1. Trust as the Foundation of Corporate Governance in Japan
Postwar economic development and the lifetime employment system reinforced this trust-based logic. Companies offered stable careers and social status; employees reciprocated with diligence and loyalty. When members shared similar values and behavioral norms, trust became the connective tissue between individuals and the organization. However, this model required homogeneity and long-term employment, and as external conditions shifted, its sustainability was challenged.
2. The Transformation of Trust Mechanisms
In recent years, Japan’s labor structure has undergone significant change. The proportion of temporary and contract workers has risen, generational and cultural diversity has expanded, and remote and project-based work have become commonplace. Interaction within organizations has become short-term and fragmented, making it difficult for managers to maintain trust through observation and familiarity. Younger employees value transparency, fairness, and clearly defined standards, making the traditional reliance on tacit understanding less effective.
Amid these shifts, trust has begun to be rebuilt through systems and governance frameworks. Japanese companies are exploring ways to sustain collaboration through formalized structures, data transparency, and documented processes.
3. Building Institutionalized Trust and Its Challenges
Institutionalized trust in Japan has taken shape across three key dimensions:
- Strengthening Corporate Governance: Since the introduction of the Corporate Governance Code and J-SOX in 2015, companies have been required to establish independent boards, enhance information disclosure, and reinforce internal audits. Trust is now evaluated based on verifiable standards.
- Digitalized Management Systems: With the implementation of ERP, CRM, and project management tools, organizations can visualize operations through data. Decision-making now relies on objective indicators rather than personal impressions, improving transparency and consistency.
- Cultural Renewal: Companies such as Shiseido and Hitachi have introduced “psychological safety” systems and anonymous feedback platforms, enabling employees to voice opinions without fear. This shift anchors trust in institutional stability rather than interpersonal familiarity.
While institutionalized trust reduces uncertainty, it can also lead to excessive formalization. Overly detailed rules may stifle dialogue and initiative. When internal control is perceived as surveillance instead of support, trust becomes defensive rather than constructive. Institutions require a cultural foundation to remain effective; without it, they risk becoming mere procedures.
4. Institutional Development in Japan and Taiwan
The recent institutionalization of corporate governance in Japan finds a parallel trajectory in Taiwan. Since the 2000s, Taiwan’s Financial Supervisory Commission and the Taiwan Stock Exchange have introduced a series of regulatory frameworks, including the Corporate Governance Best Practice Principles and the Regulations Governing Establishment of Internal Control Systems by Public Companies. Listed companies are required to establish internal audit mechanisms and issue annual internal control statements. In recent years, the Sustainability Best Practice Principles have further integrated governance with ESG indicators, forming a system led by law and regulatory oversight.
Japan, by contrast, follows a more principles-based approach. The Corporate Governance Code, jointly formulated by the Financial Services Agency and the Tokyo Stock Exchange, adopts the “comply or explain” model, encouraging companies to maintain market trust through transparency and self-discipline. At the same time, the Internal Control Reporting System (J-SOX) has established a framework for auditing and accountability in financial reporting.
Taiwan’s framework also mandates internal control declarations and audit procedures, but its implementation relies more heavily on supervision and regulatory enforcement. Both countries share the same goal of enhancing governance, yet their underlying philosophies differ. Japan builds trust through market transparency, while Taiwan strengthens trust through compliance and monitoring. These approaches illustrate two distinct paths toward institutional trust, reflecting how each society defines the balance between corporate autonomy and regulatory authority.
5. When Trust Becomes Part of the System
Japanese enterprises have long relied on interpersonal trust as the foundation of management. The process of institutionalization marks a turning point in this cultural model. This shift is not merely technical—it redefines how companies relate to society and markets. When trust becomes a verifiable, traceable system, organizations can function more stably in an open environment.
The effectiveness of institutional trust depends on how deeply it integrates with culture. The experiences of Japan and Taiwan show that institutions sustain trust only when they become part of organizational culture. External professional bodies such as accounting firms play an essential role in this ecosystem. Through financial audits, internal control evaluations, and sustainability assurance, they convert corporate commitments into socially verifiable trust.
For both Japanese and Taiwanese enterprises, institutionalized trust represents continuity. As organizations face generational shifts and industrial transformation, maintaining trust through systems ensures stability and competitiveness. Trust, once rooted in relationships, has become a structural element of governance and a foundation of long-term resilience.