Case Study Japan Land
JAPAN LAND CASE STUDY 6
CaseStudy: Japan Land
CaseStudy: Japan Land
Thekey corporate governance issues are composed of the board ofgovernors and management of the extended organization structure. Thecauses of the issues are large organization structure and lack ofaccountability.
Oneof the conflicts of interests is the chair of the board of directorsbeing a senior employee of the company that supplied accountingservices to JALL, a subsidiary of Japan Land. The conflict underminescorporate governance because he will not disclose financialweaknesses as the supplier of the accounting expertise. In addition,the inclusion of non-executive directors on the board of directorsand issuing them with shares conflicts their interests.
Theresignations indicated a lack of faith of the senior officers in themanagement of the firm. This indicated a perceived weakness in thefuture of the company. As a result, the resignations led to reductionof the share price of the firm.
Theindependent director should not have resigned. This is because he didnot have a large stake in the company that would have affected hisbusiness interests. Independent directors resign when their servicesare no longer needed and expertise conflicts with a firm line ofbusiness. According to Fernardo(2009),independent directors should communicate by giving detailed reasonsfor resignation to the board of directors prior to their exit.
No,the external auditors did not act appropriately. They should havedone a thorough due diligence before accepting their re-appointmentas the auditors of the firm. On the other hand, the company actedappropriately to re-appoint the previous auditors. This is because achange of auditors in such circumstances could have painted thecompany badly.
Thefinancial woes faced by Japan Land were caused by problems incorporate governance. This is because of lack of competence in theleadership and the structure of the management.
Yes,there are some cultural norms and business traditions that poseissues in systematic corporate governance not only in Japan but atthe global scene. However, it is the responsibility of the managementto mitigate the threats by understanding the business environmentthat the company is operating at (Fernardo,2009).
Thecompany complied with guideline 2.1 by having over one-third of itsboard as independent directors. However, the firm flouted guideline2.4 by not having all the directors with the necessary expertise.Despite that, the firm fulfilled principle 6 of the Code of CorporateGovernance by disclosing its directors with over three years in theannual report.
Thecompany had made efforts to divide its responsibilities, but fellshort of the level of division in regard to one of its directors. Theexecutive director at JALL, Junya Kitadaheld the position, while he was still supplying JALL with accountingservices as the principle of the contracted firm. In addition, thechair of the Japan Land board was also the founder and chairman of asubsidiary of the firm.
Theresignation of Sin Boon, an independent director plays the role ofsignaling some internal disagreements within the board of directors.It further signals management problems at the company that thedirector may have avoided. Worse still, such a resignation will nothelp other independent directors to voice their concerns
Theresignation of Ernst & Young signals poor corporate governance,and has negative impact on the confidence of the stakeholders in thecompany.
Toenhance corporate governance, the remaining members of the boardshould call for an urgent meeting and an AGM to discuss and presentresolutions regarding the company.
Tomitigate the uncertainties arising from the resignations, the companyshould have held an annual general meeting to discuss and replace thedirectors that have exited. They should also hire another externalauditor and publish public statements to reaffirm their commitment tothe governance of the company.
Fernardo,A.C. (2009). CorporateGovernance: Principles, Policies and Practices.Delhi: Pearson Education India