The evolution of the monitoring board in Japan: how the board performs monitoring function in Japanese corporate governance

Abstract

PurposeThe purpose of this paper is to trace a legal evolution of the monitoring board and to reveal what brought the evolution and what is expected to emerge. The paper points to unique complementarities in Japanese corporate governance institutions and norms which will affect how the monitoring board performs its functions.Design/Methodology/ApproachAnalysis is based on texts on corporate governance legislations in Japan from the revision of Commercial Code in 1950 to the revision of Companies Act in 2014. Other sources include Tokyo Stock Exchange regulations, White Paper on Corporate Governance and other academic literatures on Japanese corporate governance.FindingsChanges of non-legal institutions and norms in Japanese corporate governance necessitated legal reforms toward the monitoring board. Persisting institutions and norms, in particular lifetime employment, influences how the monitoring board performs its functions in Japan.Originality/ValueThis paper explains how the evolution of the monitoring board in Japan emerged and what will cause different expected functions of the monitoring board in Japan and other jurisdictions.