coporate model of japan
TRANSCRIPT
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Group I
Anjana Budathoki
Anil Basnet
Anshu Manandhar
Arjun Raj Kafle
Asmita Subedi
Seminar II
The Corporate Governance Model of Japan
Shareholders are not RulersSubmitted To:
Prof. Dr. R. S. Pradhan
Financial Management
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1. INTRODUCTION
2. OBJECTIVE OF STUDY
3. RESEARCH METHODOLOGY
4. CORPORATE GOVERNANCE DIFFERENCES INPRACTICE
5. PRESENTATION AND ANALYSIS OF DATA
6. CONCLUSION
Contents
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In US and UK Corporate Governance mainly
focuses on maximizing Shareholders wealth.
In Japan and some other countries, firmsconcerned are found within stakeholders as
well as shareholder.
There is a system of codetermination in
Germany
Introduction
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Managers of US and UK have a very strong
duty to act in interest of shareholders.
Managers of Japan do not have a fiduciaryresponsibility to shareholders
Purpose of This Article
Introduction
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To determine why there is a difference in thegoal of US, UK and Japan Corporate
Governance.
To determine whether the shareholders are therulers, actual owners of a company or not.
To determine the difference between the Anglo
American System, the Japanese and other
countries like US and UK system of Corporate
Governance.
How this Article Differs from its Predecessors
Objectives of Study
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To determine which view of corporategovernance is suitable among different markets.
To determine whether the perfect competition
market where no transaction costs or similarfrictions, no hindrances from externalities do
really exist or not.
To determine whether the company will be wellin case of distributing more dividends i.e.
satisfying the shareholders or retain more
dividends.
Objectives of Study
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Secondary source of data: Collected form
Asahi Breweries, Ltd. Case, 1989, Harvard Business School,
9-389-114.
Institute of Fiscal and Monetary Policy (1996), Chart III-3-3,p.69.
No. of firm surveyed: Japan- 68, US- 82, UK -78, Germany -
100, France- 50 (Institute of Fiscal and Monetary Policy(1996), Chart II-1-2, p.57, Chart III-4-6, p.84.
Measures FindingResearch Methodology
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Difference in Corporate governance mechanisms
based on:
1. The board of directors
2. Executive compensation
3. The managerial organization of corporations
4. The market of corporate control5. Concentrated holding and monitoring by
financial institution
Corporate Governance Difference in Practice
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Board of Directors is elected by shareholdersin US and UK.
Mixture of outside and inside directors who
are the top executives in firm. Management implement policies determined
by board.
Proxy fight outside directors are nominated bythe incumbent management allegiance withC.E.O
The Board of Directors
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Anticipated future profitability
Stock price accounting based performance measures
are also frequently used.
Another motivating force -dismissal for bad
performance
Manager difficult to find another job and so may bear
a large penalty /may be bid away at higher
U.S. pay on performance /Japan -lowest pay -world.
Important mechanisms -provided investors have an
incentive to gather information and stock market
prices.
Executive Compensation
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Aoki (1990)survey -hierarchical firm
* H-mode
Hierarchical separation between planning and
implemental operation. An emphasis on economics of specialization
* J-mode
Horizontal coordination among operation units based
The sharing of ex post on-site information Lifetime employment, seniority advancement and management
discipline are important.
Japanese decision are focused on employee and influenced by
owners
The Managerial Organization of Corporation
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Important, operation, capitalist economies
Allows management team to control the large
resource within small time
Policies- shareholders wealth- manager
replaced.
3waysmarket for corporate control operate.i. Proxy contests ii. Friendly mergers iii. Hostile
takeovers
Methodology UsedThe Market for Corporate Control
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Japan and Germany- agency problem- solved Japan- main bank system
Characteristics
*Long term relationship
bank & clients firm*Holding debt, equity -Active intervention
financial distressed
*Over come agency problem Works in financial distress
Less important -doing well
Contd.. Methodology UsedConcentrated Holdings and Monitoring by
Financial Institutions
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Contributing society as a whole- seeks to attain trustand confidence of consumer.
Major FindingsCorporate Philosophy of Asahi Breweries Ltd.
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Exhibit 1: Analysis of Working Capital TechniquesTable.2. No. of Members on Board of Directors
U.S. U.K. Japan
Ford 15 (10) Glaxo 16 (7) Toyota 60 (1)
IBM 14 (11) Hanson 19 (8) Hitachi 36 (3)
Exxon 12 (9) Guinness 10 (6) Matsushita 37 (6)
Mobil 16 (10) British Airways 10 (6) Nissan 49 (5)
Philip Morris 16 (4) Allied Domecq 12 (4) Toshiba 40 (3)
RJR Nabisco 9 (6) Grand Metropolitan 14 (1) Honda 37 (3)
Texaco 13 (11) BTR 10 (4) Sony 41 (6)Johnson & Johnson 14 (12) Associated British Food 7 (1) NEC 42 (5)
GAP 11 (8) British Steel 8 (0) Fujitsu 36 (7)
Mitsubishi Electric 37 (3)
Mitsubishi Motors 43 (4)
Mitsubishi Heavy Industries 43 (3)
Nippon Steel 53 (1)Mazda 45 (8)
Nippon Oil 22 (0)
Figure in Parentheses:
UA: Outside Director
UK: NonExecutive (Outside Director)
Japan -Outside Director including Cross Directorship
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Figure 1.
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Figure 2: Whose Company is it?
Number of firms surveyed: Japan 68, US 82, UK 78, Germany 100, France 50
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Figure 3. Job Security or Dividends?
Number of firms surveyed: Japan 68, US 82, UK 78, Germany 100, France 50
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The Anglo American model provided by theUS and UK are based on the narrow view of
the corporation in the economy. It is concerned
with maximizing the wealth of shareholders. For countries as china that are reforming their
corporate governance systems, the Anglo-
American model provides by US and UKprovides one possible direction to go in.
In Japan and other countries Broader view of
study is taken
Conclusions
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In Japan a border view of corporategovernance is taken than that of narrow viewas US and UK.
It is concerned with the efficient allocation ofresources by taking into accounts the range ofinterest of both of the stakeholders and theshareholders.
If markets are well developed, this systemleads to efficient allocation of resources.
Conclusions
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