Implications for Japan's foreign policy following DPJ election losses
FSI's research on the origins, character and consequences of government institutions spans continents and academic disciplines. The institute’s senior fellows and their colleagues across Stanford examine the principles of public administration and implementation. Their work focuses on how maternal health care is delivered in rural China, how public action can create wealth and eliminate poverty, and why U.S. immigration reform keeps stalling.
FSI’s work includes comparative studies of how institutions help resolve policy and societal issues. Scholars aim to clearly define and make sense of the rule of law, examining how it is invoked and applied around the world.
FSI researchers also investigate government services – trying to understand and measure how they work, whom they serve and how good they are. They assess energy services aimed at helping the poorest people around the world and explore public opinion on torture policies. The Children in Crisis project addresses how child health interventions interact with political reform. Specific research on governance, organizations and security capitalizes on FSI's longstanding interests and looks at how governance and organizational issues affect a nation’s ability to address security and international cooperation.
The 2008–2009 financial crisis demands we look anew at the role of corporations, and the working of financial markets around the world. In this challenging and insightful book, one of our most eminent economists provides a compelling new analysis of the corporate firm; the role of shareholders, managers and workers; and institutional governance structures.
In recent decades the firm has predominantly been seen as an organization run and governed in the interests of shareholders, where management acts as the agent of shareholders, and the workers simply as instruments for share-value maximization. This book reverses this viewpoint. It sees corporations as associational cognitive systems where "cognitive actions" are distributed amongst managers and workers, with shareholders supplying "cognitive tools" and monitoring their use in the systems. Aoki analyses the different relationships that can exist between shareholders, managers, and workers from this perspective, and identifies a range of different models of organizational architecture and associated governance structures. He also discusses ways in which corporations act as players in social, political, and organizational games, as well as global economic games; how these inter-related social dynamics may change particular, distinctive national structures into the diversity incorporated in the global corporate landscape; and how they now call for new roles for financial markets.
"Masahiko Aoki uses the social mathematics of game theory to reveal the deep structure of corporate governance systems, in the process explaining the persistence of diversity under conditions of globalization. His profound and highly original analysis speaks directly to the issue of corporate governance reform in the aftermath of the financial crisis of 2008–9."
-Simon Deakin, Professor of Law, University of Cambridge
"The recent wave of fraud, corruption, and fiscal irresponsibility at the highest corporate levels dramatizes the need for a model of the modern corporation that is at the same time deeply economic in the recognition of the centrality of incentives, and deeply sociological in the recognition of the centrality of social norms and a culture of corporate morality. Professor Aoki has combined his magisterial knowledge of business organization with a foundational study of the role of culture in epistemic game theory to produce, for the first time, a truly transdisciplinary model of the corporation."
-Herbert Gintis, Santa Fe Institute
"This is a path breaking book that provides a rigorous analysis of the cognitive underpinnings of corporations. It gives fundamental insights into the diversity of organizational forms that exist and the association of these with the historical, political, social, and technological contexts within which they operate. As with so much of Professor Aoki's work, it will radically alter the way in which we view the corporation."
-Colin Mayer, Peter Moores, Dean, Saïd Business School, University of Oxford
"A pioneering contribution which formalizes in game theoretic language complex institutional structure and environment of the corporation both at a moment of time and over time."
-Douglass C. North, Nobel Laureate in Economics 1993, Spencer; T. Olin Professor in Arts and Sciences, Washington University in St. Louis
The Southeast Asia Forum experienced an embarrassment of riches in 2009-2010. In no previous academic year had the Forum enjoyed the intellectual company of so many first-rate scholars working on Southeast Asia at Stanford. They were six in all—Marshall Clark (Australia), James Hoesterey (US), Juliet Pietsch (Australia), Thitinan Pongsudhirak (Thailand), Sudarno Sumarto (Indonesia), and Christian von Luebke (Germany)—three for the full academic year and three for two months apiece. All six visitors shared their findings and thoughts on Southeast Asia in talks hosted by SEAF. Not least among the pleasures of having them at Stanford was a Spring 2010 seminar in which they read each other’s work in progress and shared ideas as to how it might be improved. These conversations gave specific, heuristic, and collegial meaning to the abstract notion of “a community of scholars.”
Here are brief updates on all six as of the end of June 2010:
Marshall Clark
A lecturer in Indonesian studies at Deakin University in Australia, Dr. Clark came to Stanford on sabbatical to spend two months at Stanford in Spring 2010 writing up and sharing his research findings with US-based colleagues. Publications associated with his stay at APARC include two books, Maskulinitas: Culture, Gender and Politics in Indonesia (Monash University Press, 2010) and Indonesia-Malaysia Relations: Media Politics and Regionalism (co-authored with Juliet Pietsch and forthcoming in 2011), and two articles, “The Ramayana in Southeast Asia: Fostering Regionalism or the State?” in Ramayana in Focus, and (with Dr. Pietsch) “Generational Change: Regional Security and Australian Engagement with Asia,” The Pacific Review During his time with SEAF he presented papers at venues including the Association for Asian Studies convention in Philadelphia in March 2010. In April at the University of California-Berkeley at the Islam Today Film Festival he moderated a discussion of the ins and outs of making movies in Indonesia and Malaysia. (2010).
He returns to his position on the faculty of Deakin University.
Dr. Hoesterey was awarded the Walter H. Shorenstein Fellowship to spend the academic year at APARC working on several projects, including revising his University of Wisconsin-Madison doctoral dissertation into a book. Based on anthropological research in Indonesia on media-savvy Muslim preachers, Sufi Gurus and Celebrity Scandal: Islamic Piety on the Public Stage should be under review in 2010 for possible publication in 2011. Also in the pipeline are an essay, “Shaming the State: Pop Preachers and the Politics of Pornography in Indonesia,” to appear in a volume he is co-editing with political scientist Michael Buehler, and chapters in Muslim Cosmopolitanisms and Digital Subjectivities: Anthropology in the Age of Mass Media. During his fellowship he spoke to audiences at several US universities. In March 2010 he was elected incoming chair of the Indonesian and East-Timor Studies Committee of the Association for Asian Studies.
In Fall 2010 the BBC-Discovery Channel series “Human Planet” will feature Dr. Hoesterey’s work as a cultural consultant with documentary-film makers in West Papua. He will spend AY 2010-11 in Illinois as the Andrew W. Mellon Postdoctoral Fellow in Islamic Studies at Lake Forest College.
Juliet Pietsch
Dr. Pietsch is a senior lecturer in the School of Politics and International Relations at the Australian National University. During her two-month sabbatical at Stanford in Spring 2010 she worked on two books: Indonesia-Malaysia Relations: Media, Politics and Regionalism (with Dr. Clark) and (with two other co-authors) Dimensions of Australian Society (3rd ed., Palgrave Macmillan, 2010). In April, jointly with Dr. Clark, she spoke at the Berkeley APEC Study Center on “Indonesia-Malaysia Relations and Southeast Asian Regional Identity.”
Dr. Pietsch returns to her faculty position at the Australian National University.
Dr. Pongsudhirak is an associate professor in the Department of International Relations in the Faculty of Political Science at Chulalongkorn University, whose Institute of Security and International Studies he also heads. He was selected to spend a month at Stanford in Spring 2010 as an FSI-Humanities Center international scholar, and was supported for a second month by FSI’s Center on Democracy, Development, and the Rule of Law. During his time on campus he focused on the turbulent politics of Thailand—in an article drafted for the Journal of Democracy, in a number of shorter pieces, in lectures at various venues, and in interviews with media around the world. (For a filmed interview on 4 June 2010, see http://absolutelybangkok.com/thitinan-on-continuity-change/.)
Dr. Pongsudhirak will briefly rejoin some of his Stanford colleagues at a conference on Asian regionalism to be hosted by APARC in Kyoto in September 2010. Meanwhile he continues his scholarship and teaching at Chulalongkorn.
An Indonesian economist specializing on poverty reduction, Dr. Sumarto spent AY 2009-2010 at APARC as an Asia Foundation fellow writing up research, lecturing on and off campus, and advising Indonesian officials on anti-poverty policy. Notable among the publications resulting from his residence at Stanford is a book, Poverty and Social Protection in Indonesia (Singapore / Jakarta: ISEAS / Smeru Institute, May 2010), which he co-edited and most of whose chapters he co-wrote. Noteworthy, too, is a co-authored essay, “Targeting Social Protection Programs: The Experience of Indonesia,” in Deficits and Trajectories: Rethinking Social Protection as Development Policy in the Asia Region (forthcoming, 2010). Indonesia-related subjects of writing in progress include lessons from the cash transfer program, how such transfers have affected political participation, and the impacts of violent conflict on economic growth. During his stay at Stanford, Dr. Sumarto was chosen to co-convene the September 2010 Indonesia Update conference in Canberra on “Employment, Living Standards, and Poverty in Contemporary Indonesia” and to co-edit the resulting book.
Dr. Sumarto returns to Jakarta to become a senior research fellow at the Smeru Institute, which he co-founded and directed, and to continue his work on poverty alleviation in Indonesia.
Former Shorenstein fellow Dr. von Luebke completed the first year of a two-year German Research Foundation fellowship at Stanford writing a book on democracy and governance in Southeast Asia. Before the end of 2010, Gauging Governance: The Mesopolitics of Democratic Change in Indonesia should be in the pipeline toward publication. Other relevant work includes “Politics of Reform: Political Scandals, Elite Resistance, and Presidential Leadership in Indonesia,” Journal of Current Southeast Asian Affairs (2010), and a co-authored piece on current economics and politics in the Bulletin of Indonesian Economic Studies (2010). Pending revision and resubmission is an article on the political economy of investment climates in Indonesia. In the course of the year he spoke on his research before audiences in North America, Europe, and Southeast Asia, and co-organized a panel on Southeast Asian politics to be held at the annual conference of Oxford Analytica in the UK in September 2010.
Dr. von Luebke’s plans for AY 2010-11 at Stanford include research and writing on Indonesia and the Philippines and teaching a course on Southeast Asian politics
Shorenstein APARC
Stanford University
Encina Hall E301
Stanford, CA 94305-6055
Zhe Zhang is an assistant professor of organization management at the School of Management, Xi'an Jiaotong University, China, where she also received her PhD. Her research focuses on public-private partnerships, corporate governance, and corporate social responsibility. She has published in the Journal of High Technology Management Research, International Journal of Health Care Finance & Economics, Management and Organization Review, and the International Journal of Networking and Virtual Organizations.
This study explores the effects of cross-sectional and time series differences among Japanese firms selecting one of two extant corporate governance systems. The paper presents evidence that the adoption by Japanese firms of a shareholder-centric, more transparent, system of corporate governance creates greater corporate value in comparison to the traditional system of statutory auditors. This paper takes advantage of the unique opportunity afforded by Japan's introduction of a dual system of corporate governance in 2003, when companies were offered a choice to adopt a new system of outside directors, i.e. a shareholder-centric committee system. Data analysis shows a significant increase in firm valuation as measured by Tobin's q, for companies that adopted the committee system, even though comparative financial data show little difference. This finding is attributed to signal sending, as companies who adopted this system signal a choice toward transparency and openness.
The Chinese health care system has experienced profound changes like retrenchment of state financial support in the past decades. These changes have prompted the Chinese media and some academics to suggest that patients have a relatively low level of trust in physicians in today's China. In this colloquium, Dr. Tam reports the results of his survey of patient trust in physicians in Beijing's public hospitals. The survey was conducted by Horizon Research Group between November 2009 and January 2010, and 434 patients were interviewed.
The survey asked the respondents their degree of trust regarding the following three dimensions: physician agency, competence, and information provision. The survey finds a relatively high level of patient trust in physicians in Beijing public hospitals. Additionally, the survey data highlight three major determinants of patient trust in physicians, namely exposure to negative media reports about physicians and hospitals; the patient's self-assessed health status; and the patient’s level of education and income.
Waikeung Tam received his Ph.D. in political science at the University of Chicago in 2009. He is currently a Research Fellow at the LKY School of Public Policy at the National University of Singapore. His research focuses on public policy, political development, law and society, with special reference to China and Hong Kong. His research has been published in China Review, Asian Perspective, Journal of Contemporary Asia, and Law & Social Inquiry.
Daniel and Nancy Okimoto Conference Room
How does a corrupt government stop corruption? What if that government is democratic, and must cultivate the support of political parties that are themselves corrupt? Is fostering reform in such a political economy the equivalent of trying to make snow in hell?
These questions may be overstated, but the dilemmas they convey are all too real. Witness the storm of concern triggered by the recent resignation of the highest-profile reformist in Indonesia, Sri Mulyani Indrawati, from her linchpin job as minister of finance in a country that was ranked the most corrupt and the most democratic in Southeast Asia in 2009.
Sri Mulyani waged unremitting war on graft. Under her stewardship of the finance ministry, more than 150 of its personnel were dishonorably discharged. Nearly 2,000 more were otherwise punished for infractions. She led a vigorous campaign against tax cheats. Among them were rich and influential people who had grown accustomed to absconding with funds they owed the government.
Euromoney named her ‘finance minister of the year’ in 2006—a post she had only taken up the year before. In 2008 and again in 2009 Forbes magazine admiringly listed her among ‘the 100 most powerful women in the world.’ Correspondingly, on the heels of her resignation on 5 May 2010, Indonesian stocks and rupiahs fell.
Indonesian president Susilo Bambang Yudhoyono (SBY) was directly elected to that office in 2004 and, for a second five-year term, in 2009. As president he has opposed corruption and championed reform. Fatefully, however, in 2004 he chose a wealthy businessman, Aburizal Bakrie, to join his government as coordinating minister for the economy.
In 2006 in East Java, a Bakrie-controlled company using an unprotected drill while probing for gas may have triggered a mud volcano that would swallow more than a dozen villages and render more than 15,000 people homeless. In 2010 the volcano continued to spew an estimated 100,000 tons of mud daily onto the surface. Bakrie’s reputation for probity was not enhanced when, reportedly against Mulyani’s advice, he insisted on denying responsibility for the disaster. Instead he blamed an undersea earthquake that had struck off the south coast of Java, some 250 kilometers away, two days before the mud erupted. Opinions remain divided as to what caused what.
An unambiguously man-made crisis in 2008, the global financial meltdown, shrank the Jakarta stock market, Bakrie’s holdings included. Trading on the exchange was temporarily suspended. Bakrie urged his fellow cabinet member Mulyani to extend the suspension. She refused. He was furious. Her relations with him worsened further when she slapped travel bans on certain Bakrie company executives accused of tax evasion.
In 2009 Bakrie became chair of the Golkar Party. Toward the end of that year he led a fierce campaign in the Indonesian legislature against both Mulyani and another nonpartisan technocrat, Indonesian vice-president Boediono, for malfeasance related to the government’s decision in 2008 to rescue an ailing financial institution, Bank Century. The bailout may have prevented a spiral of withdrawals, and thus helped Indonesia weather the global crisis, but the effort cost far more than expected, and some of the infusions apparently benefited key depositors more than the bank itself.
Legitimate financial questions were soon superseded, however, by a thoroughly political effort on the part of politicians and their supporters opposed to Mulyani and her reforms to oust not only her but the vice-president as well. Mulyani’s and Boediono’s opponents included, in addition to Bakrie, others whose circumstancial links to corruption she had uncovered.
An anti-Mulyani case in point is the Justice and Welfare Party (PKS). Despite priding itself on upholding Islamic ethics and opposing corruption, the PKS rejected allegations that one of its legislators, Muhammad Misbakhun, could have been implicated in a fictitious Bank Century letter of credit for US $22.5 million. When, at the end of April 2010, Misbakhun was arrested and detained on a warrant signed by the national police official in charge of economic and tax crimes, PKS leaders accused the police of having an ulterior motive. The party had by then, in effect, joined the anti-Mulyani chorus.
Subjected to intense and prolonged criticism by these politicians in the glare of the media, Mulyani had ample reason to quit the spotlight, resign, and leave Indonesia. (On 1 June 2010 she will become a managing director of the World Bank in Washington DC.) But her long record of nonpartisan tenacity in the struggle against corruption makes it hard to believe that she simply lost her will to fight. For the time being it is impossible to rule out that she was sacrificed for the sake of a restoration of political comity between SBY and his opponents.
The irony is that Golkar and the PKS had joined with SBY’s Democrat Party to form a ruling coalition, to which they continue to belong. SBY had built that coalition with the expectation that its members, having joined the government, would support it, including its campaign against corruption.
That inclusive or ‘rainbow’ strategy was a triple failure. First, cabinet posts that might have been held by competent and ethical nonpartisans motivated by a desire for public service were allocated instead to partisans whose skills and motives, shall we say, varied. Governance suffered. Second, coalition-party leaders who were given ministerial posts in return for ensuring broad legislative backing for the government in the legislature either would not or could not deliver that support. Cooptation failed. Third, some ruling-team politicians, who might have at least stood back from the fray, instead jumped in, seemingly hoping to blunt the government’s efforts to diminish corruption and improve governance while protecting themselves and furthering their own careers. Discipline frayed.
Mulyani has resigned. Has Bakrie won?
In a recent conversation, an off-the-record analyst anticipated ‘more stability, which, in Indonesia, correlates inversely with reform.’ He could be wrong. But it may not be coincidental that on 6 May 2010, one day after Mulyani announced her resignation, SBY met with ruling-coalition leaders. Or that the meeting launched a Coalition Parties Forum whose daily activities will be led by none other than the chair of the Golkar Party, Aburizal Bakrie. Or that Bakrie reported that SBY had agreed that the Forum would not try to bind the coalition to a common position. Or that, again according to Bakrie, whereas previously the coalition parties were only asked to help safeguard the government’s policies, henceforth they would be asked to help determine them as well. Much will depend on Mulyani’s replacement as minister of finance, and on whether he or she is told to stop rocking the boat.
If Mulyani’s remarkable legacy is indeed erased, illiberal circles in Singapore may think, ‘We thought so. Democracy does thwart reform.’ But my own judgment in hindsight will be less sweeping.
Indonesia’s Democrat Party is still basically an extension of the appealing personality of SBY. Over the six years since he was first elected president, more time, energy, and resources could have been invested in deepening the roots and popularity of the party itself. Had those assets been so spent, the Democrats might have been able, in the legislative elections of 2009, to enlarge their contingent of lawmakers enough to be able to rule, not by the dubious grace of Sri Mulyani’s antagonists, but in SBY’s and his party’s own right—subject to democracy’s checks and balances, yes, but freed of the need to cobble together a coalitional rainbow of colors that clash.
Donald K. Emmerson heads the Southeast Asia Forum at Stanford University and is also the editor of Hard Choices: Security, Democracy, and Regionalism in Southeast Asia. (Stanford/ISEAS, 2008/9)
A heartening number of analysts helpfully commented on an earlier draft of this essay. While protecting their privacy by not naming them, I am grateful to them. Complementing my focus here on the politics of Sri Mulyani’s exit is the economic context ably reviewed by Arianto A. Patunru and Christian von Luebke in their ‘Survey of Recent Developments’ in the Bulletin of Indonesian Economic Studies, 46: 1 (2010, 7-31.)
Between 2009 and 2010, major new developments in and around the Korean Peninsula profoundly affected the context of U.S.-South Korean relations. The global economy, led by Northeast Asia, began slowly to recover from the economic recession that followed the U.S. financial crisis. As China’s economy continued its dramatic development, East Asian countries strengthened the architecture of regional cooperation. The international community focused increasingly on multilateral problems such as climate change and environmental issues. The United States maintained its focus on terrorism and the Middle East and South Asia. President Obama initiated a global nonproliferation campaign, but little progress was made in curbing the Iranian and North Korean nuclear programs.
The members of the New Beginnings policy study group on U.S.-Korean relations offer the following major recommendations to the Obama administration: