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Corporate Governance

Corporate governance Japan: independent Directors not only execute control in emergency situations, continuous contributions are more important

Corporate governance Japan: Prime Minister Abe urges reform of corporate governance

Reuters reports that Japan’s Prime Minister Abe urges company boards to reform corporate governance to include independent directors. I added the following comment.

Corporate governance Japan: exercise of shareholder power and emergency situations

The question of independent Board Directors is often framed in terms of exercising shareholder power over the company, as is the main message of the article above. Another focus of discussions on the role of outside independent directors, is during emergencies, and here the Olympus case is often cited.

Corporate governance Japan: steady state contributions of independent directors

However, in my experience in Japan, including my work as a non-Japanese independent Board Director of a public Japanese company, enlightened companies will welcome independent Board Directors for their know-how and contributions to the company – in the end the market decides.

Corporate governance Japan: Docomo vs SoftBank

As an example, lets compare NTT-Docomo and SoftBank. NTT-Docomo has a homogeneous pure Japanese Board, while SoftBank has independent Directors from many different countries and from many different walks of life. SoftBank recently overtook NTT-Docomo in terms of market cap, revenues, operating income and net income. https://www.eurotechnology.com/2014/05/07/softbank-overtakes-ntt-docomo-kddi/
In the end regulations have limitations, and the realities of the market decide, as is the case of SoftBank.

Corporate governance Japan: SoftBank and SPRINT

As another example, SoftBank appointed Marcelo Claure, CEO of Brightstar Corporation and of Bolivian origin, to the Board. Masayoshi Son announced the appointment with the following words: “Marcelo’s experience as an entrepreneur and businessman who created and successfully grew a global telecommunications company will bring an invaluable perspective to Sprint’s board.” Note that Masayoshi Son clearly states that Marcelo Claure is appointed to bring invaluable know-how and experience to SPRINT, Masayoshi Son does not seem to be motivated by “increasing the power of the shareholders over Sprint“.

The “power of shareholders” is usually a matter or last resort, when all other methods fail. Usually, when you have to show your power, its too late.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

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Corporate Governance

Corporate governance Japan: external independent directors on Japanese Boards

by Gerhard Fasol

Corporate governance Japan is now in the focus of Prime Minister Shinzo Abe’s reforms

Reform of corporate governance is an ongoing issue in Japan, and part of Prime-Minister’s Abenomics’ “third arrow” revival efforts. Here is a note, that I added to a recent article in The Economist, entitled “Corporate governance in Japan – A revolution in the making“:

“Outside Directors” is only one step along the way to end the “inbreeding problem”. Bringing diversity into the management of Japanese companies is critical for growth in Japan: non-Japanese directors, women directors, non-Japanese women directors.

Corporate governance Japan: in the end the markets decide whether diversity is necessary, or whether in-breading wins

Of course the market decides: I believe that companies which do not bring in management diversity will find lower market capitalization than those which do.

I am European and independent Board Member of a Japanese company, traded on the Tokyo Stock Exchange. Since all business and all board meetings are in Japanese, full command of business Japanese is necessary, including the ability to read a big volume of Japanese reports 100s of pages long sometimes from one day to the next.

Corporate governance Japan: very few non-Japanese are capable of functioning on the Board of a Japanese corporation

There are only very very few non-Japanese people with the qualifications to serve as independent Board Directors, who have the necessary full command of Japanese. So there is a substantial bottle neck against bringing diversity into Japanese corporations even if there was a strong pull from Japanese corporations. Currently only a few excellent Japanese corporations exercise this pull, to pull in non-Japanese external Board Members.

One company which is remarkably advanced is HitachiHitachi several outside and non-Japanese Board Members, including also one foreign woman recently.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved