chapter5 of fraud accouting
The Olympus Scandal and Corporate Governance Reform:
Can Japan Find a Middle Ground between the Board Monitoring Model and Management Model?
Bruce E. Aronson∗
I. Introduction
II. The Olympus Scandal and Corporate Governance Issues
III. Towards a Mixed Model? Considering Effective Monitoring of
Management under the Japanese Corporate Governance System
IV. Conclusion
I.
INTRODUCTION
Japan has been in a corporate governance dilemma for the past 15 years. The country has been open to the idea of corporate governance reform following the collapse of its economic bubble in the early 1990s and has looked to the U.S. for inspiration. However,
Japan has been caught between its traditional model of a board of directors that actively manages the corporation (the “management model”) and the American model of a board that focuses on the monitoring and supervision of management (the “monitoring model”).
This Article argues that it should be possible for Japan to find a middle ground between the management model and the monitoring model, which would incorporate a
∗
Professor of Law, Graduate School of International Corporate Strategy, Hitotsubashi Univer- sity, National Center of Sciences; Professor of Law, Creighton University School of Law.
I thank Mr. Sumitaka Fujita, Professor Yumiko Miwa, and Mr. Naoaki Okabe for acting as a panel of commentators following my presentation on this research at the Meiji Institute for Global Affairs Inaugural Symposium, Tokyo, Japan (21 February 2012), and participants in presentations at Nagoya University (20 April 2012), AIMA Japan Hedge Fund Forum
2012, Tokyo Stock Exchange (4 June 2012), 2012 International Conference on Law & So- ciety, Law & Society Association, Honolulu (5 June 2012), and Business Research Institute,
Tokyo (3 August 2012) for comments.
I also thank members of two study groups on corporate governance in which I am cur- rently participating:
Can Japan Find a Middle Ground between the Board Monitoring Model and Management Model?
Bruce E. Aronson∗
I. Introduction
II. The Olympus Scandal and Corporate Governance Issues
III. Towards a Mixed Model? Considering Effective Monitoring of
Management under the Japanese Corporate Governance System
IV. Conclusion
I.
INTRODUCTION
Japan has been in a corporate governance dilemma for the past 15 years. The country has been open to the idea of corporate governance reform following the collapse of its economic bubble in the early 1990s and has looked to the U.S. for inspiration. However,
Japan has been caught between its traditional model of a board of directors that actively manages the corporation (the “management model”) and the American model of a board that focuses on the monitoring and supervision of management (the “monitoring model”).
This Article argues that it should be possible for Japan to find a middle ground between the management model and the monitoring model, which would incorporate a
∗
Professor of Law, Graduate School of International Corporate Strategy, Hitotsubashi Univer- sity, National Center of Sciences; Professor of Law, Creighton University School of Law.
I thank Mr. Sumitaka Fujita, Professor Yumiko Miwa, and Mr. Naoaki Okabe for acting as a panel of commentators following my presentation on this research at the Meiji Institute for Global Affairs Inaugural Symposium, Tokyo, Japan (21 February 2012), and participants in presentations at Nagoya University (20 April 2012), AIMA Japan Hedge Fund Forum
2012, Tokyo Stock Exchange (4 June 2012), 2012 International Conference on Law & So- ciety, Law & Society Association, Honolulu (5 June 2012), and Business Research Institute,
Tokyo (3 August 2012) for comments.
I also thank members of two study groups on corporate governance in which I am cur- rently participating: