Reflections in a Distant Mirror: Japanese Corporate Governance Through American Eyes

Ronald J. Gilson, Columbia Law School


For the last ten years, Japanese corporate governance has served as a distant mirror in whose reflection American academics could better see the attributes of their own system. As scholars came to recognize that the institutional characteristics of the American and Japanese systems were politically and historically contingent, other countries' approaches became serious objects of studies, rather than just way stations on the road to convergence. In this paper, I try to return the favor by holding up the Japanese system to an American mirror. In recent years, exogenous changes have shocked each component of the Japanese corporate governance: for example, weakened banks and corporate access to the global capital market have weakened main bank relations and the banks' ability to monitor corporate performance; a decrease in the number of positions to which lifetime employment attaches due to increased global competition threatens to change the incentives of the next generation of employees. When reflected in an American mirror, this wave of economic change highlights a critical uncertainty concerning the Japanese corporate governance system: what are the instruments of adaptive efficiency in a system structured to support commitment and stability?