5. How Are Japanese Employees Reacting to Changing Corporate Governance?

This chapter discusses the employees’ attitudes to changing corporate governance. Although Japanese employees have been characterized by their cooperative relationships with management based on the stakeholder-oriented corporate governance, change to shareholder orientation may dissolve their cooperation. This may erode competitiveness of Japanese firms. While survey data shows that employees present an unexpectedly high ratio of the approval for increasing shareholder value, regression analysis demonstrates that they consider shareholder value as similar to corporate value to be shared with employees as well as shareholders; Japanese employees convince stakeholder-based management even under changing corporate governance. We further found that employees recognize the necessity to strengthen the monitoring by shareholder on facing poor corporate performance and seek monitoring by employee themselves when perceiving long-term employment not to be maintained. In short, Japanese employees want to participate in corporate governance together with shareholders to increase corporate value and protect stakeholder orientation, as is the German counterparts. However, there is no such institutional mechanism in Japan. We address that this is a true challenge for the Japanese corporate governance reform.