(Translation-) I support Japan’s new Asset Owner Principles, but am a little disappointed that they are weak. It seems clear that one of the major purposes is to urge asset owners to sign the Stewardship Code (SC), which they should be doing already. But even that request is weak: “When fulfilling stewardship responsibilities, asset owners should consider accepting Japan’s Stewardship Code and then take actions in accordance with the Code, based on the size of their AUM and capabilities.” I would have hoped for stronger language, at least for pension funds. (Something have been suggesting since 2016. See below.)
And even though the Principles are not binding and do not more strongly ask asset owners to sign the Stewardship Code, they do not mention or clarify that overseeing their fund managers’ voting activities is one of their responsibilities, included in their fiduciary duties. In other words, the “Avon Letter rule (1988)” under ERISA in the U.S. has yet to make its way to Japan.
In addition to the Principles, what was most needed was simply to make a few minor changes to the Corporate Pension Law and its regulations, as I suggested eight years ago.
My 2016 proposal:
https://blog.bdti.or.jp/2016/08/20/pengovrprop/
What is written in law and regulations will have a much greater impact than “soft law”. And it is only a legal amendment that can make it possible for beneficiary pensioners to directly sue pension trustees (directors) in cases of malfeasance, rather than having to ask the company (which can refuse) to sue on their behalf.
Also, unlike my 2016 proposal, the Principles do not make it clear that pension funds should tell their beneficiaries (pensioners) whether or not the fund has signed the Stewardship Code or not. From the perspective of a pension recipient, or future recipient, wouldn’t you want to know? If it is true that Japanese companies “take care of their employees”, then such a notice should be a matter of course.
Of course, I am not saying that the Principles do not have significance and are not a step ahead, but clearly the purpose was to “create some policy” while avoiding the hassle of changing the law. I hope that the existence of the Principles will not later become an excuse “to not revise laws and regulations”.
”Asset Owner Principles”(and announcement)
https://www.fsa.go.jp/policy/pjlamc/asset_owner/aop.html
Nicholas Benes
(My individual opinion and not that of any organization.)