David Herro, a money manager who oversees $35 billion (¥4.35 trillion) worth of investments and learned about Japanese corporate governance the hard way, says for all Prime Minister Shinzo Abe’s efforts, the nation remains 30 years behind in this area.

Boards are too big and lack diversity, while balance sheets have too much cash, said the chief investment officer of Harris Associates LP. Herro, whose firm was one of the largest shareholders in Olympus Corp. during its $1.7 billion accounting fraud, says corporate Japan is held back by reluctance to welcome outsiders and he’s not sure companies buy the government’s push for change.

“Japan has gone from zero to two” on the scale, Herro, named Morningstar Inc.’s international stock fund manager of the decade in 2010, said from Chicago on May 20, referring to the overhaul of rules for companies in the past two years. “It’s improving. But we need to get to eight, nine or 10.”

Governance is in focus in Abe’s Japan, with the government starting a new code this week that will call on firms to name two independent directors. It also introduced stewardship principles for institutional investors and a stock index designed to stop firms hoarding cash. Equity analysts have talked up the changes, with Merrill Lynch Japan Securities Co. describing the policies as a “return revolution.”

Companies are starting to display the behavior Abe wants.

An index of business spending turned positive last quarter. Dividends and share buybacks will increase by 25 percent this fiscal year, according to Goldman Sachs Group Inc. Return on equity for companies on the Topix index climbed to 8.2 percent in May from 5.9 percent two years earlier. The gauge is trading near a 7½-year high.

Yet some of Japan’s biggest stocks are making headlines for the wrong reasons.

Toshiba Corp. is embroiled in an accounting probe that it says will reduce profit by at least ¥50 billion. Housing materials maker Lixil Group Corp. has postponed earnings pending an investigation and said one of its units will file for insolvency.

Toshiba “goes to tell you having an effective board is critically important,” said Herro, 54, who still owns shares in Japanese companies from Toyota Motor Corp. to Honda Motor Co. “If you have clean corporate governance, then you have a more proactive management team, you have people pressing and questioning management. If you have a good audit committee you don’t have these scandals.”

Herro has been down that road before.

The face of Harris Associates throughout the Olympus affair, he watched as shares of the major medical equipment-maker plunged over 80 percent in the month after it dismissed its president, Englishman Michael C. Woodford, in October 2011. Woodford had been asking questions about transactions that the company later admitted were fraudulent.

Herro said in October 2012 that the situation at Olympus was eventually fixed and had a happy ending, and that he had doubled his holdings. Harris Associates owned 1.1 percent of Olympus as of March 31, according to data compiled by Bloomberg.

“Olympus played a big role” in the governance changes, Herro said. “Japan could have swept it under the rug like they typically do, or they could have done some self-examination,” and it took the latter route, he said.

Cash holdings of nonfinancial companies were equivalent to 48 percent of the nation’s gross domestic product at the end of 2014, according to calculations by Daiwa Institute of Research Ltd. That compares with about 20 percent in France and Germany and less than 10 percent in the United States.

“We are all in favor of a safe balance sheet,” Herro said. “It’s like you own a $50,000 (about ¥6.2 million) car and insure it for $5 million. It’s pointless. It’s a waste. Buying too much insurance is as much a crime as not buying enough insurance.”

Japan rose to third from fifth in a ranking of 10 Asian countries published by CLSA Ltd. and the Asian Corporate Governance Association in September 2014. It trailed Hong Kong and Singapore.

The nation lags behind in corporate governance because it is too insular, according to Herro, who has doubts about how much companies believe in Abe’s changes.

“The good thing is, the government is on board,” he said. But companies also “have to want it. They have to realize why it’s good. That’s what I think is missing.

“It shouldn’t have to be legislated. These are things that should be done anyway.”