[paper] Tough Measures are Required in Order to Restore Governance

Toshihiro Shiga: Senior Consultant, the Business Solution Division of Mitsubishi Research Institute

Toshihiro Shiga is a Senior Consultant at the Business Solution Division of Mitsubishi Research Institute. He joined the company in 1985 after working for the Digital Media Development Division of Hitachi. He is a specialist in electronics-related companies, the management of manufacturers and the impact of IT on management.

The spate of system troubles that occurred in the Mizuho Financial Group was chaos on a large scale, which is unacceptable for financial institutes. However, Terunobu Maeda, President of Mizuho Holdings, shamelessly commented in the Diet, "There has been no special damage caused to users." A very grave state of affairs can be suspected from this remark: although the immediate cause of the trouble was defect in the computer system, its root is that the management of Mizuho lacks "self-governance."
Effective corporate governance does not exist without fundamental belief in the top management. For this reason, top management must above all govern themselves. This is a major premise of management. However, in the case of Mizuho, the management was not aware enough of the lack of preparation in incorporating the computer systems. In addition, they even neglected to pay the necessary attention to implementing their governance. Autonomous governance of management will never work in such conditions.

However, a lack of governance among management is not a state of affairs exclusive to Mizuho, or exclusive only to merged financial institutes. Mr. Shiga thinks it is a problem that is now widely seen in companies of any type of industry. He points out that the lack of governance gradually became noticeable after the oil crisis in the 70s, and suggests that the major reason for this is that the management from post-war generation sat idly on the legacies handed down from the leaders of the pre-war period, and rotated those positions among themselves. By using the devastation of Mizuho as a lesson, many companies and their leaders must objectively review their state of governance, as well as rectifying any defects found therein. So, what must be rectified, and how? "Normal" measures such as enhancement of shareholders' rights or the utilization of outside board members is not enough. Thorough information disclosure on actions by management, the infusion of "new blood" into top managementmu positions, the elimination of inertia and force of habit, etc The author insists that these "tough measures" are also required.