ISS has proposed a policy for Japan essentially opposing the creation of “advisory” posts for retired directors or kansayaku, who can tend to over-influence the decisions of currently serving executives because the “advisors” were previously the “senpai” (seniors) of executives, thus creating bottlenecks or “legacy” issues can make changing strategy difficult. This occurs notwithstanding the fact that “advisors” bear no fiduciary duties, cannot be sued by shareholders, and require no disclosure (not even regarding their compensation). At the same time, METI has announced that it will undertake a study about the impact of such positions.
Such advisory posts are a custom in Japanese corporate governance that I have publicly opposed for some time, even before I proposed the full disclosure of all compensation paid to “advisors” when proposing the contents of the Corporate Governance Code to the FSA in 2014. (Unfortunately, the FSA did not include that provision. )
While ISS’ proposed policy is the outcome of my recommendations in an indirect sense, in fact I have had no recent discussions whatever with anyone at ISS about this topic, and it is most accurate to say that concern about the practice simply “percolated” and came to be shared by many others over the past few years. This is further evidence of a deepening dialogue and consideration of key issues related to corporate governance practice in Japan.
I would like to encourage those who have comments on the proposed policy to respond to the questions below by sending an email to: email@example.com