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This chapter presents an empirical analysis of the implementation of the “company with committees law” of 2002 that was aimed at expanding the role of independent directors. Most boards continue to have a significant executive presence and external directors are treated as advisers and associates rather than as monitors of management or as agents of the shareholders. However, there has been an increase in external directors across all companies (not just those opting into the new law), and a clearer separation between monitoring and execution. Because the core of the “community firm” appears to remain intact, the chapter interprets these developments as a renewal of the postwar model, stressing elements of continuity along with the adaptability of the Japanese corporation in the face of external pressures. A similar conclusion is reached concerning the limited impact on managerial practice of growing shareholder engagement, including recent instances of hedge fund activism.

Debates about corporate governance reform in Japan began in 1992, when the term “corporate governance” was still relatively unknown. This chapter follows the subsequent evolution of executive thinking about corporate governance, focusing on key publications by Keizai Dokukai (Japan Committee for Economic Development) and Nippon Keidanren, identifying underlying continuity in these, and continued stress on labor‐management cooperation. It then looks at changes in corporate governance institutions and behavior, finding significant change in the legal framework, but less change in actual practice. Attempts to tackle corporate corruption, moreover, have strengthened corporate social responsibility measures. Inagami then considers evidence for the “silent shareholder revolution” thesis, paying special attention to executive career paths and remuneration. Despite some changes to value‐added distribution, he concludes that there has not been a major realignment of stakeholder relations or demise of the community firm.

This introductory chapter sets out the main themes of the book and provides an overview of the chapters that follow. The chapter explains how the traditional or postwar model of Japanese corporate governance came under pressure in the “lost decade” of the 1990s and how a debate concerning corporate governance was launched in the early 2000s which led to a number of reforms, including legal encouragement for the appointment of independent directors and changes to takeover law in the aftermath of the Livedoor case in 2005. The chapter suggests that Japan's recent experience should not be seen either in terms of a delayed transition to the “global standard” on corporate governance or of simple resistance to the Anglo-American model. Instead there has been a managerial adaptation to, and reshaping of, the corporate governance reforms, which, paradoxically, has served to strengthen the core features of the Japanese “community firm.”

This chapter reports the results of interviews with senior managers of large Japanese companies in 2007 and 2008. There is recognition of a greater role for the CEO, and of a less collegial approach to management. There is more direct communication with shareholders than there used to be and greater sensitivity to shareholder value, but many companies continue to stress regularity of supply to customers as the main priority. It is accepted that dividend payouts are not going to be as stable as in the past and there is a growing role for independent directors, but they tend to be seen as advisers, not the representatives of the shareholders. On executive pay, there is a perception that the gap between the pay of senior managers and the rest had not become excessive. The idea that shareholders “own” the company has little support.

This chapter begins by contrasting “goodwill” in finance and industrial capitalism, and the evolution of the former in the United States with the latter in Japan. In rejecting the “spirit” of finance capitalism in the 1920s and 1930s, Japanese executives committed themselves to linking efficiency and equity, and laid the foundations for the emergence of the postwar community firm. This historical perspective helps us to understand the reception of finance capitalism‐inspired corporate governance reform in the 1990s, and its attempts to reorient Japanese executives to an outward focus on shareholder interests. It also helps us to understand why, despite considerable change to formal institutions – especially legislation – executives remain skeptical over the efficiency (not to mention equity) claims of finance capitalism. At heart they continue to believe that, to deserve greater attention, shareholders should also demonstrate commitment.