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 5: Corporate Governance and Closely-held Companies in Japan: The Untold Story

Tomoyo Matsui


Tomoyo Matsui* Most of the English literature on Japanese corporate governance focuses on large, publicly listed companies. For example, the current debate over the erosion or the endurance of the ‘J-firm’ – characterised by boards of internally promoted directors, main bank monitoring, keiretsu cross-shareholding arrangements, low-level M&A activity and lifelong employment (Aoki, 1988) – revolves around governance features typically observed in large-scale, publicly listed and internationally renowned corporations. Yet listed companies account for only a fraction of all business enterprise in Japan. As of 30 November 2007, there were 4,000 companies listed on one of Japan’s six stock exchanges.1 By contrast, surveys by the Ministry of International Affairs and Communication (MIAC), 2004a; 2004b) show that there are over 5 million unincorporated businesses across the country, 2.86 million of which own offices or factories. A survey of taxation records by the National Tax Agency (NTA, 2005) reveals that there are 2.59 million incorporated entities. Of these, 1.45 million are private, closely-held (or ‘limited liability’) companies (yugen kaisha)2 and a further 1.04 million are companies limited by shares (or ‘joint stock’ corporations, kabushiki kaisha). Although these statistics derive from surveys conducted at different times and with * Research for this chapter was supported by and completed during a Japan Society for the Promotion of Science (JSPS) Postdoctoral Fellowship for Research Abroad. 1 According to the public websites of the relevant exchanges, 2,409 companies are listed on the Tokyo Stock Exchange, 1,065 on the Osaka Stock Exchange, 976 on JASDAQ, 392...

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