Principles and Agents: CalPERS and corporate governance in Japan

A growing literature discusses the convergence of national systems of corporate governance. Fostering convergence are activist institutional investors, especially from the United States. The following is a case study of one institutional investor – the giant pension fund, CalPERS – and its efforts to change governance in Japan over the past 15 years. CalPERS’ involvement in Japan went through three stages: solo activism; cultivation of local partners; and, most recently, a shift from marketwide activism to company‐level relational investing. Although CalPERS has had some success in changing Japanese corporate governance, economic and political factors have limited its influence and permitted the persistence of Japan’s distinctive governance system.