Leadership at Sumitomo in the Early Modern Era

Author: Teruaki Sueoka


Seven director-generals led Sumitomo in the early modern era, securing the foundation of the enterprise and developing the business. They were (from the first to last): Saihei Hirose, Teigo Iba, Masaya Suzuki, Kinkichi Nakada, Kankichi Yukawa, Masatsune Ogura, and Shunnosuke Furuta. 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.

Before the war, Sumitomo’s chief executive was referred to as soriji or director-general. However, Saihei Hirose, although considered to be the first director-general, was in fact soridainin or sorinin (prime agent) of the House of Sumitomo, titles indicative of a role somewhat different to that of Teigo Iba and subsequent director-generals.

Mercantile houses of the Edo period employed the dainin (substitute, deputy, proxy, representative, agent) system whereby a person would act on behalf of the head of the house if the head were immature, infirm, or a woman. The term soridainin did not exist in the Edo period and was of later provenance. The term sori conveys the sense of overseeing and supervising an activity in its entirety and managing and dealing with every aspect of it. Today, sori is mainly used as an abbreviation of naikaku sori daijin (prime minister).

Director-General Saihei Hirose, the first person to hold that position, was soridainin (sorinin), an agent with authority as a representation whose scope was not restricted. Vested with unlimited authority of representation by the House of Sumitomo as an agent, it was his task to manage the business of the House of Sumitomo on behalf of the head of the Sumitomo family.

On the other hand, soriji, the title used for the second director-general onward, was elected by the riji (directors) on jyuyakukai (the executive board) and his task was to supervise riji (directors). The task of both soridainin (sorinin) and soriji was to manage the business on behalf of the head of the Sumitomo family, but Hirose was the sole “soridainin” of the House of Sumitomo and the soriji system as an institutional structure started with Iba, the second director-general.

Management structure in the Edo period

During the Kan-ei era (1624-1644) in the early Edo period, Masatomo, the founder of Sumitomo, left the priesthood started the publishing business and opened a shop selling medicines in Kyoto.

Tomomochi (married to a daughter of Masatomo), the second head of the Sumitomo family, made copper refining, which was the business of Riemon Soga, his biological father, the principal business of the House of Sumitomo, moved from Kyoto to Osaka (present-day Osaka City) in 1630 and started copper trading, too.

Tomomochi negotiated directly with the head of the Dutch Trading Post, in whose diary Tomomochi is described as a capable merchant. During the Kanbun era (1661-1673), Tomonobu, the third head of the Sumitomo family, began developing copper mines across Japan. He established a comprehensive system extending from copper mining through to refining and exporting while also taking his first steps as a moneychanger and financier. Tomoyoshi, the fourth head of the Sumitomo family, opened the Besshi Copper Mines in 1691 and reinforced Sumitomo’s business foundation.

Thus, the first four heads of the Sumitomo family were vigorously involved in business. However, from Tomomasa, the fifth head, onward, the heads of the Sumitomo family were less deeply engaged in business, with exception of Tomonori, the sixth head, and Tomohiro, the ninth.

When the head of the Sumitomo family was not involved in management, the head of a cadet branch of the family or the highest-ranking tedai (clerk) fulfilled the leading role in management.

According to the organizational structure of the House of Sumitomo from 1760 onward, shihainin (general manager) was the foremost executive followed by fuku-shihainin (deputy general manager), motojime (controller) and yakugashira (head administrator). Below them were various non-executive positions, including tedai (clerk), maegami (junior clerk), and kodomo (apprentice).

In addition, in exceptional circumstances, a retired manager was appointed robun (advisor) and in the event of a crisis, several robun returned to work as nikkin robun providing guidance.
In a present-day company, nikkin robun is equivalent to chairman, robun is an advisor, shihainin is president, fuku-shihainin is vice president, motojime is general manager, and yakugashira is senior manager.

Negotiating the transition to the new Japan

A letter of attorney from Tomochika, the 12th head of the Sumitomo family, to Saihei Hirose, entrusting him with full authority concerning business of the House of Sumitomo.

Toward the end of the Edo period, particularly from the Tenpo era (1830-1844) onward, the House of Sumitomo got into financial difficulties. The Besshi Copper Mines were making huge losses while the Tenpo Reforms buffeted the Edo-based financial business. In 1849, Sumitomo was on the verge of bankruptcy because of its inability to repay the deposit of doza (the copper guild authorized by the Tokugawa shogunate).

In this crisis, Sumitomo adopted a collective leadership system in which the shihaikata (management board), consisting of nikkin robun, shihainin, and fuku-shihainin, was supported by the cadet branches of the Sumitomo family.

This collective leadership was a source of frequent cautionary advice to the head of the Sumitomo family. In 1864, Tomonori, the 11th head, died at the age of 20. His younger brother Tomochika, who was to have been adopted by another family, was recalled to serve as the 12th head of the Sumitomo family in 1865 at the behest of the cadet families and the clerks who had reached a consensus on this issue. This crisis triggered a shift to collective leadership at the House of Sumitomo.

Saihei Hirose rolls up his sleeves

Around the time of the Meiji Restoration, important matters concerning the House of Sumitomo were decided by the shihaikata at Osaka Head Office. In 1868, the shihaikata consisted of five people. It was led by Nikkin Robun Hojo (Deputy Chairman) Genbee Takawara and the other members were Nikkin Robun Uhei Imazawa, Nikkin Robun Soemon Shimizu, (Shihainin) Kaemon Matsui, and deputy manager (Fuku-shihainin) Kohei Takenaka. They were supported by a group of high-ranking representatives of the cadet branches of the Sumitomo family who constituted the old guard.

Having led Sumitomo for about three decades since becoming general manager of the head office in 1840 Takawara was the senior member of the shihaikata. Imazawa and Shimizu had become nikkin robun after having served as general managers of the Besshi Copper Mines. Saihei Hirose, then general manager of the Besshi Copper Mines, engaged in tough negotiations with Koichiro Kawada of the Tosa clan over the control of the Besshi Copper Mines, which the government was threatening to requisition. As the general manager of the Besshi Copper Mines, Hirose was ranked fifth in the House of Sumitomo, following Shihainin Matsui.

In March 1868, Hirose brought negotiations with the new government to a successful conclusion, securing Sumitomo’s right to manage the Besshi Copper Mines. However, seeking a way out of the financial crisis gripping the Besshi Copper Mines, executives at Sumitomo’s Osaka Head Office wanted to sell Sumitomo’s management right to the mines for 100,000 yen, which they thought would ensure the survival of the House of Sumitomo. However, in Hirose’s conception, the House of Sumitomo extended far beyond the members of the Sumitomo family to include everyone working for Sumitomo. On the New Year’s Eve of 1866, he traveled to Kyoto to persuade the kanjo bugyo (commissioner of finance) to supply rice for the miners. Later he composed a poem in Chinese characters, recalling that day.

“The livelihoods of 5,000 people are in my hands. Storms would not stop me. I would submit to all hardships. On New Year’s Eve, food is scarce and supplies still uncertain. Yet, with resolution, I welcome the New Year.”

For Hirose, the 5,000 miners and their families were all members of the House of Sumitomo. Based on this conviction, Hirose resisted the directors at Sumitomo Head Office and devoted himself to preventing the sale of the Besshi Copper Mines, which in his opinion would be an outrageous act.

Present-day Shimanouchi 1-chome, Chuo-ku, Osaka City
where Sumitomo’s Unagidani main residence once stood
Present-day Shimanouchi 4-chome, Nishi-ku, Osaka City
where Sumitomo’s Tomizima branch once stood
Photos by Hitoshi Fugo

From that time onward, Hirose championed the thoroughgoing reform of the Besshi Copper Mines, sometimes without consulting Sumitomo Head Office, in order to defend the interests of the miners and their families, all of whom he viewed as members of the House of Sumitomo.

In 1869, Hirose changed his given name from Giemon to Saihei. (The Chinese characters sai and hei mean “take charge” and “peace,” respectively). Regarding his change of name, he declared: “Shouldering the responsibility for ensuring all our people enjoy peace of mind, I am resolved to make all decisions in a spirit of fairness.”

This declaration about Hirose’s change of name expressed his determination to assume the position of soridainin.

From robun to soridainin

Hirose was appointed robun bekke in February 1872. Upon his appointment as kokenyaku (conservator) of the general manager of the Besshi Copper Mines in March, Hirose announced the introduction of a monthly salary and a job grade system as well as the adoption of performance-based assignment, ahead of Sumitomo’s Osaka Head Office. In connection with the introduction of the monthly salary and job grade system, Hirose referred trenchantly to the executives who opposed him, “Despite today’s civilization and enlightenment, incapable, stubborn, and foolish people are occupying high positions and abusing their power. This must cease.” It may seem remarkable that Hirose was not dismissed, but the House of Sumitomo had a tradition of respecting the opinions of clerks. At the time of the Meiji Restoration, proposals on measures to save the crisis-rocked House of Sumitomo were solicited from all the clerks, regardless of their careers at the House of Sumitomo or age, and they were encouraged to offer their ideas without hesitation. Saihei Hirose was a product of this culture of Sumitomo. It seems that Hirose’s evident sincerity and passion overwhelmed the antipathy of the executives at Sumitomo Head Office toward him. They could not help but recognize Hirose’s diplomatic talent in negotiating with the government and other key parties.

Unagidani main residence upon completion photographed by Saihei Hirose in 1879
Photo courtesy of Sumitomo Historical Archives

In October 1873, Tomochika, the 12th head of the Sumitomo family, entrusted Hirose with all matters pertaining to the employment of a foreigner for the modernization of the Besshi Copper Mines. This was the first delegation of authority by the head of the Sumitomo family.

Taking this opportunity, Hirose reinvigorated Sumitomo’s business activities in Osaka and opened a branch in Tomijima (present-day Kawaguchi 4-chome, Nishi-ku, Osaka City) at the mouth of the Ajigawa River for convenience in marine transportation, moving the sales function from the main residence in Unagidani (present-day Shimanouchi 1-chome, Chuo-ku, Osaka City).

In June 1875, Hirose was promoted from robun to nikkin robun, signaling his involvement in all the businesses of the House of Sumitomo. In December 1875, Soemon Shimizu, the senior member of the shihaikata, retired and, as a result, the shihaikata at head office comprised Robun Saihei Hirose, Shihainin Seibei Kimura, and Shihainin Kenichiro Murata. Hirose became the highest-ranking Sumitomo executive at the age of 47. Upon taking the helm, he separated the business from the house, thus resolving a longstanding issue, designating the property in Unagidani, Osaka, “honke” (head house) and Tomizima branch “honten” (head office).

In January 1876, it was decided to call the head of the Sumitomo family “kacho” (head of household) and in August 1876 Honke Daiichi no Kisoku (Principal Rules of the House of Sumitomo) was issued under the name of Tomochika, the head of the Sumitomo family.

Article 2 of the Principal Rules of the House of Sumitomo states: “the mines in the Besshi Mountains of Iyo (present-day Ehime Prefecture) constitute a vital, eternal, incomparable property of Sumitomo. In the management of the mines, due consideration shall be accorded to the interests they embody.” The House of Sumitomo shall prioritize the interests of the Besshi Copper Mines, that is, of the business, not those of the head of the household.

What qualities should the head of the household possess? According to Article 10, “If the legitimate heir lacks learning, does not cherish the interests of the household, and is self-indulgent, his or her right as the legitimate child shall be revoked and the second eldest son or daughter shall inherit.” Thus, even in the case of a legitimate heir of the Sumitomo family, if he or she is unsuitable, his or her right shall be revoked. The House of Sumitomo declared in the name of the head of the Sumitomo family that its business possessed an enduring value. In light of Hirose’s bitter experience with the executives at head office who sought to sell the Besshi Copper Mines, it seems likely that Hirose urged Tomochika to include this provision.

It is noteworthy that Honke Daiichi no Kisoku (Principal Rules of the House of Sumitomo) formed the basis of the Rules Governing the House of Sumitomo established in 1882.

Sumitomo Head Office in the Edo period. Source: Nippon Morokoshi Nisennen Sodekagami

On February 14, 1877, Sumitomo family head Tomochika appointed Saihei Hirose soridainin. The letter of attorney signed by Tomochika states: “As I am physically infirm, I appoint you soridainin (prime agent) and delegate the authority set forth below.” Specifically, “to manage all my affairs and all the administration related to the commercial code and to supervise numerous employees.” Thus, Saihei Hirose became soridainin. When Japan’s first naikaku sori daijin (prime minister) was appointed in 1885, Sumitomo had already been using the term “sori” for eight years.

In 1882, the Rules Governing the House of Sumitomo was established and the term sorinin superseded that of soridainin. The responsibilities of the sorinin were defined as “management and supervision of all business administration in accordance with the Articles of Incorporation.” Sorinin was defined as an official position, rather than as the private role entrusted to Saihei Hirose by Tomochika. In 1896, the Rules Governing the House of Sumitomo was extensively revised and soriji (director-general) superseded sorinin. Opting to use the term soriji rather than the term rijicho is indicative of Sumitomo’s attachment to the term sori.

As a result, soriji (director-general) selected from among riji (directors) led Sumitomo.