Firms produce goods and services and are economic agents that support people’s lives. In Japan, many firms take the form of joint-stock companies. Systems that protect the rights of workers employed by firms are also important.
Basic Knowledge
Firms are economic agents that engage in production activities and are classified as private firms (such as joint-stock companies), public firms (public enterprises), and mixed public-private firms (the third sector). The most common form is the joint-stock company. A joint-stock company issues shares to raise funds widely, and shareholders have limited liability up to the amount they invest. Firms operate with the aim of earning profit, which is sales minus costs. Workers’ rights include the three fundamental labor rights guaranteed by Article 28 of the Constitution of Japan: the right to organize, the right to bargain collectively, and the right to act collectively (the right to strike). These rights are given concrete form by the three labor laws: ① the Labor Standards Act (1947: establishes minimum standards for working conditions, including 8-hour workdays and 40-hour workweeks), ② the Labor Union Act (1945: protects union activities and collective bargaining), and ③ the Labor Relations Adjustment Act (1946: establishes procedures for resolving disputes between labor and management).
Joint-stock company (a form of firm that raises funds by issuing shares and operates with shareholders’ limited liability)
Limited liability (the principle that shareholders are liable only up to the amount they invest)
Three fundamental labor rights (Article 28 of the Constitution: the right to organize, the right to bargain collectively, and the right to act collectively (the right to strike))
Labor Standards Act (1947. Establishes minimum standards for working hours, wages, holidays, and other working conditions)
Labor Union Act (1945. Protects the formation of labor unions, collective bargaining, and strikes)
CSR (corporate social responsibility. Responsibility for the environment, society, and employment in addition to pursuing profit)
Further Study (Background and Significance)
As capitalism developed after the Industrial Revolution, disparities between labor and management and poor working conditions became social problems. Against this background, the labor movement grew and laws protecting workers were established. Today, the increase in nonregular employment (temporary agency work, part-time work, and casual work) is a problem, and the principle of equal pay for equal work has been introduced through measures such as the Part-Time and Fixed-Term Work Act, which took effect in 2020. Firms are expected to practice CSR (corporate social responsibility), including not only the pursuit of profit but also environmental conservation, contributions to local communities, and compliance. In recent years, management that emphasizes diverse parties concerned, or stakeholders, including employees, customers, and local communities as well as shareholders, has become widespread.
- The three labor laws = Labor Standards Act (1947), Labor Union Act (1945), and Labor Relations Adjustment Act (1946)
- The three fundamental labor rights, including the right to strike, are based on Article 28 of the Constitution
- Legal working hours are 8 hours per day and 40 hours per week (Labor Standards Act)
- Because shareholders have limited liability, they do not bear losses exceeding the amount invested
- Nonregular employment problem: introduction of the equal-pay-for-equal-work principle (2020)
- CSR (corporate social responsibility): consideration for the environment, employment, and local communities
- Public employees are not granted the right to strike (restrictions under public service laws)
Points to Note (Easily Confused Concepts)
① Organize the enactment years of the three labor laws: Labor Union Act (1945) → Labor Relations Adjustment Act (1946) → Labor Standards Act (1947). ② Distinguish among the right to organize, the right to bargain collectively, and the right to act collectively: the right to organize is the right to form a union, the right to bargain collectively is the right to negotiate with an employer, and the right to act collectively is the right to strike. ③ The fundamental labor rights of public employees are restricted according to their occupation, and in particular, the right to strike is not recognized. ④ Distinguish between limited liability and unlimited liability: investors in a general partnership have unlimited liability.
Practice
- Name the three labor laws and explain the enactment year and main content of each.
- Explain the characteristics of a joint-stock company using the terms “shares” and “limited liability.”
- What is “CSR (corporate social responsibility)”? Give and explain examples of specific initiatives.