Growing investor demand and more than a decade of economic stagnation are forcing Japanese companies to re-examine their traditional corporate governance practices, Standard & Poor’s Corp. said in reports released Thursday.
“Standard & Poor’s sees signs of a gradual shift in the philosophy regarding corporate governance in Japan, and companies are embracing greater transparency and disclosure,” said Hiroko Kiguchi, a member of S&P’s governance unit who compiled the reports.
Companies are increasingly moving toward more rigorous practices, the U.S. credit-rating agency said, pointing out that traditionally, boards have consisted solely of executive directors, and companies have been bound with cross-shareholding ties.
Recent revisions to Japan’s Commercial Code will promote further improvement in corporate governance practices, she added.
But Japanese firms still have much discretion in their governance, given the lack of strict regulations or legal enforcement, Kiguchi said.
“As a result, the implementation of effective corporate governance in Japan continues to depend primarily on the level of management’s commitment,” she said.
Trade watchdog set up
The Japan Foreign Trade Council, a federation of the nation’s trading firms, will work to ensure the industry obeys the law following a series of bribery and bid-rigging scandals at trading houses, the council said Thursday.
At a news conference in Tokyo, Kenji Miyahara, chairman of the council and of Sumitomo Corp., said the trade council will set up a special committee to work on compliance issues and will draw up a model compliance program to assist efforts at member firms.
The planned committee will include members from outside industry, including university professors and legal experts, and will study the kinds of measures taken by each member firm to ensure compliance, Miyahara said.
(The committee will also draw up a model compliance program to assist efforts at member firms, he added.)
Mitsui & Co. President Shinjiro Shimizu and Shigeji Ueshima, the firm’s chairman and executive director, are set to resign Sept. 30 over allegations that Mitsui bribed a senior Mongolian government official to secure orders for a Japanese government-funded power project.
The industry group also decided not to take any punitive steps against Mitsui & Co. for a spate of bid-rigging scandals.
A company should take responsibility for a scandal on its own, Miyahara said, stressing that the council has no plans to consider punitive measures against Mitsui, such as an expulsion.
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