The Administration of the Compliance System and the Director's Duty Care

This article deals with the administration of the compliance system and the director's duty of care. Within the past few years, most Japanese companies began to pay attention to conducting business according to the relevant rules and ethics code. This change came about after a series of scandals came out in the 1990's. The problem basically relates to the board's monitoring function and the director's duty of care (in particular duty to monitor). How should the board execute its responsibility for securing the company's compliance? What is an appropriate legal framework? It is also thought that the administration of a well-functioning compliance system is a part of the responsibility for internal control by the board in the U.S. These issues on the compliance system are discussed in this article in reference to the U.S.A. At first (Part 2), I will survey some U. S. legal sources, for example, the Foreign Corrupt Practice Act of 1977, section 13 (b)(2) of the Securities and Exchange Act of 1934 and the Federal Sentencing Guidelines of 1991. Part 3 will follow the developments and discussion of internal control by the board; the meaning, design, elements, and responsibility for administration of internal control. Finally (Part 4) , I will discuss the legal framework of the board's responsibility and the director's duty of care for executing compliance in Japan