Japan firms need more women board members, outside directors and foreigners to balance power, reform economy and draw FDI
“ Japanese firms are defensive”. corporate governance at the University of Cambridge Judge Business School.“ I think the one thing that is very important to understand is that long-term investors have an interest in making sure that the companies in which they invest are successful. This should be welcomed with open arms”.
CORPORATE GOVERNANCE
Warning: Reform or Fail
Japan firms need more women board members, outside directors and foreigners to balance power, reform economy and draw FDI
By Julian Ryall
• Concern at slow change of pace
•“ Paltry” 1.1 % of board are female
• Do firms really want to reform?
• UK has good governance model
Britain is a global leader in the area of corporate governance and there are many lessons that our firms have learned that are also applicable in Japan, according to speakers at a recent symposium organised by The Nippon Foundation.
The speakers expressed concern, however, at the slow pace of change in corporations in a country that is widely considered to be a“ special case”. They also questioned whether there is a
genuine desire for reform in Japanese boardrooms.
Evidence indicates that investors are increasingly shying away from putting money into firms that fail to have more outside directors on their boards; resist women or foreign nationals joining the highest echelons of their management; are at a disadvantage in global markets, due to an inability to communicate in English; or have not reformed the structure and format of board meetings to make them more efficient.
Firms that are not evolving in these critical areas, the analysts suggested, are not attracting capital and will slip behind their international rivals.
“ I have detected a kind of defensiveness in many of the relationships that I have had with Japanese companies”, said Simon Learmount, a lecturer in
“ Japanese firms are defensive”. corporate governance at the University of Cambridge Judge Business School.“ I think the one thing that is very important to understand is that long-term investors have an interest in making sure that the companies in which they invest are successful. This should be welcomed with open arms”.
The UK has seen a shift in the concepts behind corporate governance to“ a more nuanced and inclusive debate”. This is thanks, in part, to the ongoing examination of the importance of appropriate government in firms, and the implementation of a number of new regulations and recommendations.
For example, the 2010 UK Corporate Governance Code states:“ The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the longterm success of the company”.
This makes it clear that the directors’ primary duty is to the firm, rather than to shareholders.
Change began in the UK in the wake of financial scandals at firms such as Polly Peck International and Coloroll, which demonstrated just how easy it was to fabricate corporate accounts, Learmount said.
One of the most important conclusions of the Cadbury Committee’ s report, issued in 1991, was that there needs to be a balance of power on a firm’ s board as well as more external directors.
22 | BCCJ ACUMEN | MAY 2013