The Washington Post: ”A Maverick Founder Wins Enemies in Japan With Move to Dump Board”

An excerpt from an article on the somewhat unique situation at Cookpad. We don’t think we have seen a story like this before, at least not recently.

”(Bloomberg) — A spat is rocking one of Japan’s most popular Internet companies after the founder moved to kick out the board, enraging staff and sending shares tumbling.

Akimitsu Sano, who owns 44 percent of Cookpad Inc., shocked investors in January by calling on them to dump all other directors of the recipe-sharing site, saying the company was neglecting its main business. The stock fell 23 percent in one day and has whipsawed with each new skirmish in a battle to control a firm with more than 85 million monthly website users.

Facing exile, as Sano’s stake in effect meant he could unilaterally replace them, the then board sought to negotiate a compromise, and by February reached an agreement for some members to retain roles. Nine directors — Sano, five of his picks and three others from the previous board — were anointed by shareholders at the annual meeting in March.

Prof. Sean J. Griffith: ”Corporate Governance in an Era of Compliance”

”Abstract: Compliance is the new corporate governance. The compliance function is the means by which firms adapt behavior to legal, regulatory, and social norms. Formerly, this might have been conceived as a typical governance matter to be handled at the discretion of the board of directors. Compliance, however, does not fit traditional models of corporate governance. It does not come from the board of directors, state corporate law, or federal securities law. Compliance amounts instead to an internal governance structure imposed upon the firm from the outside by enforcement agents. This insight has important implications, both practical and theoretical, for corporate law and corporate governance. This Article pairs a detailed descriptive study of the contemporary compliance function with a normative account of its incompatibility with current conceptions of corporate governance. It argues that compliance alters the political economy of American business, challenges governance efficiency, and makes old theories of the firm new again. Prescriptively, the Article calls for greater transparency and a more limited role for government in designing corporate governance mechanisms………”

Study by Prof. Hiroshi Uemura: ”The Attributes of Japanese Corporate Governance Influencing the Quality of Internal Controls”

”Abstract: This study examines the corporate governance characteristics that influence the improvement in the quality of internal controls. Previous studies suggest that corporate governance independence and expertise affect the quality of internal controls (Krishnan et al. 2005; Hoitash et al. 2009). In Japan, however, any company that discloses significant deficiencies (SD) in internal controls has the motive to increase the independence of corporate governance to mitigate any subsequent negative consequences. As a result, independent directors are made the scapegoats, rather than allowing them to fulfill the expectation of improvement in the quality of internal controls. On the other hand, directors with financial expertise that have a high status in a company do influence the improvement in SD in internal controls. This suggests that in Japan it is important to provide financial experts with the power and authority to improve the quality of internal controls in the short term, due to the difference in the provisions between the Financial Instruments and Exchange Act (J-SOX) and the Sarbanes–Oxley Act (SOX). The requirements in Japanese Corporate Law (JCL) for independent directors are not as strict as those within SOX. Therefore, companies in which the boards are able to promote expert directors to important positions improve the quality of internal controls more often than those that are not. It is thus revealed that auditors should be able to discuss with the financial experts as to what is required to improve any significant deficiencies that are detected in the process of internal control audits……..”

Papers by Professor Toru Yoshikawa: the Importance of Trust, and “Convergence”

directorship director training

A recent article put out by the SMU Office of Research, quoted second below, describes the work of Professor Yoshikawa of the Singapore Management University related to concepts of convergence in corporate governance as related to Asia and Japan. I personally think that the more recent 2013 paper that Professor Yoshikawa contributed to is equally, if not more, on point. In my own experience effective collaboration between management and outside directors can only occur if the latter’s perception of the CEO values and integrity, including his/her committment to governance, are high. This is true in any country, but it is even more true in Japan because the number of outside directors is small. (Comment by Nicholas Benes of BDTI)

1) Paper: “The Effects of CEO Trustworthiness on Directors’ Monitoring and Resource Provision2

Comment on Reuters Article: ”Secrecy, hierarchy haunt Japan corporate culture despite Abe’s reforms”

Comment by Nicholas Benes at BDTI: The foreign press often tends to focus on each of these scandals as if they expose significant flaws in a recently installed set of governance “best practices” that in fact, is just now gathering momentum and evolving in Japan. However, the foreign press rarely specifies exactly what additional changes are needed, which is not easy to do. What the recent scandals most directly reveal, is flaws in the corporate culture of particular firms. It is my own view that the combination of: (a) the content of the new practices (and upcoming reforms) (b) the degree to which they are sincerely deployed; and (c) the extent to which companies use external training to spread essential knowledge and awareness in the ranks, all affect the extent to which boards can effectively focus on “managing” and improving their own corporate culture.

”TOKYO, May 3 (Reuters) – A spate of high-profile scandals at leading Japanese companies show reforms and rhetoric aimed at improving the country’s corporate governance do not go far enough to unwind the culture of secrecy and hierarchy that plagues Japan Inc.

Ferillo & Veltsos: ”Grading Global Boards of Directors on Cybersecurity”

On April 1, 2016 NASDAQ, along with Tanium (a leading-edge cybersecurity consultant), released a detailed survey of non executive (independent) directors and C-suite executives in multiple countries (e.g., the US, UK, Japan, Germany, Denmark, and the Nordic countries) concerning cybersecurity accountability. [1] NASDAQ and Tanium wished to obtain answers to three basic questions: (1) how these executives assessed their company’s vulnerabilities to cybersecurity threat vectors; (2) how they evaluated their company’s readiness to address these vulnerabilities; and (3) who within the company was held “accountable” for addressing these cybersecurity vulnerabilities.

Brunswick Review Journal: ”The Boardroom Issue”

Brunswick Review is a Journal of Communication and Corporate Relations that features insights from global business leaders, policy makers, political critical and journalists as well as Brunswick consultants.

In this edition, the Journal features diverse topics on Directors and Boardroom issues. Among them is an Interview with Mr. Osamu Nagayama titled ‘The View from Outside’ on page 16. Mr. Nagayama is the Chairman and CEO of Chugai Pharmaceutical. He is also a member of the Enlarged Corporate Executive Committee of Rochel besides being a member of board of directors at Sony.

Hoang C. C. et al : ”Institutional Investors and Trends in Board Refreshment”

”As many institutional investors have concluded, prevailing governance policies and practices have not produced desired board refreshment, which these investors would support in order to strengthen expertise, promote diversity and provide fresh perspectives in the board room. At the same time, companies and investors alike appreciate that term and age limits, as they have been typically applied, may not be the solutions, because they force the arbitrary retirement of valuable directors.

Daniel E. Wolf et al :”Social Covenants in Mergers: Legal Promises or Moral Commitments?”

‘With the return of acquirer stock as a featured form of consideration in many recent deals, dealmakers are once again focusing on “social” issues in striking a merger agreement. As compared to most straight cash takeovers where price garners the overwhelming share of, if not exclusive, attention, an acquisition featuring stock consideration, and especially a so-called merger-of-equals, often involves significant discussion between the parties of softer issues, including governance, board composition, management, people, and corporate identity (e.g., corporate and brand names, headquarters and facility locations, and charitable and community commitments). A number of deal developments over the last few years highlight some of the risks and considerations unique to these social terms.