Application Paper #2
Improved Corporate Governance will improve Japan’s Earning Power
Luis C. Mendoza
Corporate Governance GB-6215(Online) Spring 2015
18 April 2015

Can improved Corporate Governance improve Japan’s earning power? Tradition and honor in Japan’s culture are very strongest traits which develop the foundations of daily lives and how corporations conduct business. A tradition in Japan is taking an all male work team, salesmen and clients to visit a bar/club after hours that are greeted by a “Hostess”. A “Hostess” is a woman who is paid to flirt with men. These visits are sometimes mandatory which corporations cover fully and label them as “entertainment expenses” (Smith, Japan Flirts with Goverance Reform, 2015). One of Japan’s biggest problems is poor corporate governance (Smith, Bloomberg View, 2015). This is an example and evidence that poor corporate governance to a degree is liable for the potential drought of business investments into Japan’s economy (Smith, Japan Flirts with Goverance Reform, 2015). This is an example of why Japan’s Prime Minister Shinzo Abe’s made a decision to develop and incorporate Abenomics in 2014.
Japan, as a society with extreme high value to culture and respect, views and approaches corporate governance has been very different for the past few decades compared to the United States. Japan’s board members are typically internal corporate managers rather than independent directors. Independent directors are very uncommon and without this type of approach, companies focus on empire building rather than on focusing on creating shareholder value and increasing profitability (Smith, Japan Flirts with Goverance Reform, 2015). Abenomics has a code that requires improved oversight of executives by independent board directors to make them more effective and profitable (Narioka, 2014). Low profitability is evidence