Part 2: Labor Unions and Corporate Restructuring

October 18, 2024 [No. 128 – 2024]

Mr. Fujikazu SUZUKI
Institute of Labor Education and Culture
Research Center for Solidarity-based Society

 

 

There was a phrase, “mud-boat like enterprise split” in the early 2000s. It described a fierce company split. If a boat sinks before the tide rises, corporate invigoration or industry revitalization is only pie in the sky after all. It has often been pointed out that, to prevent this, it is important to consider employment issues and labor relations when carrying out corporate restructuring.  Emeritus Professor Keisuke Nakamura of Tokyo University published a book titled "Kigyo Saihen To Rodo Kumiai (Corporate Restructuring and Labor Unions)" (2023). This book was based on the latest research he conducted from 2019 to 2021. The book analyzed case studies of 12 companies. Only one of the companies had its real name revealed. Here is a summary of the case study of that company.

Kyoei Life Insurance faced bankruptcy when the bubble economy collapsed. The company had difficulty managing its high-yield products. The company's labor union tried very hard to restore the business and purchased shares using its reserve fund. Despite its best efforts, the company filed a petition for the application of the law called the Act on Special Measures for Reorganization and went bankrupt. The labor union had discussions with the reorganization trustee (meaning a person who oversees the reorganization). It also secured working conditions and provided mental care for its members. The labor union members had to apologize and explain the situation to customers, and they were very tired. The company finally became Gibraltar Life Insurance, a subsidiary of a multinational financial group, and made a fresh start. This is an interesting case study. It represents a typical behavior of labor unions in Japan's corporate society. It also shows a new form of corporate restructuring in globalization because the company became part of a foreign company and made a fresh start.

In his research, Professor Nakamura analyzed many other fascinating case studies. Here are some of them. (1) A company faced bankruptcy because it made excessive investments during the bubble economy and filed a petition for the application of the law called the Civil Rehabilitation Act. Both management and employees worked closely together and restored the core business. After going through many ups and downs, the company was successfully re-listed on the stock market. (2) A company was taken over by a vulture fund. The company managed to escape from the nightmare after being acquired by a Japanese company operating in the same industry. Professor Nakamura explained how differently Japanese companies behaved when they were acquired by foreign companies.

There are lessons to be learned from the 12 companies that have gone through corporate restructuring. Here is what Professor Nakamura pointed out.

The effects that corporate restructuring has on human resources management and labor relations can be quite different. They depend on these factors: Is the acquiring company a foreign company or a Japanese company? Is the acquiring company operating in the same industry as the acquired company? Is the acquired company absorbed by its parent company? In all cases, labor unions play an important role. It is important to have strong labor unions to achieve "forward-looking reform." At the time of corporate restructuring, a labor union and its members should communicate more closely and more often than ever before. At the time of corporate restructuring, the existence of a labor union in the company must be guaranteed by agreement. Problems may arise when a labor union is merged or integrated. So, it is also necessary to be prepared for such situation. In a crisis, the leadership, judgment, decision making skills, and dedication of labor union leaders are very important.