Steven Towns of Active Investing Submits Public Comment to TSE Regarding its Proposed Listing Rules

[ BDTI is seeking to collect any and all public comments recently submitted to TSE per is public comment process. We have recently received this one from Steven Towns of Active Investing. Please feel free to send your comment to BDTI at ]

Sent: Thursday, March 29, 2012 12:36 PM
Cc: steven.towns
Subject: Public Comment (Restoring confidence in the securities mkt)
Dear Tokyo Stock Exchange Listing Department:

Thank you for the opportunity to comment on the rules surrounding directors of listed companies. The Exchange is correct to be concerned about confidence in the Japanese securities market. My experience as a private investor in Japanese equities and as a writer (I previously edited the Japanese stock section for the leading independent U.S. market news and analysis provider,; and most recently I published a book entitled Investing in Japan: There is no stock market as undervalued and as misunderstood as Japan (2012)), has shown me time and again that investors have an overwhelmingly negative image of Japanese corporate governance. This is unfortunate, but need not be the case. In regards to the Exchange's request for public comment, I would like to make the following points:

1. The Exchange appears to be excessively focused on independent directors even though (a) the Exchange recommends that only at least one board director be independent, even if the director is a non-voting statutory director, and (b) the string of recent corporate frauds, particularly Olympus, proves that insider (i.e. executive) directors were at fault. Executive directors dominate corporate boards in Japan, far outnumbering independent directors.

2. Based on the truths of No. 1 above, it is evident that director training needs to be (a) applicable to both executive and non-executive (independent) directors and (b) that the more disclosure of such training and directors' qualifications, will certainly be welcomed by investors. Helpful information to investors regarding training includes a description of the training program, how many hours it takes to complete, and when training was last completed. Ideally, directors will be trained prior to the commencement of their directorship. In addition, directors should be provided opportunities for continuing education/training.

In conclusion, I thank the Exchange again for taking seriously the matter of restoring confidence to Japan's securities market. As a longtime market observer and participant, I hope that the Exchange will see that there is much value to requiring companies have more independent directors, and that all directors be required to undergo necessary training and make commensurate disclosures, not just a possible lone independent director.

Steven Towns

Active Investing
Author of Investing in Japan (2012)

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.