What seems to have happened, based on reports that I’ve read, is that fraudulent fees paid at the time of acquisition of new investments were filtered through tax havens to support the valuation of investments previously made on which losses had been incurred. The precise details of the shenanigans are, of course, not yet known but it seems likely that this process has been going on for at least 20 years.
Three observations seem pertinent at this moment.
The first is to note that a situation where an overly strong board of directors with weak or non-existent nonexecutive directors, none of them accountable to effective shareholder scrutiny gives rise to a situation where corruption and abuse is far too easy. We should not be complacent and think that this applies to Japan alone.
This is also an accurate description of the UK quoted company environment where boards are almost entirely unaccountable, whether to non-executive directors (almost all of whom are recruited from the same small coterie of people) or to shareholders, where institutions dominate. Since, however, those institutions show no willingness to act on behalf of those whom they are supposed to represent, but do instead align their self-interest with the City of London and in turn with the companies they are supposed to be monitoring, we have no effective governance of these arrangements in the UK either, so we have no reason to take comfort from this situation by pretending it is peculiar to Japan alone.
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