Research On The Transformation Of Contractual Relationship Of Japanese Corporate Governance

Since the early 90s of the last century, Japan has been trapped in a secular stagnation along with"foam economy"finally met its end. Such secular stagnation and systematic abuses further induced a series of reforms in Japan's economic system including corporate governance, and hence made the reforms in Japanese corporate governance a highlight both in theoretical researches and practical concerns. Strengthening research on the reforms in Japanese corporate governance is not only in favor of diversifying the researches on the reforms in corporate governance, but also in favor of promoting people's cognition upon the transition of systems; it is not only in favor of enhancing the skills of elucidating the practice of the reforms in Japanese corporate administration, but also in favor of offering valuable experience references to the reforms in corporate administration in China, which is in the same oriental cultural background and is currently experiencing its transferring stage.There are a number of research findings on the reforms in Japanese corporate governance, yet such findings are remarkably divergent. With the aim of further revealing the essentials of such reforms in Japanese corporate governance, the article selected the"contractual relationship transformation"as an entry point, applied Contractual Theory, Stakeholder Theory and Institution Change Theory to research the reforms in Japanese corporate governance. This particular research angle is favorable to reveal the contractual nature of corporate governance, and it is favorable to dynamically elucidate the process of such reforms, furthermore, it also provides an instructive method—Divided Research Structure to the researches on corporate governance.Corporate governance is an aggregation of a series of contracts, and it is a power balancing system formed by the contracting parties connected by corporate interest on the basis of equal gaming. The article conducted its researches on the reforms in Japanese corporate governance from four aspects i.e. the contractual relationship between shareholders and operators, the contractual relationship between corporations and creditors, the contractual relationship between corporations and employees, and the contractual relationship between affiliated corporations, and then the article conducted its analysis in the light of a framework i.e."changes in contractual environment—emergence of contractual conflicts—practice of contractual reforms—performance of contractual reforms".Through a systematic research, it can be noticed that the contractual relationship in Japanese corporate governance has transited from enclosed to opened, and transited from coordination oriented to competition oriented, which can be noticed as the following reforms: (1) Distinct changes in the proprietorship basis of contractual relationship: reciprocal shareholding between corporations reduced constantly, the proportion of bank holdings declined continuously while the proportion of individual holdings increased, and the proportion of investment from domestic and overseas institutional investors increased remarkably; (2) Distinct adjustments in contractual structure: laws give definite permission to corporations to make a free choice between Japan's conventional"dual level structure"and the"centralized structure"from U.K. and U.S. as well as a third structure formed by their combinations, and hence it diversifies the contractual structure between shareholders and operators. In the adjustment of contractual structure, the decision making mechanism of board of directors and the supervising mechanism of board of supervisors are strengthened to varied extents, shareholders'equity regained the upper hand and has its supervision of operators strengthened; (3) Distinct weakening in the administrative functions of banks: on one hand, corporations are less dependent on bank loan as their financing channels multiplied; on the other hand, banks are obliged to cut down their holdings initiatively due to the pressure caused by business competition, and hence their contingent governance upon corporations is weakened. The changing of the relative strength between corporations and banks causing the relationship between corporations and creditors trend toward more flexible and open; (4) Career-long employment comes loose gradually: although career-long employment still exists as a convention, its range of applicability shrinks gradually, seniority system is changing, performance doctrine and capability doctrine are having an ascendant standing, while employment contracts such as the manners of employment and wage systems are diversified as well; (5) Distinct adjustments in the relationship between corporations: the reciprocal shareholding relationship between major corporations is becoming more flexible, the outsourcing relationship between major corporations and small/medium sized corporations is weakening, the relationship between corporations transits from enclosed to opened, and competitive edges are strengthened constantly. However, it should be noticed that such changes may have different influences on Japanese corporations. A trend of diversified corporate governance styles emerged in Japan, namely there are corporations that follow conventional corporate governance styles, there are also corporations that combine relational financing and relational employment, and there are corporations that combine relational financing and market zed employment. Corporations that follow such combined styles indicate higher performance in corporate governance. Corporations that combine market zed financing and adjusted relational employment (i.e. an coexistence of career-long employment and performance related pay) especially indicate remarkable international competitive edges.Based on the said changes, we can educe the following basic conclusion upon the reforms in Japanese corporate governance, namely Japanese corporate governance is experiencing certain unexpected reforms at the moment. It is understood that such reforms cannot be described as a total denial of the contracts in conventional corporate governance, neither an unilateral convergence of management patterns adopted by corporations in U.K. and U.S., but rather a new system balance formed at a much higher level. The practice of such reforms in Japanese corporate governance has significant reference value to China's reforms in corporate governance.