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 6: Panacea or Placebo? An Empirical Analysis of the Effect of the Japanese Committee System Corporate Governance Law Reform

Peter Lawley


* Peter Lawley On two significant occasions in its modern history, Japan has undertaken law reform on a massive scale and at a blistering pace. In the 1850s, Japan embarked on the Meiji Restoration and achieved in thirty years a level of industrial development it had taken Western powers nearly a century to attain (Jansen, 1995). Beginning in the 1950s, post-war Japan transformed itself from a nation bombed into third-world status into the economic envy of the world only a few decades later (Dower, 1999). Over the past fifteen years Japan has been attempting to repeat this feat. The collapse of the Japanese economy in the early 1990s and its stagnation during the ‘lost decade’ (Milhaupt, 2006; Nottage and Wolff, 2005) has spurred rapid and extensive corporate law reform. In the field of corporate governance, a number of these reforms fill the gaps left by the decline of traditional monitoring mechanisms (Gilson and Milhaupt, 2005, pp. 347–52; Puchniak, 2003, pp. 48–9). Some commentators argue that the nature of these replacement mechanisms signals a shift toward a US-style corporate governance environment (Kelemen and Sibbit, 2002; Hansmann and Kraakman, 2001, pp. 455–6; compare generally Nottage, Chapter 2 in this volume). A significant step in that direction was the enactment in 2002 of legislation giving large corporations the option of adopting a US-style committee corporate governance structure. The committee system requires a corporation to establish committees for audit, remuneration, and nomination within its board of directors. In the months before and...

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