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Navigating the intricacies of Japanese governance and the nuance of its boardroom etiquette takes patience and skilled listening to build trust before acting, say Tokyo-based directors Dr Gerold Knight GAICD and Elizabeth Masamune PSM GAICD.
Australian-born Elizabeth Masamune has lived in Japan for 26 years and serves on the boards of three Japanese companies in Tokyo — Asteria Corporation, Financial Partners Group and Arakawa Chemical Industries.
“My husband and I love it here,” she says. “I’m an old Japan hand from way back, so it really does feel like home now.”
Masamune studied Japanese at Melbourne’s Monash University and the University of Queensland, later working as a senior trade envoy to Japan with the Australian Trade Commission. A fluent Japanese speaker, she says people on calls often assume she is Japanese.
Why Japan?
It’s easy to see why Japan is a natural destination for Australian directors seeking overseas experience. It’s a democratic, country with strong economic and trade ties with Australia. In 2022, the two countries renewed their Joint Declaration on Security Cooperation to bolster trade, investment, defence and security ties in the Asia Pacific.
Investment and trade figures from the Department of Foreign Affairs and Trade bear out the close relationship between the two nations. In 2024, Japan was Australia’s third-largest trading partner after China and the US, with two-way goods and services trade valued at $107.8b. Meanwhile, Japan was Australia’s third-largest import source, valued at $32.2b, owing to Australian demand for cars, travel and refined petroleum.
Masamune points out there is much to unite Japanese and Australian governance. “This includes shared values around building trust with business partners and a medium to long-term view of building corporate value,” she says.
In the 10 years since she was first appointed to a Japanese board, governance has progressed considerably, so there are now many areas of similarity. “Companies can come to see the rise in shareholder activism as a relatively positive thing to help them improve their governance,” she says.
Things change
For Australian directors aspiring to a Tokyo board seat, it’s vital to understand what has changed – and what hasn’t.
Before the turn of the century, Japanese corporate governance was bank-centred and inward-focused, many boards made up of lifetime employees rather than independent directors. Shareholders were largely passive in exercising their rights and it was not uncommon for local banks to hold shares in the companies they were funding – and vice versa – a controversial practice known as cross-shareholding.
Japanese governance in 2026 is entirely different, underpinned by a strong reformist agenda, increasing shareholder activism and a stronger focus on independent directors.
“Since 2019, Japan has consistently ranked second globally in terms of the number of shareholder activist cases, only behind the US,” says Hiroyuki Watanabe, an academic and Japanese law expert at University College London.
Reform began in 2014, when Japan’s Financial Services Agency and the Tokyo Stock Exchange established a stewardship and corporate governance code, respectively, prioritising director independence and discouraging cross-shareholding.
“Companies are now encouraged to engage in dialogue with shareholders and have become more receptive to proposals that contribute to financial policy and management efficiency,” says Watanabe, adding that directors with overseas experience are in high demand.
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- In Japan, foreign investments can trigger regulatory review and disclosure obligations at low shareholding levels of one per cent in certain sectors. Australia has its own foreign investment framework, with rules separated from corporate law, administered by the Foreign Investment Review Board (FIRB).
- Japan’s Corporate Governance Code is not legally binding, but employs a “comply or explain” metric. Australian governance has stronger provisions regarding director duties, plus civil and criminal liabilities.
Japan’s foundational statute is governed by a mixture of the Companies Act and Financial Instruments and Exchange Law, with additional rules issued via the Tokyo Stock Exchange. Australian director duties are mostly set out in the Corporations Act 2001, which outlines legal duties, reporting, enforcement and penalties.- Boards of listed companies on the top-tier prime market in Japan must be comprised of at least one-third “outside” (independent) directors. In Australia, the ASX Corporate Governance Principles and Recommendations state that a majority of the board and the chair should be independent.
- Japan has a higher threshold for mandatory takeover offers, triggered when a shareholder acquires one-third of the company. In Australia, it is 20 per cent.
Source: Japan Financial Services Agency, FIRB, ASX, Corporations Act, MinterEllison
Cultural clashes
Nevertheless, cultural differences remain that can affect the ability of an Australian NED to make an impact on a Japanese board, says Gerold Knight, chief risk officer and a member of the executive leadership team at Coca-Cola Bottlers Japan. He is also on the board of CCBJI Insurance in Singapore. When he first moved to Tokyo, he worked with a culture coach to better understand societal and corporate norms, such as the etiquette surrounding business cards – and bowing.
“Bowing can feel uncomfortable at first, especially when people are bowing to you, but that’s the culture and you embrace it,” he says. “Some days, I’ll bow nearly 100 times.”
Knight has also had to adapt his communication style. “People in Japan don’t want to be embarrassed,” he says. “Being an Aussie, I’m naturally assertive, but you have to change your approach to communicating.”
He recommends incoming Australian board members conduct research on the history of the company, including its structure and performance, which can impact the decision-making protocols of the board. Building trust takes time, he adds, as does convincing others of the need to change tack. “You have to show examples of why this approach works and if something hasn’t been done before, you need to validate the ‘why’.”
Masamune says building relationships with the board before introducing change is the smart move. “In Japan, listening is valued highly. You should be seen to be listening, to be taking things on board. Then, when you suggest changes, you’ll be listened to.”
Gaining a board seat
If you’re seeking a board role in Japan, says Knight, there needs to be a compelling reason why a Japanese-domiciled company would look beyond their own talent pool. “Ask yourself what the rationale is for the diversification. You need to know what you’re bringing to the table.”
Masamune says Australians may gain a seat on a Japanese board if the company is hoping to expand into Australia. Or they could have distinct corporate experience the firm wants to tap. It helps if your Japanese is fluent. Most big boards provide translators or have executives that speak English, but not necessarily in smaller or mid-cap firms.
“If your Japanese is limited, it may be harder to to read the room fully,” says Masamune. “To understand the different responsibilities and areas of technical expertise of each board member.”
In any case, to assess your readiness for a board role, it’s vital to understand how Japanese corporate governance has evolved. “It’s important to recognise the progress that has occurred,” says Masamune. “Japanese are very loyal and very appreciative of the efforts that you make.”
This article first appeared under the title 'Directors Abroad' in the April/May 2026 Issue of Company Director Magazine.
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