Japanese Corporate Government Reform

The current stage and pending subjects of Japanese Corporate Governance Reform

Tokyo Stock Exchange (TSE) released the report “ Appointment of Independent Directors by TSE-Listed Companies (2016)”

According to the report currently almost 6000 seats are occupied by the independent directors at the board of TSE-Listed Companies the number of which is about 3500.

The remarkable development shall be represented by the fact that now among that among the TSE’s first section listed firms (about 2000) , 80% has two or more independent directors while the ratio was 20% two years ago before the introduction

of Japanese Corporate Governance Code (see the attached graph ” Appointment of two or more Independent Directors “) and 96% of the TSE first section listed firms have at least one independent director at their board.(see the attached graph “Appointment of Independent Directors ” ) About 60% of the total TSE listed firms (about 3500) now have more than two independent directors (see the attached table “Appointment of Outside/Independent Directors” )

We are observing the follwing characteristics in recent Japanese corporate governance discussions ;

1)    Importance of the nomination committee of CEO reflecting recent corporate scandal such as Toshiba and Seven & I.

2)    Emphasis on dividend payments and share buy-backs from the viewpoint of ncreased return to shareholders and capital efficiency

3)    Neccesity of evaluation of   the board’s effectiveness as well as training of both internal and outside directors

4) Institutional investors’ active engagement in dialogue with corporate management and the board under Japanese Stewardship Code

It will take rather long time to accomplish the satisfactory reform due to Japanese tarditional corporate system of life time emplyment and inner looking circumstance and the following four basic idea in the Japanese Corporate Governance Code shall be critical for the success;

1) Fiducairy duty of the directors

2) Separation between the baord of directors and excecutive officers

3) Diversity of the board

4) Dialogue with shareholders