Fundamental Issues and Recent Trends in Japanese Corporate Governance Reform : A Comparative Perspective

Japan has been widely criticized as being slow to reform a corporate governance system that seemingly remains fixed on the interests of employees over shareholders and unresponsive to recent global trends such as the spread of independent directors. This Essay seeks to present a more nuanced and balanced view of the ongoing evolution of Japanese corporate governance. This Essay discusses how analysis of Japanese corporate governance is hampered by the lack of both an agreed upon standard for evaluating change in Japan and data concerning important governance practices, such as the actual role of company auditors (kansayaku). The main, focus, however, is on describing and evaluating experimentation at leading individual Japanese companies that seeks to address monitoring and other fundamental issues of corporate governance in Japan by developing a "hybrid" system of governance. This system attempts to combine the best elements of the board management and monitoring models, i.e., the information access of insiders and the independence of outsiders, in a way that results in real board discussion and management oversight.The Essay goes on to identify and briefly discuss three key issues that may be critical in influencing the future direction of Japan's corporate governance system and practices: the role of domestic institutional investors, the development of a standardized hybrid model, and the adjustment of Japanese corporate governance to the demands of globalization