ICGN Affirms New Japan Governance Priorities

ICGN will announce a series of new governance priorities for Japan at a meeting of global institutional investors, companies, and stakeholders, hosted by the Tokyo Stock Exchange and the Japan Exchange Group taking place in Tokyo on 04 October 2022.

Japan is an important capital market for ICGN Members, many of whom are investors responsible for assets of around $70 trillion based largely in Europe and North America, with growing representation in Asia. First published at the ICGN Annual Conference in Tokyo on 16 July 2019, this second edition of the Japan Governance Priorities provides guidance to regulators, companies, and stakeholders around matters of significance to domestic and overseas investors which may influence company voting, engagement, and investments.

In updating the Japan Governance Priorities, ICGN considered recent changes to the Japan Corporate Governance Code and ICGN’s own Global Governance Principles, the latter often referred to by governments in the development of national codes. ICGN’s CEO, Kerrie Waring, serves as a Member of the TSE and FSA convened Council of Experts Follow-up of Japan’s Stewardship Code, and Corporate Governance Code, and said:

“The themes presented this year acknowledge the positive corporate governance, investor stewardship, corporate reporting and audit reforms that have taken place in Japan. ICGN’s recommendations are intended to encourage continued momentum under the Kishida Administration aligned with international acceptance, that effective corporate governance based on the principles of fairness, accountability, responsibility, and transparency directly contribute to successful companies and sustained value creation.”

The Japan Governance Priorities feature over 30 recommendations based around the following themes:

1. Corporate reporting focused on timing of publication of AGM notices and securities reports, dispersion of AGMs, board accountability for corporate reporting, internal control, audit committees and sustainability reporting standards and frameworks.

2. Board independence focused on board effectiveness, independence levels, independence criteria evaluation, appointment process, diversity, board leadership and use of senior advisors.

3. Board evaluation and Nomination Committees focused on evaluation process, results disclosure, committee charter publication, appointment of external consultants, and role of the lead independent director.

4. Capital efficiency and cross-shareholdings focused on capital allocation policies, cross-shareholding rationale, approach to dividends, and disclosure around economic profitability relative to cost of capital.

5. Executive pay and Remuneration Committees focused on remuneration setting process, pay disclosure, mandatory rule changes, committee charter publication, performance related incentives, and disclosure of non-executive director remuneration.