Corporate Governance and Administrative / Environmental Laws

Corporate governance (コーポレートガバナンス) is the mechanism by which shareholders, the board of directors and others watch whether management runs the company in line with its purpose and its investors' interests, and correct it when necessary.

Separating the role of overseeing management from the role of running the business, and placing people free from internal interests on the overseeing side, curbs unchecked or fraudulent conduct by management. Concrete measures include adding outside directors with no ties to the company or its executives to the board, and having corporate auditors audit how directors carry out their duties. In Japan, beyond the corporate bodies prescribed by the Companies Act, the Corporate Governance Code for listed companies sets out principles for this approach.

AnalogyIt is like a lookout sent by the shipowner checking from the deck that the captain has not strayed off course.

How to rememberGovernance comes from a Latin word meaning 'to steer'. Link it to a mechanism that checks whether the company's helm is being steered properly.

3 past questions on this term コーポレートガバナンス →

The Whistleblower Protection Act (公益通報者保護法) shields workers and other whistleblowers from dismissal and other unfavorable treatment when they report their employer's violations of law to a recipient the Act designates.

Possible recipients include the employer's internal hotline, an administrative body with authority over the matter, and outside parties such as the media, and the further outside the recipient, the stricter the conditions for protection. The aim is to let insiders who know of wrongdoing speak up without fear, so that corporate misconduct is found and corrected early. A 2020 amendment, in force from 2022, extended protection beyond workers to people within one year of leaving the job and to officers.

AnalogyIt is like a rule that keeps a player who reports a foul to the referee from being benched for having spoken up.

How to rememberSplit the Japanese name into 'public interest' (公益), 'whistleblower' (通報者) and 'protection' (保護), and the purpose, who is protected and the effect can be read straight off it.

3 past questions on this term 公益通報者保護法 →

The internal control reporting system (内部統制報告制度) requires management of listed companies to assess whether the financial-reporting part of their in-house mechanisms for running operations properly (internal control) works effectively, and to disclose the result as an internal control report.

In Japan it began in fiscal 2008 under the Financial Instruments and Exchange Act, and because it was modeled on the US SOX Act it is also called J-SOX. The report is audited by a certified public accountant or audit firm, so management's self-assessment is checked by outside eyes. The aim is to prevent false financial information from window dressing and the like and to keep capital markets sound.

AnalogyIt is like a store manager checking that the shop's cash-handling procedures are followed, then having an outside inspector with no stake in the shop confirm that the check was right.

How to rememberThe J in J-SOX stands for Japan. Remembering it as the Japanese version of the US SOX Act also reminds you that its legal basis is a securities market law.

2 past questions on this term 内部統制報告制度 →

The Information Disclosure Act (情報公開法) is the law that lets anyone request disclosure of administrative documents held by national administrative organs and sets out the procedure for doing so.

Its formal name is the Act on Access to Information Held by Administrative Organs, and its purpose is to fulfill the government's duty to explain its activities to the public (accountability). An organ that receives a request must in principle disclose, but information that can identify individuals or that would harm a corporation's legitimate interests if made public is excluded as non-disclosure information. Documents held by local governments are handled by each one's own information disclosure ordinance.

How to rememberThe one doing the disclosing is the national administrative organ. Remember it by the subject: the duty to open up lies not with the requester but with the government body that holds the documents.

2 past questions on this term 情報公開法 →

The Waste Management Act (廃棄物処理法) sets out how waste is to be stored, transported and disposed of, requiring proper treatment to protect the living environment and public health.

Its formal name is the Act on Waste Management and Public Cleansing. Waste is divided into industrial waste, the legally specified types that arise from business activities, and general waste, which covers everything else, and businesses must treat the industrial waste they generate on their own responsibility (generator responsibility). When a company discards used PCs or servers as waste, it also has to handle them in line with this Act.

AnalogyIt is like a town agreeing in advance on how garbage is put out, carried away and where it ends up, so that nobody dumps it by the roadside.

How to rememberThe 'public cleansing' at the end of its formal name is a holdover from an older law on keeping towns clean.

Recycling acts (リサイクル法) is a collective name for several laws, each set for a particular item category, that have used products and containers collected and reused as resources.

The underlying Basic Act on Establishing a Sound Material-Cycle Society sets the order of priority: first reduce waste, then reuse things, then recycle them as resources. On that basis, separate laws for items such as home appliances, PCs, and containers and packaging decide who collects them and who bears the cost.

The GX Promotion Act (GX推進法) uses national strategy and investment mechanisms to drive GX (green transformation), which pairs decarbonization, meaning cuts in greenhouse gas emissions, with economic growth.

GX refers to efforts to shift industrial and social structures that rely on fossil fuels toward clean energy. The law passed in 2023, formally the Act on Promotion of a Smooth Transition to a Decarbonized Growth-Oriented Economic Structure, provides for, among other things, a government GX promotion strategy, government bonds (GX economy transition bonds) issued to support decarbonization investment up front, and the phased introduction of carbon pricing, which puts a price on carbon dioxide emissions.

How to rememberThe X in GX stands for the 'trans' (meaning 'across', read as 'cross') in transformation, the same convention as in DX.