日本取締役協会

Corporate governance in Japan has made a lot of progress since the introduction of the governance code 10 years ago. But this is a journey and still many areas for improvement remain to be addressed. There are a number of important discussions at the moment and in this article, I would like to take a look at a few of them. One recent topic is the question of whether to delist a company and take it private or to remain on the stock exchange. In 2024, a record ⁽¹⁾ 94 companies were delisted in Japan. The reasons for these decisions are manifold and range from the need to transform an ailing business to avoiding takeovers or even national interest. On the other hand, many experts point to another phenomenon on the other side of the spectrum: the fact that many Japanese start-ups do their IPOs rather early and with small evaluations - at least compared to other countries.

To List or Not to List that is the Question - but also Why!

It seems to me that there is often a lack of full clarity as to why (and also when) to list a company in the first place and why - or why not - it should continue to be traded on the stock exchange. In strategy-making and business transformations, the question of "Why" is tremendously important - even though very often executives tend to focus too much on the "What" and "How " of running a business rather than the Why. I believe the same is true for corporate governance as well. We see a lot of discussion on What needs to be governed and How it should be governed but we lack a deeper discussion of the Why. However, without a clear understanding of the Why - Why we exist (as a company) - and our Purpose, it is very difficult to come up with the right ways - the What and the How - of delivering on the Why and fulfilling the Purpose of the business. The Why also defines the North Star or True North which the company is following. Japan's leading management thinker Professor Ikujiro Nonaka⁽²⁾ basically spent his entire academic career deep diving into the essence of why companies exist. Before passing away on January 25 this year, Nonaka-sensei prepared some key messages he wanted everybody to remember, and they were printed onto a postcard that was handed to everybody at his O-wakarekai memorial service on February 2, which I attended. "Without questioning the meaning, innovation cannot emerge"「意味を問わなければ、イノベーションは生まれない」is one of those messages and an example of the importance of constantly asking Why.

Keep 'em Coming: Intellectual Combats in the Boardroom

Another discussion point, in corporate governance in Japan today is the role of the independent directors and the level and quality of discussions in the boardroom. Here again seems to be a lack of clarity which might interfere with the most effective corporate governance. Rather than reviewing operational details - this is the job of the executives - the board should discuss Strategy and the Direction of the company and make sure that the company stays true to its Purpose - and its Why - i.e. the reason to exist. And those discussions should be open and candid and create value for the organization. As Nonaka-sensei says in his messages: "No second-guessing! Engage in intellectual combat with your whole being!" 「忖度するな！全身全霊で知的コンバットせよ」. Note that the word intellectual here does not refer to anything theoretical but rather is about practical wisdom and ultimately the application of knowledge. We would definitely like to see more intellectual combats going on in the boardroom - especially those that make sure that we are crystal clear about Why we exist and our Purpose as well as the Direction we are going. Strategy needs to flow from there and the executives are then mandated to execute the strategy to get to the relevant outcomes.

From Book-smart to Street-smart

Yet another discussion point refers to value creation and evaluation of companies. Especially the fact that many Japanese companies tend to have low price-to-book ratios meaning that their market value is lower than their book value if that metric is below 1. As of February 21, 2025, less than 55% of the Tokyo Prime listed companies had a PBR above 1. This is certainly a concern. However, more important than just looking at the numbers is to fully understand the reasons and situations behind the metrics and a thorough discussion - or intellectual combat - about what is the best way to improve. It sometimes feels that we are placing too much emphasis on numbers and metrics and not enough on a deep understanding. Don't get me wrong: We definitely need metrics and KPIs and we need to have hard data to understand our business and make decisions. But management is not only science, it is both art and science and we need to make sure we don't get stuck in 'analysis paralysis' and underestimate the power of qualitative insights in addition to the quantitative ones. We need both art and science. We need to understand the books - and be book-smart for sure - but at the end of the day what will decide whether we will win in the market or not will be how street-smart we are. As Nonaka-sensei says: "Hone your instincts! Cultivate practical wisdom!". 「野生を磨け！賢慮を育め！」 So let's not lose sight of the Why for all the numbers and KPIs.⁽³⁾

Management is a Way of Life

Finally, Nonaka-sensei also reminds us that "Management is a way of life" 「経営とは、生き方（a way of life）である」. It is both true for professional and personal life that we first need to have clarity on Why we exist and what our Purpose in life really is - whether it is our professional career or our private situation. Let's engage in intellectual combats about corporate governance and in the boardroom and let's follow our 'Why' as our True North - both in business as well as in personal life.

Dr. Florian Kohlbacher
Executive and Author
Florian is a Japan based executive and expert on global business, technology and consumer trends, focusing on how to manage innovation, strategy, sustainability and change. He is particularly well known for his work on aging and business and how companies can strategically manage the challenges and opportunities of population ageing and other megatrends. Florian has published numerous articles, reports and books including "The Silver Market Phenomenon: Marketing and Innovation in the Aging Society", 2nd edition, "Advertising in the Aging Society: Understanding Representations, Practitioners, and Consumers in Japan", and "International Marketing in the Network Economy: A Knowledge-Based Approach" (with a foreword by Ikujiro Nonaka). He is an Advisor to the Start2 Group Start-up Accelerator, providing mentorship to German start-ups considering market entry into Japan, an Advisor to German start-up Loyi, as well as a member of the Advisory Board of Aoyama Business School.
In his more than 20 years in Japan, Florian has held leadership roles in organizations across different sectors, including B2B products and services, education & research, strategic consulting and consumer goods. After more than 5 years with The Coca-Cola Company's Japan & South Korea Operating Unit as VP of Strategy and VP of Commercial Transformation, he joined Olympus Corporation as VP Corporate Planning & Governance in March 2025.