Corporate Governance in Japan

Corporate Governance has been a much talked about topic in Japan since the Olympus scandal (followed by the Daio Paper scandal) surfaced in the last quarter of last year. The Tokyo Stock Exchange in an effort to restore confidence in Japanese companies has issued a “Revisions to Listing Rules Regarding Corporate Governance to Restore Confidence in the Securities Market” comment with a call for comments (see

Non-profit, non-governmental agencies like Japan Corporate Governance Network (CG Net), which was created from the merger of Japan Independent Directors Network, Japan Corporate Governance Forum and Japan Corporate Governance Research Institute Inc., are advising on how to improve corporate governance in Japan. Another important organization, The Board Director Training Institute of Japan, focuses on improving trust between corporations and the public through training and information sharing through their web site.

Simply put, lack of transparency into how a corporation is operated and safeguards against things like misappropriation of funds, contribute to a loss in confidence in investing in that market. Japan has a history of creating structures in which a particular person or group can control the whole entity without a majority. Employees of the company, with the unwritten promise of life time employment, do not raise any concerns nor do other stake holders like investors who may be large financial institutions that have not questioned what goes on (or what goes wrong). Well until now. The question is whether things will change on their own, or will authorities need to provoke a change in behaviour to insure corporations at the board level are governed properly.

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