[24WashIntlLJ0315] Substance Overload: A Comparative Examination of Japanese Corporate Governance Law Through the Lens of the Daiwa Bank Case

Abstract

A. Reid Monroe-Sheridan, Registered Foreign Attorney in Japan (New York-licensed), Monroe-Sheridan Foreign Law Office; Adjunct Lecturer, University of Tokyo Law School. Abstract: Japanese corporate governance law is facing a period of remarkable change. In light of Prime Minister Shinzo Abe’s push for corporate governance reforms and the explosive news of Olympus Corporation’s $1.7 billion accounting scandal in 2011, academics and practitioners alike are devoting renewed attention to the rules that govern Japan’s boardrooms. This increased focus brings to the fore two key questions about Japan’s modern corporate governance principles: how have they evolved and how are they applied in practice? To answer these questions, this article revisits the Daiwa Bank case, one of Japan’s most stunning business scandals. This international criminal conspiracy resulted in one of the world’s largest banks being banned from operating in the United States and gave rise to a seminal Japanese judicial opinion that found a single bank director personally liable to his employer for over $500 million. By examining the law and legacy of the Daiwa Bank scandal and subsequent developments in Japanese statutory and case law, both on their own terms and in light of their analogues in Delaware, this article seeks to shed light on and critically evaluate the evolution and application of certain major Japanese corporate governance principles.