Corporate Governance and Top Management

Corporate governance refers to the means by which stakeholder control is exercised over corporations (Charkham, 1994; Clarke and Clegg, 1998; Takahashi, 1995). In the past, analysis tended to focus on the separation of management from ownership (Berle and Means, 1932) and assumed that property rights were the most important source of formal power, and hence that the key stakeholders were the owners. Often the focus would be on the ways in which control passed from the owners to the stewards — the managers — as the day-to-day custodians of capital. It was their job to see that the enterprise was efficiently and effectively controlled in the interests of the owners. (Often, some of these owners were senior management, with stock options that tend to blur boundaries and align the interests of managers and owners.) In Japanese enterprises the stakeholders are not only shareholders but also banks, employees and the unions (Figure 2.1). The current tendency in Japan, however, is to place more importance on shareholder value.