Shareholder activism has been on the rise in Japan over the last few years, as institutional investors have grown increasingly frustrated with some companies’ poor governance practices and the slow pace of change. High-profile scandals, such as that at Toshiba, have heightened the pressure on companies to be more responsive to shareholders. Now an update to Japan’s Corporate Governance Code, and encouraging announcements from the government and the Tokyo Stock Exchange (TSE), suggest there could be a greater focus on shareholder value in Japanese boardrooms.
The latest revision to the Corporate Governance Code urged companies to improve their disclosure on ESG initiatives such as gender diversity targets, to adopt TCFD reporting, and to increase board discussions on ESG issues, in order to drive long-term sustainable value. In addition, Japan’s Financial Services Agency (FSA) recently published its plans to progress governance reforms.
Other long-standing issues around board independence and gender diversity are also starting to be addressed. Independent directors now account for a third of board members, and there are more female directors than in the past, when it was not uncommon to see boards of up to 25 directors, all of them male executives. In June, the Japanese government adopted a policy for women to account for over 30% of directors on the boards of Japanese companies listed on the TSE’s prime market, by 2030.
At EOS, we have long advocated for improved gender diversity within Japanese boardrooms and senior management teams, given the body of evidence that this leads to better company performance. We have done this directly with company management teams and boards, and through public policy advocacy alongside the Asian Corporate Governance Association (ACGA), and with the FSA and the TSE, to progress this and other governance issues, including board independence and cross-shareholdings.
Read the full article in our Q2 2023 Public Engagement Report.