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

”………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:

GPIF: ”Summary Report of Listed Companies’ Survey about Institutional Investors’ Stewardship Activities”

Ⅰ. Purpose of the Survey

The Government Pension Investment Fund, Japan (GPIF) conducted our first survey to JPX Nikkei Index 400 companies to evaluate stewardship activities of our external asset managers and to grasp real situation of constructive dialogues. As we stated in “Summary Report of GPIF’s Stewardship Activities in 2015” dated of 29th January 2016, it is our intention to raise the standard of dialogues between institutional investors and Japanese companies.

Daniel E. Wolf et al :”Social Covenants in Mergers: Legal Promises or Moral Commitments?”

‘With the return of acquirer stock as a featured form of consideration in many recent deals, dealmakers are once again focusing on “social” issues in striking a merger agreement. As compared to most straight cash takeovers where price garners the overwhelming share of, if not exclusive, attention, an acquisition featuring stock consideration, and especially a so-called merger-of-equals, often involves significant discussion between the parties of softer issues, including governance, board composition, management, people, and corporate identity (e.g., corporate and brand names, headquarters and facility locations, and charitable and community commitments). A number of deal developments over the last few years highlight some of the risks and considerations unique to these social terms.

Terry Lloyd: ”Sharp: How Not to Sell a Company in Japan”.


E-biz news in Japan

”Late last week, Mr. Terry Gou, the CEO of Foxconn Technology Group (also known as Honhai) signed a JPY389bn deal to take control of Sharp, one of Japan’s bedrock electronics firms. The signing came after a protracted cat-and-mouse game played between Mr. Gou, the management of Sharp, and in the wings, the public-private INCJ fund. Mr. Gou showed consummate deal sense in luring Sharp’s board with a much more attractive offer than the government’s INCJ (which wanted to break up the firm) then drag out the negotiations as Sharp was facing a possible collapse. Lastly, with impeccable timing he sprang a last minute demand to reduce the deal price by 20% and completely out-maneuvered, Sharp’s executives and shareholders, who eventually caved in and agreed.

WSJ (Benes) – ”Japan’s Pension Funds Could Help Curb Cash Hoarding”

”Almost three years after I first proposed in these pages that Japan adopt a governance code to raise productivity, the country now not only has a Corporate Governance Code but also a Stewardship Code for institutional investors. There has since been much discussion, and even exhortation by the government, about the urgent need to change the corporate mindset, engage with investors and increase companies’ return on equity. These are all major achievements. But when it comes to increasing corporate profitability through reinvesting in the real economy, there is still much progress to be made.

Japanese companies continue to sit on a mountain of excess cash. According to Japan’s Ministry of Finance, this mountain actually grew to $1.5 trillion in 2015 from $1.4 trillion in 2011, despite substantial increases in dividends and stock buybacks. During that same period, capital expenditure shrank by more than half……….”

BCCJ ”Corporate Governance Code in Japan”

At a joint event hosted by the American Chamber of Commerce in Japan (ACCJ) and the British Chamber of Commerce in Japan (BCCJ) on 23 March 2016, Lady Barbara Judge spoke to members about the development of Corporate Governance Code in the US, UK, and Japan.

”Lady Judge, a former member of the U.S. Securities and Exchange Commission, chair of the U.K.’s Institute of Directors, and now an independent outside director on the board of LIXIL Group Corporation, opened the session with her definition of corporate governance: