GlobalProxyWatch, the popular newsletter for investors worldwide, reported as follows after the ICGN Conference in Tokyo this last week:
Prime Minister Shinzo Abe’s corporate governance reforms thrust Japan into unfamiliar comply-or-explain mode, officials told the International Corporate Governance Network regional meeting in Tokyo Monday:
Issuers. Abe’s Liberal Democratic Party of Japan (LDP) is planning to present the country’s first national corporate governance code to the government in June, party leader Masahiko Shibayama told Bloomberg February 27 (GPW XVII-38). The move was welcomed at Monday’s meeting by Tokyo Stock Exchange (TSE) managing director Masaki Shizuka, who said the exchange tried to launch a code in the early 2000s but dropped the idea after fierce resistance from business. This time may be different. The LDP sees a code as central the so-called ‘third arrow’ of Abe’s growth plan, which centers on revitalizing companies and investment. The hope: further change will bolster the remarkable 40%-plus gain in the Nikkei since he took office last year, fueled by US$150 billion from foreign investors. The high political stakes may help Abe overcome resistance from civil servant mandarins and the powerful business federation Keidanren, which last November succeeded in watering down the government’s company law bill requiring one independent director to a comply-or-explain rule (GPW XVII-43). Expect that victory to make it more difficult for Keidanren to oppose a governance code that is also comply or explain.
Investors. A final draft of the government’s stewardship code was issued February 26 by an Financial Services Agency (FSA) expert group after comments that produced little change from the initial December draft (GPW XVIII-02). This and the company law bill will be the first real experience with a comply-or-explain approach for Japan, which has a rules-based corporate governance system like the US. s a result there is a danger of vague explanations that address only the minimum standard, said FSA director Motoyuki Yufu. The agency will report on implementation annually to forestall that outcome.