|MIYAJIMA Hideaki (Faculty Fellow, RIETI)
|December 2021 21-P-020
|Frontiers in Corporate Governance Analysis
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As the social norms related to the purpose of companies have changed profoundly, the stakeholder view has become more prevalent worldwide. In the past, it was expected that the world would converge on the U.S. model of governance, which advocated the maximization of shareholder value as the purpose of business, but in fact, the Anglo-American world is now tilting toward a stakeholder-focused model. On the other hand, in Japan, companies were exposed to such new global trends exactly when they were reorganizing their governance arrangement as a part of the reforms of the Shinzo Abe Administration, which were intended to realize corporate growth through the strengthening of shareholder primacy. With these new options before us, which direction should corporate governance in Japan take? In our view, the task for corporate governance reform is to realize technological innovation and economic dynamism by increasing emphasis on the role of the stock market without falling into the trap of short-termism, and to create a framework for companies to internalize critical social values and sustainability. In other words, the goal is not to move simply closer to the U.S. governance model or to revive the traditional Japanese model, but to newly design a "Japanese model 2.0," which would be a hybrid of those two models. From those perspectives, this paper first summarizes the economic consequences of the corporate governance under Abenomics. Then, it suggests crucial focal points for designing Japanese Model Ver 2.0. We address the redefinition of the purpose of Japanese firms, the new roles of corporate boards, and an appropriate ownership structure that could support the purpose of the corporation.