Research profile: Do cultural norms impact corporate governance practices?

Professor Masao Nakamura believes that corporate governance, culture and decision-making are all interrelated. And, considering his personal background, academic studies and knowledge of Japan’s history and business culture, he is uniquely situated to investigate this theory.

The author of numerous books and articles, he is the Konwakai Japan Research Chair and holds joint appointments with UBC's Sauder School of Business and Institute of Asian Research.

Nakamura has been working on a research project that examines how cultural factors mediate the adoption of western corporate governance practices, specifically in Japan. He knows, for example, that one of the elements blamed for the Japanese recession of the 1990s was the traditional, inward-looking Japanese corporate governance system; one that the government has encouraged businesses to change.

As a result of this change in policy, the government has promoted the adoption of an Anglo-American style of corporate governance. These practices include things like shareholder value maximization, institution of independent board members, increased transparency, and the protection of minority shareholder rights.

“The culture found in Anglo-American governance is one that is based on western liberal norms,” suggests Nakamura. “These norms include development of a strong competitive environment, a focus on individualism, and maximization of shareholder value.

"Historically, Japan’s corporate governance has not been based on these concepts, rather it emphasized the welfare of firms’ stakeholders, group-oriented behaviour, consensus building, and the avoidance of open confrontation.”

With this move to be more Anglo-American in its corporate culture, Japan has been undergoing a transition; one that Nakamura wants to understand. 

As a result, he has been studying the changes in the norms and culture change in Japanese businesses. Specifically he has been examining the process of selective adaptation by examining what happens when old and new norms conflict, and analyzing the reasons why some norms are adopted, altered or discarded.

Nakamura’s research indicates that none of the new concepts have been accepted in their entirety in Japan, but ideas such as developing a strong competitive environment and appointing independent directors have been adopted in some form. 

He suggests that when Anglo-American institutions are transplanted to Japan, or elsewhere in East Asia, recipients of these changes may not necessarily embrace these new ideas. It is these times when institutions are in flux and when selective adaptation takes place. 

In Japan, for example, shareholder value maximization has not been widely accepted because Japanese corporate culture has traditionally emphasized the importance of not only the welfare of firms’ shareholders, but also the welfare of their suppliers, employees, customers and other stakeholders.

Nakamura’s research is valuable for anyone interested in how culture can impact corporate governance. Investors could use his results to better understand local corporate governance norms, while Japanese policy makers might be advised to consult with his research findings in their efforts to attract more international investors to Japan and to further adopt an Anglo-American business culture.

Visit Professor Nakamura's profile for more information about his research.