Coporate Model of Japan

7/28/2019 Coporate Model of Japan

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Group I

Anjana Budathoki

Anil Basnet

Anshu Manandhar

Arjun Raj Kafle

Asmita Subedi

Seminar II

The Corporate Governance Model of Japan

Shareholders are not RulersSubmitted To:

Prof. Dr. R. S. Pradhan

Financial Management


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1. INTRODUCTION

2. OBJECTIVE OF STUDY

3. RESEARCH METHODOLOGY

4. CORPORATE GOVERNANCE DIFFERENCES INPRACTICE

5. PRESENTATION AND ANALYSIS OF DATA

6. CONCLUSION

Contents


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In US and UK Corporate Governance mainly

focuses on maximizing Shareholders wealth.

In Japan and some other countries, firmsconcerned are found within stakeholders as

well as shareholder.

There is a system of codetermination in

Germany

Introduction


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Managers of US and UK have a very strong

duty to act in interest of shareholders.

Managers of Japan do not have a fiduciaryresponsibility to shareholders

Purpose of This Article

Introduction


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To determine why there is a difference in thegoal of US, UK and Japan Corporate

Governance.

To determine whether the shareholders are therulers, actual owners of a company or not.

To determine the difference between the Anglo

American System, the Japanese and other

countries like US and UK system of Corporate

Governance.

How this Article Differs from its Predecessors

Objectives of Study


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To determine which view of corporategovernance is suitable among different markets.

To determine whether the perfect competition

market where no transaction costs or similarfrictions, no hindrances from externalities do

really exist or not.

To determine whether the company will be wellin case of distributing more dividends i.e.

satisfying the shareholders or retain more

dividends.

Objectives of Study


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Secondary source of data: Collected form

Asahi Breweries, Ltd. Case, 1989, Harvard Business School,

9-389-114.

Institute of Fiscal and Monetary Policy (1996), Chart III-3-3,p.69.

No. of firm surveyed: Japan- 68, US- 82, UK -78, Germany -

100, France- 50 (Institute of Fiscal and Monetary Policy(1996), Chart II-1-2, p.57, Chart III-4-6, p.84.

Measures FindingResearch Methodology


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Difference in Corporate governance mechanisms

based on:

1. The board of directors

2. Executive compensation

3. The managerial organization of corporations

4. The market of corporate control5. Concentrated holding and monitoring by

financial institution

Corporate Governance Difference in Practice


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Board of Directors is elected by shareholdersin US and UK.

Mixture of outside and inside directors who

are the top executives in firm. Management implement policies determined

by board.

Proxy fight outside directors are nominated bythe incumbent management allegiance withC.E.O

The Board of Directors


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Anticipated future profitability

Stock price accounting based performance measures

are also frequently used.

Another motivating force -dismissal for bad

performance

Manager difficult to find another job and so may bear

a large penalty /may be bid away at higher

U.S. pay on performance /Japan -lowest pay -world.

Important mechanisms -provided investors have an

incentive to gather information and stock market

prices.

Executive Compensation


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Aoki (1990)survey -hierarchical firm

* H-mode

Hierarchical separation between planning and

implemental operation. An emphasis on economics of specialization

* J-mode

Horizontal coordination among operation units based

The sharing of ex post on-site information Lifetime employment, seniority advancement and management

discipline are important.

Japanese decision are focused on employee and influenced by

owners

The Managerial Organization of Corporation


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Important, operation, capitalist economies

Allows management team to control the large

resource within small time

Policies- shareholders wealth- manager

replaced.

3waysmarket for corporate control operate.i. Proxy contests ii. Friendly mergers iii. Hostile

takeovers

Methodology UsedThe Market for Corporate Control


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Japan and Germany- agency problem- solved Japan- main bank system

Characteristics

*Long term relationship

bank & clients firm*Holding debt, equity -Active intervention

financial distressed

*Over come agency problem Works in financial distress

Less important -doing well

Contd.. Methodology UsedConcentrated Holdings and Monitoring by

Financial Institutions


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Contributing society as a whole- seeks to attain trustand confidence of consumer.

Major FindingsCorporate Philosophy of Asahi Breweries Ltd.


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Exhibit 1: Analysis of Working Capital TechniquesTable.2. No. of Members on Board of Directors

U.S. U.K. Japan

Ford 15 (10) Glaxo 16 (7) Toyota 60 (1)

IBM 14 (11) Hanson 19 (8) Hitachi 36 (3)

Exxon 12 (9) Guinness 10 (6) Matsushita 37 (6)

Mobil 16 (10) British Airways 10 (6) Nissan 49 (5)

Philip Morris 16 (4) Allied Domecq 12 (4) Toshiba 40 (3)

RJR Nabisco 9 (6) Grand Metropolitan 14 (1) Honda 37 (3)

Texaco 13 (11) BTR 10 (4) Sony 41 (6)Johnson & Johnson 14 (12) Associated British Food 7 (1) NEC 42 (5)

GAP 11 (8) British Steel 8 (0) Fujitsu 36 (7)

Mitsubishi Electric 37 (3)

Mitsubishi Motors 43 (4)

Mitsubishi Heavy Industries 43 (3)

Nippon Steel 53 (1)Mazda 45 (8)

Nippon Oil 22 (0)

Figure in Parentheses:

UA: Outside Director

UK: NonExecutive (Outside Director)

Japan -Outside Director including Cross Directorship


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Figure 1.


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Figure 2: Whose Company is it?

Number of firms surveyed: Japan 68, US 82, UK 78, Germany 100, France 50


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Figure 3. Job Security or Dividends?

Number of firms surveyed: Japan 68, US 82, UK 78, Germany 100, France 50


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The Anglo American model provided by theUS and UK are based on the narrow view of

the corporation in the economy. It is concerned

with maximizing the wealth of shareholders. For countries as china that are reforming their

corporate governance systems, the Anglo-

American model provides by US and UKprovides one possible direction to go in.

In Japan and other countries Broader view of

study is taken

Conclusions


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In Japan a border view of corporategovernance is taken than that of narrow viewas US and UK.

It is concerned with the efficient allocation ofresources by taking into accounts the range ofinterest of both of the stakeholders and theshareholders.

If markets are well developed, this systemleads to efficient allocation of resources.

Conclusions


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THANK YOU

Coporate Model of Japan

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