New Japan Paper on Kansayaku Boards and Audit Committees -ACGA recently completed a paper titled, “The Roles and Functions of Kansayaku Boards Compared to Audit Committees”. The paper compares the Kansayaku (statutory auditor) Board in Japan with the Audit Committee in other developed markets. We explain the historical background and legal foundations of both systems, outline expected roles and best practices, then look at how they actually function in practice.
The paper also includes a short note on the limited nature of enforcement (ie, the extent to which regulators, shareholders and others try to ensure that the rules governing both systems are implemented by companies) and ends with a conclusion and set of recommendations.
While we recognise that both systems have their strengths and weaknesses, our core argument is that a genuinely independent and well-run the Audit Committee system has the potential to strengthen board governance and management oversight more effectively than the Kansayaku system. We make some recommendations on how Japanese companies and the government could move forward in this area.
The paper is also available in Japanese.