CEO Behind 5,500% Stock Gain Says His Secret Is Raising Salaries

Masaru Tange, 46, says his business model is an attempt to remove inefficiencies in Japan's software industry.

Masaru Tange says the strategy that turned his company into one of Japan's best-performing stocks may be surprising: He buys smaller firms and boosts their workers' pay. Tange's Shift Inc., a software tester, acquires other businesses near the bottom of the industry supply chain and raises their engineers' salaries. He says he's able to do this and still charge competitive prices by cutting out layers of companies that serve as middlemen in the outsourcing process. And having more workers leads to higher sales. Shift's shares have risen more than 5,300% since it went public in 2014, the second-best performance on Tokyo's benchmark stock index. The company's market capitalization has surged to about $2.3 billion, pushing the value of Tange's 33% stake to about $745 million. Tange, 46, says his business model is an attempt to remove inefficiencies in Japan's software industry, where layers of subcontractors take cuts on orders before passing the work to another company below. It's also, he says, a break from the M&A strategy of buying a business and looking to reduce costs.