Change and Continuity in Japanese Corporate Governance

Abstract

This chapter discusses the corporate governance reform in Japanese firms since around 2000. It was initially modeled on US firms because in contrast to the prolonged slump in Japanese firms, US firms were praised for their prosperity due to prioritizing shareholder interests in corporate governance. However, Japanese firms did not adopt such a direction of shareholder-oriented corporate governance despite the increasing shareholder pressure. They preserved the stakeholder-oriented corporate governance and reformed managerial organization to restore their corporate performance. This chapter investigates the actual change in the governance structure, particularly focusing on the board structure, and presents that change is incremental and cumulative contrary to the assertion of an overall institutional change such as US-style committee system. Japanese firms preserve their own governance structure and present a diversity among different forms. We found change and continuity unfold as the reform proceeds in the course of gradual institutional change.