EMPLOYEEISM, CORPORATE GOVERNANCE, AND THE J-FIRM

It has been alleged that the management of the Japanese firm is shielded from market discipline and left free to pursue employee welfare maximization. In this paper, employees and management are constituent members of the Japanese firm, and the Japanese firm practices a labor-management philosophy dubbed as employeeism. I maintain that the appearance of employee corporatism be understood in the overall scheme of bank-based corporate governance coupled with employees′ extensive residual control within the firm. I propose that the standard principal-agent formulation be modified to incorporate institutional features of bank-firm relations and the modus operandi of residual control. © 1993 Academic Press, Inc.