Whistleblowers? No, thanks.

Michael Woodford was sacked as president of Olympus last year after he revealed a $1.7 billion accounting coverup. The board of the Japanese cameramaker lied about the mystery for weeks. When the truth at last came out, the board kept their jobs and the whistleblowing boss lost his. Woodford called it a "black comedy." In no other developed market, he lamented, could this happen.

His frustration is understandable. At one point Olympus' shares lost about 80 percent of their value, yet its institutional shareholders uttered not "one word" of criticism against the company's board. For many, the Olympus scandal highlighted the need for more checks and balances. Woodford, whose angry memoir is to be published this month, likens Japanese boardrooms to "Alice in Wonderland." They need more assertive shareholders and regulators, and more independent directors, he reckons.

Keidanren, Japan's big-business lobby, appears to have drawn the opposite conclusion. Olympus had three external directors, a high number for Japan. The problem, in Keidanren's view, was too much external scrutiny.

Over the summer, a government advisory committee quietly squelched proposed changes to the law that would have required listed firms to appoint at least one outside director. It is the third time in 13 years that change has been stymied. If the bill is eventually passed, the only crumb of reform that remains is that listed firms without an outside director will have to explain why. Nicholas Benes, head of the Board Director Training Institute of Japan, which promotes better corporate governance, said companies are now preparing cookie-cutter excuses for shareholders' meetings next year, just in case. This may be harder than they think. "It's not so easy to explain why one outside director -- out of 12 or 15 -- would be an intolerable presence," Benes said.

Japan's Asian rivals, including China and India, require companies to have independent directors. Firms that list in New York must fill a majority of board seats with outsiders. But Japanese bosses contend that similar rules in Japan would limit managers' freedom and would in any case fail to stop another Olympus debacle, says Yuko Kawamoto of Waseda University.

The Asian Corporate Governance Association, a watchdog, recently downgraded Japan to fourth in Asia for corporate governance, tying with Malaysia. It noted that "Japan is also lagging most markets in not requiring any training of directors." It added that this was "shocking."

Woodford did manage to change Olympus, at least a bit. In September the company's former chairman, Tsuyoshi Kikukawa, and two top lieutenants pleaded guilty to fraud. Earlier this year the entire Olympus board resigned; though Woodford called the appointment of the new chairman, Yasuyuki Kimoto, "completely and utterly wrong." Kimoto is a former executive at Sumitomo Mitsui Banking -- Olympus' main bank.

Kawamoto, a director of several companies herself, fears Japanese capitalism will become "obsolete" unless companies learn that external directors who ask tough questions can actually make them stronger.