Reconstruction Of The Internal Supervision Mechanism Of Companies

Ever since the 20 th century, corporate governance environment has changed significantly with the economic development. The operational scale of companies has been expanded continuously, stock companies have been developing rapidly, owners have separated from operators seriously, the equity structure has become more and more complicated, and the original mode of supervising the company operation by owners themselves has become harder and harder to maintain. Company owners usually take a back seat and hold a certain proportion of company shares without participating in the company operation. Thus, it is very difficult for company owners to supervise the company operation effectively. How to establish and further improve the new internal supervision mechanism of companies has also become a new topic about corporate governance worldwide. In face of the new situation, the commercial law and company law are modified by companies in order to adjust the internal supervision mechanism in companies.The internal supervision mechanism of Japanese companies is with unique representativeness worldwide, which inherits the historic sources of the supervision mechanism development of the country and absorbs the experience and lessons of laws in Germany and America. On this basis, innovation is also available to form a free and tolerant supervision system. In the formation and development process of the mechanism, many times of key modification and improvement have been conducted, among which, the modification of the commercial law in 2002 is a milestone. It has been the largest modification on the internal supervision system of companies since the Japanese commercial law was introduced. It not only further enhances the traditional supervision system of Japan, intensifies the supervision functions, and improves the unique external supervision system, but also imitates the US to introduce the committee supervision mechanism and traditional supervision mechanism, thus forming the unique binary system in the world. Such binary system is deep rooted in the commercial law of the civil law with the integration of characteristics of the country. Meanwhile, the US system is transplanted to the soil of Japan. Japanese companies are given with more selection rights, thereby allowing companies to choose the internal supervision mechanism of companies by themselves in accordance with his or her own situation.It is of great importance to study the internal supervision mechanism in Japan, especially the law modification in 2002. It can not only help us to understand the experience and lessons learnt by the traditional internal supervision mechanism of Japan with the time development and changes, but also allow us to learn the success and failure of Japan when transplanting other countries’ mechanisms. Whether the Japanese style of internal supervision mode of companies is advantageous in the 21 st century economic situation and its problems are further researched.This paper attempts to take the Japanese commercial law modification in 2002 as the main study object. The transformation of the internal supervision system of Japan before the law modification in 2002 is briefly introduced first, and relevant introduction about several times of major law modification actions before 2002 is made. It is found that there are still large defects and problems about the internal supervision system in Japanese companies, which have seriously restricted the development of Japanese companies and the economic development. After that, the background of the law modification in 2002 is elaborated from the domestic economic environment of Japan, the company and bank relationship change in Japan, the equity structure change in Japanese companies, the promotion of relevant Japanese organizations and agencies, the promotion of America, and the catalysis of the international economic situation. These causes have jointly boosted the implementation of law modification this time. Origins constituting this law modification scheme are classified, including multiple opinion programs made by people from various circles in Japan. The two schemes constituting the main content of this law modification, including “Commercial Law Amendment of Corporate Governance Relationships” and “Trial of Partial Commercial Law Amended Drafts” are mainly studied. Based on the disputes and discussion about these scheme contents by Japanese scholars, specific measures of the law modification in 2002 are described. Contents about the internal supervision system of companies mainly include the introduction of the supervisory committee system, and setting of execution service system, various items about the independent director system, completion of the traditional supervision system, enhancement of supervision functions, and weakening of directors’ responsibilities. Seen from the content of this law modification, a most important part is that Japan has introduced the American style of committee supervision mechanism without abandoning the traditional supervision system, thus making the internal supervision system of Japanese companies enter to an alternative binary system mode. In other words, Japanese companies can select the traditional supervision mode or the American style of committee supervision mode according to their own situation. Next, contents of the law modification are evaluated. The execution of new system after the law modification as well as the positive influence is introduced. Of course, certain problems and insufficiencies must still exist in the practice of the new system. Finally, the development and changes of the internal supervision system in Japanese companies in the recent decade are introduced, especially the adjustment about the supervision system after the company law of Japan was enacted in 2005. According to relevant data and materials, problems about the supervision system in Japan at present are pointed out, and an outlook for the development of the internal supervision system in Japanese companies is conducted in the end as well.