Japan's 'professional' stockholders profit by putting firms on the hot seat

Last Jan. 30, Sony Corporation reportedly made the Guinness Book of World Records for having the longest Japanese shareholders' meeting ever. Sony began the meeting at 10 a.m. It soon became apparent to all present that this was going to be a tough one.

Sony president Norio Ohga faced a barrage of critical questions from the floor, mostly from a group of some 30 vocal shareholders about the company's deteriorating sales and earnings in the past year. The rowdy group attacked Sony's provocative new advertising campaign to boost sales of its video tape recorders and overruled any other shareholder who tried to interject at the gathering.

Thirteen and a half hours later, a tired Mr. Ohga finally dragged himself out of the hot, smoky conference room. The president told the press that he had expected a drawn-out affair, but that the ordeal had indeed been exhausting.

Not all annual meetings go this way in Japan. Most end quietly within half an hour or so. Compared with his Western counterpart, a Japanese shareholder has relatively little say in company policies, and the annual meeting traditionally has been considered more of a ceremonious occasion than a place for discussion.

But Sony's experience is seen as proof that the sokaiya, or professional shareholders, are still up and about and that the revision of the commercial code two years ago has done little to change anything except in outward appearances.

The tradition of sokaiya goes back to the beginning of the century when racketeers began demanding (and collecting) payment from corporations that wanted to avoid embarrassing scenes and disruptions at their annual meetings.

In return for a ''thanks fee,'' a sokaiya promised to quell any dissenters and to help conduct meetings smoothly. Over the years, the sokaiya have come to be tolerated because they also served the companies' interests.

Payments to sokaiya can come in various forms: consulting fees, commission fees, subscriptions, gift coupons, or sometimes more indirectly through the patronizing of sokaiya-owned restaurants, companies, or sports clubs.

A top sokaiya earns as much as several hundred million yen a year. Masayuki Kajitani, a leading figure in the Rondan Doyukai sokaiya, says he makes about 70 million yen ($280,000) a year. Police estimate that in the year preceding the 1982 law, the 10 largest sokaiya groups extorted 63 billion yen ($252 million) from companies in Tokyo alone.

Among the active sokaiya, the strongest is the Rondan Doyukai, whose members are noted for their wit and eloquence. Perhaps next in line is the Kyoyukai, which began as an offshoot of a notorious underworld group headed by Kaoru Ogawa , who is currently in prison.

A newly formed Morimoto group has been actively displaying its force in recent annual meetings, including the one at Sony. There are several others - many of which are linked with the underworld, according to a businessman knowledgeable about the sokaiya.

Two years ago, the Japanese government changed the commercial code in an effort to crack down on the sokaiya and to bring more democracy to the shareholder. Under the revised code, the company and the sokaiya may receive a $ 1,200 fine or six months imprisonment if found exchanging money or gifts. The new code also has tightened requirements for becoming a shareholder: Now he must buy 1,000 shares instead of just one.

Police applied the new code for the first time last June. An executive of Isetan Company, a major Tokyo department store, admitted giving $4,400 in entertainment treats and merchandise coupons to members of the Rondan Doyukai. The executive and six sokaiya were convicted. Investigators believe that these gifts had helped Isetan conduct its annual meeting smoothly last February.

More recently, an official of Rihit Sangyo, an office equipment maker, has been arrested for paying $6,000 to a sokaiya the past year. The police suspect that the sokaiya members were paid to keep order during the annual meetings.

Authorities are worried that some of the bigger sokaiya groups are expanding their operations, this time overseas. Leading members of the Rondan Doyukai were recently reported attending shareholder meetings of IBM and General Motors this year.

However, police officials report that the number of sokaiya has dwindled to about 1,000 from about 6,500 when they were at their peak in 1976. Some of the small-time sokaiya have turned to other income sources, while others are believed to have forged closer ties with criminal organizations, or the ''Yakuza.''

Except for a handful of cases, the annual meetings, too, seem more orderly. Many companies holding their annual meetings last June had called on the police to be on alert, but the majority of meetings ended after half an hour with little or no disturbance.

Even companies in some financial trouble or touched by scandal managed to get away unscathed. For instance, both Japan Air Lines, which had failed to declare a dividend this year, and Nippon Credit Bank, which was reported to have been involved in a political scandal, managed to close their meetings swiftly without any occurence.

Some targeted companies have been able to outsmart the sokaiya by being ready with answers to all anticipated questions. Honda Motor Company, for instance, put on a well-organized presentation, using a slide projector and screen to answer all questions from the floor.

But whether most of the companies are prepared to rough it out with the sokaiya remains doubtful. Many believe that despite the law some companies did make arrangements with the sokaiya before their general meetings.

In fact, most of the companies are believed to have given lump-sum contributions to the sokaiya a year in advance, just before the new code took effect. That way they could be assured that they weren't going to be bothered for a while.

Now that a couple of years have gone by and their payments are long overdue, the sokaiya are undoubtedly going to make their comeback to the boardrooms, observes a businessman who has done some research on the sokaiya.

The common view is that the law alone isn't sufficient to eliminate the sokaiya. If anything, they've only gone underground. A banking official philosophically sums up the situation: ''Illegal or not, a sokaiya is determined to make his livelihood, no matter how.''

And as long as he owns the minimum required shares of a company, the banking official said, not even the police can keep him out of the meetings unless he becomes physically violent.

The sokaiya appear to be using subtler tactics. A number of sokaiya, for instance, own ''journals'' or ''newsletters'' to which the companies pay subscription fees, sometimes as much as $40 a copy, according to one company official.

''And these aren't journals that we'd want to read,'' he explains. Many are flimsy pamphlets in which the ''journalists'' run gossip columns about the companies. Most of thse sokaiya operate ''research institutes'' specializing in digging up juicy scandals about top executives of major corporations. Retail companies and banks sensitive to public image are particularly vulnerable, and many pay the sokaiya to keep undesirable scoops off their pages.

The recent arrests indicate that the police are determined to crack down on the sokaiya. But the law alone isn't enough to eradicate what has been an age-long tradition.

An old-time businessman warns that nothing can change unless the companies themselves shape up. For starters, they would have to give more rights to the shareholder and allow open discussions at meetings. ''That way,'' he suggests, ''the sokaiya won't have a place at the general meetings.''