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Message from an External Director (2013)

MASAYUKI MATSUSHIMA
Director
Senior Advisor of The Boston Consulting Group K.K.(title at that time)

Two years have now elapsed since I assumed the position of external director for MOL. Before my appointment, I had the image of MOL as “an organization that leads the world shipping industry." This image has not changed. Indeed, in many respects my expectations have been surpassed, in terms of strong leadership under successive management teams, daring action geared toward providing bestfit solutions to customers, an extremely open corporate culture, and employees’ earnest approach to their work.
In the midst of the worst shipping recession in recent years, MOL now finds itself enduring a very rough passage. When freight rates for dry bulkers, tankers, and containerships all slump at once, the situation is akin to a violent hurricane and a tornado striking simultaneously. Even from my standpoint as an external director, I am struck by the uphill battle faced by those on the front line, in the face of this protracted industry downturn. As a leader within the marine transport industry, however, MOL has boldly changed tack and is forging ahead.

To me, management does not mean avoiding the winds of risk, but rather facing into those winds and seeing them as your allies.

While it is critical, of course, that MOL determine how best to operate in the current market, I believe this is also an ideal opportunity for shipping companies to reassess how they should proceed going forward. They have endured hard times in the past, such as the oil shock of the 1970s, and the yen’s sharp appreciation after the Plaza Accord of 1985. Every time it faced these challenges, MOL made serious efforts to survive by adopting a broad range of policies from various cost-cutting measures and adjusting its fleet to large-scale restructuring, including two rounds of industry consolidation. The future will remain challenging and undoubtedly present every kind of risk. In this highly volatile business climate, I believe MOL must learn and think about how to identify and contain ever-present risks. Without the benefit of accumulated wisdom, MOL could not remain afloat in conditions that are worse than expected. It is no exaggeration to say that the heart of company management lies in its ability to prepare for potential risks.
Currently, MOL is planning to reduce its free vessels. Some might think it sufficient only to reduce the number of free vessels and increase the ratio of medium- and long-term contracts, but I don’t think so. It is far more important for MOL to establish a long-lasting business model that strikes the right balance between stable revenue and opportunity cost. In the process of building this model, the first job is to identify the risk profiles of vessel types and correlations of risk variables. And then MOL must explore the best mix of vessel type in its portfolio with reference to the global supply demand outlook, taking into account the risk tolerance of the company.
Hedging against every possible risk to eliminate the influence of all risk is not what I would call management. To me, management does not mean avoiding the winds of risk, but rather facing into those winds and seeing them as your allies. In the shipping industry, the winds can fluctuate greatly. It is very important that employees across the entire company accept this reality, and maintain a sharp sense of the line between earnings optimization and risk tolerance, in both good times and bad.
MOL has bled huge red ink. I believe the company must retain the lessons learned this time about how to deal with market risk and incorporate it into management.

I would like to see it become a true global company in terms of both quality and quantity.

After MOL returns to profitability following its Business Structural Reforms, I would like to see it become a true global company in terms of both quality and quantity. I believe the company has made good progress in expanding its overseas operations, but still see scope for further globalization. In particular, I think MOL must take advantage of Asia’s rapid growth. MOL already uses Hong Kong as the base of its containership business and Singapore as the hub for most tankers. With this latest round of reforms, the company has continued this shift to Asia by transferring the operation of dry bulker free vessels to Singapore as well. MOL employs people from many countries, and not just in sales activities on land; many seafarers, for example, hail from the Philippines. Going forward, I would like to see the company focusing not so much on setting up and expanding individual operating bases, but rather on building a united and organic trading sphere across Asia. To this end, MOL would do well to explore every possible means, including a stepped-up alliance strategy, personnel exchanges, enhanced sales partnerships among organizations around the world, and even video conferencing for exchanging and sharing information.
While it is only natural that the pursuit of profit is a major objective for companies, I believe that profit is not everything. It is also extremely important to find the optimal balance between the interests of various stakeholders, and to maintain accurate disclosure. Also, companies need to envision the roles and responsibilities expected of them by society, 5 and even 10 years down the track. Based on these considerations above, I would like to contribute to MOL’s ongoing evolution.

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