Corporate Governance Japan and USA

Compare the fundamental differences which can exist between cultures regarding the attitude towards corporate governance, such as for example between USA and Japan.

Corporate governance is the structure of rules, practices, and processes used to run and manage a company. However, the way how a company is run depends on cultural aspects. To get a better overview of the role of culture in corporate management, it the essential differences between corporate governance in the USA and Japan will be discussed below.

Firstly, it starts with the relevance of success. While for American managers profit, shareholder value, are the towering characteristics of success, the quality of products, and the satisfaction of employees and customers have top priority in Japan. Dismissals are another aspect; it is natural in the USA that every employee may leave the company at any time, and the company may fire the employee at any time. That is normal! In contrast, in Japan, layoffs are unthinkable; there, companies do not have employees, but rather the people who work in a company are the "company." Unfortunately, the system is changing in the last years towards the American system.

Finally, in the USA, work is divided into small, controllable, quick learning steps. There is a small, well-educated administration class recruited from the same universities and a large workforce that performs tasks according to accurate descriptions. This makes the employee replaceable at any time, but not innovative. Suggestions for improvement and improvisation are quite undesirable. Very different in Japan. There, employees see themselves as an integral part of the company. Every employee practices the art of KAIZEN, continuous improvement. The employees see themselves as essential parts of the company; they develop "the feeling of solidarity of a village community."

To conclude, Japan and the USA are the real opposites in almost all areas. One cannot say who does right or wrong. In my opinion, companies should follow the model of Japan and run companies more socially. It is not for nothing that Toyota has been at the forefront of customer surveys and quality checks for years.

...