Aronson on Japanese Corporate Law

Bruce E. Aronson has posted Postwar Reform of Corporate Law and Corporate Governance in Japan: Democratization Under the Occupation and the Japanese Reaction on SSRN with the following abstract:

This short essay introduces two opposing views, held by two American lawyers who directly participated in the occupation of Japan, on the necessity and success of reforming Japanese corporate law in 1950. One view, by Lester Salwin, held that corporate law reform was necessary, collaborative, and successful in supporting the basic occupation policies of democratization and economic deconcentration, and in particular the broad dispersion of shares in prewar zaibatsu corporations to individual shareholders among the general public. An opposing view, by Thomas Blakemore (with Makoto Yazawa), asserted that such reform, particularly its emphasis on new shareholder rights, was unnecessary, unilaterally imposed by the occupation authorities, and unsuccessful. Viewing this debate from a contemporary perspective, this essay makes two points.

First, from the beginning there was a tension in Japanese corporate law reform between “management-friendly” reforms, which allowed both professional management and access to capital markets for the newly public corporations that replaced the zaibatsu, and “shareholder friendly” reforms, which sought to balance this strengthening of management by giving shareholders new rights to monitor management. This tension remains today.

Second, systemic transformation of corporate governance systems, i.e., from a stakeholder system to a shareholder system, is very difficult. Even in the unusual situation where the Occupation authorities seemingly had both the desire and the means to carry out a fundamental transformation of the Japanese corporate governance system by creating “American-style” public corporations with widely dispersed shareholders, they did not achieve their intended result. Instead, individual shareholders sold their shares in the market to corporate purchasers and a new Japanese stakeholder system based on corporate cross-shareholding emerged. It resembled neither Japan’s prewar zaibatsu system nor the American system.

ECC