Japan's boardrooms need to be overhauled says the Asian Corporate Governance Association (ACGA).
In a paper, commentators recommend bringing in more independent directors and fixing up the rules for what defines an outside director. According to the ACGA, the definition of an outside director in Japan's Companies Act is is "weak and often confusing to foreign investors and others". It also says Japanese companies should start publishing proxy results and that institutional investors should be required to publish their voting guidelines and how they voted. Cross shareholdings need to be disclosed to eliminate conflicts of interest, laws brought in requiring companies to seek shareholder approval for private placements and more disclosure of cross shareholdings.
Basically, the paper urges the world's third biggest economy (China became the second biggest in December), to catch up with the rest of the world. It's not before time. If you look at this table published here, you will see that Japan's has the world's third worst performing stock market, something that highlights poor management at a micro and macro level.
And the problem is that without these structural reforms, the Japanese government will continue borrowing, funding endless spending packages that will aggravate the industrialized world's worst debt situation. Investors will continue to get hammered.
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