Journal of Interdisciplinary Economics

Company law in Japan has recently undergone drastic reform. The 2005 reform is the last of a series of recent reforms in this area of the law. The notable points relating to corporate governance in the 2005 reform are as follows: First, the 2005 reform introduces a new corporate governance option for small stock companies to secure the fairness of the company’s financial statements: the accounting consultant. Second, the liabilities of directors have been modified.

Although the state of the Japanese economy is still uncertain, it is said that the most difficult part is over. We will need to examine the implementation of the new law to see whether the 2005 reform guarantees the soundness of management in Japan and improves the international competitiveness of Japanese companies in a real sense.

Some scholars have argued that the corporate governance systems of the major economies are likely to converge towards the economically best system at a rapid pace, while others maintain that such convergence will not occur because of a variety of forms of path dependence. In this article we first describe the evolution of the different systems. Then we search for evidence that convergence of corporate governance is correlated with globalisation, i.e. governance systems will converge to a certain degree and that the fear of an “inefficient convergence” is unfounded. We do so by describing the present efforts for a unification of the corporate governance systems. The number of standards-setting bodies and multilateral institutions that have been set up in recent times to foster good corporate governance worldwide is testimony to the heightened interest in this particular issue. In addition we present arguments for a further harmonisation and weaken the theories against it. We conclude that the systems will converge because the pressure of change is stronger than the tendencies of persistence. In addition we argue that systems composed of useful elements of different systems can be optimal.

The notion of ‘ownership of the firm’ is central to conventional treatments of corporate governance, yet there is very little discussion about what this means in practice. In this paper we briefly draw attention to some of the debates around the notion of ownership in various disciplinary fields, and then recount and discuss some of the meanings associated with ownership of the firm that we have found in two empirical studies carried out in the UK and Japan. Our aim is to illuminate and disturb some of the commonly taken for granted notions of what it means to ‘own’ a firm.

JEL Codes: G34, L20, L00

In this paper, the authors show the evolution of German and Japanese Corporate Governance, the impacts of codetermination in German supervisory boards on the system, and evaluate the latest movement of Japan towards a one-tier-system. Japan originally adopted the two-tiers-system from Germany. Under strong influence of the allies (i.e. America), a one-tier-system was put on top of the two-tiers-system. In the 1970s control function of the supervisory organ had been drastically reinforced, meaning the return to the two-tiers-system in practice. Then with the latest reforms, Japan introduced the possibility of choosing a real one-tier-system.

Considering the specific Japanese prevailing conditions of management, it seems that the reform had not been critical enough; especially in regard to the possibility of abuse of power by the CEO constraints may occur.

Therefore, as a completion of the two-tiers-system, the one-tier-system is advantageous. It is, however, pointless to introduce the new system for all Japanese companies by completely replacing the two-tiers-system with it.

Since the financial crisis of 1997, the Korean Commercial Code has been dramatically reformed to address several problems in the Korean corporate governance structure. The main purpose of legal reform in Korea has been to restrain small groups of controlling shareholders who exercise practical power over the corporate management. Especially in 1998, 1999, 2000, the Korean Company Law has been considerably revised to restrain controlling shareholders’ practical power. To name just a few: such matters as the Liability of Shadow Directors, the Introduction of Outside Directors, Committees in Board of Directors, Adopting Accumulative Voting, etc., have been newly inserted. The legal reform in Korea is coming to a close with the enforcement of the Korean Securities Class Action that was strongly opposed by the Federation of Korean Industries in January 2005. However, view of the general public is that changes to the antiquated management ruling system by controlling shareholders have not been successfully implemented. The process of legal reform is therefore likely to continue beyond the next presidential election.

This paper examines the US corporate law approach to persuading companies to adopt environmentally-conscious management practices, and considers the corresponding Japanese situation. The US Securities Laws have an environmental disclosure system for investors, which helps investors to exert market forces on companies to address ecological management actively. Shareholders have used shareholder proposal systems actively to request that companies better address such issues, including higher-level environmental disclosure. These measures are worth considering, so that both the managers and owners of companies recognize that environmentally-conscious management is a significant part of good corporate governance.