U.S. and Japanese Models of Corporate Governance

Corporate governance is broadly defined as the system by which business corporations are directed and controlled. A corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation such as the board of directors, executives and managers, shareholders, and other stakeholders. Corporate governance spells out the rules and procedures used to make decisions on corporate affairs, thus providing the structure through which company objectives are set and the means of attaining those objectives while monitoring performance (What is corporate governance, 2003).

More narrowly interpreted, corporate governance refers to the relationship of a company to its shareholders and society. It focuses on promoting corporate fairness, transparency, and accountability û at least in the idealized sense of the term (Anderson, Fox, Twomey, & Jennings, 1998; Miller & Jentz, 2000). Corporate governance has become a topic of enormous significance in the United States in recent years due to a number of corporate scandals (e.g., Enron, WorldCom, Arthur Andersen, Tyco) and Congressional reaction to those scandals which called for new standards and new regulatory strategies designed to improve corporate ethics (Royster, 2003).

The United States is not the only country in which corporate governance has become a significant topic. J

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ng existing auditor positions, which are generally filled by insiders. Each committee will consist of at least three board members, and more than half of the committee members must be recruited from outside the company. Major companies will have to decide whether to switch to the US system by their next shareholder meetings. Nevertheless, nearly 60 percent of large companies in Japan have decided not to adopt a U.S.-style corporate governance system. This means that the majority of Japanese companies prefer to have insiders appoint board members and serve as auditors, which can directly impact upon the transparency of corporate operations. The reluctance, says Whitten (2003), stems in part from the fact that top Japanese managers do not generally want to cede power to a committee. At many companies, the current Japanese president chooses his own successor and resistance to change has been strong. There are those in Japan who are extremely resistant to the idea that they should adopt U.S. corporate governance styles and strategies. Jopson and Pilling (2003) have reported that foreign investors are pushing Japanese companies to adopt U.S. type board structures of the sort now favored by Sony, Toshiba, and Hitachi. Those who
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Approximate Word count = 4984
Approximate Pages = 20 (250 words per page)

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