Payments to a corporate racketeer, and Ujiie Junichi’s second governance overhaul (1997)

What two scandals asked

The weight of this decision lies in the fact that the same company repeated the same kind of misconduct within six years. “New Nomura,” proclaimed in 1991, spoke the language of returning to first principles while leaving intact the practice on the floor of running discretionary accounts for a corporate racketeer. That Ujiie Junichi put crisis at the front of the second overhaul can be read as the obverse of the first one’s failure: it had been a renewal of words. Between declaring a principle and rebuilding the machinery by which orders are won and executed lies a distance that has to be closed deliberately.

That the second renewal ran all the way to a holding-company structure and a committee-based board looks like an attempt to plug a hollow in governance with institutional design. Building the institution is not, however, the same as each person on the floor keeping to the law. Nomura would go on to take Lehman’s divisions in 2008 and face, once again, the governance problem of binding different corporate cultures together. The question the racketeer case pressed — can misconduct be prevented by structure? — is still handed forward to corporate governance today.