The Wall Street Journal:”Japanese Companies Are Haunted by’Ghosts In The Boardroom”

(Excerpts ) — “Toshiba isn’t unusual in keeping “ghosts in the boardroom,” as Nicholas Benes, head of the Board Director Training Institute of Japan, describes former executives who stay on the payroll in an advisory role. He estimates that 80% or more of large Japanese companies have such posts. Many top executives in Japan, where CEO pay is lower than in the U.S., consider them an entitlement, to supplement their pensions.

In Japanese, these positions are called “sodanyaku” or “komon,” which translate as “adviser” or “counselor.” Sodanyaku are typically former company presidents, while komon can also be outsiders. Both roles frequently come with perks such as offices, secretaries, chauffeured cars and club memberships—as well as considerable sway over corporate strategy.

At Sharp Corp., former chief executive and chairman Katsuhiko Machida, 73, who led the expansion of the company’s liquid crystal display business, remained a paid adviser until June, when he resigned from that role three years after stepping down as chairman.

Some analysts say Sharp should have moved to reduce its exposure to LCDs because of falling prices and growing competition in the business, but Chief Executive Kozo Takahashi said in May that the company would keep full ownership of the panel unit.

–It is very difficult to undo things a former CEO has initiated.’
—Takeyuki Ishida, executive director of the Japan office of Institutional Shareholder Services

Sharp said Mr. Machida wasn’t available to comment. As of June, the company had no more sodanyaku or komon, a spokeswoman said.

Sodanyaku and komon are neither executives nor directors, and Japanese companies aren’t required to disclose their existence or their pay. Mr. Benes says this is inconsistent with Prime Minister Shinzo Abe’s push to improve transparency and governance at Japanese companies.

“If you’re not in the kitchen bearing liability as a director, you shouldn’t be telling me how to cook,” Mr. Benes said. “

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The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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