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Corporate governance in Japan

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The early 1990s witnessed great changes in the political and economic history of post war Japan, due to the profound upheavals that occurred at the end of the reign, which interrupted for more than 50 years, the rule of the Liberal Democratic Party, and then the financial and real estate bubble burst.

Although some people believe that the period of uncertainty that followed the questioning of the Japanese model was a ?lost decade', a post hoc analysis can be seen rather as opening a parenthesis of multiple reforms which hit the Japanese system at various levels, including directly recasting the model of corporate governance ?to the Japanese' that was established previously.

In this area, the changes that have affected the formal laws and practices and established the overlap between business and politics show that the revolution of the system has started.

The J-Corporate Governance is more recent, and new rules continue to be established. How does the Japanese model of corporate governance operate? The corporate world behind Japan's policies is unusual and it is currently experiencing the biggest upheaval in its history. What historic turn is corporate governance taking? Does it approach the US model of absolute authority of the shareholders, who until then had a more modest role?

In order to understand current developments in corporate governance system in Japan, the main characteristics of this system should be presented in advance, that which is called the traditional J-Corporate Governance, which focuses on the interaction between three groups' key players.

The top management of a company was seen as the culmination of a career for employees accustomed to a lifetime of employment. Therefore, the Board of Directors, was composed solely of internal staff working as a sub-structure-dependent top management.

One of the main prerogatives of management was to provide a constant, as independently as possible in-kind benefits to its employees as bonuses for seniority, promotions and bonuses, allowances and benefits, to keep best profiles and allow the ruling class of the company to choose their successors and to co-opt the future elite.

Tags: Japan; corporate governance; system of corporate governance in Japan

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