Progress: GPIF Refers to “Corporate Governance Codes” for the First Time

The GPIF should be highly commended for including reference to “the corporate governance codes of each country” to its recent statements regarding its stewardship policy and its proxy voting policy. This is a major step forward, considering the politics that it faces and the long-standing and unfounded claim by leaders in the industrial community who claim that if the GPIF had its own “principles and guidance for governance and proxy voting”, that would be “intervening in managerial decision making.  Even though the reference in the recently-released principles bends over backwards to encourage “giving a full hearing to explanations of non-compliance”, if you know the full background, this is significant progress.  (For the first time, the GPIF has uttered the words “corporate governance code” in writing!)

GPIF Stewardship and Proxy Voting Principles  

http://www.gpif.go.jp/en/stewardship_and_esg/pdf/stewardship_principles_and_proxy_voting_principles.pdf   (English)

http://www.gpif.go.jp/operation/pdf/stewardship_activity_principle.pdf (Japanese)

スチュワードシップ活動原則  /  Stewardship Activities Principles

” ○ If a company should decide not to comply with any of the principles established by relevant corporate governance codes of individual countries or equivalents but to explain, asset managers should seek full explanations and engage with the companies if necessary.
○ Given the significance for passive investment of GPIF equity portfolio, GPIF’s performance depends upon medium- to long-term sustainable growth of capital markets. Asset managers for passive mandate should develop and effectively implement a suitable engagement strategy for passive investment.”

http://www.gpif.go.jp/operation/pdf/stewardship_activity_principle.pdf   (Japanese)

議決権行使原則 /  Proxy Voting Principles

” ○ Asset managers should exercise voting rights in accordance with Corporate Governance Codes established by individual countries. When there is no such code or equivalent, asset managers should appropriately exercise voting rights consistent with the standard that they require investee companies to follow. [GPIF-hired] fund managers should appropriately vote their shares based on the items that are required of companies based on the corporate governance code of each country.  When there is no governance code or other similar document, each fund manager should vote its shares appropriately, at the level that it requires of all its portfolio companies.”

http://www.gpif.go.jp/operation/pdf/voting_rights_principle.pdf  (Japanese)

This of course still leaves much to be done in order to catch up with the principles and guidelines of other nations’ national pension funds, such as the Canadian Pension Plan , but at least the GPIF has begun the process of having its own policies regarding governance at its portfolio companies.

Posted by Nicholas Benes, as an individual

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