On a weekday morning in late September, an hour and a half from Tokyo off a side-road near the town of Sakura, the ticket queue for the Kawamura Memorial DIC Museum of Art is long. Cars wait along a cedar-lined lane for a spot in the second overflow parking zone. The gift shop has been so overwhelmed by customers in recent days that management has shut its doors. By 11:45am, the digital screen outside the museum’s Belvedere Italian restaurant declares the waiting time for a table is now 181 minutes; a special notice on the website recommends bringing a packed lunch instead.
The museum has said it will close in early 2025, and thousands of art lovers, in their stampede to the Chiba countryside, can sense an emergency. Large parts of corporate Japan can sense something far, far more alarming.
The unfolding saga of this comparatively obscure museum — and of the hundreds of artworks owned by the listed chemicals company behind it — is also an unfolding saga of corporate Japan and what version of shareholder capitalism the country as a whole wants to subject itself to. A belated reckoning now looks to be rearing back up from the murky late 1980s, when banks encouraged Japanese company founders to borrow wildly against what were then soaring domestic real estate values.
It is a first, potentially trailblazing instance of a company revealing the extent of its art collection under explicitly governance-driven pressure. Of the 754 works in the Kawamura collection, 384 are owned by DIC — pretty much all of the most famous works belong to the company and thus their ownership is now caught in an ideological limbo.
One argument — now more visibly gathering steam as Japanese companies are held to ever higher standards by their investors — is that art is simply an asset of a company that they, the shareholders own, and should be treated like any other asset.
The counter is that however compelling the argument above, companies have a wider societal function than simply service to shareholders, and that their asset portfolios should be assessed accordingly. That same argument holds that Japan, as a whole, has benefited from this much broader interpretation, and would be the poorer if everything were subjected to the hard rules of shareholder capitalism. The debate, raging around the vast expanse of “non-core” assets and business ventures maintained by Japanese companies, is now at the heart of a tectonic structural shift.
One of the nation’s most exquisite dirty secrets — the ambiguous ownership of highly valuable art, the exploitation of listed companies to protect generational wealth and habitual asset-mingling between families and public companies — has broken the surface after lying relatively undisturbed for decades. In this instance, it has been exposed by Oasis Management, a notoriously catalytic shareholder activist. But it is part of a broader, inexorable-looking trend.
“Japanese companies were told they were worth billions. It was funny money, so they did funny things,” says Toby Rodes of Kaname Capital, a fund manager whose strategy includes delving into the art collections hidden on the Tokyo stock market, using their existence as a signal of more profound governance shortcomings.
There is no particular allegation that anything illegal has taken place — simply that the Japanese market has been supernaturally tolerant of blurred lines. In his particular focus on art, Rodes is a rarity, but the hunt for governance failures and the potential returns that come with repairing those has attracted scores of activist and value funds to Japan.
Not all of the buying in the late 1980s and early 1990s was ostentatious. But the escapades that the era fuelled became the stuff of legend. Japanese company bosses — in some cases with bankruptcy lurking quite soon in their future — set jaw-dropping records for purchases of Van Gogh’s “Sunflowers”, Renoir’s “Bal du moulin de la Galette”, Picasso’s “Les Noces de Pierrette” and many other gems.
The bursting of the bubble triggered a quiet, bad-debted and, to many, face-losing outflow of Japan’s art throughout the downturn of the late 1990s. Some instances, such as the efforts to trace the whereabouts of Van Gogh’s “Portrait of Dr Gachet” after it fell into the hands of creditors, have been multi-decade international mysteries. But these outflows were not, by any means, a full clearance sale. Across corporate Japan, major works accumulated in the heyday still loom over the rarefied exclusivity of boardrooms.
It is a subject about which very few in the art-dealing world like to talk on the record; often because they now see that governance improvements in Japan and the enforcement of transparency on listed companies could actually flood “lost” art on to an illiquid market, and reveal more of its murky past.
$500mn (¥74bn)Estimated value of DIC’s Kawamura Rothko collection
¥11.2bnDIC’s formal book value for its entire art collection
Where is it now? Funds and art experts suspect that an unknowable trove, technically owned by listed companies, has made its way into the private homes of their founders or the founders’ descendants. Masterpieces almost certainly sit, undeclared, in company-owned warehouses around the country, art dealers say. VIP visitors to the Tokyo headquarters of Nomura may find themselves sitting at a table with a Monet at one end and a Chagall at the other. Special guests of Marubeni may catch a glimpse of Botticelli’s “La Bella Simonetta”.
“I will never forget when I stumbled across a ‘museum’ that doubled as the executive floor of a Japanese broadcaster,” said one veteran US-based fund manager. “Being protected from a change of control by legal regulation, the entrenched management team had a penchant for very fine works of art. The team escorting me to the elevator after a meeting got nervous when I paused in front of a Cézanne.”
Now, in an era when urgent corporate governance reforms are being ordered by both the Japanese government and Tokyo Stock Exchange, when greater transparency is being demanded and shareholder activism has become more emboldened, the debate around these assets threatens a painful rethink of Japan’s relationship between companies, their founders, society and shareholders.
Despite its somewhat awkward location in the sticks, the Kawamura Memorial museum, elegantly constructed at the end of Japan’s 1980s bubble era and set in gardens dotted with a Henry Moore and other sculptures, has plenty to justify a visit. Some would argue, excessively so: a financial anomaly hiding in plain sight for decades.
The collection was assembled by the founding family of the Dainippon Ink and Chemicals Corporation (DIC) from the 1970s. Whatever it lacks in thematic coherence it more than makes up for in stunning reminders of just how acquisitive Japan became at the peak of its financial powers.
It is no coincidence that the museum opened in 1990 — the year in which, according to FT data analysis, imports of paintings to Japan hit an all-time peak of almost ¥500bn ($3.3bn), or more than 10 times higher than in 1985. By 1992, the value had plummeted again to ¥34bn ($229mn).
Inside the museum’s softly lit galleries hang works by Matisse, Chagall, Ernst, Monet, Picasso and Renoir. There is a remarkable Pollock, two works by Twombly and a special alcove housing Rembrandt’s “Portrait of a Man in a Broad-Brimmed Hat”.
But Kawamura’s most valuable show-stopper is upstairs, in a dedicated room walled with seven panels by Mark Rothko, from a collection originally painted for the Four Seasons restaurant in New York’s Seagram Building. The huge works are widely seen as part of the most important commission Rothko ever undertook. The auction record for just one Rothko painting stands at $86.9mn. According to art experts consulted by investors, the ones in Kawamura might, together, be worth well over half a billion dollars.
Despite the qualities of this extraordinary collection, it has been on display here for 34 years without ever generating more than a modest stream of visitors at an average rate of just a few hundred people a day.
But on August 27 the board of indebted, unprofitable DIC, which owns the museum and much of the art inside, made a surprise announcement. Because of the relationship between the company and the museum, and because of the “opinions expressed by investors”, said the statement, it had now become impracticable to maintain and operate the museum in its current state. The museum, it declared, will “temporarily close” from January 2025. It then, on September 30, sent out a second notice saying that it would postpone the closure until March 2025 “taking into account visitor numbers” since its earlier notice.
Crucially, though, the DIC statement addressed one of the great enigmas that have hung, permanently, over the museum. Until now, the company has never specified how much of the art it displays in its museum it actually owns, and how much is owned by the family. It has, accordingly, not ascribed a precise market-to-market value to the art in the published accounts.
But in its August 27 statement the company came partially clean. Of the 754 works in the collection, it said, 384 are owned by the company — and thus, activists would argue, by the shareholders. DIC put a formal book value of just Y11.2bn ($77mn) on the company’s art — an extremely low reckoning of its potential value were the art to come on to the market.
Several things have happened since that bombshell. The first is that many Japanese have seen the news, panicked that the days of a great national treasure are now numbered — even though most had not previously bothered to visit — and decided that they must trek over there in their thousands. A second is that the decision has been vehemently challenged. Prominent “DON’T CLOSE IT!” signs have popped up along the roads around the museum, and an online petition against the closure appeared on the local municipality’s website. As of last weekend, it had more than 47,000 signatures.
The third and arguably most life-changing effect for Japan has been to focus the attention of investors on how many other DICs there may be lurking around the country. Hedge funds that now specialise in this sort of socially fraught treasure hunt, and have spoken to the FT over recent months, suspect that there are dozens of companies listed on the Tokyo Stock Exchange that bear a close resemblance.
The background to DIC’s decision to close the museum was more than a decade in the making. The country’s first governance code setting best practice for companies was introduced in 2015, and was accompanied by a stewardship code that set out the obligations on investors to hold companies’ managements to account. Since then, the situation has begun to change. Companies have gradually begun to raise governance standards, even when they have not fully accepted the premise of shareholder primacy. Well-known shareholder activists, such as ValueAct Capital and Elliott, have focused heavily on the opportunities in Japan, while smaller funds, such as Oasis, 3D and the group headed by Yoshiaki Murakami, have managed to run a series of hard-hitting campaigns.
There was — and still is — a great deal to fix. Japanese boards were not diverse, were very rarely controlled or overseen by a majority of independent directors, and shareholder activism was decried as a barbaric western practice. This, in effect, conferred huge freedom on the managements of listed companies to run them as they pleased, rather than more directly in the interests of shareholders.
To doubly secure their freedom, Japanese companies created great networks of shareholdings in other, friendly listed companies on the understanding that those blocs of shares would never vote against management.
And to triple-lock it in, Japanese companies constructed a collective narrative that they existed for a higher purpose than simply expanding shareholder value and maximising profits. Long before BlackRock’s Larry Fink reversed years of investment dogma and began urging a more responsible recalibration of corporate focus and a broader definition of corporate “purpose”, Japanese companies were comfortably citing their grander purpose and sense of duty to multiple stakeholders. They have argued, forcefully, that Japanese society has benefited from this, no matter how inefficiently they have deployed capital.
An obvious question, now asked with ever more frequency and consequence, is why should so many — 3,951 at the last count — Japanese companies be listed at all, given the lengths they have gone to avoid the structures, scrutiny and potential pressure that comes with being listed?
Several can see the governance writing on the wall. Within the past year, the managements of two companies still closely tied to their founding families have decided to undertake management buyouts and de-list from the exchange — away from activists, governance strictures and the general scrutiny now in prospect. They are Benesse, the education company whose founding family established the famous Benesse Art Site on Naoshima island, and Taisho Pharmaceutical, whose founding family’s art is displayed in the Uehara Museum and include works by Cézanne, Renoir and Corot.
“The common thread [is that] both company founders are art collectors and were likely feeling the pressure of needing to come clean on the conflicts of interest and poor governance that put the art on the walls,” said one private equity executive in Tokyo who knows of at least half a dozen other companies contemplating a similar move.
The key to understanding what is happening, says Rodes, co-founder of Kaname Capital, is Japan’s long history with extremely high levels of inheritance tax — a levy of around 50 per cent on large estates that can, in theory, wipe out family wealth over a few generations.
One of the most popular ways to deal with this was for families to list their companies and hold on to significant stakes so that there was always a cache of shares that could be liquidated to pay the taxman. The stock market, in that light, has been abused as a means of securing generational wealth, rather than as a mechanism for growing good companies. Families would maintain their control over the listed companies’ boards by installing favourable directors.
Because of this extremely common pattern, say Rodes and others, families came to see the balance sheets of listed companies as, in effect, their own asset. It was a critical psychological leap that lies right at the heart of the corporate governance problems that investors are now shining the brightest of lights upon.
“Looking at the art collections is one way of bringing bad governance to the surface,” says Rodes. “It is our way of saying, ‘We know what you did’. Art is the governance sledgehammer. Could the companies do more with these notoriously illiquid assets? Absolutely.”
Joji Kaneko, a visitor to the Kawamura museum who has travelled more than 400km by car from Nagoya, is now admiring a wall of art by Frank Stella. “I’m here because I’ve heard that this museum is going to close in January and this could be my last chance to see everything here,” Kaneko says. “It’s a sad thing, but I guess it’s just something that can’t be helped. Money always wins in these situations, doesn’t it?”
The statement by DIC in which it announced the closure of its museum referred to “the opinions of investors” — euphemistically, the questions raised by certain shareholders, including Oasis Management, around whether the corporate ownership of art can be justified when the company is heavily indebted and the Tokyo Stock Exchange itself is calling for listed companies to demonstrate greater capital efficiency.
Beyond the polite protest posters outside the Kawamura museum, there is a low-level outrage that shareholders should be able to force companies to behave differently than they have done in the past. But change is in the air.
“Owning art and pretending you are doing God’s work is crazy. Boards can no longer pretend there is nothing to see here,” says Rodes.
Leo Lewis is the FT’s Tokyo bureau chief. Additional reporting by Dan Clark
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