Corporate Governance in the 21st Century

Corporate Governance in the 21st Century

Japan’s Gradual Transformation

Corporations, Globalisation and the Law series

Edited by Luke Nottage, Leon Wolff and Kent Anderson

The ‘lost decade’ of economic stagnation in Japan during the 1990s has become a ‘found decade’ for regulatory and institutional reform. Nowhere is this more evident than in corporate law. In 2005, for example, a spate of reforms to the Commercial Code culminated in the new Company Act, a statute promising greater organisational flexibility and shareholder empowerment for Japanese corporations competing in a more globalised economy. But does this new law herald a more ‘Americanised’ system of corporate governance? Has Japan embraced shareholder primacy over its traditional loyalty to other key stakeholders such as ‘main banks’, core employees, and partners within diffuse corporate (keiretsu) groups? This book argues that a more complex ‘gradual transformation’ is unfolding in Japan – a process evident in many other post-industrial economies.

Chapter 1: Introduction: Japan’s Gradual Transformation in Corporate Governance

Luke Nottage, Leon Wolff and Kent Anderson

Subjects: asian studies, asian business, asian law, business and management, asia business, international business, law - academic, asian law, corporate law and governance


Luke Nottage, Leon Wolff and Kent Anderson Like other major post-industrial democracies around the turn of the 21st century, Japan is undergoing a ‘gradual transformation’ in socio-economic relations (Streeck and Thelen, 2005). Unlike the ‘great transformation’ that engendered the welfare state in the mid-20th century (Polanyi, 1944), the current shift is back towards more market-driven governance. Yet entrenched legal and social norms and institutions mitigate the pace and influence the direction of this shift. Consequently, the ways in which it occurs and the overall extent of the transformation vary among countries, although some identifiable patterns are emerging from this transition worldwide. One common but relatively low-key means of effecting a ‘gradual transformation’ is ‘layering’. This means adding new institutions to see whether innovations will percolate through to other fields (Streeck and Thelen, 2005a). In policy initiatives and practices in Japan, layering seems particularly popular. One recent example is the superimposition of new postgraduate ‘Law School’ (hoka daigakuin) programs on top of undergraduate legal education since 2004. This reform is aimed at boosting the quality and quantity of law graduates able to qualify as bengoshi lawyers, public prosecutors and judges (Miyazawa, 2007). A second example of newly layered institutions is the greater use of lay participation in legal arenas. For example, in 2009 Japan will introduce a quasi-jury system (saibanin seido) for serious criminal trials. This may, as promised by the reformers, have much broader ramifications for both criminal justice and civic engagement (Anderson and Nolan, 2004; Ambler, 2007). A third...