Certified Financial Management Specialist Practice Exam

In the Japanese Model of corporate governance, who do smaller independent shareholders interact with the least?

1. Banks

2. Management

3. Major shareholders

4. Government officials

The correct answer is: Major shareholders

In the Japanese model of corporate governance, smaller independent shareholders tend to interact the least with major shareholders. This is primarily due to the concentration of power within corporate structures where major shareholders, often other corporations or financial institutions, play a substantial role in decision-making and influence. Smaller shareholders may find their interests overshadowed and therefore have less incentive or opportunity to engage directly with major stakeholders. The nature of the Japanese corporate environment emphasizes relationships and the fostering of long-term commitments, which can marginalize the influence of smaller shareholders. Additionally, the collaborative dynamics often prioritize discussions among larger entities, such as banks or major shareholders, limiting the interaction that smaller shareholders have in governance matters. In contrast, smaller shareholders may have more interactions with management and banks, as these entities may seek to maintain good relationships with all investors to promote stability and secure funding. The engagement with government officials may also occur, although it typically takes the form of compliance with regulations rather than direct influence or interaction like with management and financial institutions. This scenario reflects how the concentration of influence in major shareholders limits the active voice of smaller independent shareholders in corporate governance.