Contracts, Markets, and Laws in the US and Japan
Edited by Zenichi Shishido
Chapter 14: Stagnant Japan? Why outside (independent) directors have been rare in Japanese companies
In most developed countries, listed companies usually have a board of directors that includes several outside (and independent) directors as core members. A board comprised in this way does not make decisions about day-to-day operations of the company; its main role is to supervise the management of the company. This paradigm is called the “monitoring model” of a board of directors. In Japan, however, the vast majority of board members are insiders. They are former employees who were promoted to the position of directors. To date, neither the law nor the listing rules have required listed companies to appoint outside directors, though a listing rule that urges listed companies to appoint an outside director is about to come, as will be shown in section 14.3 of this chapter.
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