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

12 Replies to “Vote “NO” and help make TAC better”

  1. Great job!

    I’m fully behind you 100%.
    Ken Imai


  2. Hi, I just recieved this mail from a fellow member and think the points raised are relevent.

    Quick question, has this been translated and distributed in Japanese. With 1/3 of members Japanese, it’s this silent group that might push the yes vote through.

    Thanks again for the points raised. Great food for thought.

    Kind regards
    Vikram J Shahani

    > Sent from my mobile device

  3. I would like to submit that what our Club needs now is a reasoned and structured plan to address each of the shortfalls noted in the sequestered consultant report, as well as a sense of strategic direction. A knee-jerk “temporary” assessment meets neither of those criteria.

    The Club houses some extraordinary talent among its members, many of whom I’m sure would offer time and energy pro bono to get to a place where clear progress can be shown. Let’s harness that talent.

    The Club is owned by its members, not its management. The current approach speaks more to mantaining the status quo than effecting real change. Staff deserve a focused and articulated direction forward – most today do not understand the issues, nor the proposed solutions.

    What the BoG and management should seek to do is provide transparency and openness – any attempt to stifle discussion or guillotine debate demonstrates nothing more than a desire to preserve the standing of a privileged elite. And that defines a oligarchy, not a club.

  4. 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

  5. I am wondering why we have a GM and an Assistant GM. What benefits do these guys get and how much are we paying them? From what I can see, they aren’t even bilingual.

  6. It is proving remarkably easy to do some DIY benchmarking of the TAC financials. When visiting restaurants and other hostelries, ask for the manager and ask him directly what his labor costs are as a proportion of revenues. Most of them seem to have this ratio memorized and are not at all shy about sharing the data. Over the last couple of days I have come up with the following:-

    Hobgoblin Kobe (very comparable in capacity to the Traders Bar) 23%.

    Westin Hotel Tokyo: Around 30-40% over time rising towards the top end of that range with the recession.

  7. At the May 14th, 2010 Townhall meeting, I asked why we have 7 full-time Human Resource staff at the club. I also asked why there were two full time IT staff. Surely this could be outsourced to save about $2M USD at a minimum.

    I would like to know more details about the cost-cutting and why we aren’t outsourcing these areas. Someone else suggested F&B could be outsourced as well. The Roppongi Hills Club is a great example of how well that is going with a hotel running the Food and Beverage for Mori Building.

    If we aren’t managing our costs in HR and IT, I would guess we’ve got a lot of other cost issues with TAC staff.

  8. The proposed levy is only ONE of the pieces of the jigsaw puzzle that the TWG and BOG stated as a requirement to meet the EBITDA hurdles. The other pieces were membership increase and labor cost reductions.

    Even if the levy does get up the membership piece is also critical. How on earth does the club expect to get USD3m from new memberships over the coming 12 months if the sales pitch is a 30% increase in monthly dues?

    The sirtuation has just been allowed to deteriorate over the past 3 years to the point where the club is facing bankruptcy.

    The minute the balance sheet changed we stopped being a club and it became absolutely imperative that the place be run as a business. By any measure you like,this has not been done.

    History is well documented on a blog set up some years back by other concerned members.

  9. I also agree with the points made and proposed action steps of the MABT group and will support a NO vote. I was particularly interested in the “greater transparency” recommendation. For too long have rumors, innuendo, and gossip circulated to the effect that many TAC purchases, contracts and service agreements were awarded to members or “associates” of members” based on an entrenched system of cronyism. A forensic audit of certain transactions, particularly those related to glossy printing and publications that seemed to serve little purpose, in the 1990-2007 period would clear up any possible misunderstandings or misconceptions as to how our fees are being disbursed.

  10. I am wondering why we have a GM and an Assistant GM. What benefits do these guys get and how much are we paying them? From what I can see, they aren’t even bilingual.

  11. I entirely agree with your perspective – please let me know if there is anything one can do to help stop this ludicrous and irresponsible charade.

  12. Thank you so much for taking leadership on this. We really need the TAC to be run like a business. What can I do to help?

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