The board's real work is not the day-to-day running of the company. To select managers, evaluate them, and replace them when necessary — this supervision is what sits at the core of the board's job. This piece returns to the text of the Companies Act to confirm the line it draws between supervision and execution, and sorts out what to separate and look at when, on the materials-review floor, you are told "this is a management decision."
01The Misconception That "the Board Manages"
The board can look like a supreme command post that moves the company's important matters by its own hand. But that image is only half right. What the board holds is the "decision on the important execution of operations" and the "supervision of directors' performance of their duties" — not the running of daily operations itself. The running is done by the execution side.
This distinction matters in practice. When, in materials review, something is explained as "a management decision," the responsible party that made the decision (execution) and the side that supervises it from behind (the board) exist separately. The single word "management" bundles together two figures: the one who decides and the one who watches. Unless you separate the two, who bears responsibility for what never comes into view.
02Companies Act Article 362 — The Provision That Separates Supervision from Execution
The separation is written into the statute. Article 362, paragraph 2 of the Companies Act lists the board's duties: the decision on the execution of operations, the supervision of directors' performance of their duties, and the appointment and removal of representative directors. The "select managers and replace them when necessary" mentioned at the outset is rooted in the third of these. And Article 363 provides that those who actually execute operations are the representative directors and the executive directors. The deciding-and-supervising board and the executing directors are split in role on the face of the statute.
The separation of ownership and management is often discussed: the shareholders who put up the capital and the directors who carry out management are split apart. What Article 362 draws is the line beyond that. Within the side that carries out management, it further separates supervision from execution. A two-tier separation forms the skeleton of how the Companies Act is built.
The board of directors
Decides the execution of operations, supervises directors' performance of their duties, and appoints and removes representative directors (Art. 362(2)). It stands on the side that selects, evaluates, and, when necessary, replaces managers.
Representative and executive directors
Actually run operations in line with the decided policy (Art. 363). The party responsible for day-to-day management sits here.
Decisions kept with the board
The decision on the important execution of operations cannot be delegated wholesale to individual directors (Art. 362(4)). A holding-back that preserves checks and balances.
03From the Management Model to the Monitoring Model
The board's center of gravity has shifted over time. The form in which the board steps into the details of execution and decides them itself is called the "management model." By contrast, the form in which execution is entrusted to the management team and the board plants its weight on supervision is the "monitoring model."
The Corporate Governance Code, in its General Principle 4, positions the board as the bearer of the supervisory function. Adding outside directors; establishing nomination, remuneration, and audit committees — moves that look like separate measures when seen one by one connect when read along a single line: thickening the supervisory function. They can be understood as an arrangement to reinforce the side that watches over execution.
04Why "Wholesale Delegation" Is Prohibited
The board is busy. That does not mean important decisions may simply be handed off in bulk to the execution side. Article 362, paragraph 4 of the Companies Act prohibits delegating the decision on the important execution of operations wholesale from the board to individual directors. Part of the decision-making authority is kept in the board's own hands.
The reason is checks and balances. If the supervising subject hands over even the decisions in full to the object it is meant to watch, the eye that watches from behind disappears. Keeping part of the power to decide is the brake that stops supervision from spinning idle. The provision can be read as one that prioritized maintaining checks and balances over the convenience of delegation.
05To the Materials-Review Floor — Separate the Responsible Party from the Supervisor
Everything sorted out so far comes straight down into the practice of materials review. When a reviewer's rejection is pushed back with "it's a management decision," the one who made that decision is the execution side. What watches from behind whether that execution functions properly is the board, and the materials-review system is one of the gears that keeps that supervision actually moving.
So you need a perspective that separates where responsibility lies, one tier at a time. The one who decided (execution), the one who supervises that execution (the board), and the review that keeps a record between the two. Mistake these layers and you misjudge "who to say what to in order to move the structure." The duty of care and the duty of loyalty that directors bear are taken up in Vol. 2; the duty to build the internal control system that supports supervision in Vol. 6; and the duty of oversight that extends to its operation in Vol. 9. An eye that views supervision and execution separately is the foundation of persuasiveness on the floor.
- The board is a supervisory body; execution is carried out by the representative and executive directors (Art. 362(2), Art. 363).
- The "decision on the important execution of operations" cannot be delegated in full to individual directors (Art. 362(4)) — a reservation that preserves checks and balances.
- The trend of placing the supervisory function at the core is the shift from the management model to the monitoring model.
- When told "it's a management decision," separate the responsible party (execution) from the supervisor (the board).
- Companies Act, Article 362, Paragraph 2 (Authority of the Board of Directors). Provides, as duties of the board, the decision on the execution of operations, the supervision of directors' performance of their duties, and the appointment and removal of representative directors.
- Companies Act, Article 363 (Authority of Directors of a Company with a Board of Directors). Provides that the representative directors and the executive directors execute the operations.
- Tokyo Stock Exchange. Corporate Governance Code, General Principle 4 (Responsibilities of the Board). Indicates that the board should, with the supervisory function at its center, bear responsibility for enhancing corporate value.