The loss-compensation scandal, the president’s resignation and “New Nomura” (1991)

How do you get profit-at-all-costs out of an organisation?

The weight of this decision lies in the attempt to turn a crisis into an occasion for reform. In removing its own leadership and declaring a return not to a new strategy but to the founding idea of prospering together with the customer, the largest house in the industry took the measure of the trust it had lost head-on. Loss compensation was not a Nomura aberration but a practice that had spread across the securities business, and whether the firm at its epicentre could set an example was a question the whole market’s recovery hung on. The choice of the phrase “back to first principles” carries a sober admission with it: no clever manoeuvre changes a constitution.

The racketeer case six years later measured the distance still left between the declaration of an ideal and the behaviour of the floor. The momentum of profit-first does not drain away with a single act of contrition, and the work of changing both mindset and machinery passed to Ujiie Junichi and to the managers after him. Scandals with Nomura at their source left behind a legal ban on ex-post compensation and a surveillance commission; the question they raised — how to strip out of a profit-making organisation the temptation to treat fairness lightly — is still put to every company that competes on earnings, securities firm or not.