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Hastings Business Law Journal

Abstract

Japan has been widely criticized as being slow to reform a corporate governance system that seemingly remains fixed on the interests of employees over shareholdersand unresponsive to recent global trends such as the spreadof fidependent directors.This article seeks to present a more nuancedand balanced view of the ongoing evolution of Japanese corporate governance.

This article discusses how analysis of Japanese corporate governance is hamperedby the lackofboth anagreed-uponstandard for evaluating change in Japan and data concerning important governancepractices,such as the actualrole of company auditors (kansayaku). The main focus, however, is on describing and evaluating experimentation at leading individual Japanese companies that seeks to address monitoring and other fundamental issues of corporategovernance in Japan by de veloping a "hybrid"system of governance. This system attempts to combine the best elements of the board management and monitoring models, i.e., the information access of insiders and the independence of outsiders,in a way that results in real board discussion and management oversight.

The article goes on to identify and briefly discuss three key issues that may be critical in influencing the future direction of Japan's corporate governance system and practices: the role of domestic institutional investors, the development of a standardized hybrid model, and the adjustment of Japanese corporate governance to the demands of globalization.

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