Country Analyses, Second Edition
Edited by Christine A. Mallin
Christina L. Ahmadjian and Ariyoshi Okumura* INTRODUCTION Since the early 1990s, corporate governance in Japan has been in the process of transformation. The post-war system of governance, marked by the balance of a set of intertwined stakeholders – labour, management, capital, buyers and suppliers, and the state – has been unravelling as foreign investors pressure firms to adopt more ‘Anglo-American’ practices and Japanese corporate executives institute more flexible and fast-paced decision-making systems. As the pillars on which the Japanese system was based – the main bank system and bank-based finance, the permanent employment system and cross-shareholding – weaken, the post-war system has become obsolete, leaving a ‘corporate governance vacuum’ that a new system has yet to fill. In some areas, changes have been striking. Managers have shifted their attention towards delivering a return on equity investment to shareholders. The old consensus-based system of decision-making has given way to stronger CEOs, as well as greater autonomy for divisions and business units. New accounting regulations have increased reporting transparency and loosened the obligational networks of cross-shareholding. Foreign investors hold substantial stakes in an increasing number of firms. In other aspects, however, changes are less pronounced. Independent directors are still rare. Executive compensation remains at moderate levels, and senior executives are cognizant of the need for balance between their compensation and that of their employees. While restructuring is widespread, Japanese firms have yet to adopt US values that justify downsizing in the interests of shareholder value. Furthermore, even as of 2010, the mention of the words ‘corporate...
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