Japanese Corporate Governance at a Crossroads: Variation in 'Varieties of Capitalism'?

45 Pages Posted: 7 Nov 2005

See all articles by Luke R. Nottage

Luke R. Nottage

The University of Sydney Law School; The University of Sydney - Australian Network for Japanese Law


Over the last decade or so, elaborate theoretical and empirical analyses of 'varieties of capitalism' have been developed, mainly to contrast Anglo-American models with those in East Asia and - especially - Europe. Corporate governance, broadly defined as relations among a range of stakeholders in firms, provides a useful focal point in testing and refining these analyses, especially in relation to Japan and the issue of convergence or divergence on Anglo-American models. Parts II-IV of this paper apply principal-agent theory to identify problems arising from incomplete information and possible opportunism among managers, shareholders, creditors and employees. It finds considerable realignment of manager and shareholder interests, even more change to Japan's main bank system of corporate governance, and less obvious - but significant - transformations in employment relations. Although differences are therefore apparent in these three major components of corporate governance, the degree of convergence towards more arm's length control mechanisms characteristic of Anglo-American models is more pronounced than expected by some theorists of 'varieties of capitalism'. However, Part V suggests that more cooperative relations may continue to prevail at the level of industrial production in Japan, premised on expansive information-sharing and participation, in turn suggesting that more than opportunism is at work. The Japanese state may also be moving in this direction, implying a more positive assessment of seemingly indecisive policy-making over the last decade. This could further set the stage for new forms of corporate governance to emerge, similarly characterised by forthright information-sharing among new stakeholder participants. Key issues are therefore whether Japan as a whole is moving towards more openness in information flows and participation by various socio-economic groups, and whether this is driven purely by concerns about opportunism or by other normative considerations. These issues are common to the US and Britain as well, suggesting a deeper level of convergence in Japan. But how they are resolved could well play out quite differently, leaving important divergences. In this conclusion, and generally by suggesting some possible tensions as well as coherence among important dimensions of contemporary capitalist systems, this paper therefore questions some other tenets of 'varieties of capitalism' theories developed so far.

Keywords: Corporate law, Japan

JEL Classification: K22, K49

Suggested Citation

Nottage, Luke R., Japanese Corporate Governance at a Crossroads: Variation in 'Varieties of Capitalism'?. North Carolina Journal of International Law and Commercial Regulation, Vol. 27, No. 2, pp. 255-299, 2001. Available at SSRN: https://ssrn.com/abstract=837025

Luke R. Nottage (Contact Author)

The University of Sydney Law School ( email )

New Law Building, F10
The University of Sydney
Sydney, NSW 2006

The University of Sydney - Australian Network for Japanese Law

Room 640, Building F10, Eastern Avenue
Sydney, NSW 2006

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