ACGA’s Feedback to FSA on Japan’s Governance Code: Training by Specialist Providers Important

Feedback by the Asian Corporate Governance Association in a memo submitted to the FSA’s Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code last December:

”………Experience shows that the implementation and evolution of “comply and explain” can take a long time to develop, but there are opportunities to accelerate this transition. The Follow-up Council may wish to consider how to guide and assist Japanese listed companies and domestic institutional investors to understand and implement good disclosure. For example, the Council could advise the FSA to do the following:

  • Encourage or require companies to undertake training and workshops organised by specialist providers;
  • Invite regulators from the United Kingdom and other markets to share their implementation experiences;
  • Develop a guide for companies drawing on good disclosure practices in Japan and, where relevant, other developed markets; and
  • Investigate potential legal impediments to collective efforts by investors wishing to promote long-term stewardship.

One assumption in the “comply and explain” model that may not be immediately apparent to market participants in Japan is that “comply” does not mean ‘do what the Code says and state this as a fact’. Investors are also looking for an explanation as to how a company is implementing the Code’s provisions and what have been the results of this in action. “Comply” or explain” would more accurately, if less elegantly, be written as “comply and explain; or do not comply and explain”.  The onus is therefore on the company to think through its governance polices and practices, and then explain this rationale to shareholders. This is the quid pro quo for using soft law (guidance) rather than hard law (legislation): companies are given flexibility to choose, but are also expected to take responsibility for their actions. This is not an exercise in merely following the letter of the law……………..”

Download full memo here.

Source: Asian Corporate Governance Association (ACGA)

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