Catalysing Corporate Governance: Japan and Korea Revamp Approaches
July 10, 2025
Japan’s Financial Services Agency (FSA) has released an action programme to reform corporate governance in the country, while South Korea’s National Assembly has passed a major corporate governance reform bill.
The FSA’s action programme showcases future policy priorities to effectively implement corporate governance reform by encouraging companies and investors to improve dialogue and engagement.
Meanwhile, South Korea’s corporate governance reform bill – which received overwhelming support in the National Assembly – aims to heighten transparency in capital markets and reinforce protections for minority shareholders.
The Japan FSA’s 2025 Action Programme for Corporate Governance Reform comes a decade after Japan’s Corporate Governance Code was introduced in 2015. It has also been 11 years since Japan’s Stewardship Code was created in 2014.
Quality disclosure and dialogue with investors is a central issue that the FSA is looking to address to raise the standard of the country’s corporate governance. The agency highlighted that last month it revised the stewardship code with the aim of “enhance[ing] the effectiveness of investors’ engagement with companies”. The action plan noted that this collaborative engagement is key to creating constructive dialogue and promoting transparency to benefit shareholders.
Additionally, in an attempt to “return to the essence of a principles-based approach”, the FSA streamlined the stewardship code. This included tweaking, consolidating, and simplifying sections that have already become incorporated as standard to stewardship practices since the code’s most recent revision in 2020.
The revisions alter Principle 4 of the code, which focuses on the engagement between institutional investors and investee companies. The FSA added guidance that stated institutional investors should outline how many shares they own or hold in the investee company if requested by the firm and disclose policy on how they will respond to such requests.
However, in a response to the FSA’s consultation on the proposed changes to the code the Asian Corporate Governance Association also expressed some trepidation over the reworking of this provision.
While greater transparency of beneficial shareholders could encourage more effective engagement and help build trust, it may risk creating an uneven playing field where smaller shareholders are deprioritised by companies for engagement. Institutional investors could also face challenges in meeting requests due to legal or other practical reasons.
The association also indicated concern over the FSA’s reference to collaborative engagement as an “important option” in the English version of the code. This could imply, perhaps unintentionally, that such engagement is optional rather than essential.
The FSA has also discussed the development of an environment for disclosing the annual securities report before the AGM and identified practical challenges involved.
“Going forward, it is important for the revised code to be implemented in a way that leads to constructive and purposeful dialogue between companies and investors to enhance corporate value and promote companies’ sustainable growth,” the action plan read. “It is important for the FSA to follow up on the implementation of the revised code, while avoiding situations where the revised code is implemented contrary to the aims of the code and hinders effective dialogue.”
The agency has also looked to enhance the effective implementation of stewardship activities by publishing the “practices on stewardship activities” document which consolidates and analyses the practices of asset managers, asset owners, and proxy advisers.
Going forward, the FSA intends to augment “constructive dialogue” by improving the quality of stewardship activities and corporate disclosure that meet investors’ expectations. This includes the agency following up on the dialogue between companies and investors which is aligned with the revised Stewardship Code.
The FSA will also set up a discussion forum for companies and investors to gather and share good practices for engagement, including updating the “practices on stewardship activities” document.
Minerva Analytics previously reported in December 2023 that Japan’s Government had published a policy plan to position the country as a leading asset management centre. This included corporate governance reforms to promote sustainable corporate growth and increase corporate value over the medium-to-long term, as well as a programme to assist new entrants to the asset management sector.
The plan also included reforms to stewardship activities in Japan to promote effective engagement efforts between institutional investors and companies, similarly to what the FSA’s new action plan is attempting to do.
Last month, Minerva Analytics reported that Japanese companies have accelerated the uptake of virtual-only AGMs, with more than 500 adopting articles to allow such meetings according to the Tokyo Stock Exchange’s Corporate Governance White Paper 2025.
Virtual-only AGMs could degrade shareholder rights, creating risks including restricted access to meetings, limited opportunities to pose questions to senior company figures, and a reduced opportunity for discussion with the firm over important topics.
Meanwhile, South Korea’s National Assembly last week voted through a corporate governance reform bill which looks to bolster transparency in capital markets and improve protections for minority shareholders.
The bipartisan legislation was approved in a 220–29 vote, with 23 abstentions.
The core of the reform bill heightens fiduciary duty responsibilities for company directors. Directors will now be legally required to act in the interest of shareholders as well as for the company, which looks to dilute family control of firms and strengthen minority investor rights.
The bill also mandates hybrid shareholder meetings for large firms. Publicly traded companies with more than ₩2 trillion (U$1.5 billion) in assets will have to host electronic shareholder meetings because of the new rules.
As previously noted, virtual-only AGMs can create risks for shareholders, but hybrid meetings offer benefits including reduced costs, improved efficiency and allowing a broader range of participants while still providing the choice to attend in-person.
In December, Minerva Analytics reported that South Korea’s Financial Services Commission had proposed amendments to the Capital Markets Act to improve transparency and fairness in corporate mergers with the aim of better protecting minority shareholders.
Separate to the recently approved corporate governance bill, the commission’s suggested changes would require all company’s boards of directors to better safeguard shareholder rights during mergers and acquisitions, split offs, share swaps and asset transfers.
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Last Updated: 10 July 2025