Japan has been widely criticized as being slow to reform a corporate governance system that seemingly remains fixed on the interests of employees over shareholders and unresponsive to recent global trends such as the spread of independent directors. This Essay seeks to present a more nuanced and balanced view of the ongoing evolution of Japanese corporate governance. This Essay discusses how analysis of Japanese corporate governance is hampered by the lack of both an agreed upon standard for evaluating change in Japan and data concerning important governance practices, such as the actual role of company auditors (kansayaku). The main, focus, however, is on describing and evaluating experimentation at leading individual Japanese companies that seeks to address monitoring and other fundamental issues of corporate governance in Japan by developing a system of governance. This system attempts to combine the best elements of the board management and monitoring models, i.e., the information access of insiders and the independence of outsiders, in a way that results in real board discussion and management oversight.The Essay goes on to identify and briefly discuss three key issues that may be critical in influencing the future direction of Japan’s corporate governance system and practices: the role of domestic institutional investors, the development of a standardized hybrid model, and the adjustment of Japanese corporate governance to the demands of globalization.

This essay argues that it is not a good idea to propose keywords to help find the "essence" of Japanese law. In fact, such an approach may well be the problem as we search for a single lens with which to analyze a complex society. Our perceptions of Japan, related to both exaggerated views of early postwar success and subsequent failure and to a preoccupation with cultural explanations, may hinder, rather than aid, careful analysis of Japanese law and its impact on society. This essay instead proposes that we treat Japan as a "normal" country that has both similarities to and differences with other advanced societies. Those with expertise and experience in Japan can contribute to the understanding of Japan by supplying the Japanese context in which law operates.Many of the problems of perceptions and stereotypes that involve Japanese law and society are also shared with China and other Asian and non-Western societies. Japanese law scholars should also make greater efforts to collaborate with other Asian law scholars to counter exaggerated cultural perceptions and to increase understanding of their work among general legal comparativists and the general public.

Two persistent questions of enterprise law are raised and addressed: First, how does law matter to business practice? Second, how can we make law that stimulates economic efficiency? These questions are difficult to answer because of two important complementarities: the complementarity between areas of law within a country’s legal regime and the complementarity between law and other social environments such as markets and social norms. Over the course of the two-day conference, academics and practitioners from the U.S. and Japan in the areas of corporate law, securities regulation, labor law (including both employment protection law and labor union law), bankruptcy law, and tax law investigate the ways that enterprise law affects practice complementarily with markets and social norms. A key analytical framework is introduced, in which the business enterprise is viewed as an incentive mechanism among the four indispensable capital providers of the firm: management, employees, shareholders, and creditors. Only through close attention to the incentive bargain between these four players can optimal legislative design and economic efficiency be achieved.

ANNELISE RILES, Collateral Knowledge: Legal Reasoning in the Global Financial Markets University of Chicago Press, Chicago and London, 2011, xii, 295 pages. $27.50 ISBN: 9780226719337

SUMMARY Since the 1990s global institutional investors have strongly advocated the widespread use of independent directors in accordance with the U.S.-derived board monitoring model. Japan may be the country that has displayed the greatest resistance to this prescription for reform. The fallout from the scandal over financial reporting at Olympus Corporation provides a new opportunity to reconsider both theoretical and practical issues related to Japanese corporate governance reform. This Article proposes that the deadlocked debate in Japan over director independence be expanded to produce more effective reform. The aim is to pay closer attention to current proposals and to the ongoing experimentation at a number of leading Japanese companies. Their goal is to develop a mixed governance system that seeks a “middle ground” between Japan’s traditional management board model and the monitoring model. Proposals should also consider means to spread such best practices more broadly among Japanese companies. Although current proposals and experimentation in Japan have the potential to achieve significant corporate governance reform, it is too early to judge whether the post-Olympus ferment will, in fact, lead to the incorporation of an effective management monitoring function into the traditional Japanese corporate structure. ZUSAMMENFASSUNG Global agierende institutionelle Investoren werben seit den 1990er Jahren mit Nachdruck fur einen verstarken Einsatz von unabhangigen Mitgliedern in den Verwaltungs- bzw. Aufsichtsgremien von Unternehmen nach US-amerikanischem Vorbild. Japan ist vermutlich das Land, das sich diesem Ansinnen am nachhaltigsten widersetzt hat. Die Nachwirkungen des Rechnungslegungsskandals bei dem Unternehmen Olympus geben Anlass, erneut uber theoretische und praktische Aspekte im Zusammenhang mit der Reform der Corporate Governance in Japan nachzudenken. Der Beitrag schlagt vor, die festgefahrene Diskussion uber die Unabhangigkeit von Verwaltungsratsmitgliedern in Japan perspektivisch zu erweitern, um so eine effizientere Reform zu ermoglichen. Ziel ist, den aktuellen Vorschlage und organisatorischen Experimenten fuhrender japanischer Unternehmen grosere Aufmerksamkeit zu schenken. Diese versuchen einen Mittelweg zwischen Japans tradiertem Modell eines von Managern dominierten Verwaltungsrates und eines demgegenuber starker von Aufsichtsaspekten gepragten zu finden. Entsprechende Vorschlage mussen zugleich der Problematik der Umsetzung bei den japanischen Unternehmen Rechnung tragen. Auch wenn die diskutierten Vorschlage und Experimente das Potential haben, zu einer bedeutenden Reform der Corporate Governance in Japan zu fuhren, ist es noch zu fruh, um beurteilen zu konnen, ob es im Zuge der Unruhe nach dem Olympus-Skandal tatsachlich zur Integration einer effizienten Unternehmensuberwachung in die tradierte japanische Unternehmenskultur kommen wird. (Ubersetzung durch die Redaktion)

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

This paper reassesses the results of Japan‘s financial deregulation over the last two decades. Japan‘s Big Bang sought to transform a highly regulated bank-centered financial system to a transparent, market-centered financial system to revitalize Japan‘s economy and aging society. Prior assessments generally view this reform effort as a failure due to Japan‘s low economic growth rate.This paper finds, contrary to conventional wisdom, that government-led deregulatory and administrative reform was largely successful in removing legal and administrative obstacles to the development of a market-centered financial system. However, the persistence of past practices by market participants and strong headwinds such as low macroeconomic growth and poor financial market performance prevented achievement of the Big Bang‘s ambitious goals. This illustrates both the limits of what can be accomplished through deregulation of financial markets and the problem inherent in using a results-oriented standard in evaluating Japan‘s reform efforts.

This short essay introduces two opposing views, held by two American lawyers who directly participated in the occupation of Japan, on the necessity and success of reforming Japanese corporate law in 1950. One view, by Lester Salwin, held that corporate law reform was necessary, collaborative, and successful in supporting the basic occupation policies of democratization and economic deconcentration, and in particular the broad dispersion of shares in prewar zaibatsu corporations to individual shareholders among the general public. An opposing view, by Thomas Blakemore (with Makoto Yazawa), asserted that such reform, particularly its emphasis on new shareholder rights, was unnecessary, unilaterally imposed by the occupation authorities, and unsuccessful. Viewing this debate from a contemporary perspective, this essay makes two points. First, from the beginning there was a tension in Japanese corporate law reform between “management-friendly” reforms, which allowed both professional management and access to capital markets for the newly public corporations that replaced the zaibatsu, and “shareholder friendly” reforms, which sought to balance this strengthening of management by giving shareholders new rights to monitor management. This tension remains today. Second, systemic transformation of corporate governance systems, i.e., from a stakeholder system to a shareholder system, is very difficult. Even in the unusual situation where the Occupation authorities seemingly had both the desire and the means to carry out a fundamental transformation of the Japanese corporate governance system by creating “American-style” public corporations with widely dispersed shareholders, they did not achieve their intended result. Instead, individual shareholders sold their shares in the market to corporate purchasers and a new Japanese stakeholder system based on corporate cross-shareholding emerged. It resembled neither Japan’s prewar zaibatsu system nor the American system.

This Article considers the potential significance of Toyota’s recent troubles for Japanese corporate governance by examining two sets of issues. First, it looks at the relevant fiduciary duty of Toyota’s directors, i.e., the general duty of oversight in Japan as set forth in case law in the Daiwa Bank shareholder derivative litigation (2000) and the related subsequent statutory duty to establish a system of internal controls provided in the Companies Act (2005). Potential director liability would depend on the filing of a shareholders derivative suit and the discovery of facts which show director’s negligence in devising, implementing, and monitoring specific measures to carry out the board’s existing overall policy on internal controls. Second, it considers the Toyota case in light of the ongoing debate in Japan during the last decade between competing board structures: the traditional company auditor (kansayaku) structure with no required outside directors and the newer alternative board committee structure with a required majority of outside directors. The potential role of independent directors remains controversial and is currently the hottest topic in Japanese corporate governance. The recent failures of Toyota, a highly successful champion of the traditional Japanese governance system, might help make Japan more receptive to calls by international and domestic institutional investors to take measures to increase board independence.

Unser Bild von Japan ist das einer abgeschotteten Gesellschaft, die auf informellen Konsens Wert legt und in der die Juristen und das Recht keine wichtige Rolle spielen. Jedoch haben die Deregulierung und die Verwaltungsreform, die wahrend der japanischen Wirtschaftskrise der 1990er Jahre eingeleitet wurden, im letzten Jahrzehnt zu uberraschenden Anderungen gefuhrt – eine neue Nachfrage nach Rechtsrat fur Unternehmen, eine Zunahme der Zahl der Juristen, das Aufkommen groser Anwaltskanzleien und eine wachsende Betatigung auslandischer Rechtsanwalte. An einer Podiumsdiskussion, die vor kurzem an der Creighton University School of Law stattfand und die diese neue Welt des Anwaltsberufs in Japan zum Gegenstandhatte, beteiligte sich eine Gruppe angesehener Rechtspraktiker der fuhrenden japanischen und auslandischen Kanzleien in Tokyo. Dabei ging es um den Aufstieg von unternehmensrechtlich orientierten Kanzleien, die Internationalisierung der japanischen Anwaltschaft sowie die soziale Rolle von Anwalten. In Bezug auf die Zunahme von grosen unternehmensrechtlich orientierten Sozietaten stellten die Diskussionsteilnehmer fest, dass sowohl die Nachfrage nach Rechtsberatung fur Unternehmen im Inland als auch die Zahl der Anwalte in diesem Bereich in Japan wahrend der letzten zehn Jahre stark gestiegen ist. Wahrend Unternehmen in der Vergangenheit fur eine Antwort auf die Frage, ob eine bestimmte Transaktion oder Praxis zulassig war, eher zum zustandigen Ministerium gingen, ziehen sie heute im Zweifel einen Rechtsanwalt zu Rate. Ab dem Jahr 2000 kam es verstarkt zum Zusammenschlus von Kanzleien. 2005 hatte bereits jede der funf fuhrenden Kanzleien mehr als 200 Rechtsanwalte. Die Konferenzteilnehmer interessierten sich fur die Auswirkung der Liberalisierung der Tatigkeit auslandischer Anwalte und Kanzleien in Japan. Der erste bedeutende internationale Zusammenschluss zwischen einer japanischen und einer auslandischen Sozietat fand zu der Zeit der jungsten Liberalisierung 2005 statt, und die Presse hob hervor, dass zwischen beidem eine enge Verbindung bestanden habe. Jedoch betonte die Leitung der japanischen Gruppe, die am ersten internationalen Zusammenschluss beteiligt war, dass die Liberalisierung dabei keine Rolle gespielt habe. Die Motivation sei es eher gewesen, die grenzuberschreitende Tatigkeit weiter auszubauen und von den weiter entwickelten Geschaftspraktiken internationaler Kanzleien zu profitieren. Hinsichtlich des Einflusses der oben beschriebenen Anderungen auf die soziale Rolle der Anwalte betonten die Diskussionsteilnehmer aus den grosen Kanzleien ihre neue, erweiterte Rolle auf den Finanzmarkten und bei regulatorischen Angelegenheiten sowie die Erweiterung der traditionellen pro bono-Programme der Kanzleien. Anwalte kleinerer Sozietaten, die aktiv an gemeinnutzigen Aktivitaten beteiligt waren, sahen keine Abnahme des Interesses an solchen Unternehmungen. Sie beobachteten jedoch inhaltliche Anderungen weg von umstrittenen Arbeits- und Umweltbelangen hin zu medizinischen und gesundheitlichen Angelegenheiten. (Ubersetzung durch die Red.)

Although rapid law firm growth has been with us since the 1980s, the acceleration of this trend over the last decade by means of mergers is puzzling. Why would normally conservative law firms embark on a merger strategy which appears to encompass significant risk and uncertain benefits? And is this trend a peculiarly American (or Anglo-American) phenomenon? Most of the popular explanations for law firm mergers focus on a single factor; law firms everywhere cite strikingly similar reasons based on a presumed client demand for one-stop shopping. This article contributes to providing a more robust, multi-causal explanation for law firm behavior through a comparative study of reputational competition among elite law firms in selected jurisdictions - the U.S., U.K., Germany, Australia and Japan. It posits that industry consolidation and changing market conditions have intensified law firm competition, and that since firm quality is hard to measure law firms compete largely on the basis of reputation. Many law firms are thus paradoxically driven to engage in (defensive) mergers to meet the competition due to their risk averse nature and the fear of losing existing clients. The study considers circumstances which are likely to lead to mergers through an examination of reputational competition, particularly the elements of reputational signaling, herd behavior and reputational status as law firms. It identifies rules of the game for firm behavior with respect to international mergers. It finds that the impact of a strategic decision, such as a merger, by a first-tier firm is of far greater significance than a similar action by another elite firm; it is much more likely to lead to defensive actions, such as mergers, by competitor firms. Thus, which firms engage in merger activity in a given market is an important factor in explaining and predicting both the reaction of competitors and whether mergers will become widespread in that market. This study further suggests that the common phenomenon of law firm mergers is likely a result of law firms reacting to similar types of changes in their operating environment (i.e., a parallel development), rather than convergence to an Anglo-American model of the law firm.