IoD Japan Business Group explores the evolution of Japanese corporate governance

Chaired by Dr Indranil Nath, Fellow of the Institute of Directors and Chair of the IoD Japan Business Group, the session examined how governance practices in Japan are evolving and why understanding boardroom dynamics remains vital for organisations aiming to succeed in the marketplace.

Opening the event, Dr Nath stated that although Japan remains one of the world’s most attractive and rewarding markets, success demands more than just a strong product or strategy. He highlighted that businesses must also grasp how decisions are made, how consensus is built, how risk is perceived, and what occurs behind boardroom doors.

The webinar was hosted by Ichiro Tominaga, Representative Advisor in Japan for Henley & Partners and an IoD Ambassador in Tokyo. Drawing on his UK and Japan experience, he guided the discussion and audience Q&A.

The guest speaker, Zuhair Khan, Managing Director and Chief Investment Officer at UBP Tokyo, delivered the main presentation on Japanese corporate governance reform. He outlined how reform has developed in a structured and government-led manner since the introduction of Japan’s Stewardship Code in 2014 and Corporate Governance Code in 2015, with both codes subsequently revised and strengthened.

Khan highlighted that reform in Japan has created a distinct divide between proactive companies, reactive ones, and a minority that remain obstructive. He argued that although governance standards have meaningfully improved across many Japanese firms, a significant number still fall short in areas such as board independence, executive alignment with shareholders, diversity, transparency, and restructuring discipline.

Among the main themes discussed were:

• the ongoing impact of insider-led governance frameworks in many Japanese firms.
• the uneven empowerment of independent non-executive directors
• the importance of skills, diversity, and avoiding groupthink in the boardroom.
• the role of cross-shareholdings in shielding management from external pressure.
• the persistence of entrenched leadership structures, including retired executives still serving as advisers, and
• the opportunity to enhance shareholder value through improved governance and reform.

Khan observed that, although governance reform has gained significant momentum, progress remains inconsistent. He stated that some of Japan’s largest and more internationally connected companies have adopted change, while others stay resistant, especially where management is protected by friendly shareholders and inherited structures.

The audience discussion covered a broad range of issues, including sector differences, board diversity, founder- and family-led companies, language and cultural barriers, governance red flags linked to corporate scandals, and the probable direction of future reform.

A recurring theme was that Japanese corporate governance should not be viewed solely through a Western lens. Speakers emphasised that current structures are shaped by Japan’s social, economic, and corporate history, including long-term employment practices, post-bubble economic pressures, and a deep-rooted emphasis on continuity and stakeholder stability.

At the same time, the session highlighted that change is genuine and ongoing. Khan emphasised that around 70% of companies are not fundamentally opposed to reform and are taking steps, at varying speeds, to enhance governance, competitiveness, and openness to new perspectives.

Closing the webinar, Dr Nath thanked the speakers and participants for a highly engaged discussion, noting the strong interest shown by the number of audience questions. He also highlighted the Japan Business Group’s upcoming webinar programme on doing business in Japan, including future sessions on channels and partners in Japan, meetings and decision-making in Japan, and marketing to Japanese buyers.

The webinar is part of the IoD Japan Business Group’s wider aim to assist business leaders in deepening their understanding of the Japanese market and enhancing UK-Japan boardroom and business relationships.