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Corporate governance challenges for Japanese multinationals (1)



Japan, United Kingdom

Japan's new Corporate Governance Code came into effect earlier this year.

Background: Japan's new Corporate Governance Code came into effect earlier this year. The Code is based on the OECS Principles of Corporate Governance and reflects elements of the UK Corporate Governance Code.

The Code aims to establish fundamental principles for effective corporate governance in companies listed on the Tokyo Stock Exchange. However the Code is voluntary and it remains to be seen what significant impact it will have on Japan's boardroom culture.

Next steps: how do you build, maintain and enforce global corporate governance arrangements in a Japanese multinational group?

Answer: don't panic – even though it will be a challenge on a number of different levels.

In the first place, multinationals often have different divisions with diverse product lines operating in different sectors around the world. These will have different cultures and varying levels of internal legal/regulatory support available to call on. 

Secondly, there is the challenge of filtering and assimilating relevant information and large volumes of documentation. There is often a problem not of a lack of appropriate documentation, but rather an excess of documentation which might be appropriate and relevant, but which is difficult to organise and communicate to a large workforce in various jurisdictions. 

Thirdly, there is the challenge of ensuring staff across the organisation are properly trained and have access to necessary support when they need it. 

Lastly, there is the challenge of getting access to relevant laws as they develop and in identifying and managing levels of risk which will need to be reported internally to support the effective growth and support of the business.

Where do you need to get to? Ideally you will want to end up in a position where you have:

  • A high level set of values and principles which are unique to your business and which you would expect everyone – whichever jurisdiction they are operating in – to abide by.
  • More detailed policies which address topics specifically, but which apply in all jurisdictions.
  • Business or jurisdiction specific policies which are not globally applicable.

How do you get there? We have assisted Japanese clients in establishing and updating corporate governance programmes, so we are familiar with some of the models chosen to meet modern governance standards.  We can help you by:

  • Identifying the policies you already have in the business.
  • Identifying any duplication / areas of overlap between the policies you have.
  • Identifying any missing policies.
  • Prioritising which policies need to be updated first (focussing on policies which are critical to the business or which carry the highest legal or reputational risks).
  • Ensuring that any updated policies are presented in a format which is easy to understand for your colleagues.
  • Co-ordinating the process of updating the legal aspects of your policies.
  • Co-ordinating the process of providing training on the updated policies where appropriate.
  • Providing guidance on how to enforce the updated policies throughout the business (including by ensuring your management lead the way).

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