Biased boards, a key weakness in Japan Inc.
The recent scandal at Olympus revealed that twelve of the companies’ fifteen board members are inside executives. It is a common structure in corporate Japan, but a sensitive weakness in a time when debate about the future is strongly needed, critics say.
Olympus was rocked a few days ago by the abrupt dismissal of its chief executive, a Briton who had been appointed only six months before.
Japanese boards are normally overcrowded with insiders, who rarely challenge decisions taken by members with longer experience in the company. Olympus makes no exception.
"You have so many insiders, very few independent members and none of them is really in a position to challenge the decision-making of long-standing members of the board," said Robert McCormick, chief policy officer at the advisory firm Glass Lewis & Co. "I think the CEO kind of came into that," he said, referring to former Olympus CEO Michael Woodford.
The situation seems negative for corporate governance in Japan in general, said a top member of the Asian Corporate Governance Association based in Hong Kong. "There had been some hope that Japanese companies would take on not just outside directors but outside managers and that corporate cultures in Japan would be more open and international."
