|Title:||The board as an example of Japanese corporate governance system hybridization: An outline of the problem|
Vol. 13, No 3, 2020
Published date: 09-2020 (print) / 09-2020 (online)
Economics & Sociology
ISSN: 2071-789X, eISSN: 2306-3459
University of Gdańsk
|Keywords:||corporate governance, systems, board of directors, board of statutory auditors|
|JEL classification:||G30, G34, G38, K20, M14|
This paper argues that hybridization is a process that has been going on for decades in Japan and has contributed to improvement of Japanese corporate governance, and that the regulations regarding the board of directors are a good example of this hybridization process. The paper outlines the main changes within Japanese corporate governance system and identifies their determinants. Three main waves of hybridization of Japanese regulations and corporate governance are identified, along with three functioning structures of Japanese boards, and their strong and weak points. The company with statutory auditors (with Kansayaku Board), the company with Three Committees - nomination, audit, and remuneration - and the company with an Audit and Supervisory Committee are presented as evidence of this hybridization process. The paper addresses the research question: why has hybridization rather than convergence resulted in an improvement of Japanese corporate governance? The method of critical analysis is applied to academic literature sources, legal acts, and corporate governance regulations. The article contributes to a reduction in the research gap in Polish academic literature in the field of Japanese corporate governance, especially with respect to Japanese boards.
1. Aoki, M., Patrick, H. T. (1994). The Japanese main bank system: its relevance for developing and transforming economies. Oxford [England], New York: Oxford University Press.
2. Aoki, M. (1990). Toward an Economic Model of the Japanese Firm. Journal of Economic Literature Vol.28(1), 1-27.
3. Aoki, M., Dore, R. P. (1994). The Japanese firm: the sources of competitive strength. Oxford [England]; New York: Oxford University Press.
4. Ahmadjian, C.L. (2007). Foreign investment and corporate governance in Japan, in: Corporate governance in Japan. Institutional change and organizational diversity. (eds) M. Aoki, G. Jackson, H. Miyajima. Oxford, Oxford University Press.
5. Ahmadjian C.L. (2008). Japan’s Evolving Corporate Governance System Is There a New Model of Japanese Management? APAN SPOTLIGHT, May / June. https://www.jef.or.jp/journal/pdf/159th_cover02.pdf.
6. Ahmadjian, C. L., Okumura, A. (2011). Corporate governance in Japan, in: Handbook on International Corporate Governance (ed.) C. Mallin, Edward Elgar, Cheltenham, UK.
7. Allen F., Zhao M. (2007). The Corporate Governance Model of Japan: Shareholders are not Rulers. Franklin Allen University of Pennsylvania and Bentley College, May, 1-17. http://finance.wharton.upenn.edu/~allenf/download/Vita/Japan-Corporate-Governance.pdf
8. Aronson, B. E. (2014). Fundamental Issues and Recent Trends in Japanese Corporate Governance Reform: A Comparative Perspective. Hastings Business Law Journal, June 10. https://ssrn.com/abstract=2448076.
9. Augilera R. V., Jackson, G. (2002). Hybridization and Heterogeneity Across National Models of Corporate Governance. Economic Sociology Vol3(2), 17-26.
11. Aguilera R.V., Jackson G. (2010). Comparative and International Corporate Governance. The Academy of Management Annals Vol 4, No 1.
12. Aguilera R.V., Desender K.A., Lopez-Puertas, Lamy M., Ho Lee J. (2017). The governance impact of a changing investor landscape. Journal of International Business Studies No 48, 195–221.
13. Aguilera R.V., Jackson G. (2018). Corporate Governance –Business key messages. The Business and Industry Advisory Committee to the OECD, April. http://biac.org/wp-content/uploads/2018/04/FIN-2018-04-10-Corporate-Governance-Strategy-Paper16.pdf.
14. Bebchuk L.A., Roe M.J. (2004). A theory of Path Dependence in Corporate Governance and Ownership, in: Convergence and Persistence of Corporate Governance Systems. (eds) Gordon J., Roe M. Cambridge University Press.Cambridge. https://www.researchgate.net
15. Bird A. (2005). Encyclopedia of Japanese Business and Management. Routledge.
16. Braendle U. C., Noll J. (2006). On the Convergence of National Corporate Governance Systems. The Journal of the Interdisciplinary Economics, 17(1), 83-97. https://journals.sagepub.com/doi/abs/10.1177/02601079X06001700105
17. Branson D.M. (2001). The Very Uncertain Prospect of Global Convergence in Corporate
18. Governance. Cornell International Law Journal, Vol.34 (2), 322-362. https://scholarship.law.cornell.edu/cilj/vol34/iss2/2
19. Braucher, R. (1961). Commercial Law in Japan and America. American Bar Association Journal Vol.47( 2), 150-155. www.jstor.org/stable/25721471
20. Carney M, Estrin S., Liang Z., Shapiro D. (2018). National Institutional Systems, Foreign Ownership and Firm Performance: The Case of Understudied Countries. Journal of World Business. Elsevier, 54(4), 244-257 https://doi.org/10.1016/j.jwb.2018.03.003
21. Chizema A., Shinozawa Y. (2012). The ‘Company with Committees’: Change or Continuity in Japanese Corporate Governance? Journal of Management Studies, 49 (1), 77-101.
22. Commercial Code. (2018). Act No. 48 of March 9, 1899 amended Act No.29 of 25 May 2018.https://www.loc.gov/law/foreign-news/article/japan-commercial-code-amended-language-modernized/.
23. Companies Act. (2006). Act No. 86. Retrieved February 14. 2020 http:///www.japaneselawtranslation.go.jp/law/detail/?id=2035&vm=04&re=02
24. Corporate Governance in Japan. (2017). (eds) Aoki M., Jackson G., Miyaajima H. Edward Elgar (Cambridge University Press), Cambridge.
25. Corporate Governance in the 21st Century: Japan's Gradual Transformation. (2009). (eds) Nottage L., Wolff K., Anderson Edward Elgar Publishing.
26. Corporate Governance Watch. (2018). Report by the Asian Corporate Governance Association and CLSA. file:// D:/Users/wzr/Downloads/CG%20Watch%202018.pdf
27. Denis D. K., McConnell J. J. (2003). International Corporate Governance. The Journal of Financial and Quantitative Analysis, 38 (1), 87-110. March. https://www.jstor.org/stable/4126762
28. Dore R. P. (2000). Stock Market Capitalism: Welfare Capitalism: Japan and German Versus the Anglo-Saxon. Oxford University Press, Oxford. 10.1093/acprof: oso/9780199240623.001.0001
29. Drobetz W., Momtaz P.P. (2019). Corporate Governance in the European M&A Market. Finance Research Letters, Elsevier. https://www.sciencedirect.com/science/article/abs/pii/S1544612318306421?via%3Dihub
30. Eberhart, R. (2012). Corporate governance systems and firm value: empirical evidence from Japan's natural experiment. Journal of Asia Business Studies, 6, (2), 176-196. https://www.deepdyve.com/lp/emerald-publishing/corporate-governance-systems-and-firm-v
31. Gilson, R. J., Roe, M. J. (1993). Understanding the Japanese Keiretsu: Overlaps between Corporate Governance and Industrial Organization. Yale Law Journal, 102, (4). Stanford Law and Economics Olin Working Paper; Harvard Public Law Working Paper. SSRN: ht
32. Gilson R.J. (2004). Globalizing Corporate Governance: Convergence of Form or Function, in: Convergence and Persistence in Corporate Governance. (eds.) Gordon J. N., Roe M. J., Harvard University, Massachusetts.
33. Gilson R.J., Milhaupt C.J. (2005). Choice as regulatory reform: the case of Japanese corporate governance. American Journal of Comparative Law, Issue 53, 343–377.
34. Gordon J.N., Ringe W.G. (2015). The Oxford Handbook of Law and Governance. Oxford University Press, Oxford.
35. Gordon, J.N., Roe M. (2004). Convergence and persistence in corporate governance. Cambridge University Press. 10.1017/CBO9780511665905. The%20Oxford%20Handbook%20of%20Corporate%20Law%20and%20Governance%2.
36. Goto, G. (2013). The Outline for the Companies Act Reform in Japan and Its Implications. Journal of Japanese Law, 35, p.p.13-38. file:///D:/Users/wzr/Downloads/22-Artikeltext-22-1-10-20141212.pdf.
37. Hansmann H., Kraakman R. (2000). The End of History for Corporate Law. Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series. Paper 280, 1-34. http://lsr.nellco.org/harvard_olin/280
38. Haxhi I., Ees H.V. (2010). Explaining diversity in the worldwide diffusion of codes of good governance. Journal of International Business Studies, 41 (4), 710- 726.
39. Hattori R., Maeda E. (2000). The Japanese Employment System. Bank of Japan Monthly Bulletin. https://www.boj.or.jp/en/research/brp/ron_2000/data/ron0001a.pdf
40. Hard decisions. (2018). Special Report Asia faces tough choices in CG reform. Asian Corporate Governance Association and CLSA Limited. file:///D:/Users/wzr/Downloads/CG%20Watch%202018%20(1).pdf.
41. Hopt Klaus J. (2011). Comparative Corporate Governance: The State of the Art and International Regulation. The American Journal of Comparative Law 2011, 59 (1), 1-73.
42. Hoshi, T. (1994). The Economic Role of Corporate Grouping and The Main Bank System in: The Japanese Firm: The Sources of Competitive Strength. (eds) Aoki M., Dore R. Oxford: Oxford University Press, 285-309.
43. Hoshi T., Kashyap A. (2001). Corporate Financing and Governance in Japan. The MIT Press.
44. Hough J. E., Yakura Ch. (2016). Japan Bar Association Issues New Anticorruption Compliance Guidelines. Morrison & Foerster LLP | mofo.com.
45. Inagami T., Whittaker D.H. (2005). The new community firm: Employment, governance, and management reform in Japan. Cambridge University Press, Cambridge. 10.1017/CBO9780511488610.
46. Itami, H. (2005). Revision of the Commercial Code and Reform of the Japanese Corporate Governance. Japan Labor Review, 2. Tokyo.
47. Jackson G., Miyajima H. (2007). Introduction: The Diversity and Change of Corporate Governance in Japan. 10.1093/acprof: oso/9780199284511.003.0001.
48. Jacoby, S. M. (2002). Corporate Governance in Comparative Perspective: Proposals for Convergence. Comparative Labour Law & Policy Journal, 22.
49. Japan Corporate Governance. (2020). Corporate Governance Chapters. Nishimura & Asahi. The Legal 500. https://www.legal500.com/guides/guide/corporate-governance/.
50. Jeffers, E. (2005). Corporate governance: Toward converging models? Global Finance Journal 2005, 16 (2), 221-232.
51. Kanda H. (2000). Situations in Japan, Company Law Reform, in: OECD Countries. A Comparative Outlook of Current Trends. Stockholm, Sweden 7-8 December. https://www.oecd.org/daf/ca/corporategovernanceprinciples/1931692.pdf.
52. Kansaku H., K. Takei K. (2012). Background and Goals New Recommended English translation of “Kansayaku” and” Kansayaku-kai”. Japan Audit & Supervisory Board Members. Association. http://www.kansa.or.jp/en/New_Recommended_English_translation_of_Kansayaku_
53. Karolyi G.A. (2016). The gravity of culture for finance. Journal of Corporate Finance 2016, 41(C), 610-625. www.elsevier.com/ locate/jcorpfin
54. Kensy, R. (2001). Keiretsu Economy – New Economy? Japan’s Multinational Enterprises from a Postmodern Perspective. New York: Palgrave.
55. Khanna T., Palepu K. (2004). Globalization and Convergence in Corporate Governance: Evidence from Infosys and the Indian software Industry. Journal of International Business Studies, 35, 484-507.
56. Khanna T., Kogan J., Palepu K. (2006). Globalization and similarities in corporate governance: a cross-country analysis. The Review of Economics and Statistics, 88 (1), 69-90.
57. Kobayashi A. (2015), Kaisha-ho Nyumon [Introduction to Corporation Law], Tokyo: Daiichi Hohki.
58. Koyama Y. (1991). Japanese Economy: Another Aspect of Development. The Journal of Economics Niigata University, 51.
59. Koyama Y. (2003). Bad Loans Problem and Banking System Crisis in Japan. European and Asian Experiences and Public Policy Consideration, University of Greenwich Business School, London, July.
60. Kwok-bun, Ch., Peverelli P.J. (2010). Cultural Hybridization: A Third Way Between Divergence and Convergence. The Journal of New Paradigm Research .66 (3-4), 219-242. https://www.tandfonline.com/doi/abs/10.1080/02604021003680479?journalCode=gwof20.
61. Kuepper J. (2017). Japan's Lost Decade: Brief History and Lessons. International Investing, https://www.thebalance.com/japan-s-lost-decade-brief-history-and-lessons-1979056.
62. La Porta R., Lopez-De-Silanes F., Shleifer A. (1999). Corporate ownership around the World, Journal of Finance, 54 (2), 471-517 .
63. Larcker D., Tayan B. (2011). Corporate Governance Matters. A Closer Look at Organizational Choices and Their Consequences, Pearson Education Inc.
64. Lee Ch., Allen J. (2013). The Roles and Functions of Kansayaku Boards Compared to Audit Committees. Asian Corporate Governance Association (ACGA) Hong Kong https://www.acga-asia.org/upload/files/advocacy/20170330102329_21.pdf
65. Lee J. (2014). Hybrid Corporate Governance: The Case of Asia. Review of Contemporary Business Research, 3(3 & 4), 21-36.
66. Licht A. (2001). The mother of all path dependencies toward a cross-cultural theory of corporate governance system. Delaware Journal of Corporate Law, 26 (1), 147-205. https://ssrn.com/abstract=266910.
67. Lovels H. (2016). Japanese Bar Association Publishes New Guidance on Foreign Bribery Prevention, (3.06) https://www.lexology.com/hub/japan.
68. Masuda E., T. Yoshida T. (2016). New corporate governance structure: Company with audit and supervisory committee. Masuda & Partners Law Office in Tokyo. https://www.iflr1000.com/NewsAndAnalysis/New-corporate-governance-structure-Company-with-audit-and-su
69. Mayer C. (1997). Corporate Governance, Competition and Performance. Journal of Law and Society, 24 (1), 152-176.
70. Milhaupt C., J. (2003). A Lost Decade for Japanese Corporate Governance Reform? What’s Changed, What Hasn’t, and Why? Columbia Law School, Centre for Law and Economics Working Paper, July, 1-35.
71. Miyajima H. (2012). Institutional Change and its Economic Consequence in Japan: The bright and dark sides of hybridization. RIETI Discussion Paper Series 12-E-049, 1-43. https://www.rieti.go.jp/jp/publications/dp/12e049.pdf.
72. Morck R., Nakamura M. (2007). Business Groups and the Big Push: Meiji Japan’s Mass privatization and Subsequent Growth. Cambridge University Press, 8 (3), 543-601, September. Available at SSRN: https://ssrn.com/abstract=2269969.
73. Miyashita, K., Russell, D. W. (1994). Keiretsu: Inside the Hidden Japanese Conglomerates. New York: McGraw-Hill, Inc.
74. Morikawa, H. (2002). Zaibatsu: The Rise and Fall of Family Enterprises Y Groups in Japan. Tokyo, University of Tokyo Press.
75. Nakamura, M. (2011). Adoption and Policy implications of Japan’s new corporate governance practices after the reform. Asia Pacific Journal of Management, 28, 187-213. https://doi.org/10.1007/s10490-010-9230-8
76. Nakamura, M. (2016). The Security Market and the Changing Government Role in Japan, Asian. Education and Development Studies, 5 (4), 388-407. https://doi.org/10.1108/AEDS-09-2015-0044.
77. Nestor S., Thompson J.K. (2000). Corporate Governance Patterns in OECD Economies: Is Convergence Under Way? OECD. http://www.oecd.org/dataoecd/7/10/1931460.pdf
78. Nottage, L., Wolff, L. T. (2005). Corporate Governance and Law Reform in Japan: From the Lost Decade to the End of History? CLPE Research Paper, 3. Sydney Law School Research Paper No. 06/14, 1(1).
79. Nottage L., Wolff L., Anderson K. (2009). Corporate Governance in the 21st Century: Japan's Gradual Transformation. Edward Elgar Publishing.
80. Nyberg, A., Fulmer, I., Gerhart, B., Carpenter, M. (2010). Agency Theory Revisited: CEO Return and Shareholder Interest Alignment. Academy of Management Journal, 53 (5), 1029-1049.
81. OECD Corporate Governance Factbook.. (2019). OECD. http://www.oecd.org/daf/ca/Corporate-Governance-Factbook.pdf
82. Okabe M. (2009). Corporate Governance in Japan: Evolution, Policy Measures, and Future Issues, in: Codes of Good Governance Around the World. (ed) Felix J., Lopez Iturriaga. Nova Science Publishers, New York.
83. Okumura H. (1984). Enterprise Groups in Japan. The Journal of Commercial Papers, 147.
84. Ovsiannikov K. (2017). Corporate Governance Reforms in Japan: Instilling the New Regime. Cogent Business & Management, 4 (1), 1-16. https://doi.org/10.1080/23311975.2017.1300993
85. Palkar Ch., Lellapalli R.V. (2015). Divergence or convergence: paradoxes in corporate governance? Corporate Governance, 15(5), 693-705. https://doi.org/10.1108/CG-05-2015-0066
86. Patrick H. (2004). Evolving Corporate Governance in Japan. Working Paper No. 220 Working Paper Series Center on Japanese Economy and Business Columbia Business School, 1-34. https://core.ac.uk/download/pdf/161436199.pdf
87. Pieterse, J. N. (1994). Globalization as hybridization. International Sociology No 9,. 161-184.
88. Raupach-Sumiya J. (2000). Reforming Japan’s Corporate Governance System: Will the Markets gain Control?, Working Paper 00/2 Erscheinungsort: Tokyo 2000, Deutsches Institut für Japanstudien https://www.dijtokyo.org/publications/WP_00-2.pdf .
89. Sakamoto M., Harima Y. (2014). Companies Act Reform 2014: Can the new New Topics amendment to the Companies Act of Japan strengthen the corporate governance systems of Japanese listed companies? http://www.city-yuwa.com/english/publication/shared/PDF/JLG2
90. Siems M.M. (2010). Convergence in corporate governance: a leximetric approach. The Journal of Corporate Law, 35 (4), 729-756.
91. Shishido Z. (2001). Reform in Japanese Corporate Law and Corporate Governance: Current Changes in Historical Perspective. The American Journal of Comparative Law, 49 (1), 653-678. http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=2081&contex
92. Shishido, Z. (2007). The Turnaround of 1997: Changes in Japanese Corporate Law and Governance. In: Corporate Governance in Japan. (eds.) M. Aoki, G. Jackson, H. Miyajima, Oxford University Press.
93. Takahashi, E. Madoka S. (2005). The Future of Japanese Corporate Governance: The 2005 Reform. The Journal of Japanese Law, 19(35), 1-35. file:///D:/Users/wzr/Downloads/294-Artikeltext-534-1-10-20150210.pdf
94. Teranishi J. (2005). Evolution of the Economic System in Japan. Edward Elgar.
95. The End of Diversity? Prospects for German and Japanese Capitalism. (2003). (eds) Yamamura, K., Streeck, W. ITHACA LONDON, Cornell University Press. Retrieved February 24, 2020, from www.jstor.org/stable/10.7591/j.ctv1nhqd6
96. The Corporate Auditor System in Japan. (2007). Japan Audit and Supervisory Board Members Association. http://www.kansa.or.jp/en/whats-new/the-corporate-auditor-system-in-japan.html
97. The Oxford Handbook of Law and Governance. (2015). (eds) Gordon J.N., Ringe W.G. Oxford University Press, Oxford. The%20Oxford%20Handbook%20of%20Corporate%20Law%20and%20Governance%2
98. TSE-Listed Companies White Paper on Corporate Governance. (2019). Tokyo Stock Exchange. https://www.jpx.co.jp/english/news/1020/b5b4pj000002xyda-att/b5b4pj000002xyfw.pdf
99. Tricker B. (2015). Corporate Governance. Principles, Policies, and Practices, Oxford University Press. Oxford.
100. Tsuboi H. (2014). The Role of Outside Directors in Improving Japanese Corporate Governance. Hitotsubashi University Graduate School of International Corporate Strategy, https://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/26836/1/ics020201400103.pdf.
101. Ueda R. (2015). How is corporate governance in Japan changing? Developments in listed companies and roles of institutional investors, OECD Corporate Governance Working Papers,17. OECD. file:///G:/Gla-Jap.20/5jrw7j3s37hh-en.pdf
102. West, M. (2001). The Puzzling Divergence of Corporate Law: Evidence and Explanations from Japan and the United States. University of Pennsylvania Law Review,150 (2), 527-601. doi:10.2307/3312972
103. West J. (2019). Better Corporate Governance Is Critical for Japan’s Future Prosperity. The Asian Century Institute, September. https://www.brinknews.com/better-corporate-governance-is-critical-for-japans-future-prosperity/
104. What are the major characteristics and functions of the Japanese keiretsu? http://www.polska-azja.pl/what-are-the-major-characteristics-and-functions-of-the-japanese-keiretsu-%E7%B3%BB%E5%88%97-how-and-why-are-these-changing-today/
105. Wright D. M., Siegel D.S., Keasy K., Filatotchev I. (2013). The Oxford Handbook of Corporate Governance. Oxford University Press, Oxford.
106. Yamaguchi, S. (1950). The Banking System in Japan and its Problems. The Annals of the Hitotsubashi Academ, 1(1), 80-90. Retrieved February 6, 2020, from www.jstor.org/stable/43751239
107. Yao Y. (2009). Historical Dynamics of the Development of the Corporate Governance in Japan. Journal of Politics and Law, 2 (4), 167-174.
108. Yoshikawa T., Rasheed A.A. (2009). Convergence of corporate governance: critical review and future directions. Corporate Governance: An International Review, 17 (3), 388-404. https://www.academia.edu/14684293/Convergence_of_Corporate_Governance_Critical_R