OYAMA, Shizuoka Pref. -- Japanese firms need to create a strong system of checks and balances on management by hiring more external auditors, top business leaders agreed July 24 at the annual summer forum of the Japan Federation of Economic Organizations (Keidanren).

Japan's largest economic organization opened its forum July 24 with 25 business leaders in attendance. In response to recent scandals involving Nomura Securities and Dai-ichi Kangyo Bank, some corporate leaders expressed their opinions on corporate governance and how companies should be managed.

"The issue of corporate governance is a problem involving both corporate ethics and the current company system," said Kenichi Suematsu, adviser to The Sakura Bank, Ltd. Toru Hashimoto, chairman of The Fuji Bank, Ltd., proposed that more than half of the auditors in a company be outside auditors.

Although Japan's Commercial Code currently requires large corporations to have at least three internal auditors and one outside auditor, outside auditors are still uncommon in Japanese firms and in general do not have much influence over decisions made by a company's board of directors. Hirotaro Higuchi, chairman of Asahi Breweries, Ltd., said that Keidanren as a business organization should call on its members to establish a powerful organization of auditors.

While some members stressed the importance of outside auditors in their discussions of corporate governance, Shoh Nasu, chairman of Tokyo Electric Power Co., said companies should pay more respect to corporate shareholders. He said that firms should solicit more written input from shareholders and reflect those opinions in their annual shareholders' meetings. "We have to think about how we can better respect our shareholders," Nasu said. "Having a lengthy general shareholders' meeting is not the way to respect shareholders."