Download PDF Now - LegiStorm

of their process equipment inventory is less than 10 years old. In
contrast, we're running just the opposite-- two-thirds more than
20 years old or older. Among other things, this means that as our
capacity utilization increases, we will have to employ less produc-
tive equipment than they, and as a result, start to feed inflation
earlier.
DR. BARANSON: One other point on that, and that's very
important. A Boston consulting group did an analysis also of the'
Japanese firm and its after tax, after distributed dividend income
to the company, and they're higher. It's contrary to the myth that
the Japanese firm's average earning is low. The available funds
for reinvestment in the future is greater in Japanese industry.
It's a very critical component to the financial structure.
MR. FRITTS: So then, the tax structure is--
DR. BARANSON: Tax and dividends. Because the other
thing he's mentioning, this whole business'of the propensity for
American management to go for the necessity for survival to go
for the quick buck is very critical, and it's because the pressure
is on to show dividends for the last two quarters and to distribute
dividends to the stockholders, It's disastrous when you can't
distribute dividends.
Well, Japanese management is not under this compulsion,
it's able to retain earnings not only after tax but after dividends.
They don't distribute dividends until they really get going.
American
is very
MR. WADA: To further develop what you said, I compared
annual reports against Japanese annual reports, and what
interesting is that Amnerican annual reports have lists
of both boards of directors
only one. We don't have
outsiders who sit on the
shows two: those represent
and of officers.
the two lists. There
board of directors.
two banks.
In Japan, we have
may be one or two
Sony's annual report
In other words, Japanese management normally does not
have to worry about the stockholders, or about dividends: we worry
about interest. This illustrates the point you've been saying.
The banks want you to borrow more and more and more.
You borrow and pay the interest before tax. Inflation will help
You'll be so happy you borrowed.
you l
(Laughter.)
In -erica, you are zore concerned with dividends. You
have to pay dividends after tax. tid again, you will be paying
tax on the dividends you receive. Tremendous disincentive. In
Japan, take Sony, for example, we took a long time to perfect our
version of color televisions. 'rle spent about $700,000 every year
for about five years.
I