The excellent companies like Toyota or Canon seem to have confidence about their corporate governance because their businesses have been doing very well.
They insist they should pursue Japanese style of corporate governance instead of following American way, which requires so-called "the company with committees" system.
However, there are some pitfalls in this argument. I would like to point out only several points of contention.
First, corporate governance is based on an argument to show the ground of the validity legitimating management prerogative.
In other words, it is a problem whether the management can clearly explain why they can manage the company or not.
The fact that they are doing well in business cannot be the ground of the validity in this sense. If I may say in a parody of the phrases by Max Weber,
"traditional control is not appropriate for modern corporations and charismatic control becomes more routine and obsolete at some point".
There is little possibility that the companies that turn their backs on legitimate control can remain to be one of the excellent companies in the future.
Second, the value of corporate governance is put to the test when the company is on the verge of collapse.
People do not let the government either use public funds or come up with a reconstruction plan if the failed company is not the one with committees like the Resona Bank case.
Since there is no guarantee that excellent companies can remain excellent forever, they need the governance that they can be confident with under all conditions.
Old-fashioned systems become frayed sooner than you expect. The history of corporate law since 1602 when Dutch East India Company established tells us that superiority never lasts.
Third, in many cases, these companies tend to say that employment is more valuable to them than shareholder value.
However, their shareholders are mostly corporations, and they expect stable support from those corporate shareholders, that is, the support from their fellow management people.
However, they often assume the shareholder means an individual shareholder when they say, "employment is more important than shareholder value".
In short, we cannot say those companies are rooted in civil society because they are saying that corporate shareholders are more important than individual shareholders.
Fourth, since Japan lacks business combinations legislation, these blue-chip companies benefit from limited liability without accepting responsibility to creditors or minority shareholders in subsidiary.
While foreign companies are paying considerable costs in this respect, Japanese companies do not compete equally with them.
In the future, if precedents or legislations confirm the principle that there is a responsibility wherever there is a control,
who knows these companies can remain one of the excellent companies even after paying those costs.
After all, it is expedient for those excellent companies to establish a corporate governance system with which they can claim the validity of management right under all conditions.
Many have the sense that they won't have to change anything because they are doing well right now. Those current management executives will never know that sense might be the biggest factor for their future crisis.
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The excellent companies like Toyota or Canon seem to have confidence about their corporate governance because their businesses have been doing very well.
They insist they should pursue Japanese style of corporate governance instead of following American way, which requires so-called "the company with committees" system.
However, there are some pitfalls in this argument. I would like to point out only several points of contention.