Corporate governance and active engagement in Japan: transformation in the face of incremental shareholder value?

Abstract

In this article is examined the consequences of an increasing emphasis on shareholder value as a result of corporate ownership structural change for shareholder activism and corporate governance reforms. By focussing on active engagement through shareholder proposals in Japan, it is shown that limited actors and their motivations lead to narrow agenda setting. Further, by analysing the determinants of corporate governance structure, it is also shown that larger firms tend to undertake a greater degree of institutional change in corporate governance, depending upon their ownership structure. Finally, this study shows that mitigating agency problems through board structural reform is not the major source of active engagement through the submission of shareholder proposals in Japan, where shareholder activism has not yet developed to realise shareholder value.

Keywords:

• Japan
• corporate governance
• institutional change
• shareholder activism
• ownership structure
• shareholder proposals
• proxy voting

Acknowledgements

I thank Professor Gordon L. Clark for sharing his expertise, comments and suggestions. I also thank Dr Dariusz Wójcik, Kazutaka Kuroda, Minako Takaba, Kats Takagaki, Takeyuki Ishida, Adam Frost, Sandra Carlisle, Ken Chatfield, Sheung Luk, Jaime Briz, the editors, and two anonymous referees. Support for this article was provided in the Graduate Student Conference: Institutional Investor and Corporate Governance for Sustainability held at the University Oxford in May 2012. All errors and omissions are my responsibility.