomo Honsha, Ltd. The number of affiliated companies increased to 13, including those involved in metals, electric wire, chemicals, machinery, banking, and life insurance. Sumitomo became a large enterprise and the number of employees rose to 80,000.

Meanwhile, serving also as a member of the House of Peers and a member of the Cabinet Deliberation Council, Ogura offered recommendations on economic policy and moral education. Viewed as a “person indispensable for the nation,” he was appointed Home Minister in the second Konoe cabinet and Minister of Finance in the third Konoe cabinet. Subsequently, Ogura continued his efforts to promote cultural exchanges between Japan and China. He donated his collection of books on China to Aichi University and established a library, which is the present-day Asia-Africa Library.

Upon leaving Sumitomo in 1941, reflecting on his 11 years of service as general-director of Sumitomo, overwhelmed by emotion, Ogura said, “Although I am bidding farewell to Sumitomo, in my heart I will always be at Sumitomo.”

Shunnosuke Furuta, the last director-general

Seven director-generals—First Director-General Saihei Hirose, Second Director-General Teigo Iba, and five succeeding director-generals—led Sumitomo in the early modern era, securing the foundation of the enterprise and developing the business. Each strove to align Sumitomo’s business with the development of Japan, contributing to the emergence of the modern nation state by pursuing management based on high ethical standards.
Shunnosuke Furuta, the seventh and the last director-general, did his utmost to protect the interests of Tomonari, the 16th head of the Sumitomo family, and some 200,000 employees of 35 companies affiliated with Sumitomo when World War II culminated in the crushing defeat of Japan and the devastation of the country.

Sharing the same fate as other zaibatsu at the hands of the General Headquarters of the Allied Powers (GHQ), Sumitomo Honsha, Ltd. (Head Office) received a dismantling order and had no choice but to dissolve in January 1946. During the war, in accordance with the Japanese government’s policy of forced consolidation of financial institutions, Sumitomo Marine & Fire Insurance merged with Osaka Marine & Fire Insurance in 1941. Sumitomo Mining, Sumitomo Metal Industries, Sumitomo Electric Industries, Sumitomo Chemical, Sumitomo Aluminium Smelting, Sumitomo Communication Industries (NEC), Nippon Sheet Glass, etc. were designated munitions suppliers. Furuta established the Sumitomo Senji Souryoku Kaigi (Sumitomo Wartime Council) to which power and authority of the Head Office was transferred as a counterweight to government control.

A ceremony marking the dissolution of Sumitomo Head Office held on the roof of the head office building in 1946
Shunnosuke Furuta is in the center of the third row from the front.
Photo courtesy of Sumitomo Historical Archives

Sumitomo had been integrated into the wartime economy in accordance with the Japanese government’s policy. Japan’s defeat meant that the very survival of Sumitomo, with all its history and traditions going back more than 300 years, was in jeopardy. The dissolution of Sumitomo Head Office was unavoidable. What concerned Furuta most was the fate of the employees who had devoted their lives to Sumitomo. Those who had been assigned to affiliated companies in Korea and Manchuria during the war streamed back to Japan. In negotiations with GHQ, Furuta maintained that “Sumitomo’s entire responsibility lies with me, and no one else.” Furuta stressed that a distinction should be made between, on the one hand, Sumitomo’s business and employees, and, on the other hand, the House of Sumitomo. Once the possibility of the continued existence of Sumitomo’s businesses had been secured together with continued employment for the workforce, Furuta took the initiative and dissolved Sumitomo Head Office.

Following comprehensive consideration of the situation and the options available, Furuta determined the policies concerning Sumitomo’s businesses and employees: 1) consolidate disparate businesses to prevent hollowing out of human resources and formulate new business plans providing work for all employees, 2) provide as much support as possible for repatriates and their families, and 3) convert businesses to ensure their survival and manage them so as to secure national prosperity and people’s livelihoods. Furuta’s policy reflected his profound appreciation of Sumitomo’s employees and his earnest desire to lay the foundation for Sumitomo’s revival, most notably by retaining a critical mass of excellent committed people capable of spearheading a thoroughgoing resurgence.

In an inaugural speech addressed to affiliated companies that Furuta made upon taking office as director-general, he said, “The rise and fall of business depends on people,” indicating the priority he always accorded to the human element, and consequently, his emphasis on human resources development. Following the dissolution of Sumitomo Head Office, his parting words to the presidents of affiliated companies were: “Sumitomo has an incomparable tradition of eschewing the single-minded pursuit of commercial gain and engaging in fair and just business activities. I want you to form a spiritual alliance so that, come what may, you never lose your sense of brotherhood.” Furuta urged that this business philosophy be shared, preserved, and handed on as corporate DNA even if capital relationships were to be dissolved.

Shunnosuke Furuta
Photo courtesy of Sumitomo Historical Archives

Furuta was born in Kyoto in 1886. On graduating from Tokyo Imperial University in 1910, he joined Sumitomo. Furuta first worked as a foundry worker. Glistening with sweat and shrouded in dust, he became skilled in metal casting. Starting his career as an engineer, Furuta was eventually appointed general manager of Sumitomo Copper Works in 1925, becoming responsible for Sumitomo’s entire metals business, including Sumitomo Steel Tube & Copper Works, Sumitomo Metal Industries, and Manchuria Sumitomo Metal Industries. Furuta was appointed the seventh director-general in April 1941, succeeding Director-General Ogura. Displaying resolute leadership, Furuta earned the affection of his subordinates who nicknamed him Oyaji, meaning “Father.” Isoroku Yamamoto, the commander-in-chief of the Combined Fleet, and Furuta developed a firm friendship in the course of business. Konosuke Matsushita, the founder of present-day Panasonic Corporation, recalled that his encounter with Furuta inspired him to develop his own business philosophy.