It was not until the introduction of Japan’s Corporate Governance Code in 2015 that the need for and importance of corporate governance began to be widely recognized in Japan. That was only eleven years ago. Of course, this does not mean that corporate leaders before then simply ignored governance. Rather, their understanding and practice of governance were largely shaped by their own experience and judgment. The introduction of the Corporate Governance Code provided a framework that enabled companies to understand, implement, and review governance in a more systematic way. Since then, I believe we have increasingly come across the phrase “governance is not functioning effectively.”

Olympus, where I worked, experienced an accounting scandal in 2011 involving certain members of its management at the time, which caused serious harm to many stakeholders. Having subsequently played a central role in the company’s management, I found the broader movement in Japanese society toward strengthening corporate governance to be a powerful source of support in fulfilling my own role in rebuilding the company.

Even before the term “corporate governance” became widely used, I had been thinking about what kinds of governance functions and systems were necessary for a company to achieve sustainable growth. In particular, I believed that Japanese companies, many of which had traditionally been managed on the basis of lifetime employment and seniority-based advancement, faced a risk that governance would not function effectively enough. I could strongly sense this risk in the workplaces around me.

Whether I was young or in mid-career, I always tried to remain conscious of how sound governance could be put into practice from whatever position I happened to occupy. The experience I gained through those years proved extremely valuable later, when I became CEO and was able to design and implement significant changes within the company.

To reiterate, I view corporate governance as “everything a company does to achieve sustainable growth.” It is not something to be carried out by any particular individual or organization. Rather, it is about making the entire system of the company function effectively: establishing mechanisms that enable the company to make the best possible use of its people, resources, and capital; monitoring those mechanisms; and making improvements whenever necessary. Naturally, this requires management to put them into practice and the board of directors to effectively oversee and challenge management.

When I became CEO, I invited an activist investor to join the board. My intention was to increase the diversity of the board as a whole in its oversight of management, thereby strengthening governance and contributing to the company’s development. From a management perspective, one might think that having an activist investor on the board would make running the company more difficult. But if the goal is to increase the likelihood of the company’s success, it is essential to have someone who is willing to offer tough criticism and serve as both a mentor and a supporter to management.

Perhaps our perspective on corporate governance changes if we see it not simply as a means of protecting a company from risk, but as a means of enabling it to take bold action for growth as the business environment continues to change.