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J. Mark Ramseyer & Yoshiro Miwa, 2014 kaisha ho kaisei, "koporeto gabanansu kodo" to "shagai torishimariyaku" [The 2014 Amendments to the Corporate Code, "the Corporate Governance Code," and "Outside Directors], 28 Osaka gakuin daigaku keizai ronshu 15 (Oct. 2015) (written in Japanese).


Abstract: As of June 1, 2015, the Tokyo Stock Exchange mandated a "corporate governance code" on firms that would list their stock on its exchange. In effective, the code required most listed firms to appoint outside directors to their boards. The code itself was the output of a study committee organized under the auspices of the Financial Service Agency and the Exchange. And it had as its formal impetus the 2014 amendments to the Corporate Code that increased pressure on firms to appoint outside directors. The mandates trace their origins to debates within other countries over corporate governance, and to the on-going political disputes over reviving Japanese economic growth. In this article, we explore four questions relating to the mandate: (a) what do the outside director mandates actually require, (b) who actually decides the substance of the mandate, (c) what process resulted in the mandate, and (4) what relation does the mandate bear to economic theory and empirical research? By standard economic theory, market pressure will push shareholders to select those directors (whether insiders or outsiders) who most effectively increase stockholder wealth. To mandate the appointment of anyone else (again, whether insiders or outsiders) will necessarily cause stockholder welfare to fall. The proponents of the new mandate argued aggressively that that it would stimulate the Japanese economy. We suspect they will soon adopt other measures that require outside directors even more rigidly. Nothing in economic theory or research, however, provides any support for their claims. Also available at: 28 Osaka gakuin daigaku keizai ronshu 15 (2015) (written in Japanese).