Changing Japanese corporate governance

This paper examines the rhetoric and reality of corporate governance reform in post-bubble Japan. I argue that the process of corporate governance reform in Japan is neither one of convergence to a "global standard" nor one of inertia, and rather reflects the theme of permeable insulation taken up by other contributors to this volume. Japanese firms are increasingly adopting practices long associated with U.S. corporate governance: small boards, independent directors, and stock options. While these changes have attracted much publicity, they signify relatively little for corporate governance. Boards remain insider-dominated, and the authority of boards of directors vis a vis the CEO has been unchanged. Despite the spread of stock options, executive compensation is only minimally tied to the stock market, and disclosure of executive pay remains far from transparent.