While responding to a comment here, I remembered a point that I had intended to make but forgot.
Noah Smith’s op-ed states: Japan’s approach to corporate governance has, for the past 40 years, been very different from that of the U.S. Independent directors are very rare and boards are filled with corporate managers. As you might expect, this makes companies focus more on empire-building than on creating shareholder value and boosting low profitability.
Now the story Japanese “boards are filled with corporate managers,” making “companies focus more on empire-building than on creating shareholder value and boosting low profitability.” was a very popular meme during the go-go, Japan-as-No.1, 80s. But how does that explain the behavior of Japanese corporations today, who we are told are hoarding cash like dragons curled around their gold instead of “building empires” like chatterists claimed that they did in the good old days?
Actually, I do have some idea of why Japanese “boards” “filled with corporate managers” tend to behave the way they have been behaving. It’s not hard to figure out if you actually talk to Japanese businessmen, and I don’t think that they are lying.