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Development of Corporate Governance in Japan and Germany: is the two-tiers-system obsolete?

Author

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  • Eiji Takahashi

    (Eiji Takahashi is Associate Professor of the Faculty of Law at Osaka City University, 3-3-138 Sugimoto, Sumiyoshi-Ku, Osaka-shi 558-8585, Japan. Tel: 81-6-66052320. Fax: 81-6-66052920. E-mail: takahasi@law.osaka-cu.ac.jp)

  • Oliver Kirchwehm

    (Oliver Kirchwehm is a lawyer in Germany doing research for his PhD with a scholarship from the Ministry of Science and Education of Japan. The authors would like to thank Professor Ruth Taplin for her help with the paper.)

Abstract

In this paper, the authors show the evolution of German and Japanese Corporate Governance, the impacts of codetermination in German supervisory boards on the system, and evaluate the latest movement of Japan towards a one-tier-system. Japan originally adopted the two-tiers-system from Germany. Under strong influence of the allies (i.e. America), a one-tier-system was put on top of the two-tiers-system. In the 1970s control function of the supervisory organ had been drastically reinforced, meaning the return to the two-tiers-system in practice. Then with the latest reforms, Japan introduced the possibility of choosing a real one-tier-system. Considering the specific Japanese prevailing conditions of management, it seems that the reform had not been critical enough; especially in regard to the possibility of abuse of power by the CEO constraints may occur. Therefore, as a completion of the two-tiers-system, the one-tier-system is advantageous. It is, however, pointless to introduce the new system for all Japanese companies by completely replacing the two-tiers-system with it.

Suggested Citation

  • Eiji Takahashi & Oliver Kirchwehm, 2006. "Development of Corporate Governance in Japan and Germany: is the two-tiers-system obsolete?," Journal of Interdisciplinary Economics, , vol. 17(1-2), pages 163-175, January.
    • Handle: RePEc:sae:jinter:v:17:y:2006:i:1-2:p:163-175
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