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Nova (eikaiwa)

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Nova
Company typePublic (JASDAQ: 4655)
IndustryLanguage instruction
FoundedOsaka, Japan (1981)
HeadquartersOsaka, Japan
Key people
Nozomu Sahashi (猿橋 望, Sahashi Nozomu) CEO
RevenueDecrease 57,064 million JPY(2007)[1]
Decrease -2,495 million JPY(2007)[1]
Websitewww.nova.ne.jp

The Nova Group is the largest of the Big Four eikaiwa (literally "English Conversation" or private English teaching companies) in Japan. As of February 2007, the company operated a chain of 924 Nova branches plus the Multimedia Center located in Osaka, Japan.[2]

History

The Nova Group was founded in August 1981 and is led by CEO Nozomu Sahashi.[3] Nova's corporate headquarters are in Osaka. The company is the largest employer of foreign nationals in Japan,[4] employing 7,000 foreign workers,[5] 5,000 of whom are employed as language instructors.[6] Each year, Nova hires between 2,500 and 2,600 foreign teachers to replace those who have left.[5] Although instructors are not required to have traditional educational training, the company provides a salary bonus for teachers with an accredited TEFL certificate, any Masters Degree or a degree in education. Teachers can be admitted straight from university graduation with any degree that allows them to obtain a work visa. Instructors from participating countries[7] who can obtain a Working Holiday Visa may be admitted without a degree. They work fewer hours and earn less pay than full-time instructors.

Sahashi originally established the company with two high school graduates from Sweden and Canada whom he met via a friend who was studying abroad in Paris, opening the first classroom in Shinsaibashi, Osaka. The name 'Nova' (an astronomical term for a new star) was chosen by Sahashi as he felt it would appeal to prospective students.[8] In November 1996, Nova's initial public offering[3] was met with several demonstrations in front of Nomura Securities and the Tokyo Stock Exchange. A complaint filed by The Nova Union cited the company was violating Japanese exchange laws by falsely stating that there were no unions at Nova or no pending litigation and that labour relations between the company and its employees were amicable and untroubled.[9][10][11]

Since 1997, Nova steadily expanded the number of its schools as its business grew, going from 239 schools to 623 in 2004.[3] By 2002, Nova had captured 50% of total market share by revenue (61.5 billion yen) and in 2003, Nova had gained a 66% market share by number of students, some 410,000 students in total, but 2005 saw Nova lose ground in total sales revenue.[12]

The company was in the red in the business year ending in March for the second consecutive year,[13] posting net losses of 3 billion yen in fiscal 2005 and net loss of 2.4 billion yen in fiscal 2006 after a failed expansion attempt. The number of students fell to 418,000 as of the end of March, down 12.1 percent from a year earlier.[14]

Marketing and services

The eikaiwa chain aggressively operates extensive advertising campaigns in print and on television and has a very high profile and strong brand recognition.[15][16] Until recently, Nova used an animated pink rabbit (Usagi) for the popular face of the company, appearing often on as the focus of Nova's commercials TV and other advertisements.[17] The rabbit appealed strongly to children and became extremely popular. The introduction of 'Usagi' merchandise saw sales totals of over 260 million yen in the first 2 weeks of availability. [18] Nova partially discontinued using the rabbit in January 2003 after JSPCA animal rights activists lodged a protest over a commercial that featured the rabbit getting its ears ripped off citing concerns of its impact on children's awareness of death.[17]

Many of Nova branches are located near train stations, and the company uses the term 'ekimae ryūgaku' ("study abroad near the train station": 駅前留学) in its promotional materials. The catch phrase helped Nova to become the nation's biggest chain of English language schools. [19] It similarly promotes its interactive multimedia network as 'ochanoma ryūgaku' ("study abroad from the living room": お茶の間留学).[20]

Nova's success is also attributed to its promises of a foreign teacher, smaller class sizes than its rivals, and an appointment system that allowed students to schedule and attend class at their convenience.[21] However, in 1997, 18 students filed a grievance with the Tokyo Metropolitan Government claiming they were unable to make lesson appointments when they wanted despite the school's advertisements stating that its students could reserve classes "at any time." The students said they had purchased hundreds of tickets when joining the school, but found it impossible to use them all by the expiry date due to inflexible scheduling procedures. Nova agreed to a proposal by the Damage Relief Committee to repay a total of 3.8 million yen and said the dispute had been the result of a misunderstanding.[22]

Services

The company offers English courses for adults, children, business English and test preparation (TOEFL, TOEIC) as well as Chinese, French, Spanish, Italian, and German instruction.[3] Through subsidiaries, the company also offers telecommunications and travel agency services and offers in-house English instruction, translation and interpretation services for Japanese corporations.[23][24] While Nova's main product continues to be English language services, the company has shifted some of its focus toward China, as 100,000 of its students currently study Chinese.[25]

Employment & labor relations

Drug testing

In 1994, after two instructors were arrested on drug charges in August and September, Nova asked all 3,100 instructors to sign an agreement to have a mandatory drug test, the results of which would be reported to the police. The drug test only applied to foreign staff.[26][27] The Osaka Bar Association wrote an opinion that the policy was a violation of the teachers' right to privacy.[28] Nova claimed consent forms had been received from more than 90 percent of employees. According to the union, no instructors were ever required to take a drug test.[29] On January 31, 2007, seven Nova teachers were charged with possession of illegal drugs arising from the arrest of two men in Roppongi on November 19, 2006.[30]

Shakai hoken

In March 2005, after the General Union filed a complaint, Nova and other English schools in Japan were investigated by the Social Insurance Agency for not enrolling employees in shakai hoken (Employees Health Insurance and Pension). The law stipulates that companies must enroll all full-time workers who have been in Japan for over two months in the system. Payment is split between employer and employee, each paying about half the monthly premium amount.[6]

In June 2005, Nova amended its working times for instructors and standardized lesson length to 40 minutes, with two minutes either side for lesson planning and student evaluation resulting in a total lesson time of 44 minutes with 6 to 11 minutes unpaid time between classes. As a result of changes to working hours, regular non-titled teachers work under 30 hours a week and are ineligible for shakai hoken giving an estimated saving to the company of over one billion yen in annual premium payments. Teachers can register for National Health Insurance (a different system to Shakai Hoken), although this system does not offer coverage for time taken off work due to illness. Nova also offers its own private insurance program.[4]

Anti-fraternization policy

After six employees were fired for violating a clause in their contracts that forbids interactions between students and instructors outside of the classroom, a complaint was filed with the Osaka Bar Association by two employees, one of whom had been dismissed as a result of the policy. The two instructors claimed the policy violated their human rights and argued it was racial discrimination since it only applies to foreigners. The clause in Nova's labor contract states foreign teachers 'should not have a relationship with customers outside the workplace.'[31] The Osaka Bar Association subsequently issued a non-binding recommendation that the company drop the clause saying that it restricted instructors' freedom of association and discriminated between foreign and Japanese staff.[32] The company said the clause is there to 'protect both the teachers and the students from trouble, as they do not know each other's cultures and customs.'[33]

On December 11, 2005, an Australian who had been teaching in an Osaka Nova branch reached an out-of-court settlement of ¥400,000[34] and a letter of commendation after claiming that the policy had interfered with his life. The then 30-year-old teacher had been demoted and transferred to another school branch in 2004 when Nova found out he had a relationship with a 21-year-old student.[35]

Contested dismissals

In November 2004, union supporters gathered outside Nova's Shinjuku Honko school, protesting dismissals of five teachers, three of whom had been working at Nova for more than 10 years. All were members of the Nova union (a branch of the NUGW). The union alleged they were dismissed due to their union activities.[36]

In March 2006, Kara Harris reached a financial settlement with Nova for approximately 7 million yen after she had been dismissed following her request to be made a permanent employee during negotiations with Nova over her sixth consecutive contract.[37][35] Nova had originally offered her a 12-month extension and, after disputes with her manager over several issues, she sued Nova for wrongful dismissal. Successive courts found that Harris was unfairly treated by Nova.[35]

Government intervention

Concerns about refund policy

On February 14, 2007, the Japanese Ministry of Trade, Economy and Industry and the Tokyo Metropolitan Government conducted on-the-spot inspections at Nova Headquarters in Osaka and several other branches.[38] Officials said that several Nova schools failed to give full refunds to students who canceled their remaining lessons after paying in advance. Other clients said that Nova refused to accept unconditional cancellation of lessons, claiming the eight-day "cooling-off" period had expired, and had also deceived students by giving false information about their cancellation procedures.[39][40][41]The Kyoto Consumers Contract Network NPO also expressed similar concerns.[42] Reductions in the number of teaching staff since 2004 had created a situation where students found it increasingly difficult to schedule classes, precipitating a substantial increase in complaints.[43] During the February office inspections the Ministry had discovered a memo in which Nova President Nozomu Sahashi stated there was no need to stop pushing sales despite difficulties meeting student reservations due to teachers shortages.[44] Consumer centers nationwide have received more than 1,000 complaints and queries regarding Nova annually[45]and The National Consumer Affairs Center of Japan says it received some 7,600 complaints or inquiries about Nova's contract and cancellation policies from 1996 to March 2007.[46] Under Nova's system, students buy points in advance to pay for their lessons. The larger number of points they buy in bulk, the smaller the per-class fees. The case taken to the top court involved a former student who had purchased 600 points at a rate of 1,200 yen per lesson. The student canceled the contract after using up 386 points, but Nova offered a refund based on a calculation that 300 points were bought. That meant it cost 1,750 yen per lesson.[47] Nova said the value of the used points should be calculated as having been bought in smaller lots.[45]

The Asahi Shimbun cites an example of a contract for 100 lessons, which would cost 230,000 yen in advance, for a per-lesson fee of 2,300 yen. A contract for 600 lessons would require an advance payment of 720,000 yen, or 1,200 yen per class. But if a person with a contract for 600 lessons cancels after taking only 100 classes, Nova applies the fee of 2,300 yen per lesson, and the student receives a refund of 490,000 yen. Such students say the contract for 1,200 yen per lesson should apply in these cases, which would mean a refund of 600,000 yen.[41]

Supreme Court appeal rejected

On April 4, 2007, Nova's appeal on two lower court rulings was rejected by the Japanese Supreme Court which described Nova's refund policy as invalid and in violation of specified commercial transaction law.[48][49] The ruling prompted the Ministry of Trade, Economy and Industry to revise the regulations for the specified commercial transaction law to prevent a recurrence of trouble.[50]

On June 13, 2007, LDP Lower House member Yasuhide Nakayama has acknowledged he was accompanied by Nova's president, Nozomu Sahashi, and vouched for the company during a meeting with Osaka Mayor Junichi Seki on the morning of May 22, 2006, during the court dispute over the company's refund system. Nakayama, who was elected from an Osaka constituency (of which Sahashi is a member of the lawmaker's support organization) recalled saying at the time that it was "not right by social norms that Nova's refund rule is unacceptable." and explained "It is a politician's job to help out when a supporter is in trouble,". Nakayama stated it was not his intention to exert pressure and Mayor Seki said he did not think the judgment of city officials was swayed by the lawmaker's visit.[47]

Industry minister Akira Amari also admitted on June 22, 2007 that he met with Yasuhide Nakayama earlier that year in February shortly after his ministry began investigating the school. Nakayama sought a meeting with Amari to express concern that the ministry might discipline the school over its fee discount system. Amari stated that Nakayama did not try to sway him from punitive action.[51]

Business restrictions imposed

On June 13, 2007, the Ministry of Economy, Trade and Industry imposed a six-month ban on Nova from soliciting, accepting or finalizing new contracts for long-term courses that last for over a year or 70 hours.[52][53] The ban was imposed because of issues regarding refunds for the cancellation of contracts.[54] The six months suspension order will not affect those who have already signed up for lessons, meaning that Nova's students can continue taking classes.[53]

The ministry also said that Nova failed to comply with a "cooling-off" system provided for in the specified commercial transaction law. Under this system, consumers can cancel a contract without conditions if the cancellation is made within eight days from when the contract was signed. At Nova, potential students first register their name, address and other data before finalizing their contracts. An official application to the school is made several days later, after the details of the contract are decided upon. Nova told students who wanted to quit were told they could not use the cooling-off system, claiming that the day students registered their data was the first day of the contract.[45]. Ministry officials were quoted as saying that the actions of Nova were "organized and malicious". The ministry has received over 7,000 complaints and inquiries since 1996.[54]

On June 15, 2007, The Ministry of Health, Labour and Welfare said that Nova's English language courses will no longer qualify for government subsidies for those engaged in educational training authorized by the welfare ministry to improve the abilities of the unemployed and other people. In 1999, Nova's 32 courses were approved for the subsidies program. In fiscal 2006, about 4,700 people received a total of 560 million yen in subsidies under the program. Since 1999, around 71,000 Nova students have received a total of about 16.1 billion yen in such subsidies.[55] Nova submitted a business improvement plan to the Tokyo government in late June 2007 as required by the METI conditions. Originally instructed to submit the plan on June 10, Nova postponed the submission until June 24.[56] The plan was rejected on the basis that it was lacking in concrete details and the planned improvement measures were deemed 'insufficient'. Nova was requested to submit an additional report.[57]

Events following restrictions

In an interview in the The Daily Yomiuri on June 16, 2007, Sahashi said he was considering offers of capital and business alliances from several companies in various industries, including retail firms, to deal with an expected drop in sales and to restore trust in the company and possibly selling off properties and real estate in Osaka estimated to be worth several billion yen.[58] A capital alliance would serve to improve its creditworthiness and secure operating expenses.[14]

In July 2007, Nova CEO Nozomu Sahashi met with Hideo Sawada, chairman of H.I.S. travel agency, to discuss a financial assistance as well as a business tie-up[59] but the meeting did not conclude with a decision.[60] [61] Although Sahashi had rejected the possibility of a business affiliation with another English school[58], Benesse Corporation (parent company of Berlitz Language Schools and provider of home nursing services) announced that it would not be undertaking any business relationship with Nova.[62] and saw no synergy between the two companies.[63]

Sahashi indicated the company may issue new shares to strengthen its capital and that Nova management "must take responsibility," stating the company will set up an internal inquiry and management reform committee to investigate the scandal, consider disciplinary measures of its executives including himself, and examine how best to avoid scandals in the future.[55][64] Sahashi also said that the company did not need assistance from financial orgnizations[58] During its annual stockholder meeting in June, Nova President Nozomu Sahashi apologized for causing the disciplinary action by the government[64] and told the shareholders, "We'd like to regain your trust as soon as possible". Forty-six shareholders attended, and one shareholder who had apparently lost faith in the current Nova management called on them to resign.[65] In response to a call for his resignation from Nova shareholders, Sahashi refused stating "If I resign, the company will collapse,".[64] On August 14, 2007 Nova announced and subsequently sold 170,000 new shares on August 30.[66]

Financial strains

Indications of an impending financial crisis stemmed from a rapid increase in refund claims that total nearly 5,000,000,000 yen nationwide.[67] An August 21, 2007, article in the Toyo Keizai, Nova was described as repeatedly delaying payment to business partners and banks, falling into arrears for printing costs at the end of July, asking an ad agency to defer a payment.[68] Nova's 2007 first quarter financials showed a loss of 4,300,000,000 Yen, and a 19% decrease in sales compared to the previous year period and overall 19% decrease in reoccurring profit.[69] Nova cited a decrease in the number of students and deterioration of its image as an explanation.[70][71] The Asahi Shimbun reported on September 11, 2007, that Nova had made a request to an asset management consulting company, requiring them to return an outstanding amount of 8 million shares that were loaned to them on July 30, 2007. Nova had previously used the asset management consulting company to arrange short term financing with an 11 million share stock loan on July 29, 2007.[72] BNP Paribas had obtained the 8 million shares from a 3rd party on July 30, selling them on September 4.[73] Commenting on its temporary possession of Nova shares, BNP said it had been the result of the asset management consulting company exercising its option.[74]

Unpaid/Delayed wages

A decline in the stock price following the release of Nova's 2008 fiscal year first quarter financials[69] was preceded by news of a delay in payment of wages and bonuses to some employees.[75] Nova explained that the delay in the monthly wages was due to change in its payment system and personnel management and accounting sections that had not been completed on time and that the summer bonus delay until October was a business necessity that required employee co-operation.[67] On September 14,2007, Nova delayed wages to many of its teaching staff. Many teachers who had previously resigned, are still waiting for salary payments from the month of July.[76] The NAMBU Foreign Workers Caucus in Tokyo estimated that up to 3,000 had not received their salaries on time. According the the Sydney Morning Herald, some teachers said they were owed thousands of dollars and others posted messages expressing the intent to quit. Nova President Nozomu Sahashi issued a statement saying it had not been possible to complete all the necessary operations to deposit instructor salaries'.[77] As a result of Nova delaying the payment of salaries, the Sankei Shimbun reported that insecurity spread amongst both staff and students surrounding the possible closures of Nova branches. On September 20, 2007, one teacher who demonstrated outside of Nova's office in Osaka was quoted as saying 'I've already heard about the possible closures of 200 to 300 branches across the country. Nova no longer has the ability to pay the salaries of teachers and staff'.[78] By September 25, 2007, the cash flow problems had not improved and Nova President Nozomu Sahahshi mortgaged 9 million shares of company stock (which included 1.18 million of his own personal shares) for the purposes of raising working capital. Nova Corp. said that they were not involved in planning the transaction. [79] A fax sent to branches after 9pm on Friday 12 October informed all instructors that salaries would not be met on 15 October as scheduled.[80] The fax promised a solution for 19 October, the day Nova must resubmit its new business plan to JASDAQ after its previous business was rejected by the Securities Exchange on October 5, 2007 for being insufficient.[81] On 23 October, the Osaka Labor Standards office accepted a demand by Nova instructors to investigate criminal charges against Nova President Sahashi over delayed and unpaid wages.Cite error: The <ref> tag has too many names (see the help page).

Recent lawsuits

The parents of a Nova employee who committed suicide in 2004 filed a suit against the company on August 31, 2007. Their son, aged 28, at the time was employed by Nova to design and supervise the construction of new classrooms. During that period Nova engaged in a rapid expansion meant to increase the number of Nova branches by 300 in an attempt to reach 1,000 total. The parents suit alleges that their son was required by Nova to work up to 80 hours of overtime in one month, and even through the night on seven occasions despite his inexperience. At one point he had requested to be relieved but was persuaded to stay, eventually leading to overwhelming stress shortly before his suicide. [82]

On September 3, 2007, an Osaka woman filed suit against Nova over a refund related issue. Unlike previous complaints about how Nova adjusted the value of unused lesson points which the Japanese Supreme Court ruled on in June 2007, this suit contested Nova's decision not to refund lesson points that were extended after the woman purchased additional points.[83] The woman claims that while Nova explained that her unused points, worth approximately 400,000 yen, from the first contract would carry over after signing a new contract, she was not told that they could not be refunded if she chose to cancel.[84]

Lindsay Ann Hawker murder

Main article: Lindsay Hawker

On March 27, 2007, the body of Lindsay Ann Hawker, a 22-year-old Nova teacher from Brandon near Coventry, was found in a sand-filled bathtub on the balcony of an apartment in Ichikawa, Chiba. Police say the suspect is 28-year-old Tatsuya Ichihashi. Police went to Ichihashi's apartment after Lindsay's flatmates had indicated she had gone there to teach an English lesson, but the suspect ran away and remains at large.[85]

See also

References

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  28. ^ Letter of Recommendation Osaka Bar Association. Retrieved March 20, 2007
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  59. ^ Travel agency H.I.S. eyes alliance with struggling Nova The Asahi Shimbun (July 3, 2007) Retrieved July 9, 2007
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  62. ^ Benesse considers support for Nova Nikkan Sports (July 12, 2007) Retrieved August 12, 2007
  63. ^ Benesse Chairman: No synergy with Nova Nikkei Business Daily (July 12, 2007) Retrieved August 12, 2007
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  65. ^ Shareholders meetings reach peak / Nova, Katokichi, Kajima among scandal-hit firms grilled by investors The Yomiuri Shimbun (June 29, 2007) Retrieved August 12, 2007
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  67. ^ a b "Unpaid salary showing a predicament for Nova management?". Iza News. August 1, 2007. Retrieved 2007-08-16. {{cite web}}: Check date values in: |date= (help)
  68. ^ "The end of the road for Nova's business practices as cash flow crunch intensifies". Toyo Keizai (Toyo Economics). August 21, 2007. Retrieved 2007-08-21. {{cite web}}: Check date values in: |date= (help)
  69. ^ a b "Nova shares fall after poor performance in 1st quarter". Asahi Shimbun. August 27, 2007. Retrieved 2007-08-29. {{cite web}}: Check date values in: |date= (help)
  70. ^ "Nova sees decrease in students and 4,300,000,000 yen loss in Q1". Nikkei Market News. August 27, 2007. Retrieved 2007-08-30. {{cite web}}: Check date values in: |date= (help)
  71. ^ "Nova down 4,300,000,000 yen loss in Q1, sees decrease in student enrollment". Nikkei Market News. August 25, 2007. Retrieved 2007-08-30. {{cite web}}: Check date values in: |date= (help)
  72. ^ "Nova requests consulting company return 8,000,000 stocks". Asahi Shimbun. September 11, 2007. Retrieved 2007-09-11. {{cite web}}: Check date values in: |date= (help)
  73. ^ "BNP Parabas sells stock, has 0% stake in Nova". Jiji Press. September 4, 2007. Retrieved 2007-09-06. {{cite web}}: Check date values in: |date= (help)
  74. ^ "Nova requests consulting їcompany to return 8,000,000 shares". Sankei Shimbun. September 12, 2007. Retrieved 2007-09-12. {{cite web}}: Check date values in: |date= (help)
  75. ^ "Nova explains a "system trouble" causing delays of wages". Sutra newspapers via Yahoo Japan. August 2, 2007. Retrieved 2007-08-16. {{cite web}}: Check date values in: |date= (help)
  76. ^ "Unions want Nova, president indicted over payroll delays". Japan Times. October 17, 2007. {{cite web}}: Check date values in: |date= (help)
  77. ^ "Teachers unpaid as company falters". Sydney Morning Herald. September 19, 2007. Retrieved 2007-09-19. {{cite web}}: Check date values in: |date= (help)
  78. ^ "Nova closures spread insecurity among staff and students". Sankei Shimbun. September 20, 2007. Retrieved 2007-09-20. {{cite web}}: Check date values in: |date= (help)
  79. ^ "Nova financing via 9 million share mortgage?". Sponichi Annex News. September 25, 2007. Retrieved 2007-09-25. {{cite web}}: Check date values in: |date= (help)
  80. ^ "No Pay For Nova Teachers on October 15th". Japan Probe. October 14, 2007. Retrieved 2007-10-16. {{cite web}}: Check date values in: |date= (help)
  81. ^ "Jasdaq rejects NOVA report on improvement measures". Mainichi Daily News. October 24, 2007. Retrieved 2007-10-16. {{cite web}}: Check date values in: |date= (help)
  82. ^ "Parents seek recognition for their son's suicide". Mainichi Daily News. September 1, 2007. Retrieved 2007-09-01. {{cite web}}: Check date values in: |date= (help)
  83. ^ "Woman files suit against Nova seeking carryover point refund". Yomiuri Shimbun via Yahoo News. September 3, 2007. Retrieved 2007-09-04. {{cite web}}: Check date values in: |date= (help)
  84. ^ "Woman Takao, sues Nova for an 'unjustly low' refund". Asahi Shimbun. September 3, 2007. Retrieved 2007-09-03. {{cite web}}: Check date values in: |date= (help)
  85. ^ Briton's body found in Japan bathBBC News March 27, 2007. Retrieved March 27, 2007

External links

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