Corporate Governance Failures in Japan and Malaysia: A lesson for Pakistan

Abstract

This study argues out contributory factors of the failures of corporate governance in Japan and Malaysia and key lessons to be drawn for Pakistan. The research is based on the fact that corporate governance, i.e., the system of rules, practices and processes according to which the business enterprise is guided and controlled is the core of enhancing transparency, accountability and sustainable economic performance. The evolution of the corporate governance practices in Japan and Malaysia is discussed here. Although there have been positive changes in the regulatory landscape, such as the Corporate Governance Code, still there have been problems like constant concealment and board indecisiveness, cultural inertia against whistle blowing and by auditor non-service, as shown in the Olympus, the Toshiba and the Nissan case. Malaysia achieved a lot between early institutional roots and after Asian Financial Crisis reforms to the formulation of Malaysian Code on Corporate Governance (MCCG). But the infamous scandals like 1MDB or accounting fraud in Transmile Group Berhad reveal some fundamental wrongs where governance issues lie. Examination of the two legal systems Japan, the developed economy that holds developed legal institutions, and Malaysia, an emerging market, which has underdeveloped structures provides a blueprint to Pakistan that is invaluable. The development of corporate governance also ensued in Pakistan, including initial forms such as the Code of Corporate Governance 2002 to the present-day reforms. Some of the issues, however, remain such as weak enforcement, absence of board independence; the prevailing family-owned businesses and transparency oppose this. Based on the experience in Japan and Malaysia, this study mentions some strategic plans for Pakistan.