Your editorial on corporate governance on July 22 suggests Japanese businesses need to learn from their mistakes. However, you fail to mention how to solve the problems.
The solution has to be a combination of auditors and independent board directors who would sit on the audit committee. After the Enron/Arthur Anderson scandals of the early 2000s, the U.S. enacted new laws to significantly strengthen the power of the audit team. Indeed the Sarbanes-Oxley Act requires that all listed companies have an audit committee with a majority of independent directors sitting on it.
Secondly, whistleblowers need to be protected better. The current law protects their jobs but there is no penalty for the company if they punish the staff. Criminal penalties should be introduced for harming whistleblowers but also senior staff who commit the crimes. This would encourage more staff to highlight troubles. Sarbanes-Oxley also gave responsibility to audit committees to protect whistleblowers. Over 6,000 tips were received after the law were passed. By contrast Japan can count only a handful of employees who have come forward, such as at Snow Brand Milk Products and Olympus.
As you mentioned, 65 percent of TSE-listed companies have implemented 90 percent of the corporate governance code. This is not enough if all they do is check off boxes on the forms. Corporate Japan needs to change its behavior. Even companies that are doing well should challenge the status quo at the first sign of trouble. Uber dominates the ride-sharing industry, but its major shareholders and board decided to fire the CEO, Travis Kalanick, to prevent its problems from spiraling out of control. Toshiba and Takata shareholders would have benefited if their CEOs had been fired and whistleblowers publicized their troubles earlier.
The opinions expressed in this letter to the editor are the writer's own and do not necessarily reflect the policies of The Japan Times.