Over the summer, a government advisory committee quietly squelched proposed changes to the companies law that would have required listed firms to appoint at least one outside director. The decision, after intense pressure from Keidanren, was a white flag by the ruling Democratic Party of Japan (DPJ), which pledged to toughen corporate governance when it took power three years ago.
It is the third time in 13 years that change has been stymied. If the bill is eventually passed, the only crumb of reform that remains is that listed firms without an outside director will have to explain why. Mr Benes says companies are now preparing cookie-cutter excuses for shareholders’ meetings next year, just in case. This may be harder than they think. “It’s not so easy to explain why one outside director—out of 12 or 15—would be an intolerable presence,” he says.
However, he worries that even this modest reform may be scrapped after the upcoming election, which may see a rebound by the Liberal Democrats, a party whose leaders are as likely to thwart Keidanren as they are to dye their hair purple.
Japan’s Asian rivals, including South Korea, China and India, require companies to have independent directors. Firms that list in New York must fill a majority of board seats with outsiders. But Japanese bosses contend that similar rules in Japan would limit managers’ freedom and would in any case fail to stop another Olympus debacle, says Yuko Kawamoto of Waseda University.
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