Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code – First Meeting

FSA

These are the minutes of the meeting held on September 24, 2015. The materials that were distributed at the meeting can be downloaded at the bottom of this entry.

[Tahara, Director of the Corporate Accounting and Disclosure Division, FSA] Good morning. As you can see, camera crews are here only for the opening part of the Council today. Thank you for your understanding.

Now I turn it over to Chairman Ikeo.

[Ikeo, Chairman] Now it’s already the scheduled opening time, and all the prospective attendees are here, so I’d like to open the first Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code. Thank you very much for taking the time from your busy schedule.

I’m Ikeo from Keio University, and take charge of Chairman of the Council. It is my pleasure to be working with you.

First, Mr. Ikeda, Director-General of the Planning and Coordination Bureau, the Financial Services Agency, will make an opening remark, representing the Secretariat.

Mr. Ikeda, I’m handing it over to you. [Ikeda, Director-General of the Planning and Coordination Bureau] I’m Ikeda, Director-General of the Planning and Coordination Bureau, the Financial Services Agency. Thank you very much for attending the Council despite your busy schedule. Today is the first meeting of the Council, and it is my pleasure to deliver the opening address.

As we informed you, the Government and the Financial Services Agency have taken various measures to enhance corporate governance of listed companies. Japan’s Stewardship Code was formulated and published in February 2014, and the Corporate Governance Code came into effect in June 2015.

However, the formulation of these two Codes does not mean the end of our efforts for enhanced corporate governance. We consider that the establishment of these Codes was just a starting point of our efforts. The Japan Revitalization Strategy (revised in 2015), which was decided by the -2- Cabinet in June this year, states that we need to work actively to prevail and promote the adoption of both Codes, as ‘the two wheels of a cart’ in such a manner that the sustainable growth of companies will be promoted by both sides of investors and companies. We believe that further improvements of corporate governance, for example, making governance function not only formally, but also effectively, continue to be a major agenda. Furthermore, we should not regard such efforts merely as governance issues, but we consider it important to link such efforts to the sustainable corporate growth and the increased corporate value over mid- to long-term, as well as ultimately the establishment of a virtuous economic cycle.

In this respect, for the purpose of following up with the prevalence and adoption of both Codes as well as further improving corporate governance of all listed companies, we decided to set up the Council. We expect the members to have active discussions. Thank you in advance for your cooperation.

[Ikeo, Chairman] Now I’d like to hear a remark from Mr. Shizuka, Managing Director of the Tokyo Stock Exchange, representing the secretariat. Mr. Shizuka, I’m handing it over to you. [Shizuka, Managing Director/TSE] Thank you. I’m Shizuka, in charge of Listing Department of the Tokyo Stock Exchange (TSE). Thank you very much for attending the Council during the holiday-studded week.

As just introduced, we, the Tokyo Stock Exchange, started the application of the Corporate Governance Code this June. As you know, the Corporate Governance Code stipulates that companies should secure multiple independent directors. Although the application of the Code just started in June, at the completion of this year’s general shareholder meetings, among companies listed on the TSE First Section, companies which secure multiple independent directors accounted for 50% or nearly double from the last year. We strongly feel that listed companies are rapidly responding to the Code. On the other hand, we also strongly feel that discussion on governance has entered a new stage. I think the question used to be whether it is really necessary to have outside directors. Now that the adoption of outside directors has become common, I feel the question now has changed to whether the board of directors, including outside directors, is really useful.

I think that the accounting fraud issue, which has been much talked about recently, most clearly embodies such a question. What is required of the board of directors in order not only to formally exist, but also to prevent damage to corporate value or increase corporate value over mid- to long term?….”

Read the remainder of the minutes: – Minutes (PDF:559KB)

Materials that were distributed were:

Material 1 (PDF:24KB) – List of members of Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code

Material 2 (PDF:205KB) – Procedures to Run the “Council of Experts Concerning the Follow-Up of Japan’s Stewardship Code and Japan’s Corporate Governance Code” (Draft)

Material 3 (PDF:522KB) – Secretariat’s Explanatory Material

Material 4 (PDF:684KB) – Listed Companies’ Reaction to Japan’s Corporate Governance Code

 

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.

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