Asahi Case Essay

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Executive Summary Asahi Glass Company (AGC) is a Japanese-based multinational manufacturer of flat glass, chemicals, electronics and displays and other materials. In 1998, Mrs. Shinya Ishizu was appointed the CEO of this global company, ranked as the sixth largest among all the Japanese companies. As soon as he occupied the chair, Mrs. Ishizu started implementing some drastic changes in the company’s structure and corporate governance with the purpose of making AGC an international and globalized entity. The Japanese market and culture is a particular one, which makes the implementation of changes really hard and complex. As far as corporate governance is concerned, the Japanese culture revealed that the bank with the strongest relationship, also known as the “main bank”, had an active role in the company, closely monitoring and intervening in case of financial distress. With the deregulation of the capital markets and the crisis in the early 90’s, these systems gradually disappeared giving more relevance to credit rating agencies and less to banks. Subsequently, the focus of corporate governance shifted towards internationalization and opened the circle to “outsiders”, which was exactly the case of AGC. By combining Ishizu’s goals and the shift in the Japanese corporate governance culture, AGC saw a makeover in its business strategy with the creation of “in-house” companies, a reform in its corporate governance structure and an introduction of a new management performance measure system. The new compensation scheme was based on Economic Value Added (EVA) that evaluates employees, at large, accordingly to their value creation contribution to the overall company. More broadly, EVA represents the portion of free cash flows after a capital charge is deducted. An EVA-based performance measurement system can become very complex, since the computation of its components
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