00lt6 THlt6S Rl6HT .

C0RP0RATF 60vFRtAtCF
lt JAPAt
C0RP0RATF 60vFRtAtCF . HFAtlt6
Corporo1e Governonoe 1s 1e sgs1em bg u1o oompon1es ore
d1reo1ed ond oon1ro11ed"
---- CudIu Connttcc (U.K)
:ndomen1o1 ob]eo11ve o] oorporo1e governonoe 1s 1e
'enonoemen1 o] 1e 1ong-1erm vo1:e u11e o1 1e some 11me
pro1eo11ng 1e 1n1eres1s o] o1er s1oKeo1ders."
---- Kunu Munguun Hu Connttcc (Indu)
C0RP0RATF 60vFRtAtCF
Corporate Governance - The mechanism by which interested parties in a
corporation interact with each other and promote their interests.
Corporate governance is generally defined as the framework for disciplining
corporate activities.
Corporate governance has become one of the major international issues that have
succeeded in attracting a good deal of public interest in recent years
especially since the recent spate of "world famous scandalous corporate failures.
Today, it is considered that corporate governance plays an important role in the
economic health of corporations and society in general.
mproving corporate governance is a systematic project, it is necessary to the
internal governance and external governance of the ways multi-pronged
.
odeIs of corporate governance
The AngIo-US modeI
The Anglo-US model is characterized by share ownership of
individual, and increasingly institutional, investors not affiliated
with the corporation (known as outside shareholders or
"outsiders);
A well-developed legal framework defining the rights and
responsibilities of three key players, namely management,
directors and shareholders; and a comparatively uncomplicated
procedure for interaction between shareholder and corporation
as well as among shareholders during or outside the AGM.
The Anglo-US model governs corporations in the UK, the US,
Australia, Canada, New Zealand and several other countries.
1he German mode|
W Coverns Cerman and AusLrlan corporaLlons
W Some elemenLs also apply ln Lhe neLherlands and
Scandlnavla
W Some corporaLlons ln lrance and 8elglum have
recenLly lnLroduced some elemenLs
W key players l) Cerman banks
ll) CorporaLe shareholders
W Slmllar Lo Lhe !apanese sysLem banks usually play a
mulLlfaceLed role as shareholder lender lssuer of
boLh equlLy and debL deposlLory and voLlng agenL aL
ACMs
W Shareholders do noL possess Lhe auLhorlLy Lo alLer
Lhe slze or composlLlon of Lhe supervlsory board
W 1hese are deLermlned by law
1he Iapanese mode|
W 8ased on codes regulaLlons and laws
W CharacLerlzed by a hlgh level of sLock ownershlp by afflllaLed banks
and companles
W a banklng sysLem characLerlzed by sLrong longLerm llnks beLween
bank and corporaLlon
W a legal publlc pollcy and lndusLrlal pollcy framework deslgned Lo
supporL and promoLe e|retsu#
W 8oards of dlrecLors composed almosL solely of lnslders
W ComparaLlvely low level of lnpuL of ouLslde shareholders caused and
exacerbaLed by compllcaLed procedures for exerclslng shareholders'
voLes
W Manyslded cenLerlng around a maln bank and a flnanclal/lndusLrlal
neLwork or kelreLsu
W 1he maln bank sysLem and Lhe kelreLsu are Lwo dlfferenL
W AlmosL all !apanese corporaLlons have a close relaLlonshlp wlLh a maln
bank
W 1he bank provldes lLs corporaLe cllenL wlLh loans as well as servlces
relaLed Lo bond lssues equlLy lssues seLLlemenL accounLs and relaLed
consulLlng servlces
W 1he maln bank ls generally a ma[or shareholder ln Lhe corporaLlon
#eiretsu##
W !arent company (main banks)
act as administrator &
intervene in cases of financial
distress
W anks allowed to hold equity
positions in companies
W argely self-governing
W igh opacity and resistant to
change
W !erform best when there are
little capital relative to
opportunities and when
contractibility is low
!ros:
- Reduce corporate agency
costs
- Ensure returns to banks
- Easier for firm to obtain funds
- elow-market lending rates
Cons:
- No price signal to guide
decisions
- !otential conflicts of interest
- Costly misallocation of
resources
The Japanese corporate governance
W The Tokyo Stock Exchange (TSE) issued !rinciples of Corporate Governance for isted
Companies in 2004 which were revised in December 2009 and a new Company aw
came into force in May 2007, replacing provisions of the Commercial Code that relate to
companies.
W n response to the corporate governance scandals of 2007, the Japanese government
also introduced guidelines informally known as Japanese Sarbanes-Oxley or J-SOX
which became effective in April 2008.
W iggest issue -lack of independence in the composition of boards of directors which are
largely dominated by management.
W Contrary to good corporate governance practices, a high proportion of company board
members are promoted from among employees. TSE published new rules in December
2009 relating to independent directors.
W Earlier, in September 2009 the TSE laid out its isting System mprovement Action !lan
proposing at least one independent director or auditor and disclosure of names of the
independent director/auditor.
W n 2002, Japan amended provisions of the Commercial Code to allow companies to
choose between either keeping the traditional statutory auditor (kansayaku) system or
adopting a U.S.-style corporate governance system.
W n July 2005, Japan published the new Company aw No. 86, which replaces and
significantly modifies the provisions of the Commercial Code that relate to companies.
W The Company aw came fully into force in May 2007.
W 8ack ln 2003 Lhe lnLernaLlonal MoneLary lunds (lMl)
llnanclal SysLem SLablllLy AssessmenL (lSSA) had hlghllghLed
LhaL Lhe corporaLe governance sysLem ln !apan was
characLerlzed by a lack of shareholder acLlvlsm Lransparency
and relaLlvely few ouLslde dlrecLors on corporaLe boards
W 1he relaLlvely small corporaLe bond markeL and exLenslve
crossshareholdlng furLher lmpede sLrucLural change
W 1he 2008 ACCA WhlLe aper on CorporaLe Covernance a
collaboraLlve efforL wlLh global lnsLlLuLlonal lnvesLors noLes
LhaL whlle a number of leadlng !apanese companles have
lmproved Lhelr corporaLe governance pracLlces ln recenL
years Lhe sysLem of governance ln mosL !apanese llsLed
companles fall Lo meeL Lhe needs of sLakeholders or Lhe
naLlon !apans corporaLe governance sLrucLure ls ofLen
porLrayed as a sysLem of sLakeholder caplLallsm
W !apan ls ranked 33Lh among 39 naLlons raLed ln a 2009 survey
by Covernance MeLrlcs lnLernaLlonal (CMl) a corporaLe
governance research and raLlng flrm
W Maln facLors behlnd Lhe poor raLlngsaLLrlbuLed Lo Lhe lack of
lndependenL dlrecLors ln Lhe boardroom
W AS er Lhe CMl survey 96 of !apanese companles raLed by
CMl have a ma[orlLy of nonlndependenL dlrecLors on Lhelr
boards 43 have no lndependenL dlrecLors aL all and 30
comprlse execuLlve dlrecLors only
W !apan scores 70 ln Lhe dlsclosure lndex agalnsL a reglonal
average of 31 and an CLCu average of 39
W lL scores 60 ln Lhe ulrecLor LlablllLy lndex agalnsL a reglonal
average of 46 and an CLCu average of 30 and 80 ln Lhe
Shareholder SulLs lndex agalnsL a reglonal average of 63 and
an CLCu average of 66
rlnclple of corporaLe governance
W 1he rlnclples of CorporaLe Covernance apply Lo llsLed
companles
W Powever wlLh Lhe recenL developmenL of formlng a
group of companles Lhrough Lhe use of a holdlng
company eLc lL ls lmporLanL for a llsLed company Lo
ensure corporaLe governance of noL only Lhe parenL
company buL also Lhe corporaLe group as a whole
W 1herefore a llsLed company ls requlred Lo make efforLs
so LhaL corporaLe governance funcLlons effecLlvely as a
corporaLe group as a whole
W 1he followlng polnLs as rlnclples of CorporaLe
Covernance ralse Lhe lssues Lo whlch all companles
should dlrecL Lhelr aLLenLlon based on Lhe expecLed
funcLlons of corporaLe governance
18lghLs of shareholders
W CorporaLe governance for llsLed companles should proLecL Lhe
rlghLs of shareholders
W (1) 8especL of shareholders' baslc rlghLs
A 8especL of voLlng rlghLs uevelopmenL and lmprovemenL of an
envlronmenL ln whlch shareholders exerclse voLlng rlghLs
approprlaLely uevelopmenL and lmprovemenL of an envlronmenL
ln whlch shareholders are lncllned Lo parLlclpaLe ln general
meeLlngs of shareholders MuLual communlcaLlon wlLh
shareholders aL Lhe general meeLlngs of shareholders
8 8eLurn of proflL Lo shareholders
W (2) uue conslderaLlon Lo Lhe lnfrlngemenL of rlghLs of exlsLlng
shareholders
A Lnhanced dlsclosure of lnformaLlon Lo shareholders ln slLuaLlons
where speclfled shareholders have excesslve conLrol LhaL ls noL ln
proporLlon Lo Lhe ownershlp raLlo and Lhe rlghLs of oLher
shareholders are subsLanLlally lnfrlnged
8 Securlng falr LreaLmenL of and enhanced lnformaLlon dlsclosure
Lo shareholders ln cases where Lhe ownershlp dlsLrlbuLlon of Lhe
company ls or wlll be
2 Lqual LreaLmenL of shareholders
W Should ensure Lhe equal LreaLmenL of all shareholders
lncludlng mlnorlLy and forelgn shareholders
W 1he equal LreaLmenL of all shareholders of Lhe same class
ln proporLlon Lo Lhelr equlLy lnLeresLs ls an lmporLanL
elemenL of corporaLe governance
W ManagemenL dlrecLors audlLors and conLrolllng
shareholders may flnd opporLunlLles Lo abuse Lhelr
poslLlons Lo beneflL Lhemselves and such acLlvlLles are
cerLaln Lo cause dlsadvanLages Lo lnvesLors and mlnorlLy
shareholders
W 1he prohlblLlon of abuslve or fraudulenL use of corporaLe
asseLs or lnslder lnformaLlon by parLles closely relaLed Lo
Lhe company ls an lnevlLable sLep Lo be Laken boLh Lo
proLecL lnvesLors and Lo malnLaln Lhelr confldence ln Lhe
caplLal markeLs
3 8elaLlonshlp wlLh sLakeholders ln
corporaLe governance
W Should help creaLe corporaLe value and [obs
Lhrough Lhe esLabllshmenL of smooLh relaLlonshlps
beLween Lhe company and lLs sLakeholders and
encourage furLher sound managemenL of Lhe
enLerprlse
W lssues requlrlng aLLenLlon
1 CulLlvaLlon of a corporaLe culLure LhaL respecLs Lhe
poslLlons of sLakeholders and developmenL of
lnLernal sysLems Lherefore
2 1lmely and accuraLe dlsclosure Lo sLakeholders of
maLerlal lnformaLlon relaLlng Lo sLakeholders and
developmenL of lnLernal sysLems Lherefore
4 ulsclosure and Lransparency
W CorporaLe governance for llsLed companles should ensure LhaL Llmely and
accuraLe dlsclosure ls conducLed on all maLerlal maLLers lncludlng Lhe
flnanclal condlLlon performance resulLs and ownershlp dlsLrlbuLlon
W LlsLed companles shall be obllged Lo conducL Llmely and accuraLe
dlsclosure regardlng corporaLe acLlvlLles Such dlsclosure ls lndlspensable
for approprlaLe lnvesLor evaluaLlon of enLerprlses ln Lhe markeL and
concurrenLly for Lhe approprlaLe exerclslng of voLlng rlghLs by
shareholders
W lssues requlrlng aLLenLlon
W LlsLed companles should dlrecL Lhelr aLLenLlon Lo Lhe followlng lssues ln
order Lo conducL Llmely and accuraLe dlsclosure
W Lnhanced dlsclosure of quanLlLaLlve lnformaLlon on flnanclal condlLlons
and operaLlng resulLs and enhanced dlsclosure of quallLaLlve
lnformaLlon LhaL deepens Lhe undersLandlng of Lhe managemenL
condlLlons of companles by lnvesLors
W Securlng opporLunlLles for lnvesLors Lo access lnformaLlon equally and
easlly
W uevelopmenL and lmprovemenL of lnLernal sysLems Lo secure Lhe
accuracy and prompLness of dlsclosure
3 8esponslblllLles of 8oard of ulrecLors AudlLors 8oard of
Company AudlLors and oLher relevanL group(s)
W CorporaLe governance for llsLed companles should enhance Lhe
supervlslon of managemenL by Lhe 8oard of ulrecLors AudlLors
8oard of Company AudlLors and oLher relevanL group(s)( 1) and
ensure Lhelr accounLablllLy Lo shareholders
W 1he legal framework or basls for corporaLe governance permlLs Lhe
cholce of a corporaLe audlLors sysLem or commlLLees sysLem
W ln elLher case Lhe 8oard of ulrecLors AudlLors 8oard of Company
AudlLors and oLher relevanL group(s) should evaluaLe wheLher Lhe
managemenL (2) has been accuraLely and efflclenLly execuLlng
buslness pursuanL Lo Lhelr sLraLeglc guldance on sLraLegles and
prevenL Lhe occurrence of confllcLs of lnLeresL beLween Lhe
company and Lhe managemenL by reflecLlng on such evaluaLlon
prlor Lo Lhe elecLlon or dlscharge of managemenL or Lhe execuLlon
of declslons on compensaLlon and Lhereby fulflll Lhelr approprlaLe
supervlslon responslblllLles
THAtK Y0u