TAC Membership “Assessment Vote” Meeting Report

TAC Meeting Summary-

In the 7 June meeting, there was an attendance of about 150 (need to verify) members as well as the Board of Governors.  The BOG’s intension was apparently to announce the result for the vote and the new membership types.  The members made it very clear that they needed more information and more transparency to help the club.  The large turn-out seemed to reinforce that.  Some points of interest were-

  1. The majority of the membership would like to see the operations of the club bid out to multiple hospitality vendors.  These areas would include food & beverage, IT, operations, maintenance, and any other area were more cost efficiency and higher service levels could be attained.
  2. Many questioned the interest rates at which the club borrowed money.  These rates were reported at 4.5%.  Many feel that with the size of the loan and the location in Japan, this should be renegotiated and closer to 1%.  Some finance experts volunteered to help.
  3. One member stated that they left the board mid-term because Board of Governors exercised no leadership or power over club management saying, “We leave those decisions of running the club to the management as they are the professionals.”
  4. Due to the location and venue, many agreed that the club was not acceptable or convenient for entertaining clients.
  5. There was a comment that the club pricing was too high and not competitive with plethora of great restaurants around Tokyo and we needed to be competitive.
  6. It was suggested that members should be engaged more directly for their core-competencies.  Finance for loans, HR for dealing with salaries and right sizing of employees.
  7. One member calculated that the top management of the club makes 14-15 million yen salaries annually.
  8. There was a suggestion that the General Manager be replaced ASAP as he has not managed TAC resources well.  Many voiced agreement for this.
  9. There was a request for a financial report on the club to be drafted in a clear and concise fashion to share with all members of the club.
  10. A request for a full-disclosure of manager salaries and benefits was made again as was requested at the Townhall meetings.
  11. It was exposed that when the TAC clubhouse was demolished, so was it’s status as a non-profit organization.
  12. One member suggested that the TAC do more things to embed itself better into the community.  She related how YCAC had many activities and did not charge extra for every little thing as TAC does.
  13. It was revealed that the Club is losing about $7-8M USD annually.
  14. For the new club, members volunteered to donate equipment, web services, financial advice, HR consulting, marketing advice, IT outsourcing insights,
  15. There was a request to explain how the governance of the club was executed.  The president described the committee and board of governor system.
  16. There was a clear overall displeasure with the General Manager and suggestions that he be replaced.
  17. In the closing minutes someone said that with the heavy debt burden the club could no longer be run like a non-profit but had to be run like a business.

The additional “assessment” was rejected by the membership by a margin of about 30 votes.

Although this has been reviewed, please let us know if we missed any points from the meeting in the comment section below.

Vote “NO” and help make TAC better

A vote of “No” on the member assessment does not mean that nothing has to be done to put TAC back on a healthy financial footing.  It does mean that members do not believe at this time that enough has been done to tackle:

  • The Club’s excessively high operating costs
  • The costs of financing and outfitting the Azabudai site
  • Aggressive marketing of the club to prospective new members

Although the Club’s financial situation is grave, the crisis is not yet imminent.  The best proof of that is the timing of the proposed assessment. It would not go into affect in March of 2011, a full 9 months from now.  This timing confirms that we still have time to do this right and make sure that we create a better & healthier TAC.

Whereas we appreciate the many hours of work put in by the TWG, the Board, and Management, we, the undersigned, believe that not enough has been done to seize all opportunities to reduce costs & interest payments and to increase revenues. An assessment of higher fees to members, if truly necessary, should be a last resort, NOT a first band-aid to fix the problem.

Below are just a few examples of why we feel strongly that this is true.  (Italicized text is taken from the letter entitled, “Why Yes to the Assessment,” sent to all members on June 1, 2010.)

Operating Costs

“Reduced bonuses for management for a savings of 16 million yen”

In a situation where our Club is losing money, why would we pay any bonus to management? That is not sound business practice–particularly in a depressed economy where many business executives—some of them among our own membership–have had to forego bonuses.

“Reduced total expenses, including labor costs, by 179 million yen (6.2%) for the 12 month period ending this past March”

As our treasurer’s most recent report indicates, year-to-date April 2010, F&B labor costs are down a mere 1.8% (363 vs. 370 million Yen) vs. prior year. Allowing for that modest improvement, F&B labor expenses are still at an astonishingly high 83% of revenues. (363 vs. 435 million).

If you talk to people in the industry – and our membership list includes quite a number who are in senior positions – you will hear that the standard for labor cost is around 40% of revenues. That means that we are effectively paying twice as much for the service we are getting at TAC as we would at any good hotel or restaurant.

“… labor costs alone have been reduced by over 700million Yen (26%) relative to our original budgeting for the new Club.”

As per the data shown at the town hall meetings, the original annual revenue assumptions were 5.93 billion Yen, which now have shrunk to a mere 3.99 billion. We can probably all agree that the original budget for the new Club is no longer a meaningful yardstick. However, even allowing for that, when revenue drops by 2 billion Yen, cutting cost by 700 million Yen can hardly be considered an adequate countermeasure.  We firmly believe that–prior to a member assessment–both greater cost cutting and broader revenue generating actions should be considered.  In proposing these, there should be greater transparency and consistency in the presentation of numbers, and more member voices should be heard.

Interest Burden (DSCR)

In the town hall presentations we learned that our projected debt service (interest payments) will be 550 million Yen for full year 2012. This is based on a 4.5% interest rate. More than one member questioned the – for a Yen-based loan – unusually high interest rate. We have club members who have successfully negotiated much lower interest rates. A reduction of 1-2% is not unrealistic.

Lowering the interest rate by 2% would lighten our annual debt burden by 220 million Yen. This step alone would cover 80% of the 273 million expected from the increased assessment to members. We have members willing to assist in making this a reality.


A “Yes” vote will only put a band-aid on the problem without forcing underlying changes. Your “No” vote would give the membership at large the opportunity to push for greater accountability, transparency, and better governance on the part of Management.

The following actions can help us achieve that:

  • We propose the implementation of a member-driven “Action Committee” authorized to help Management and the Board identify and enact changes that would bring the Club back to financial health.  The club’s membership includes some of the most successful and most respected members of the Tokyo business community.  Using that talent and experience, we propose to bring together members’ expertise in:  F&B operations, hotel management, bank negotiations, and business restructuring.
  • We propose far greater transparency about all aspects of costs and revenues of Club operations.  We suggest immediately benchmarking the Club’s operations against relevant local and international standards.  We also suggest an easily understandable monthly status update available to the full membership, identifying:
  • We propose that the “Action Committee” suggested above review options for refinancing the Club’s loan, as well as reviewing outstanding purchases for the Azabudai site to determine where effective cost cutting might be made.
  • We propose that the Club not increase entry fees and monthly dues.  We believe this measure to be extremely counter-productive in this economy, since higher fees would most certainly deter new members from joining, and companies from sponsoring them.
  • We propose that the timing of the management restructuring program that was referred to in the “Why Yes to the Assessment” letter be moved forward.  The current proposal is that the review and implementation of the restructuring program take place once we complete the move to the new Club.  However, having independent, outside experts benchmark our Club management now—reviewing compensation and staffing levels against relevant industry standards–may conceivably save the Club considerable money by avoiding the establishment of a high cost management structure in the new Azabudai facility.
  • We propose that far more attention be given to marketing the club.  Instead of the current haphazard approach, a professional approach to growing membership is necessary, with clearly assigned responsibilities and new strategies developed with input from the membership at large.
    • Current financial forecasts
    • Performance against clear targets
    • New measures enacted and the financial impact of each
    • Assumptions used for the forecast model

Again, the undersigned Club members acknowledge and appreciate the many hours of work put in by the TWG, the Board, and Management in creating the proposals that have been presented to the membership for a vote.  However, we feel that there is much more work to be done to bring the Club back to a sustainable healthy financial footing. To do that, we must say “No” to an assessment that’s a mere band-aid fix and support an “Action Committee” of members with relevant professional expertise, to work with the Board and Management to tackle the issues that threaten the financial viability of our Club.


Your concerned fellow TAC members:

James AshleyGregory CarleyBryan GouldDieter Haberl
Gary LynchPaul MarquesCraig PeacockJeff Stone
Geoffrey WalkerTerry WhiteTom WilkenPatrick Wolfe
Vickie Paradise GreenBrendan MorrisRobert SewardJim Takagi
Rike WootenRoni & Mamoru OharaJesse GreenDavid Estrada

For a better TAC, please share this letter with your fellow club members and encourage them to attend the meeting on June 7th.


Visit the above site, and share your comments, concerns and ideas

Broken Promises & Fear Tactics: Member Response To June 1 TAC Board Email

From: Jerry McAlinn
To: Lance Lee <president@tac-club.org>
Cc: TAC Members
Sent: Fri Jun 04 23:01:00 2010
Subject: Some Decorum Please!

To the Signatories of the June 1st  TAC President’s email sent to all Members (please forward to the signatories and any interested members):

Ladies and Gentlemen,

I am very disappointed that you would resort to what appears to be a last minute, underhanded tactic in support of the ill-conceived proposal to assess members to pay for the new Club. I believe members will see the reference to a “reduction in service and the imposition of an array of fees” if the proposal is rejected for what it is, namely, a desperate ploy to scare members away from voting NO. If it is a case of “reality” as one Board member told me then I ask a simple question. Why weren’t members given the choices at the outset and why was this email sent only after the overwhelmingly negative response from members at the Town Hall Meetings and the email rebuttals from a group of concerned members?
As most of you know, I have been adamantly opposed to the assessment from the outset. My opposition was based on two important points. First, we promised members we would not increase dues or make a building assessment to pay for the redevelopment project.* Second, we promised that we would use our time at Takanawa to bring our costs in line with our income so we could comfortably pay our loan.

The proposed assessment breaks the first promise even before the doors are open at Azabudai. Why would any sensible member have confidence that the assessment will be temporary in light of the Board’s disregard for its own word? Does anyone besides me remember the famous John F. Kennedy quote: “Fool me once, shame on you. Fool me twice, shame on me.” I bet many of our members will remember it.

As the chair of the LRPC during the period when the redevelopment project was approved, I can say without fear of contradiction that we used the first promise, rightly or wrongly, to gain support for the redevelopment project and I do not doubt that many members would not have supported the project had we not done so. We made the promise intentionally, we knew what we were doing, and we should be honoring it, not tossing it aside as if our word does not matter.

As to the second promise, we have done precious little in my view to show the members that we have the will and the ability to achieve the cost reductions that are necessary before demanding more money from members to avoid a “crisis.” I have not spoken to a single member who believes what the Board has said in this regard. Credibility is a precious commodity that should not be squandered. How can there be any credibility to the Board’s position in light of the numbers, which speak volumes. Our payroll at the end of the last fiscal year stood at approximately 1.85 billion yen against operating revenue that is substantially less than 1 billion yen and falling. These figures are grossly out of line with the PKF recommendation, adopted by the Board, to keep payroll at no more than 60% of revenue, exclusive of entrance fees.

Furthermore, claiming a 26% decrease in proposed “increases” to payroll at the new Club as a cost reduction is like telling members “don’t worry we are drinking Krug champagne instead of Dom Perignon!” Asserting that there has been a hiring freeze in place since April of 2009, when a new expat was hired recently for the Rec Desk (whom I am told is in charge of “Merchandise”), makes me shake my head in bewilderment! You have to be sitting on the other side of the table to understand how absurd these arguments sound to anyone who is even remotely paying attention.

You are correct that whether or not the assessment passes will be up to the membership. I have already voted NO and I have privately urged friends to do the same for the above and many other additional reasons. I strongly believe the proposal deserves to be defeated soundly on the merits so that sound financial management can be restored to the Club.

The Board presented its position and the members reacted to it at the Town Hall Meetings. Had it been left at that I would not be writing this email. However, when you sent an email blast (using the Club mailing list) to all members threatening them with “cuts to service and new or additional fees for existing activities such as parking, recreation, and food and beverage…” I think you stepped over the line of fairness and decorum. It is a sad day to see the Club sink to such depths just to win a vote. Do you have so little confidence in the merit of your arguments that you did not believe you could win without throwing in some last minute fear? This kind of tactic does immeasurable damage to the democratic spirit of the Club. Regardless of how the referendum turns out, it will be years before these self-inflicted wounds are healed and that is a pity.


Jerry McAlinn

*Here is the relevant language from the Redevelopment Project Brochure:

“Financial analysis, endorsed by the Club’s Finance Committee, shows the redevelopment project to be affordable without the need to increase Club dues.” Page 5, Summary Section


“The Board and management believe that the redevelopment project, as currently conceived, can be implemented without having to increase dues on existing and new Members….

“Moreover, no building assessment, dues increase applicable to existing Members, or mandatory bond issue is anticipated, or included in the financial forecasts. The Board has considered a number of contingency options to deal with a deterioration in the financial condition of the Club resulting from either unforeseen factors in the redevelopment process or from factors unrelated to the redevelopment. The Board believes that multiple options exist for cutting expenses or raising revenue to deal with such a situation without the need for a dues increase on existing Members, and without endangering the fiscal stability of the Club.” Page 16, Section on Entrance Fees and Dues

Membership Feedback Is Flowing In

Dear TAC Fellow Members,

We just opened and kicked off this website yesterday (4 June).  Already we are seeing there is widespread shared concern around the issues that we have raised.

Letters and email have been going to board of governors from May. You can see those originals below (here and here).  There are some excellent suggestions that should be discussed.

These messages have gone unanswered by our board.  Members at the Friday evening Townhall (14 May) also commented that they had not received responses to their written suggestions or questions.

Why is there such a push to vote without taking advantage of the time to assure we fix the TAC financial management trouble?

If you have also sent a suggestion to the Board and would like to have that posted, please add it as a comment of this post and we will add it as a separate post on MABT site here.  We would like to hear your ideas.

To a better Tokyo American Club!

The MABT Team

Mr. President, Have We Evaluated The Options?

Letter to Tac President  1 May 2010

Author : Rike Wootten

Dear Editor,
This is a letter that I sent to Lance Lee on May 21.

Dear Lance,

I am writing this note today as a concerned member of the Tokyo American Club.

The recent referendum that is now in front of the general membership for vote is a concern.  TAC is facing a serious financial situation, and we are being presented with a proposal to increase fees in a very difficult economic environment.  Few, if any of our members, are experts in the management of a club such as TAC, yet we are being put in the position as owners of the club to make decisions as if we are.  I would like to suggest that we postpone the referendum that is scheduled until such as time as the following idea can be complete.  It should not take longer than a few months, allowing the referendum to be completed well before the move to the new club, if ultimately we need it at all.

The Tokyo American Club should issue a Request for Proposal from hotel or club management companies, such as Hilton, Hyatt and Marriott that would cover managing the entire operations of our club.  Our day to day operations are similar to that of a first class hotel, outside of room management.  Restaurants, sports facilities, bars, concierge etc., are all similar to that found in hotels.  By doing so, we should expect the following benefits to occur:

a)  Better purchasing power as the groups have multiple operations in Japan
b)  Lower operating costs as we have the ability to leverage centralized management that these chains would offer
b)  Confirmation that our club is being managed at competitive international standard prices
c)  Knowledge that TAC is keeping with international trends

Naturally if our current club managements cost are competitive, we do not need to go beyond soliciting bids.  Whereas it may be disruptive to existing staff to do this type of RFP, it should not be a major concern if TAC is being run as efficiently as possible.   Also if any management company were to replace our existing management, they would need to keep the vast majority of staff in any event.   I would suggest that this RFP be done every several years to confirm that TAC is getting the best value from providers, and that it provides members with transparency over the club operation.  To my knowledge, most major hotel contracts run between 5 and 20 years.

I am also aware that there has been concern that management salaries are above the industry norm.  I do not believe it is appropriate to have complete transparency over salaries, but would suggest that we hire a firm such as McLagan Associates that specialize in compensation.  They should be in a position to advise if our compensation packages are competitive with those in similar positions/industries.

I am and have been very satisfied with TAC over the years.  But the times ahead are likely to be difficult ones, and we should ensure that we are always getting the best value we can for our members.  It is not the time to raise fees until all avenues have been exhausted.


Rike Wootten
Member since 1995

Penalizing Existing Members- Letter To TAC Board Of Governors

From: Chris Garton
Sent: Tue 5/4/2010 5:28 PM
To: Lee, Lance
Cc: Joseph, Linda
Subject: Increase in charges

Dear Mr. Lance Lee, President Tokyo American Club

In reading your letter dated 30 April 2010 I was surprised to read there is a proposal to additionally charge existing members Yen 9,500 on top of the current monthly membership charge .
We are currently paying Yen 364,000 per year ( 14 x Yen 26,000 ) and you propose to increase this to Yen 497,000 per year
( 14 x 35,500 ) the percentage increase is huge ?

I feel you are penalising existing members who will have had ( by January 2011 ) over 3 years at a substandard club while the existing facility has been redeveloped . We have already not been offered the facility that many of us expected when we joined the Club because of the 3 year temporary re-location and now as you move back to Azabudai .

If you price the membership and monthly cost at a level that is this high, then surely, it is unlikely you will attract sufficient new members .

I am also concerned that any additional charges remain beyond the 12 month period you have suggested if the finances in 2011 do not improve. I also believe the terminology
” Temporary Monthly Assessment ” is misleading and you should have written this clearly and unambiguously .


Chris Garton