――Sumitomo Electric champions the Goho Yoshi concept, which focuses on fair distribution of profits to all stakeholders.

The concept of Goho Yoshi is multistakeholder capitalism, the opposite of “shareholder capitalism,” which aims to maximize shareholder profits. The Kansai business community has long been guided by the spirit of Sanpo Yoshi (Three-Way Satisfaction), and Goho Yoshi (Five-Way Win) is a modern reworking of this concept.

In the U.S., where shareholder capitalism is prevalent, its negative effects have recently become more evident. The relentless pursuit of short-term profits has contributed to growing income inequality, the rise of populism, and social instability. In response to these issues, the Business Roundtable, a group of major U.S. corporate leaders, released a statement in 2019 emphasizing the importance of focusing on five key stakeholders: customers, employees, suppliers, communities, and shareholders. This shift toward Goho Yoshi thinking, even in the heart of shareholder capitalism, is a significant change.

Looking at Japan, since the 1980s, wages have remained stagnant, and corporate capital expenditures has been sluggish. Meanwhile, shareholder returns, such as dividends and stock buybacks, have increased—completely opposite to the spirit that Kansai’s business community has fostered for so long. The influence of American-style shareholder capitalism is undeniable. If we do not return to the Goho Yoshi principle, Japan could fall into populism and face social instability.

――How exactly does Goho Yoshi translate into business operations?

Since taking on the role of Chairman of the Kansai Economic Federation in 2017, I have urged the Kansai business community to adopt this philosophy as a management principle. However, to ensure effective implementation, we need more than a qualitative understanding—we need quantitative benchmarks. Leading by example, Sumitomo Electric has set specific numerical targets in its Mid-term Management Plan 2025 for how benefits will be allocated to all the stakeholders. By laying out these figures, we have made the management’s responsibility clear.

For employees, we have committed to wage increases that exceed the inflation rate, a target we have also declared to the labor union. Japan's prolonged economic stagnation has been largely due to the decline in personal consumption, which accounts for 60% of GDP. If wages rise above inflation, consumption will follow suit.

For local communities, we have pledged to allocate 1% of our profit after-tax to social contribution activities. These include donations to cultural, arts, sports, and environmental preservation initiatives, such as the Tenjin Festival and the Osaka Marathon. We are also contributing significantly to the 2025 World Expo in Osaka, purchasing 300,000 tickets to support the event.

We have not neglected our shareholders either. We aim for a dividend payout ratio of 40%, which is considerably higher than the average of around 30% for listed companies. For fiscal year 2023, we paid an annual dividend of ¥77 per share, resulting in a payout ratio of 40.1%, up 5.5 points from the previous fiscal year. Our total dividend payout increased by over ¥20 billion, reaching ¥60.1 billion.

――What is the most important principle when advancing Goho Yoshi?

This is embodied in the concept of “Fusu-furi”—a commitment to avoid pursuing short-term or easy profits. The Sumitomo Group has inherited the Sumitomo Spirit, a business philosophy rooted in the Monjuin Shiigaki, which were guidelines left by the founder of Sumitomo, Masatomo Sumitomo, in the mid-17th century. This philosophy is built on three core principles: "Banji-nissei" (do your sincere best in not only business but also every aspect of your life), "Shinyo-kakujitsu" (place importance on integrity and sound management), and "Fusu-furi" (do not act rashly or carelessly in pursuit of immoral business). Together, these ideas form the foundation of the Goho Yoshi approach.

Banji-nissei teaches that individuals should commit wholeheartedly to their work, focusing on personal growth and character development, rather than merely pursuing profit. Each president of Sumitomo’s key companies receives a copy of the Monjuin Shiigaki from the head of the Sumitomo family and is expected to lead in accordance with these values. I keep a copy in my office and reflect on its principles daily as part of my morning routine.

We have once learned a hard lesson from straying away from the Sumitomo Spirit. In 2009, a cartel involving optical fiber cables was uncovered, taking seven years for us to resolve the issue. Had we adhered to our business philosophy, this situation would never have occurred. This experience reaffirmed the importance of Sumitomo's long-standing values. In management, there are things that should change and others that must remain constant. The Sumitomo Spirit is one of those constants, and is essential to ensuring the company's sustainability.

Management must lead based on strong ethical values, and at the heart of those values is Goho Yoshi. Increasing dividends or stock buybacks just to please shareholders is not the way forward. A leader focused on personal bonuses through stock options and luxury items cannot effectively lead a large workforce. I want all 290,000 employees of the Sumitomo Electric Group to enjoy a fulfilling work life. The same applies to our shareholders. The pioneers who built the Sumitomo conglomerate led humble lives. They prioritized contributing to society and ensuring the happiness of their employees over accumulating personal wealth.

――There is growing pressure in the capital markets to prioritize shareholders.

My mentors, Professors Shigeto Tsuru and Eisuke Yoshinaga, taught me to always remember the concept of "captains of industry" if I entered the business world. This idea, from a chapter in “Past and Present” by the Victorian era writer Thomas Carlyle, promotes public-interest capitalism. It rejects profit-driven management and emphasizes compassionate, ethical leadership—values that align with the Sumitomo Spirit. When I became an executive, I committed to this approach, and it remains a core principle in my role as president and chairman.

According to Professor Shinichi Hirota of Waseda University, capitalism can generally be categorized into two types: Liberal Market Economies (LME), which emphasize economic efficiency and often prioritize shareholders, and Coordinated Market Economies (CME), which place a stronger focus on social equity and balancing the interests of all stakeholders. Companies in the U.S. and U.K. typically follow the LME model, while many European companies are more closely associated with the CME approach. Japan has historically aligned with the CME model, but since the 2000s, there has been growing discussion about adopting more shareholder-focused management practices. While global trends have influenced this shift, I believe Japan should embrace a form of capitalism that reflects its own unique values and traditions.