Sony Signals New Era With American Director : Naming of Schulhof Symbolizes More Responsive Attitude to Foreign Markets

NEW YORK â€”  On June 29, New York-born “Mickeyâ€� Schulhof got up at Sony Corp.’s shareholder meeting in Tokyo, bowed slightly and said the words he had memorized: “Watashiwa Michael P. Schulhof desu. Dozo yoroshiku onegai itashimasu.â€�

Or, in other words, “It is a great honor to become a director of this company and I will do my best in the service of the company.�

With that, Schulhof became the first American director of a major Japanese company. In a country as racially homogeneous and closed to outsiders as Japan, Schulhof’s elevation to Sony’s top echelon is a symbol of the international reach of Japanese companies and the need for them to be increasingly responsive to foreign markets.

“Foreigners joining a board of directors is a new step, not only for Sony itself; it will influence other Japanese companies,� said Masahiko Goto, an analyst for New Japan Securities. “It is part of globalization for Japanese management to accept foreign management.�

Uses Interpreter

It is perhaps not surprising that Sony, which also named a European to the board, should lead the way in naming foreign directors. The company makes two-thirds of its sales outside Japan--27% in the United States alone. “As a global citizen, Sony is the first Japanese company to recognize the importance of external influences in its decision making,� said Schulhof.

Schulhof’s nationality makes him an unusual addition to the Sony board, but he comes honestly by appreciation for cultural diversity. His father, from Prague, and his mother, from Vienna, both Jews, fled from Hitler’s Europe in 1939, settling in Great Neck, Long Island, where Schulhof senior runs Reproducta Co., the world’s largest publisher of Catholic greeting cards. The younger Schulhof speaks French fluently, although not Japanese. At Sony board meetings, an interpreter sits next to him and whispers a simultaneous translation in his ear.

In other ways, however, Schulhof, vice chairman of Sony Corp. of America, is a typical member of Japanese corporate boards, which are dominated by inside directors. All but two of Sony’s 35 board members come from Sony’s own management ranks.

“The concept of outside directors is mostly an American invention. Japanese companies believe that the people ultimately responsible for decision making should be the same people responsible for executing that policy,� said Schulhof, sitting in his small office with compact discs, company reports and Sony gadgets piled high on one side and a spectacular view of Central Park on the other.

“In the U.S., people feel you need outside directors and independent protection of shareholder value, whereas in Japan people feel directors should know the problems of the company.�

One result of that philosophy in a company like Sony is that the board is dominated by technical people, not financial people, another way that Schulhof fits right in.

Stint at CBS

A graduate of Grinnell College, Schulhof received his masters degree in applied physics from Cornell University and his doctorate in solid state physics from Brandeis University in 1970. He wrote his dissertation on neutron scattering in anti-ferromagnets. (Neutron scattering is one of the atomic interactions that produce magnetism.) Afterwards, he worked at Brookhaven National Laboratories, publishing 27 scientific papers.

While on vacation in Jamaica, Schulhof met Clive Davis, then head of CBS records, who was there watching Paul Simon record the album “Rhymin’ Simon.�

When Schulhof said that he hoped to combine physics and business, Davis invited him to work at CBS, where he spent two years in the records division.

In 1974, Schulhof jumped to Sony Corp. of America, believing that his physics background would be more useful there. During the ensuing 15 years, he has held a variety of jobs, taking over a magnetic tape business, marketing one of the first hand-held dictation machines and overseeing the construction of Sony’s first U.S. compact disc factory and the marketing of digital audio technology in the United States.

Schulhof has become a devotee of Japanese-style management. “Sony tried to instill in me the goals and ethics of the company, not in one field but in many fields,� he said.

Shopping for a Studio

He particularly admires the way the company makes strategic decisions.

“At Sony, the financial review comes last, not first,� he said. “When we launched CDs, we did no market surveys and hired no consultants. We invested $100 million developing the technology and building a factory before the first CD player was put on the market. Nobody gave us any assurance that there would be a market, but management believed it was a good product. This runs very counter to an American company, where the chief financial officer does the final review, calculates the return on investment and knows nothing about the technology.�

Schulhof has been an architect of Sony’s strategy of expanding into movies and records.

The Japanese company showed its eagerness by buying CBS Records for $2 billion the week the stock market crashed in October, 1987.

The company is now widely believed to be shopping for a movie studio.

Schulhof has been crucial in bridging the cultural divide between his new company (Sony) and his old (CBS). Walter Yetnikoff, the head of CBS Records, contacted Schulhof just after CBS decided to put the record division up for sale, and Schulhof spent about a year persuading CBS founder William S. Paley to sell to a Japanese company such as Sony.