A Justice Ministry panel hammered out a draft bill Wednesday that would amend the Commercial Code and could radically alter the makeup of corporate boards and hasten the decision-making process of large companies.

The proposed revisions would allow a firm's operating officers to make quicker, bolder decisions regarding management policies, mirroring the powers of CEOs in the U.S., ministry officials said.

Japanese boards came under heavy criticism during the 1990s for being unwieldy and inflexible. They are usually much larger in number than their U.S. counterparts and composed of company insiders.

The subcommittee of the Legislative Council approved the proposals at a meeting Wednesday afternoon. The subcommittee is headed by Gakushuin University Professor Hitoshi Maeda.

The Japanese equivalents of U.S.-style CEOs would be known as operating officers, according to a draft of the proposed amendment.

Under the revised legislation, a company's board would also be allowed to delegate authority over a broad range of key policies to other selected operating officers.

Should a firm choose to adopt such a U.S.-style structure, it would be obliged to hire more than one so-called outside director and add them to the board.

This would grant the board greater powers to supervise the firm's operations in order to protect shareholder interests.

Under the revised law, operating officers could be given the power to order flotations of new shares or bonds.

They also would have the power to recommend the methods of distributing each year's net profits -- such as in the form of stock dividends or retained earnings -- to the board, the draft says. The board would then have the authority to approve or disapprove the recommendations.

Under the current Commercial Code, any proposal on the distribution of net profits must be approved at a shareholders' meeting.

The Legislative Council plans to give a final green light to the proposed revisions at a meeting slated for Feb. 13. This would allow the ministry to submit the amendment to a 150-day regular Diet session that convenes Jan. 21.

The revised Commercial Code would allow a company to appoint a person hired from the outside as a chief operating officer who would then confer with the president of the company.

The revised law would also allow a person who does not sit on a company's board to assume the presidency, it says.

Under the revision, only large corporations with capital of more than 500 million yen would qualify to adopt such a structure. They also would be free to retain their current structures.

A company would also be allowed to establish an auditing committee inside its board to audit the company's financial statements, a director appointment committee to choose board members, and a benefit committee to determine the level of allowances granted to board members and operating officers.

The auditing committee would assume the duties of auditors appointed under the current Commercial Code, and companies that set up auditing committees would be allowed to abolish the posts of auditors.

The reliability of corporate Japan's current auditor system has long been criticized, since the auditors usually play a dual role within their companies and are seen as less than objective.

Under the revised law, each committee would have to be comprised of three or more board members, a majority of whom must be outside directors.