抄録
The Japanese government is promoting corporate governance reforms whereby ROE (return on equity) is becoming a critical topic for strengthening the earning power of a company. However, some argue whether ROE should be the correct business objective. It is argued that ROE rather undermines GDP causing inconveniences such as restructuring by downsizing, reducing headcount, which is a company’s most valuable asset, diminishing capital investment and company stock buybacks leading to capital deficiency.
Shareholders demand that companies limited by shares give sufficient returns to fulfill investor’s expectations. It is understandable that capital efficiency is one of the important issues for corporate management. However, as most Japanese companies hold the basic corporate philosophy of harmony with stakeholders, management decisions should be well balanced and consider their stakeholder relationships. This paper proposes some recommendations on how Japanese companies deal with the ROE issue in light of the Japanese corporate culture.
