Japan's Corporate Governance Code and the Problem of Idle Cash

Japan is revising its Corporate Governance Code to push companies into investing their vast idle cash reserves rather than hoarding them, as excessive retained earnings and token corporate reforms continue to hold back economic growth.

Article-Based Questions

  1. Do you think companies should be required by a code of rules to invest their cash, or should they be free to save as much as they want? Why?
  2. Do you agree that buying back company shares just to push up the stock price is a problem, even if it is technically legal?
  3. The article argues that ordinary people do not feel the benefits when stock prices rise. Do you think that is fair? Who should benefit most from a company's profits?
  4. Do you think placing outside directors on a company's board is an effective way to prevent fraud and bad management? Why or why not?
  5. If you were running a large company, would you prefer to hold onto cash for security or invest it in new areas for growth? What would influence your decision?

Discussion Questions

  1. Is it fair for a government to tell private companies how they should use their own money?
  2. In your country, do you think large companies do enough to share their profits with employees and ordinary people?
  3. Have you ever felt that a rule or policy existed only on paper and had no real effect in practice? What was the situation?
  4. Do you think it matters to ordinary people whether a country's stock market is doing well? Why or why not?
  5. What do you think is more important for a company: being profitable for shareholders, or being good for society as a whole?

Vocabulary Spotlight

retained earnings
Profits that a company saves rather than paying out to shareholders.
governance
The system of rules and practices by which an organization is managed and controlled.
compliance
The act of following rules, laws, or official standards.
idle
Not being used or put to any productive purpose.
buyback
When a company uses its own money to purchase its shares from the stock market.