Japan & UK Accounting Standards & Corporate Governance
ACCT 311 - Corporate Accounting
Liberty University
June 12, 2024
Corporate governance
Basically, corporate governance is concerned with the manner in which
power is exercised in safeguarding resources of an organisation with the
aim of increasing and maintaining shareholders’ wealth. Corporate
governance is important in bridging the gap between economic and social
goals as well as communal and individual goals. In addition, it is used to
ensure efficient use of resources and accountability in exercising their
powers.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
In Japan, corporate governance is mainly concerned with a group of
stakeholders including suppliers, employees, and customers unlike the UK
model, which mostly focuses on the shareholders only. It ensures that the
communal resources are efficiently used. According to Smith (1776),
corporate governance ensures that firms are run efficiently while
considering the interests of stakeholders. This section focuses on
philosophies that shed light on the manner in which corporate governance
manifests itself in both Japan and the United Kingdom (UK). Consequently,
the aspects investigated include the Board of Directors, compensation for
the executives, market for corporate control and the manner in which firms
are monitored by financial institutions.
Board of directors
UK
The board of directors is elected to office by shareholders. This board
consists of both internal and external directors. Once elected, the board
outlines the policies to be pursued by the firm. The management is charged
with the responsibility of implementing these policies, as directed by the
board (Scott, 1998). Other than electing the directors, the shareholders
bear no other duty. The external directors are nominated by the incumbent
management; therefore, they are answerable to the Chief Executive
Officer (CEO).
Japan
Essentially, the shareholders do not have much influence on the board of
directors. The Japanese boards are much larger, with the majority of board
members coming from within, as opposed to the British model which is
essentially narrow. The CEO is concerned with the responsibility of
supervising the process of nomination of the directors; this role gives the
CEO a very influential position over the board members. All together, in
Japan, many organisations are forming small sized boards due to pressures
from the process of international integration.
Executives’ compensation
UK
In the UK, Investors ensure that compensation of the managers is pegged
on the performance of the company. Therefore, they gather information
regarding the stock market prices with the aim of gauging the performance
of the company – this also reflects performance of the management. In
addition, it is believed that stock prices are very predictive; hence, they can
be used to forecast profitability levels for companies. As such,
management of companies uses these stock prices to create an
impression, to the shareholders, that they are effectively safeguarding
their wealth. Even though compensation is pegged on the performance of
the company, top executives from the UK are handsomely compensated.
Japan
Contrary to directors from the UK, their counterparts from Japan are
poorly remunerated. Also, their remuneration does not depend on the
performance of the company. Aoki (1990) found significant differences
between the ancient UK hierarchical firm, the “H- mode”, and the current
Japanese structure, the “J-mode”.
Market corporate control and how firms are monitored by financial
institutions
A notable difference between the UK and Japanese market corporate
control is the UK hostile takeovers, which is unheard of in Japan.
Essentially, Japanese companies practice cross-shareholding approach to
guard against hostile takeovers. In Japan, lack of market for corporate
control solves the agency problem through financial institutions, which
keeps an eye on the corporation. This structure is known as a main bank.
Monitoring and fighting of the agency problem, between managers and
the firm, is entrusted on bank.
Conclusion
The above review of mechanisms for corporate governance in both the UK
and Japan shows their fundamental differences. The Japanese model of
corporate governance is broad and takes into account the interests of a
wide range of stakeholders unlike the UK model. Therefore, efficiency is
expected from this system as opposed to the case with imperfect markets,
which has a narrow outlook.
Financial reporting council (FRC)
This council is an independent regulator charged with the responsibility of
promoting corporate governance and reporting in the UK. This body
operates under the auspices of code of corporate governance, which
fosters quality standards. This body, also, operates an independent
disciplinary arrangement for cases involving accountants; for the purposes
of public interest.
Accounting Standards Board of Japan
The Accounting Standards Board of Japan (ASBJ) complements the efforts
of Financial Accounting Standards Setting Board (FASB) and International
Accounting Standards Board (IASB) in development of globally applicable
accounting standards. More so, it is still working to find harmony between
the International Financial Reporting Standards and the Japanese
Generally Accepted Accounting Principles.
Other accounting information/policies
The UK financial reporting standards are grouped into chapters, which are
then broken into parts. Interestingly, the International Financial reporting
Standards (IFRS) is not arranged in numbers as the UK financial Reporting
Standards. Some firms prefer adopting the UK financial standards rather
than IFRS. The Japanese Accounting Standards are grouped into chapters,
which are further broken into parts. Most Japanese firms prepare their
annual reports based on the Japanese accounting standards despite the
popularity of the International Accounting Standards.
References
Aoki, M. (1990). Toward an Economic Model of the Japanese Firm. Journal
of Economic Literature, 28, 1-27.
Scott, K. (1998). The Role of Corporate Governance in United Kingdom
Economic Reform. Journal of Applied Corporate Finance, 10, 8-15.
Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of
Nations. Dublin: Whitestone.
