Quantification of Corporate Governance : A Trial for Japanese Corporate Governance Quotient (JCGQ)

The objective of this study is to measure the level of adherence of Japanese companies to the corporate governance (CG) essentials and to understand the structural differences of CG in Japanese companies. On average, Japanese large companies exhibit a moderately satisfactory level of adherence (58.4%). A-type companies demonstrate a quite satisfactory level of adherence (71.3%) than the fairly satisfactory adherence (62.1%) by the JA-type companies and slightly satisfactory level of adherence (55.7%) by the J-type companies. Regrettably the level of compliance (36.4%) by the SMCs is still far away from the expected governance model of this study. This reveals that CG of larger companies is improving rapidly, however there is a broad variation in CG practices across the firms, both large & SMCs and the disparity is large even among larger companies. As far as the category-wise JCGQ is concerned, \u27reporting to the shareholders and communicating with investors\u27 came out as the best category or highly reformed area of Japanese CG. In contrast \u27the role of BOD\u27 component needs more attention as its responsiveness is lower, though it has been highly reformed. \u27securing fairness and transparency for executive management\u27 and \u27leadership responsibility of CEO\u27 components are found as moderately sound areas of Japanese CG. The findings suggest that the overall output of CG reforms is unbalanced as the four elements of the expected model show unequal level of improvement