Japanese Model of

Corporate Governance
Ruby Echavez
Objectives
• Learn about the Japanese model of Corporate
Governance
• Know key players of the Japanese model
• Explain the structure of the Japanese model through
diagram
• Determine the composition of the Board of Directors
• Identify the Corporate Actions Requiring Shareholder’s
Approval
• Compare Anglo-Us to Japanese Model
Corporate Governance

Corporate governance deals with the relationship

among the board of directors; management,
shareholders and other stakeholders with respect
to the control of corporations.
Anglo-US Model of Corporate
Governance

Ensures that the firms maximize the

wealth of shareholders.
Japanese Model of Corporate Governance

• High level of stock ownership by a main bank and

keiretsu
• Strong long-term link between banks and corporation
• Board of directors composed almost solely of insiders
• A comparatively low level of input of outside
shareholders
Key Players in Japanese Model

• Main Bank
• Keiretsu
• Management
• Government
Main Bank

• Provides its corporate client with loans

• Major inside shareholder in the corporation
Keiretsu

• Business network composed of manufacturers,

supply chain partners, distributors and financiers
• Affiliated company
• Major inside shareholder in the corporation
 Provides Managers, Monitors
Appoint Supervisory Board and Acts in Emergencies
(Including President) Appoint

Ratifies the President’s decision

President

Consults
Shareholders Main Bank
Executive
Management
(Primarily BOD)
Manages

Provides Loan
Corporation
Owns Owns
The Open – Ended
Hexagon Diagram
Share Ownership Pattern

• Financial Institutions – 43%

• Corporation – 25%
• Foreigners – 3%
Composition of the Board of Directors

• Composed almost completely of insiders

• If the company’s profit fall over an extended period,
the main bank and the member of the keiretsu may
remove directors and appoint their own candidates to
the company’s board
• Appointment of retiring government bureaucrats to
corporate boards
• Contains 50 members
 Disclosure Requirements
1. Financial data on the corporation, required on a semi-annual basis.
2. Data on the corporation's capital structure.
3. Background information on each nominee to the board of directors
4. Compensation data namely the maximum amount of compensation
payable to all executive officers and the board of directors.
5. Information on proposed mergers and restructurings
6. Proposed amendments to the articles of association
7. Names of individuals and/or companies proposed as auditors
Corporate Actions Requiring Shareholder’s
Approval
Routine corporate actions
•Payment of dividends and allocation of reserves
•Election of directors and appointment of auditors
Other common corporate actions
•Capital authorizations
•Amendments to the articles of association and/or charter
•Payment of retirement bonuses to directors and auditors
•Increase of the aggregate compensation ceilings for directors and auditors
Non-routine corporate actions
•Mergers, takeovers and restructuring
Anglo-US and Japanese Model of Corporate
Governance

Anglo – Us Model Japanese Model

Employment Short-term Employment Lifetime Employment
Non-specialized career
Specialization Specialized Career Path
paths

Responsibility Individual Responsibility Collective Responsibility

Segmented concern for

Concern for employees as an
Holistic concern for
Employees employee as a person
employee
Ruby Echavez