7 ProQuestDocuments-2015-02-26 Management, accounting and philosophy. The Development of Management Accounting at Kyocera 1959-2013

Author: Takeda, Hiroshi; Boyns, Trevor

ProQuest document link Abstract: Purpose - The purpose of this paper is to provide an understanding of the "Kyocera approach" to

business, i.e. the relationship between the Kyocera philosophy, the amoeba management system (AMS) and the associated management accounting system. Design/methodology/approach - Utilising a variety of secondary sources, including semi-autobiographical works written by Inamori, the architect of AMS, the authors examine in detail the links between the underlying Kyocera philosophy and the management and accounting principles derived therefrom. These sources are used to examine the historical origins of these principles, their influence on both the AMS and the management accounting system, and how these have developed over time. Findings - Both the AMS and the associated management accounting system can be shown to contain a mixture of influences, including traditional Asian/Japanese factors, but also Inamori/Kyocera-specific factors linked to Inamori's underlying philosophical approach to life and specific life experiences encountered by him. This suggests that while the Kyocera approach may be applicable more widely in Japan or Asia, outside of this context, the conflicts between Western and Asian cultures, although not necessarily insurmountable, may provide barriers leading to incomplete applications of the Kyocera approach Originality/value - This study adds to the understanding of the interrelationship between management philosophy and management accounting practices, and the ability of individuals to determine culture within organisations. It illustrates the importance of historical research in obtaining a detailed understanding of the philosophical, cultural and religious underpinnings of current management and accounting practices.

Full text: 1. Introduction In early 2011 it was announced that, as from 1 April, Japan Airlines (JAL) would be adopting the amoeba management system (AMS) in an attempt to turn round its ailing fortunes. Perhaps such an announcement should not have come as too much of a surprise since the founder of AMS, Kazuo Inamori, had been appointed chairman and chief executive officer (CEO) of the ailing JAL in February 2010[1] . In a speech made to reporters at the Foreign Correspondents' Club of Japan in October 2010, Inamori stressed that it was "important to have a system to allow you to grasp details of real-time figures and results so that all employees can pitch ideas to improve business operations" ([50] The Japan Times online , 2010). In the view of Inamori, the government bail-outs of the past had served to de-motivate employees and management, and what was required was a system which "increases a sense of management among employees and rejuvenates their interest in profitability" ([8] Asahi Shimbun , 3 February 2011). Reflecting on Inamori's three-year tenure at JAL -

he retired from the board on 31 March 2013 - Yoree Koh, correspondent of The Wall Street Journal , noted that, through the adoption of AMS, Inamori had been able to introduce a "cost-conscious culture at the once profligate national airline" ([82] The Wall Street Journal , 2013). The introduction of AMS, initiated by Inamori at what is now the Kyocera Corporation, enabled JAL to recover rapidly from bankruptcy in 2010, posting in May 2012 an annual net profit of 186.6 billion yen for the previous financial year ([51] The Japan Times online , 2012a). As a result, on 19 September 2012, JAL re-listed its shares on the main section of the Tokyo Stock Exchange, the first company ever to do so after going through Japan's version of Chapter 11 bankruptcy ([82] The Wall Street Journal , 2013). The market value of the shares, at nearly 700 billion yen, made it the world's second biggest initial public offering in 2012 after that of Facebook Inc. ([52], [53] The Japan Times online , 2012b,c). In this paper we examine not so much the details of AMS itself (since this has been examined elsewhere, see [17] Cooper (1994), [74] Sawabe and Ushio (2008), and [3] Adler and Hiromoto (n.d.)), but rather focus on the he retired from the board on 31 March 2013 - Yoree Koh, correspondent of The Wall Street Journal , noted that, through the adoption of AMS, Inamori had been able to introduce a "cost-conscious culture at the once profligate national airline" ([82] The Wall Street Journal , 2013). The introduction of AMS, initiated by Inamori at what is now the Kyocera Corporation, enabled JAL to recover rapidly from bankruptcy in 2010, posting in May 2012 an annual net profit of 186.6 billion yen for the previous financial year ([51] The Japan Times online , 2012a). As a result, on 19 September 2012, JAL re-listed its shares on the main section of the Tokyo Stock Exchange, the first company ever to do so after going through Japan's version of Chapter 11 bankruptcy ([82] The Wall Street Journal , 2013). The market value of the shares, at nearly 700 billion yen, made it the world's second biggest initial public offering in 2012 after that of Facebook Inc. ([52], [53] The Japan Times online , 2012b,c). In this paper we examine not so much the details of AMS itself (since this has been examined elsewhere, see [17] Cooper (1994), [74] Sawabe and Ushio (2008), and [3] Adler and Hiromoto (n.d.)), but rather focus on the

83) has argued that "academic accounting is bound to remain an intellectual fragment" unless there is a "profound inquiry into the reality that our discipline tries to represent". The lack of discussion of philosophical aspects of accounting, however, contrasts with that within management research, where the link between philosophy and management has been discussed for several decades. Within the management literature the emphasis has been not so much on the philosophy of management, although two journals have been developed since 2000 to publish work in this area[2] , but on management (or business) philosophy, that is, the ideas and principles which lie behind the actions of the person in charge of managing a business. But what relationship is there, if any, between the management philosophy pursued and the nature of the management accounting system adopted? Do different management philosophies result in the adoption of different management accounting systems? Does the existence of different management philosophies in Western businesses compared to that in non-Western businesses, result in the use of different management accounting systems or, indeed, different approaches to management accounting? To what extent do religion and culture influence such relationships and what problems are faced when a business developed in one geographical context goes global, either through internal expansion or taking over existing businesses operating in other countries? Although not entirely ignored by accounting researchers, the issues of religion and culture have tended to be examined in limited ways. Studies of accounting and religion have largely focused either on specific religious institutions, such as [48] Jacobs and Walker (2004) and [71] Quattrone (2004), although [13] Carmona and Ezzamel (2006) have noted that research in this field is still at an embryonic stage, or the implications of religion, especially Islam, for the international harmonisation of financial reporting ([25] Hamid et al. , 1993; [54] Karim, 2001). Of a more fundamental nature, [1] Abo (2005) has examined the moral and religious foundations of double-entry bookkeeping. In the sphere of managerial control, however, [31] Hofstede (1987, p. 8) remarked that accounting control systems were likely to vary along cultural lines, a suggestion that in the past couple of decades has given rise to cross-cultural comparative analyses of management control practices. However, as [11] Bhimani (2007, pp. 348-49) points out, much of this research has been of the nomothetic variety, and while cultural differences have been identified as explaining different practices ([63] MacArthur, 2006), or a lessened impact of specific practices on management performance in some countries compared to others ([23] Eternadi et al. , 2009), such studies largely ignore the impact of cultural roots and historical influences and, it may be added, the impact of specific individuals on particular companies. Historical and religious factors can undoubtedly influence both national and corporate cultures and individual management or business philosophies. In this study we utilise a historical lens to examine the links between the management philosophy and the managerial and management accounting practices (as influenced by Kazuo Inamori) adopted by the Kyocera Corporation, a Japanese multi-national business which expanded initially within Japan and then through overseas expansion. That individuals can potentially have a profound impact on accounting and society is suggested by the work of [33], [34], [35] Hoskin and Macve (1986, 1988, 1993), who examined the significance of the new disciplinary culture of writing, examining and grading introduced at the West Point Military Academy in the USA by Sylvanus Thayer, who was appointed superintendent of the institution in 1817. For Hoskin and Macve, this new form of power-knowledge relationship ("human accounting") subsequently permeated business and society more generally through the actions of West Point graduates such as Daniel Tyler, George Whistler and Herman Haupt. The impact of most individuals, however, is more limited, though it can nevertheless be significant for the accounting practices of their firm or organisation (see, for

example, [6] Antonelli et al. , 2008). Such historical studies, however, invariably ignore the importance of culture and religion. While it is not our intention to suggest that the impact of Inamori has been (or indeed will be) of a similar nature to that ascribed to Thayer by Hoskin and Macve, it is our view that a historical study of the Kyocera Corporation can throw light on the importance of an individual's management/business philosophy in shaping not only the nature of the accounting approach adopted but also the general corporate culture. The paper therefore relates, as one of the referees succinctly put it: [...] how the world view of a particular individual [Kazuo Inamori] shaped the growth of an industrial empire, its organisational structure, management and accounting practices, how he came to possess such a world view, how the employees in Japan were willing to buy into it, and what happened when that world view came into contact with other organisational norms as the empire expanded. The aim of this paper is therefore to stimulate discussion of the relationship between management and accounting practice on the one hand, and the extent to which these are influenced by philosophical aspects. In the context of scholarly debates, we examine the interrelationship between philosophy, management and accounting inherent within the managerial approach adopted at Kyocera (the "Kyocera approach"). This is done through a careful study of the writings of scholars and Kazuo Inamori and an analysis of the link between these writings and the management and management accounting practices at Kyocera. In order to better understand the motivation and philosophical underpinnings of the Kyocera approach (that is, the AMS, the management accounting system and the underlying Kyocera philosophy), we examine historical aspects of the life of Inamori and that of Kyocera. This use of historical analysis enables us to obtain a fuller understanding of the philosophical underpinnings of the Kyocera approach and the rationale behind it. In turn, this helps us to throw some light on the factors which have contributed to the success of AMS at Kyocera, thereby potentially enabling us to consider whether it can be "exported" successfully to other companies, such as JAL. The study is structured as follows. In section 2 we set out our definitions of management accounting and management philosophy and explore the nature of the relationship between them in general terms. This is followed in section 3 by a brief history of the development of Kyocera. Section 4 focuses on the Kyocera approach, examining the Kyocera Philosophy and the management and accounting principles, especially the latter, that derive therefrom. Section 5 of the paper briefly sets out the main elements of AMS and the associated management accounting system. Section 6 examines the success or otherwise of attempts to implement the Kyocera approach more widely, while in the concluding section we summarise the fundamental differences in Kyocera's management accounting system and briefly comment on the potential for the Kyocera approach to be effectively utilised by JAL and Western firms.

2. Management accounting and management philosophy There is no generally accepted definition of "management accounting". Nevertheless, most definitions emphasise the importance of the provision of information, whether they focus on management accounting as a process[3] or as a profession[4] . Some definitions emphasise management accounting as a body of knowledge ([7] Armstrong, 1995) or a set of techniques or practices "loosely coupled to one another and varying across both time and space" ([16] Chapman et al. , 2007, p. ix), with some academic researchers suggesting that the focus of management accounting research today should be on understanding practices within organisations (see, for example, [75] Scapens, 2006; [68] Otley, 2008). This paper reflects this viewpoint and adopts a broad definition of management accounting, namely, the use of accounting information for managerial purposes. Furthermore, it is our belief that management philosophy has an important influence on the choice of approach to management accounting, and hence the particular system adopted. The importance of management philosophies has long been recognised in management, but the link to management accounting has rarely been discussed. De Bono and Heller (www.thinkingmanagers.com/business-management/management-philosophy), while recognising that most

managers think of themselves as "doers" rather than as "thinkers" have suggested, based on their own experiences and those of others, that managers have to develop their own personal management philosophy. Moreover, management philosophies must reflect "practical requirements", while using "the thinking process to learn from results", such learning being fed back "into a deeper understanding" of the management practices being adopted (de Bono and Heller, www.thinkingmanagers.com/business-management/management- philosophy). Management accounting, as a practice which provides information for management purposes, forms an integral part of management and, as such, with any underlying management philosophy. As with "management accounting", however, there is no generally accepted definition of the term "management philosophy" ([83] Wang, 2009). In their review of the literature between the 1920s and 1960s, [62] Litzinger and Schaefer (1966, p. 337) noted that the term "management philosophy" had "been used variously to refer to a theory, a goal, a technique, a way of life with certain implied values, or a public relations gambit". Furthermore, [62] Litzinger and Schaefer (1966, p. 342) could point to a "confusion among writers on management philosophy" stemming "from a basic confusion about the term 'philosophy' itself". Over the last half a century the focus has largely shifted away from the meaning of the term "management philosophy" to how management philosophies are reflected in management practice. For example, management techniques/approaches developed in the twentieth century, such as just-in-time (JIT) and the theory of constraints, have been considered as different management philosophies ([72] Sale and Inman, 2003), while [2] Adams et al. (2007) have suggested that traditional management (TM), total quality management (TQM), and the theory of constraints are management philosophies which exhibit strong perceptual differences from each other. [79] Taka (2009) has suggested that the issue of management philosophy can be approached in seven different ways (see Appendix 1). First, from the perspective of a concern with fundamental issues of management (approach 1); second, through a focus on defining the field of study (approaches 2, 3 and 4); and third, with an emphasis on management thought and practice (approaches 5, 6 and 7). The approach adopted in this paper follows the third of these approaches encompassing: [...] management philosophy as the thoughts of a manager (as influenced by his/her personal experiences), his/her beliefs, the systematization of those thoughts and beliefs through the establishment of a corporate culture, as exemplified by the establishment of a corporate motto, management rationale, and expressed through the official documents of the corporation (e.g. corporate social responsibility report), and the implementation of such thoughts and beliefs in practice. This approach embraces the idea that the term "management philosophy" describes a "theory or attitude that acts as a guiding principle for behaviour" (one definition of "philosophy" provided by OED online), and opens up

a number of fields for potential research, such as the origins of such philosophies, how they differ from one another, and their implications for management accounting. Hence, one focus of research could be an examination of the difference between the management philosophies of individual businessmen, but of possibly greater interest given recent business and economic history would be to consider a broader focus, such as the difference between Western and non-Western management philosophies and their impact on management accounting. The latter, however, can be approached through studies of the former type since one way of better understanding such differences, consistent with the growing emphasis in modern research in both management and management accounting with practices and how they have developed and changed, is through historical case studies of individual businesses, such as Kyocera. Since the company grew up in a Japanese context, but later expanded into the West, a study of Kyocera can throw important light on the relationship between management philosophy and management accounting. Before examining the details of the Kyocera case and, in particular, the Kyocera Philosophy, and to help place it in a broader perspective, we briefly turn our attention to the different philosophical contexts that exist in Japan and the West.

2.1 Japanese and Western philosophical approaches It has often been argued that the Japanese approach to business is guided only by broadly defined objectives,

reflecting a holistic philosophical approach, whereas that of Western business is based on a more analytical approach which focuses on targets and measurable objectives ([58] Kustin, 1993, p. 4). Work by [84], [85] Yoshida (1989, 1991) has emphasised that the different approaches of Japanese and Western businesses are strongly linked to their different business cultures. In the West, and especially in the USA, business developed in a context where there was a vast quantity "of available land, large markets, an educated labour force and, in the nineteenth century, a laissez-faire government" ([58] Kustin, 1993, p. 4). This contrasted with Japanese business, which developed in an environment comprising "limited available land, a strong feudal system, and a religious following of Buddhism and Confucianism which supports the unit (i.e. family unit) rather than the individual" ([58] Kustin, 1993, p. 4). The essence of holistic philosophy is that the whole is greater than the sum of the parts ([84] Yoshida, 1989)[5] . In contrast to Western analytic thinking, which seeks to understand the whole by dividing it into its component parts, Japanese holistic thinking focuses on the whole rather than on the individual parts. Furthermore, it rejects the idea that the whole will necessarily be perfect just because each individual part is perfect ([84] Yoshida, 1989). Yoshida's discussion of Japanese and Western differences was carried out in the context of an analysis of Deming's management philosophy, i.e. his concept of quality management, which has been seen as a crucial factor in Japanese business success after second world war. For [84] Yoshida (1989), the Japanese "holistic" approach is based around the establishment of a fundamental company philosophy from which everything else follows, including corporate objectives, goals and job specifications. On the other hand, in Yoshida's view, the American "analytic" mind requires at the outset the establishment of clear-cut objectives and detailed job specifications.

2.2 The underpinnings of the Kyocera philosophy The Kyocera Philosophy, i.e. the management philosophy adopted within Kyocera, is a specific form of Japanese management philosophy. Although attempts have been made to explain it in terms of Western philosophical approaches such as Aristotelian "phronesis"[6] ([73] Sawabe, 2010) or Adam Smith's moral theory ([30] Hiromoto and Hiki, 2010), these approaches fail to consider the Kyocera Philosophy as a holistic concept. It is our contention that the Kyocera Philosophy can only be fully understood in the context of the Japanese holistic approach. Attempts such as those of [73] Sawabe (2010) and [30] Hiromoto and Hiki (2010) to explain amoeba management through the use of Western moral theories fail to acknowledge the importance of classical Chinese texts and Japanese thought in determining Inamori's philosophical approach to running Kyocera ([47] Inamori et al. , 2005; [55] Kawakami, 2010). As we shall see below (section 4), amoeba management is based on Japanese cultural norms, in particular that of toku (Fixed graphic 1 [Figure omitted. See Article Image.]), emphasising the importance of seeing the Kyocera philosophy as a holistic entity, moreover one that encompasses not only management per se but also management accounting as an important element of management. Indeed, seeing management accounting as a key element of management reflects the holistic approach. The Western view which sees management accounting as a distinct entity in its own right emphasises the difference in approach between Japan and the West. In the latter, management and management accounting are separate entities and can be analysed individually; in the former, although they may be different things, they are nevertheless inter-locked since they form part of a single system of management. [56] Kazusa (2010) and [57] Kazusa and Sawabe (2006) have argued that the management accounting system played an important role in the successful development of Kyocera. Furthermore, [30] Hiromoto and Hiki (2010) have insisted that within Kyocera the micro-macro loops of production, money and workers are connected more effectively than within Toyota. To better understand the role of management accounting in the development of Kyocera, and its significance as a part of the holistic Kyocera Philosophy, we focus in the remainder of this paper on the links between the Kyocera Philosophy and the company's system of management accounting. We start this exploration by providing in the next section a brief historical outline of the growth and development of Kyocera.

3. A brief history of Kyocera The Kyocera Corporation is a Japanese multinational[7] which, at 31 March 2013, had a capital of 115.7 billion yen and consolidated net sales of 1.28 trillion yen. Today it operates in a number of fields, including fine ceramics, electronic devices, photocopying equipment, etc., and comprises 229 companies employing 71,645 workers (http://global.kyocera.com/company/summary/company_profile.html). However, before 2000, the company was little known outside of Japan, despite the fact that it had begun to create something of a stir back in its native country more than 20 years earlier[8] . In 1980, for example, Kyoto Ceramics, as the company was originally known, was noted as being "first for its distinctive management method and creativeness" ([49] The Japanese Economic Journal , 1980, p. 4). The distinctive management method was something known as "amoeba management", a system which had been developed by the company's founder, Kazuo Inamori, from the middle of the 1960s. In 1958, having been working for Shofu Industries for four years, and following a disagreement over the company's technological development policy, Inamori left to set up his own business, assisted by his former manager, Masaji Aoyama, and two of Aoyama's friends. With borrowed funds, Inamori founded the Kyoto Ceramics Co. Ltd. on 1 April 1959 with an initial capital of 3 million yen. The company produced fine ceramics and came to specialise in the production of ceramic packages for electronic chips. Employing 28 members, the company initially faced a number of difficulties but, according to [19] Crampton (2001), the fact that it was profitable from its first year meant that Inamori was able to expand the business by both internal growth and buying up other businesses in Kyoto facing financial difficulties. Thus, the company expanded during the 1960s, opening an office in Tokyo in April 1960 and adding additional production plants at Shiga in 1963 and Kagoshima in 1969. By 1968 company employment exceeded 500 (see Table I [Figure omitted. See Article Image.]). Expansion was increasingly based on overseas sales, Inamori making his first visit to the USA in 1962. In 1966

a large order for alumina substrates for integrated circuits was secured from IBM and, two years later, in August 1968, a sales office was opened in California. In July 1969 this became the company's American sales company, Kyocera International Inc., and production facilities were opened in the USA in March 1971. Back in Japan, the company moved its headquarters to Yamashina, Kyoto, in July 1972, opening the Kagoshima Kokubo plant in October of the same year. The company's expansion led to an increase in capital and its shares becoming quoted on the Tokyo, Kyoto and Osaka stock exchanges, while American Depository Receipts were issued in the USA in February 1976 and again in May 1980, the latter issue coinciding with the company's stock being listed on the New York Stock Exchange (NYSE). Further developments at the end of the 1970s and the beginning of the 1980s resulted, in October 1982, in the formation of the Kyocera Corporation, a merger of Kyoto Ceramics and four affiliates, including Cybernet Electronics Corporation (a telecommunications equipment manufacturer in which Kyoto Ceramics had invested capital in 1979). In the early 1980s Kyocera controlled about 70 per cent of the world market in ceramic packages for electronic chips, but this market was beginning to stagnate as plastics began to replace ceramics ([22] The Economist , 9 April 1983, p. 65). Looking for sources of potential future growth, the company engaged in mergers with Japanese companies such as the camera manufacturer, Yashica Co. Ltd., in October 1983, while in June 1984, together with 24 other companies (including Sony and Mitsubishi), Kyocera established Daini-Denden Kikaku Co. Ltd. (DDI - later KDDI) as a competitor for Nippon Telegraph and Telephone (NTT) following the deregulation of the Japanese telecommunications industry[9] . A few months earlier, in April 1984, Kyocera had supported the establishment of the Inamori Foundation and the Tokyo Central Research Laboratory (later Tokyo Yoga office), while a few months later, in August 1984, it established the Solar Energy Centre (now the Chiba Sakura office) in Sakura, Chiba. Despite critics warning of disaster, Kyocera's diversification into electronic equipment, optics and bioceramics, proved successful ([22] The Economist , 21 July 1984, p. 67) and the second half of the 1980s saw the

establishment of various subsidiaries across the world, namely, Germany (May 1986), America (January 1987) and Mexico (September 1987), while two American corporations, Elco and AVX joined the Kyocera group in August 1989 and January 1990 respectively. By 1990 employment at Kyocera had reached 12,762 and sales 300.4 billion yen or US$2.4 billion ([77] St James, 1990, pp. 50-52). The early 1990s saw further developments in North America, while subsidiaries were established in China (Dongguan Shilong Kyocera Optics Co. Ltd. in July 1995 and Shanghai Kyocera Electronics Co. Ltd. in December 1995). In 1997, though sales had more than doubled compared with the beginning of the decade, reaching 714.77 billion yen (US$5.76 billion), employment had only grown slightly to 13,270 ([78] St James, 1998, pp. 329-32). It was in 1997, aged 65, that Inamori formally resigned as chairman of both Kyocera and DDI, becoming instead "founder and chairman emeritus" of both companies[10] . During the late 1990s and early 2000s the company's progress stalled somewhat but, by 2005 revenue was almost twice what it had been in the mid-1990s (see Table II [Figure omitted. See Article Image.]). Kyocera's group sales exceeded 1 trillion yen for the first time in the financial year ending 31 March 2001 but this did not prevent it having to lay off some of its workforce in 2001/2002 as a result of the problems of the Japanese economy. Since 2004, although Kyocera has continued to focus its activities on electronic components and products, it has diversified into the hotel business, medical supplies (Japan Medical Materials Corporation) and in April 2006 the company not only established a subsidiary in Korea but also set up a consultancy arm, KCCS Management Consulting Inc. A Chinese subsidiary of the consulting arm was established in Shanghai in December 2006. According to [30] Hiromoto and Hiki (2010), [56] Kazusa (2010), [57] Kazusa and Sawabe (2006) and [41] Inamori (2006), the success of the company has been built on the Kyocera approach. In the next section we analyse this approach, focusing on the Kyocera Philosophy and the management and accounting principles which it has spawned.

4. Kyocera philosophy and the management and accounting principles

4.1 Background When Inamori founded Kyoto Ceramics in 1959 there was no well thought-out philosophy guiding his approach to management. Furthermore, as a university-trained chemist, he lacked any formal, or indeed informal, training in either management or accounting. It was as a result of various events (life experiences), and developments within both the business and his own views on philosophy that a well-established approach to management and accounting matters subsequently emerged. Thus it was that AMS and its associated management accounting system began to take shape during the 1960s and early 1970s. Fundamental to this developmental process was a strike which occurred at Kyoto Ceramics in April 1961. Having set up the business in 1959, Inamori's initial concerns were focused on three areas: research; satisfying customers' needs; and avoiding bankruptcy. These ends were pursued to the detriment of matters such as personnel management. The desire to avoid bankruptcy led to pressure on sales people, production staff, and development personnel to work around the clock to fulfil product orders before their deadlines ([78] St James, 1998, p. 330). However, this neglect of workers' welfare, as Inamori focused his own energies largely on research, resulted in a three-day strike by some recently engaged high school graduates. The process of resolving this dispute made Inamori re-think his approach to managerial issues. In particular, he recognised that

he needed to be more concerned with the well-being of his workforce and it was this that resulted in the development of a new managerial rationale, reflecting his developing philosophical approach to management. The Kyocera web site today presents this rationale as follows: To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind (http://global.kyocera.com/company/philosophy/index.html). This rationale is based on Inamori's own philosophical standpoint, which was itself the result of a three-stage

developmental process ([47] Inamori et al. , 2005). The first stage was his early life (pre-working age) where he learnt, from his family and school teachers, to do "the right thing as a human being". The second stage comprised the understanding which he gained from studying the management/business philosophies of leading businessmen such as Konosuke Matsushita, founder of Panasonic, and Soichiro Honda, founder of the Honda Motor Company. Finally, the third stage is represented by the deeper understandings Inamori gained from reading philosophical texts and Chinese classics, including texts written by influential writers such as Confucius and Mencius. [44] Inamori (2007b, p. 110), has written that "if merchants have high moral standards and personal integrity [ jin-toku ; Fixed graphic 2 [Figure omitted. See Article Image.]], they can do more than gain trust: They can earn the respect of their customers. I believe that the secret of success is to earn our customers' respect". [44] Inamori (2007b, p. 110) also explains that "being virtuous [ toku-sei Fixed graphic 3 [Figure omitted. See Article Image.]; ] means more than offering superior performance on price, quality, and delivery ... .it's the ability to make others spontaneously respect us. We cannot manage a great business unless we learn to acquire this quality". These attitudes are a reflection of one of the central tenets of Confucius, namely kunshi (Fixed graphic 4 [Figure omitted. See Article Image.]; a man of toku [Fixed graphic 5 [Figure omitted. See Article Image.]]). These philosophies and thoughts can be summarised in the word toku , a commonly used word in Japan and one which is considered to represent one of the highest of all possible moral and ethical values. The meaning of toku is to develop one's character by doing good deeds that result in profit, wealth and fortune. The concept of toku originates in ancient China and its values have been accepted in Japan, China, Korea, Taiwan, Hong Kong, and Singapore for several thousand years ([26] Hasegawa, 2009). Toku therefore provides

a basis for Eastern philosophy and management thought. As a Chinese character, Fixed graphic 6 [Figure omitted. See Article Image.] ( toku ) consists of Fixed graphic 7 [Figure omitted. See Article Image.] (go), Fixed graphic 8 [Figure omitted. See Article Image.] (open) and Fixed graphic 9 [Figure omitted. See Article Image.] (mind) so that the literal meaning of toku is to go with an open mind. In other words, toku means that if an individual exhibits a fine character (one with an open mind), and realizes good deeds which generate happiness and social advancement, that individual will be rewarded with profit, wealth and fortune. However, it is important to realise that toku is a set of values that considers happiness and social advancement as priorities, profits being of secondary importance and an outcome of achieving other goals, not an end in itself. For example, Mr Nishieda, one of the friends of Aoyama who had lent funds to Inamori to help him establish the company, asked just one thing from Inamori: "Never be a slave to money" ([43] Inamori, 2007a, p. 10). By 1971, when the company was ready to go public and Inamori was eager to repay him for his investment, Mr Nishieda insisted that it was not necessary and explained: "

I did not invest in you to become rich. I did it because of your philosophy " ([43] Inamori, 2007a, p. 10 - italics in original). Similarly, when the company's stock was first listed, Inamori chose a public offering of new stock rather than that held by existing stockholders, including himself. In other words, Inamori decided against personally benefiting financially from the stock-listing, all capital raised being used to develop the company ([44] Inamori, 2007b, p. 58). Inamori was clearly influenced strongly by the concept of toku , as indicated by the notes and written memoranda he kept, reflecting on his own early managerial experiences. These notes and memoranda were subsequently fused together in what has since become known as the Kyocera Philosophy. This philosophy, developed during the first half of the 1960s, was initially put together and "published", albeit in a form solely for internal consumption by firm members, in 1967 ([59] Kyocera Corporation, 2000a, pp. 72-73). Numerous versions of this philosophy have been published over the years for use within the company (there had been 37 by 2000), but while these have indicated modifications, the fundamental underpinnings of the philosophy have remained unchanged. Indeed, according to Inamori: When I built my company, I explained my management philosophy to my employees, and I did say to the employees that with the change [in] time and culture, there may be changes needed to modify this philosophy. However, what has happened in fact is that it has remained the same throughout time (quoted in [80] Taninecz,

1995). In 1989, Inamori was persuaded that this philosophy should be made more widely available and it was published for external consumption as Kokoro wo Takameru, Keiei wo Nobasu . The English translation of the title of this work is Elevate Your Mind and Expand Your Business but when the work was eventually published in English, in 1995, it was entitled

A Passion for Success . The English version was not simply a direct translation of the Japanese text, but a more structured work which used a different method of presentation of the material and also contained some different "keywords" (see section 4.3 below) to those found in the Japanese version. These differences reflect the influence of Kyocera's merger with the US-based AVX Corporation in 1990. Following the merger, Inamori presented lectures on the Kyocera Philosophy at AVX, and it was in the light of discussions between Inamori and the AVX directors that

A Passion for Success emerged. The book represented a fusing together of the material contained in Kokoro wo Takameru, Keiei wo Nobasu with ideas that emerged from the discussions with the AVX directors, presenting Inamori's philosophy in a manner that would suit an American audience. In 1996,

A Passion for Success was translated into Japanese as Seiko eno Jyonetsu .

4.2 The structure of the Kyocera philosophy There are four key elements to the Kyocera Philosophy, as depicted in Figure 1 [Figure omitted. See Article Image.]. At the core is the corporate motto of Kyocera, Kei-Ten Ai-Jin (Fixed graphic 10 [Figure omitted. See Article Image.]: "Respect the divine and love people")[11] . The phrase Kei-Ten Ai-Jin is attributable not to Inamori but to Takamori Saigo (1827-1877), the founder of the new Japan under the Meiji Restoration in 1868. Being born and brought up in Kagoshima, the same town as Saigo, Inamori was taught by his parents and teachers about Saigo, the town's proudest son, and he learnt this phrase as a child. Just after the founding of Kyoto Ceramics, the first president of the company, Otoya Miyaki, presented Inamori with a scroll on which was depicted the phrase Kei-Ten Ai-Jin, which Inamori had mounted and displayed in the company's reception ([45] Inamori, 2007c). As Figure 1 [Figure omitted. See Article Image.] shows, immediately surrounding the corporate motto is the management rationale, representing a broader manifestation of the same message. Surrounding the rationale, and giving effect to it and the motto, are principles, which are further elucidated through the philosophy keywords and reflect the concept of management based on the bonding of human minds. The Kyocera Philosophy, as it applies to accounting, is expressed in Figure 2 [Figure omitted. See Article Image.]. Here, the key principle, as indicated by [38] Inamori (2000) is that of "seeking essence", which is expressed initially in the

12 management principles and then through the seven accounting principles. There are two aspects to the "principle of seeking essence": the pursuit of the essence of matters should be based on principles and general rules; and decisions should be made on the basis of what is right as a human being. As indicated in Figure 2 [Figure omitted. See Article Image.], the accounting principles are to be found nested inside the management principles, reflecting Inamori's holistic view that accounting is but one part of management. Furthermore, he goes on to note that accounting represents "the core of management":

I realized that being aware of the true condition of the company was essential for the long-term development of the corporation ([http://global.kyocera.com/inamori/management/accounting.html]). All 12 of the management principles (see Appendix 2 for a full list) can be found to be linked with one or more of the accounting principles. In section 4.3 below we examine in more detail certain aspects of the Kyocera Philosophy and principles depicted in Figures 1 and 2 [Figure omitted. See Article Image.].

4.3 Philosophy keywords and principles Fundamental to the education of Kyocera workers as to the company's philosophy, and its more general popularising in the external works published by Inamori, has been the development of "keywords", i.e. a series of short phrases or dictums which attempt to reflect the essence of the Kyocera philosophy and enable it to be

easily understood. While the use of such phrases or dictums is not something particularly new or Japanese, western writers on management, such as [14] Casson (1915), [69] Peters and Waterman (1982) and [21] Deming (1986), having likewise produced similar phrases or dictums[12] , what is distinctive about the Kyocera philosophy is the existence of a more detailed, c.700 word, explanation of each keyword. Such explanations help facilitate the determination of the link between the philosophy keywords and principles and have informed our discussion below. At the heart of the Kyocera philosophy is the idea that decisions should be taken on the basis of doing "the right thing as a human being". This is put into practice through the philosophy keywords which link to both the 12 management and seven accounting principles utilised within the company. While the main links are reasonably clear, the inter-relationships between them all are extremely complex, do not lend themselves readily to simple diagrammatic representation, and their explanation would take up far more space than is available in a single journal article. Hence, our analysis below is more limited, focusing on the key links, especially those between the philosophy keywords, the accounting principles and the key management principles to which they are related. To better understand the background context to these relationships, we first examine the link between the philosophy keywords and management principles. To consider such links, we need, first, to establish the philosophy keywords to be studied. This is no simple task since the precise number of philosophy keywords used has varied both over time and between Japanese and English language versions of, ostensibly, the same text. Thus, while Kokoro wo Takameru, Keiei wo Nobasu contained 106 keywords,

A Passion for Success contained only 105, while the current Kyocera web site records just 78 (see Appendix 3 for full list). The reason for the smaller number of keywords shown on the web site is not altogether clear: it may reflect simply those used in Kyocera today, or it may reflect the fact that some keywords are closely associated with actual business practice and, since they represent certain elements of Kyocera's core competency, they have been deliberately left off the web site[13] . To keep our analysis manageable, we focus on those philosophy keywords presented on the current Kyocera web site, but it needs to be recognised that several of the current web site keywords do not appear in Inamori's various works, nor do they seem to have any direct precursors or equivalents. Turning to the issue of the links between keywords and management principles, the first of the various works published by Inamori which dealt specifically with this issue was

A Passion for Success (first published in 1995). This work is divided into two main sections, the first dealing with "how to succeed in life" and the second with "how to succeed in business". The key elements in relation to the latter are summarised in the word "Passion". Each letter of this word stands for something different: "P" stands for "profit"; "A" for "ambition"; one "S" for "sincerity" and the other for "strength"; "I" is for "innovation"; "O" for "optimism"; and "N" for "never give up". For the purposes of this research, we have utilised a modern reprint of the Japanese version of this work ([46] Inamori, 2007d) and a modern reprint ([39] Inamori, 2004a) of his earlier Japanese work Kokoro wo Takameru, Keiei wo Nobasu (originally published in 1989). Utilising the explanations provided in these two works, it is possible to illustrate the links between the majority of the 78 keywords currently displayed on Kyocera's web site and the 12 management principles (see Table III [Figure omitted. See Article Image.] and Figure 3 [Figure omitted. See Article Image.]). In order to establish the links between the accounting principles and the philosophy keywords, a different publication has to be used, Inamori Kazuo no Jitsu-Gaku (Kazuo Inamori's Pragmatic Studies: Management and Accounting) . This work was first published in 1998, after Inamori had become founder and chairman emeritus of Kyocera, and while we utilise [38] Inamori (2000), a reprint of this 1998 work, it should be noted that

a number of the modern keywords with no predecessors (nos. 69-73 and 76-77 in Appendix 3) are more directly related to accounting principles than to management principles and, more specifically, deal with cost issues. The differences between the current keywords and those given in the earlier published works by Inamori may reflect the time that has elapsed since Inamori became divorced from active involvement in the affairs of

Kyocera. Furthermore, the addition of the new accounting-related keywords may reflect a concern within the company to explain more simply to the workforce and managers the practical meaning of the accounting principles. Nevertheless, it can be determined that, like each management principle, each accounting principle can be linked to at least one philosophy keyword, as indicated in Table IV [Figure omitted. See Article Image.], and also to one or more of the 12 management principles. Since both the management principles, accounting principles and the principle of seeking essence are linked to the keywords, and also interlinked with one another, the Kyocera philosophy is very complex. While in theory it is possible to build up a single diagram depicting this complexity, such a diagram would be impossible to read when reduced to a size that could be accommodated within the confines of the page of an academic journal. Thus Figure 4 [Figure omitted. See Article Image.] depicts only the links between the philosophy keywords, the seven accounting principles and the two management principles, 5 ("maximise revenues and minimise expenses") and 6 ("pricing is management"), which, according to [38] Inamori (2000, pp. 34-38), are those most closely connected with the accounting principles and the principle of seeking essence. Despite its limitations, since certain keywords are seen to be linked to both an accounting principle and either the principle of seeking essence or management principles 5 and 6, Figure 4 [Figure omitted. See Article Image.] emphasises the holistic nature of the Kyocera Philosophy, as previously indicated in general terms in Figures 1 and 2 [Figure omitted. See Article Image.]. Having established the links between the accounting principles and other aspects of the Kyocera philosophy, we now consider the former in more detail, including the rationale behind them and the historical factors that have influenced them, and draw comparisons with western approaches to accounting.