Corporate Governance Report Card

Japanese companies appear to be steadily implementing the corporate governance code introduced by the Tokyo Stock Exchange a year ago, at least in form. Of the 2,018 firms listed on the first and second sections of the TSE, 78 percent say they are now in compliance with at least 90 percent of the principles set under the code, such as having two or more outside directors on their board. But scandals that have embroiled such leading firms as Toshiba Corp. show that mere compliance in form is no proof against management irregularities and wrongdoing. The question remains whether the new rules will actually enhance transparency in management and improve profitability.