Papers by Professor Toru Yoshikawa: the Importance of Trust, and “Convergence”

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A recent article put out by the SMU Office of Research, quoted  second below, describes the work of Professor Yoshikawa of the Singapore Management University related to concepts of convergence in corporate governance as related to Asia and Japan.  I personally think that the more recent 2013 paper that Professor Yoshikawa contributed to is equally, if not more, on point. In my own experience effective collaboration between management and outside directors can only occur if the latter’s perception of the CEO values and integrity, including his/her committment to governance, are high. This is true in any country, but it is even more true in Japan because the number of outside directors is small.    (Comment by Nicholas Benes of BDTI)

1) Paper:  “The Effects of CEO Trustworthiness on Directors’ Monitoring and Resource Provision2


“Because of the importance of board members’ resource provision and monitoring, a substantial body of research has been devoted to ascertaining how directors can be incented to perform their responsibilities. We use social exchange theory to empirically examine how board members’ resource provision and monitoring are affected by their perceptions of the CEOs’ trustworthiness. Our findings suggest that board members’ perceptions of the CEO’s ability, benevolence, and integrity have different effects on the board members’ resource provision and monitoring. Our results further suggest that board members’ governance behaviors are moderated by the board’s performance evaluation practices.”

2)  Quote from article

”SMU Office of Research In September last year, a scandal of Enron-esque proportions hit international headlines. The US Environmental Protection Agency had found that German car manufacturing giant Volkswagen AG was intentionally installing sophisticated software in their diesel vehicles to evade emissions tests. 

More concerning, Volkswagen CEO Martin Winterkorn initially opted to blame a handful of “rogue engineers” when he testified before a US congressional committee. The ensuing fallout of this ‘diesel dupe’? Winterkorn resigned; shares fell by about a third since the scandal broke; and now, the carmaker is being sued for €3.3 billion in Germany by institutional investors.

It is when such enormous failures in corporate social responsibility are unceremoniously thrown into the spotlight that we are reminded of the importance of a solid corporate governance framework, says Professor Toru Yoshikawa of the Singapore Management University (SMU) Lee Kong Chian School of Business, who studies corporate governance of listed companies in Asia.

Corporate governance reform in Japan

An interesting observation Professor Yoshikawa has made is that some companies in the region are starting to embrace an American style of corporate governance, especially after the 1997 financial crisis.

“In the US, the CEO looks out for shareholders’ interests; they care about shareholders, share prices and market value of the company,” he explains. “Also, companies in the US are exposed to heavy market pressure to assure financial returns.”

The professor of strategic management studies this phenomenon, called convergence, where corporate governance styles start looking similar across nations.

His findings have been published in a 2009 paper titled “ Convergence of Corporate Governance: Critical Review and Future Directions” by the journal Corporate Governance: An International Review.

Japan is a good example of convergence in practice, says Professor Yoshikawa. Since Prime Minister Shinzō Abe’s party came to power in Japan four years ago, he pushed for reform in corporate governance, an area he thought Japan was weak in. Finally, in June 2015, the Tokyo Stock Exchange (TSE) implemented a new corporate governance code which requires at least two independent external directors to sit on a listed company’s board. “This is the first time that Japan is embracing independent boards,” he says……….”

Read full article here.

Source: Singapore Management University.

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