Statement from the Council
On April 6th, 2021 the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code (Chairperson: Hideki Kanda, Professor of Gakushuin University Law School) has published an important proposal for the revisions of Japan's Corporate Governance Code and Guidelines for Investor and Company Engagement.
Japan's Corporate Governance Code (the "Code") was compiled in 2015 and revised in 2018, and the Guidelines for Investor and Company Engagement (the "Guidelines") were compiled in 2018. The Council's proposal this time is intended to bring about the second revision of the Code and the first revision of the Guidelines.
The main points of the proposed revisions of the Code are as follows.
1. Enhancing Board Independence
・ Increase in the number of independent directors from at least two to at least one-third of the board for Prime Market listed companies (where necessary, a majority of the board members should be elected as independent directors)
・ Establish a nomination committee and a remuneration committee (appointment of independent directors enough to have them form a majority of the committee members for Prime Market listed companies)
・ Disclose a skill matrix of board members conforming to the company's business strategy
・ Appoint independent directors having managerial experiences at other companies
2. Promoting Diversity
・ Disclose a policy and voluntary measurable targets in respect of promoting diversity in senior management by appointing females, non-Japanese and mid-career professionals**
・ Disclose human resource development policies ensuring diversity, including the status of implementation
** With respect to board diversity, the current version of the Code already requires companies to ensure the diversity in terms of gender and internationality.
3. Attention to Sustainability and ESG
・ Develop a basic policy and disclose initiatives on the company's sustainability
・ Enhance the quality and quantity of climate-related disclosure based on TCFD recommendations or equivalent international frameworks at Prime Market listed companies
4. Other Major Points
・ Appoint independent directors enough to have them form a majority of the board or establish an independent special committee at Prime Market listed subsidiaries so as to cope with conflicts of interest between their parent company and minority shareholders
・ Promote the use of electronic voting platforms and disclosure in English at Prime Market listed companies
The Council anticipates that, in accordance with its proposal, the Tokyo Stock Exchange and the Financial Services Agency will make revisions of the Code and the Guidelines promptly.
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