Commitment from the Top (An Interview with the President)

Q. Taking into consideration the harsh business environment, including the European sovereign debt crisis, what are your thoughts on the past year?

The year recently passed forced us to consider long and hard on how we should support reconstruction and recovery efforts in Japan following the earthquake and tsunami disaster of March 11, 2011.

Takeshi Kunibe and I were appointed as President and CEO of Sumitomo Mitsui Banking Corporation and President of Sumitomo Mitsui Financial Group, respectively, in January 2011. The year began with earnest efforts to identify objectives of our medium-term management plan for fiscal 2011 to fiscal 2013 ending March 31, 2014. Thereafter, Japan was devastated by the March 11 earthquake and tsunami, which shifted our focus toward the best possible manner in which to support the reconstruction and recovery of the domestic economy and became the principal premise of activities aimed at carrying out the aforementioned plan.

Rather than engaging in the development of financial products in its own right, a defining feature of the financial industry is its ability to provide support and assistance to companies that provide products and services. In this regard, we have continued to modify and adapt our core business activities in order to support the efforts of our customers.

If financial institutions are unable to perform this pivotal role and cannot adequately support corporate activities, then society as a whole runs the risk of losing its energy and drive. Therefore, it is imperative that we engage in sound management and possess the strength to assist companies in carrying out their endeavors. I am therefore convinced that sound management is a prerequisite for the sustainability of any financial institution.

In fiscal 2011 ended March 31, 2012, our first year under the new management team, we confronted and addressed numerous issues. Despite a year of unpredictable events, we achieved greater-than-expected results. We did what needed to be done while fulfilling our responsibilities as a financial services group.

Q. Today, calls for a sound balance between boosting business results and contributing to society are becoming increasingly prominent. What is SMFG’s concept of CSR?

SMFG believes that fulfilling its corporate social responsibility is the essence of business itself. Leveraging our strengths as a Japanese financial services group, our ideal is to contribute to society in a manner not dissimilar to that of a circuit board.

Financial institutions are like stage assistants; we help actors to achieve success. For example, we finance companies to invest in plant and equipment and provide housing loans to individuals so that they can enjoy a better life. Our mission is to provide funds necessary to ensure a better society and from this perspective, we see CSR as the very essence of business itself.

Currently, Japan is burdened by a host of issues including a persistently strong yen, and energy problems which became obvious after the March 11 earthquake and tsunami disaster. As a result, our customers are being forced to shift their production overseas, mainly in Asia. One such destination, Southeast Asia, is currently at the height of an economic boom and there is a robust consumer demand for televisions, automobiles, motorcycles and so on. SMBC and other SMFG group companies have the expertise and knowledge to help consumers finance these needs. I am confident that we can support the people of Asia as they go through various stages of growth and development in their lives.

Looking at infrastructure development, during its economic boom, Japan confronted a major obstacle in the form of pollution. Turning adversity into opportunity, however, Japanese companies accumulated significant expertise in environmental protection encompassing water, air, and other forms of pollution. Asian countries entering periods of growth and higher living standards need not have to encounter the same pollution problems as Japan did. Harnessing our substantial network in Asia, we can form consortiums with companies that possess state-of-the-art environmental technologies, and provide the finance and support necessary to deal with pollution in developing countries. By packaging such support arrangements, we can contribute to society in a manner not dissimilar to that of a circuit board, serving as a connecting device to address environmental and business issues. As a financial services group with roots in Japan, I believe that we are more than capable of fulfilling this ideal image of CSR.

I make it a policy to meet and talk with my SMFG group colleagues around the world, and during such conversations and interactions, I stress putting our customers first in everything we do, that is to think from their perspective. This belief applies equally for countries and society. By benefitting society through our core businesses, we will be better positioned to deliver valuable services that address the needs of customers and, as a result, our business will grow. I am convinced of the benefits of this sequence of thoughts and events.

Q. What steps has the group taken to assist in reconstruction efforts since the disaster?

Leveraging our strengths as a megabank, we have been doing everything possible to support reconstruction efforts on a nationwide basis. This includes collaborating with local companies and providing venues for business matching.

I would like to take this opportunity to extend our deepest sympathies and heartfelt condolences to all those who have suffered as a result of the March 11 earthquake and tsunami. We pray for the early recovery of all the affected people and areas.

In addition to SMBC’s Sendai Branch, our group companies have an extensive network of offices in northeastern Japan. Perceiving that local residents might want to withdraw cash immediately after the disaster, which occurred on a Friday, even though they had lost their ATM cards, our Sendai Branch requested that it be allowed to open on Saturdays and Sundays. This initiative, in fact, kicked off our efforts to assist in reconstruction. With the cooperation of one of our corporate clients, a tour bus operator, we dispatched employees to support local residents and delivered emergency supplies.

As an ongoing initiative, we have on 12 occasions called for employees to participate in efforts to support the recovery of affected areas. We also established a framework to enable employees to take special leave to participate in volunteer activities. For two consecutive years, nearly all of new hires at SMBC Nikko Securities Inc. have engaged in activities to support the reconstruction of disaster-hit areas. Working in collaboration with the local 77 Bank, Ltd., we have also provided business matching venues to companies in and outside Miyagi Prefecture. Each of these initiatives reflects our position as a megabank with a nationwide network of branches. In doing everything in our power to provide assistance, we undertook a host of other measures including offering advice regarding multiple loans and providing loans at preferential interest rates.

Q. Can you provide us with details of future support activities going forward? Against the backdrop of a disaster-stricken area where conditions change on a daily basis, what support do you believe you should provide as a financial institution?

We will continue to provide assistance while collaborating with external associations in an effort to revitalize industries.

To date, our efforts have been channeled through NPOs and other organizations that are working in disaster-hit areas. I believe it is important to continue this partnership. These organizations are quick to react to any and all contingencies and effectively meet onsite needs.

As a financial institution, it is vital that we provide our full support to help bring about a recovery of industries and production activities in affected areas. We must help to reenergize industries in order to generate employment. A case in point is a company plant that was damaged by the disaster. Amid discussions about whether to rebuild a new plant at another location, the company’s president decided to rebuild the damaged plant at an early stage. On hearing of the president’s decision, employees were relieved to learn that they would not have to relocate to an unfamiliar place. This served to revitalize their spirits and allay anxieties. I am told that reconstruction was completed well in advance of the 12 months initially anticipated.

It is now more than one year since the earthquake and tsunami disaster, and there are concerns that the sense of urgency regarding the affected areas and measures to support reconstruction are dissipating. It is of the utmost importance, therefore, that we continue to support reconstruction endeavors in order to prevent interest and action from waning.

Q. The results of SMFG’s ongoing employee volunteer activities are a product of its in-house framework for promoting volunteer activities. What approach have you adopted to push this promotion framework forward?

We would like to provide support in areas outside of work to help enrich our employees’ lives. To this end, we have put in place wide-ranging systems and are working to enhance in-house awareness.

I believe that people generally go through life seeking to fulfill some kind of purpose and to confirm that their life has meaning. The simplest example is the business person who contributes to society through his/her work activities. From an individual standpoint, I also believe that each and every one of us has that urge to participate in volunteer activities and to contribute to local society. Making efforts to further enrich one’s life outside of the workplace is extremely important in enhancing the lives of employees as business people. In this regard, it is imperative that SMFG and its group companies provide appropriate support in areas unrelated to work.

Areas outside of work are wide ranging and encompass a variety of fields including volunteer activities, child-raising and diversity concerns. I am confident that the SMFG group maintains a leading position within the Japanese corporate sector with respect to its work-life balance and diversity systems. Nevertheless, there are still issues to be resolved particularly in the areas of employee awareness and the ease with which systems can be used. Having said this, our systems continue to gain wider recognition. The number of employees taking up child-raising leave, for example, rose to 683 in fiscal 2011, 27 of whom were male staff, double the number of employees taking parental leave two years ago.

Q. Considerations regarding diversity are becoming increasingly global in recent years. What initiatives are you taking toward the employment of non-Japanese staff?

We have maintained a keen interest in promoting diversity for some time.
We are actively engaged in the employment of non-Japanese personnel. Two of SMBC’s executive officers, for example, are foreign nationals.

On a personal note, I remember hiring a non-Japanese national to work in a head-office department during the late 1980s and early 1990s when I was working in the human resources department of SMBC. This was a first among Japan’s city banks at that time. I had a keen interest in international operations. It was therefore odd to me that the workplace was exclusively Japanese. I felt that a lack of diversity was the sign of a weak organization.

With the advance of globalization, diversity has long been a priority theme for me. In this regard, a key issue is the level to which the national staff, personnel employed locally by overseas offices and subsidiaries, can be vested with the authority to control onsite operations. As mentioned, SMBC currently has two executive officers, while the percentage of management personnel (deputy branch managers and above) employed locally exceeds 30%. A foreign national has also been appointed to the position of general manager of SMBC’s head-office department in Japan. Rather than a list of rare examples, it is vital that we ensure such appointments are commonplace going forward.

In the current fiscal year, a total of 15 SMBC national staff participated in new recruit training in Japan. I personally attended various training sessions and could not help but notice that foreign national participants exuded self-confidence, ambition and a strong willingness to express their opinions. This had a considerable impact on newly recruited Japanese personnel, who attacked their studies with vigor. One of the foreign participants expressed his/her joy at the presence of so many doki (employees who join a company in the same year). It was extremely pleasing to hear this reference to doki, suggesting a strong sense of comradery among personnel from in and outside Japan.

In addition to this ongoing international exchange, English as a common language is also highly important in our efforts to address increasingly global needs. Currently, we have a full-time native English teacher appointed to our head office. Employees are encouraged to seek assistance in brushing up their language skills both during and outside working hours.

Today, for us, there is little difference between a business trip to Bangkok and that to Kagoshima in Japan. Japanese manufacturers are also aggressively expanding their operations in Asia, and, for them, to consider whether to manufacture in Japan or in Asia is just a routine part of their decision making process. Against this backdrop, I would like us to foster a corporate culture that responds flexibly to resulting wide-ranging needs.

I believe that diversity is a measure of mutual respect toward the difference between men and women and between Japanese and foreign nationals. In this context, SMFG and its group companies are in a development stage. About one-third of our female employees are management-track hires and we reached this level only recently. At the very least, it is imperative that we maintain this level. More importantly, what matters is whether the employee can or cannot complete the tasks assigned and not the employee’s gender. Amid a rapidly aging and shrinking population, we must apportion wide-ranging roles among wide-ranging people taking into consideration society’s needs. Creating this form of employment is in fact one of our social missions.

Q. What steps are you taking to promote diversity?

Amid wide-ranging differences in business, regulatory requirements and culture between countries, we are promoting a commonly shared sense of unity among employees that harnesses those attributes that are unique to SMFG.

The crux of the matter is whether we can promote a commonly shared sense of unity among our employees, irrespective of gender, nationality and location, and make the most of those attributes that are unique to the SMFG group. Throughout the world, and particularly in Asia, business, regulatory requirements and cultures differ from country to country. Against this backdrop, we are faced with the issue of how best to harness our unique features. Our roots are grounded in our ability to meet the needs of customers and society. As long as we continue to do everything within our power to meet their needs, I am sure that we will garner respect toward our business and sow the seeds for continued opportunities. As we work to expand our business and determine areas of competitive advantage in Asia as a Japanese financial services group, I believe it is important that we focus on fields in which we excel, including environmental protection and pollution control, rather than attempt to pursue business in a uniform manner across all fields.

Q. Your focus then is on fully leveraging your strengths as a Japanese services group while at the same time contributing to society. What are you doing to promote employee unity toward this mission?

Meeting directly with employees and fully understanding and sharing in their hardships are very important.

It is important to witness first hand employees’ working environment and the nature of work-related hardships. For example, companies and employees that provide vital operational and support functions are working under a pressure of zero tolerance for mistakes. It is often sufficient just to let employees know that their efforts are understood and appreciated. Finance is a key input material in the fabric of society. Accordingly, ensuring trouble-free operations is a core social responsibility. It is imperative for example that every effort be made to prevent the failure of ATM operations and networks. The transfer of funds must also be completed by the required date. It is of critical importance to highlight the efforts of back-office staff who support vital banking transactions.

Q. Please tell us about your future CSR endeavors. “Proactive” is a key term under SMFG’s medium-term management plan. An issue in point is what form a “proactive” stance should take from a CSR perspective.

I believe that adopting a “proactive” approach entails keeping a keen eye on how best to adapt to a changing society and to anticipate society’s needs.

A basic premise is to avoid becoming complacent. As society changes, so too do customers. In this context, it is important that we properly grasp customers’ needs. It is vital that we proactively ask our customers for their thoughts rather than wait to be told of their needs and requirements. This is a small, but necessary feature of a proactive stance and will in turn generate new demand.

At the same time, CSR standards are becoming increasingly diverse. Naturally, ISO 26000 is one standard. While assessing ISO 26000 and similar benchmarks, we must refrain from becoming wedded to the status quo. The point of our CSR must encompass our ability to increasingly meet the needs of society and engage in ceaseless efforts. Stated another way, I believe that a proactive approach entails doing one’s best to anticipate society’s needs as opposed to just responding to such needs. During in-house discussions, I often comment that society is undergoing constant change. It is therefore erroneous to assume that tomorrow will be the same as today. In taking up this mindset, I am confident that stakeholders will better understand our motives and actions. This is also more than likely to produce a virtuous cycle in which we are held in higher esteem. As a long-held aspiration, I would like SMFG and its group companies to be recognized for our proactive approach. It is essential that we remain devoid of any of society’s current afflictions including a sense of stagnation and a younger generation that lacks energy and ambition.

Interviewer: Mitsuo Ogawa, Representative Director, Craig Consulting Ltd.
Interview conducted in July 2012