In recent years, the "Chairman and CEO" management structure has become increasingly common in Japanese companies. You may have heard news reports that major corporations such as Canon, Mitsubishi Motors, and Nitto Denko have adopted this structure.

On the surface, this may appear to be a sign of progress in governance reform, but in reality, there are important hidden implications. Why does the chairman also serve as CEO? What are the advantages and risks of this structure?

This article provides insights into understanding the complex structure of the transfer of management control in Japanese companies. Beyond mere news coverage, it also explains mechanisms that can become counterproductive the more governance reforms are implemented.

What is a "Chairman and CEO System"? The New Power Structure of Japanese Companies

Let's start by confirming the meaning of some basic terms.

What is a Chairman and CEO structure?

Traditional large corporations have a dual structure where the president takes charge at the forefront of management, while the chairman assumes a supervisory role. However, in recent years, there has been an increase in a system where the chairman, after stepping down as president, also serves as CEO (Chief Operating Officer).

Experts also refer to this system as "insei" (regency from behind the scenes). This means that, like the Emperor, the former top leader continues to guide and support the new management team while building the foundation for the business.

A prime example is the case of Hideo Takasaki of Nitto Denko. In December 2025, the company announced a change in president, with Tatsuya Akagi assuming the role of new president, while Takasaki moved into the position of chairman and CEO. This is seen as a "two-person team" arrangement, where the former top executive supports the new management team while building the foundation for the business.

Actual figures: Profits increased significantly.

Nitto Denko's Takasaki stated, "Nitto Denko's consolidated net profit (under International Financial Reporting Standards), which was 51.8 billion yen in the fiscal year ending March 2016, is projected to increase to 136 billion yen in the fiscal year ending March 2026." This can be seen as a change in organizational structure that has yielded clear results.

Why are there more "Chairman and CEO" roles? 4 reasons.

There are several reasons why the "Chairman and CEO" structure is becoming widespread in large Japanese companies. The four main reasons are as follows:

    • Point 1: Securing a "handover period"

This is because the new president will need support from the previous top management until they establish their own management structure. Especially in large corporations, a new president who has to make decisions within a complex organizational structure is in a position where failure is not an option.

    • Point 2: Expanding the involvement of "outside directors"

Of the TOPIX 500 companies, more than 60 have an independent outside director as the chair of their board of directors. The involvement of outside directors in top management appointments is driving the appointment of younger CEOs (under 55 years old).

    • Point 3: Moving away from the "ekiden (long-distance relay race) format"

In the past, a "relay race" style of personnel appointments, where a successor close in age to the previous president served a short term, was common. However, nowadays, there is a growing trend to select leaders who can tackle corporate transformation with a longer-term perspective.

    • Point 4: Responding to Business Model Transformation

The proliferation of generative AI and digitalization necessitates a fundamental transformation of companies' business models. This system is designed to allow predecessors to provide support, enabling younger leaders to commit to these changes with a long-term perspective.

Comparison with the United States: A comparison of CEO tenures.

According to data from the Ministry of Economy, Trade and Industry, the majority of CEOs of major US companies serve for more than seven years, while in Japan, nearly 70% of CEOs of major Japanese companies serve for six years or less.

This is related to the "top selection" culture in Japanese companies. In the United States, the CEO plays a role in determining the long-term direction of the company, but in Japanese companies, due to the strong involvement of outside directors and shareholders, it is not uncommon for CEOs to be replaced in short periods of time.

Signs and risks of "behind-the-scenes management" that you should be aware of.

This point is particularly important. The "chairman-CEO system" itself is not necessarily bad. However, beyond an appropriate period, it can lead to the problem of "behind-the-scenes rule."

Specific criteria: What is an acceptable range?

  • 1-2 years: An appropriate handover period. A stage to support the new president in establishing their management structure.
  • 3-4 years: Running zone. The former top executive should focus on management oversight.
  • Over 4 years: Signs of a "cloistered government" system may begin to emerge as a problem.

Nitto Denko's Takasaki has stated that they will "work together for the time being," but this is clearly a time-limited approach. Some argue that support should be provided until the new president can become independent, and after that, the role should be solely to oversee management.

Success Story: Sony Group Lion

Kenichiro Yoshida of the Sony Group became Chairman and CEO in 2023, but in 2025 he handed over the CEO position to President Hiroki Totoki. At Daiichi Sankyo and Lion, the baton has also been passed to the president and COO after one to two years.

When a handover occurs in such a short period, it is evidence that the succession plan is progressing smoothly.

Warning signal: A decision lacking a sense of urgency.

Senior analyst Ryusuke Katsura and others at SMBC Chuko Securities have assessed that "the successive appointments of chairmen and CEOs are evidence that corporate governance reforms in Japanese companies are stagnating or even regressing." This is an important perspective.

While governance reform inherently means transparent management decisions, if only specific organizational changes are highlighted, it suggests the possibility that it is merely a "superficial reform" unrelated to actual business improvement.

Summary: The Truth About the Transfer of Management Control in Japanese Companies

The "Chairman and CEO structure" discussed in this article is merely one method of transferring management control that Japanese companies have uniquely pursued. On the surface, it may appear to be a "governance reform," but behind it lie complex human relationships and organizational culture.

What's important isn't whether the system itself is good or bad, but whether it ensures "appropriate timeframes and transparency."

Good examples include those like Mr. Takasaki of Nitto Denko, which are accompanied by "clear results (increased profits) and a succession plan." On the other hand, risks include "behind-the-scenes rule" where the former top executive continues to hold management control for more than four years, and organizational changes that drag on without justification.

In business management, it's crucial to judge based on "substance" rather than "form." Instead of focusing on whether a company has a chairman-CEO structure, understand what results it's achieving under that structure and who is responsible for managing the business.

The transfer of management control in Japanese companies is a two-way process: a departure from the traditional "relay race" system and the acquisition of new leadership. While generational change doesn't necessarily happen quickly, transparent accountability is key to maintaining a company's reputation.

Finally, I would like our readers to keep in mind not the "transfer of management control" itself, but the process: "what kind of mechanism was used, who made the decision, and why?" Companies need to be more transparent and accountable in this regard.

Column: What is "Insei" (cloistered rule)?

Insei (cloistered rule) refers to:

In the context of Japanese politics, the term "Insei" refers to a system in the mid-Heian period where children of the imperial family became retired emperors and controlled politics. In corporate management, "Insei" refers to a situation where a retired president (or chairman) continues to hold de facto management control by also serving as CEO.

This in itself isn't necessarily bad, and it's fine as long as it's part of a "support period." However, if this period becomes prolonged, the negative connotations of the term "cloistered rule" will intensify.