In a recent major shareholder suit, the Osaka District Court ordered 11 former Daiwa Bank executives to pay a total of $775 million (about 83 billion yen) in compensation for the $1.1-billion loss the bank suffered from illegal bond trading by a former employee of its New York branch. The ruling has shocked Japanese corporate executives for more reasons than one.
First, they believe that it is unfair to impose unlimited liability on directors. Second, they feel the penalty is too severe given that Japanese executives are paid much less than U.S. executives. And third, some fear that incentives for people to become directors may be lost if such huge compensation is demanded.
Many members of the ruling Liberal Democratic Party are sympathetic toward the former bank executives. The Justice Ministry is reportedly considering plans to revise the Commercial Law, which would include a cap on executive liability and restricting the shareholder's right to file a suit.
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