Corporate Governance in the 21st Century
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Corporate Governance in the 21st Century

Japan’s Gradual Transformation

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.
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Chapter 2: Perspectives and Approaches: A Framework for Comparing Japanese Corporate Governance

Luke Nottage


* Luke Nottage In 2002, Japan began to emerge from its decade-long economic malaise (Katz, 2003; Ito et al., 2005). With the US confronting a rash of corporate collapses that raised concern about the merits of shareholder primacy and market discipline (Hill, 2005), Japan’s economic revival posed an intriguing set of questions. Had Japan engineered its way out of recession by refashioning its laws and economic institutions along more American lines (Kelemen and Sibbett, 2002)? Alternatively, did the economic recovery of ‘Japan Inc.’ provide evidence of the robustness of its broader, stakeholder-oriented system of governance (Collison and Kozuma, 2002)? Does Japan’s experience, in short, reflect the triumph of US-style shareholder-oriented governance, or the endurance of Japan’s stakeholder-based model of capitalism (Nottage and Wolff, 2005)? This chapter addresses these questions. It canvasses the burgeoning literature that seeks to describe and evaluate changes to Japanese corporate governance law and practice. Other contributors to this volume delve further into specific governance issues in Japan: lifelong employment (Wolff), ‘main bank’ monitoring (Puchniak), control and conflicts in closely-held companies (Matsui), management boards and committees (Lawley), and mergers and acquisitions (M&A: Dooley, Pokarier, and Kamiya with Ito). This chapter addresses bigpicture trends. One reason is that this is the literature most non-Japan specialists are likely to encounter when engaging in comparative corporate governance research. It is also replete with widely divergent assessments of the transformation of Japanese corporate governance since the 1990s – so much so, that the literature is more likely to confuse than clarify. This...

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