Challenging Corporate Governance: Japanese PM Swipes at Companies’ Shareholder Focus
14 November 2025
Japan’s Prime Minster Sanae Takaichi has condemned companies for having too great a focus on their shareholders and taking insufficient action to increase wages in the country.
Takaichi reportedly said that she thinks there has “been a trend of too much focus on shareholders” in response to questions in parliament this week which questioned how to increase the share of corporate income going to employees. “I will revise the corporate governance code to encourage companies to appropriately distribute resources not just to shareholders but to employees,” she added.
Key Client Takeaways:
Corporate Governance Code Changes
- Japan’s Prime Minister criticised companies for prioritising shareholders over employees and announced intentions to revise the corporate governance code to encourage fairer resource distribution, including wage increases.
Rising Shareholder Risks
- Potential revisions to the governance code, accompanied by the rapid rise of virtual-only AGMs, pose risks to shareholder rights, such as reduced engagement opportunities and limited access to company leadership.
Economic Challenges vs Investment Incentives
- Despite attracting billions in foreign investment, Japan faces domestic challenges such as declining real wages and concerns over corporate capital concentration, highlighting tension between global investor priorities and local economic needs.
The sceptical perspective of shareholders from Takaichi could prove problematic to those who have helped inject billions of dollars of capital into the Japanese economy, as could a potentially heavy-handed revision of the Japan corporate governance code.
The Japanese Prime Minister’s comments followed a government-led panel debating revisions to the corporate governance code commencing last month, just before Takaichi was selected as the country’s first ever female leader. Japan’s Financial Services Agency (FSA) released an action programme to reform corporate governance in the country in July, as reported by Minerva Analytics.
The FSA’s action plan came a decade after Japan’s corporate governance code was introduced in 2015 under former Prime Minister Shinzo Abe. The corporate governance code was tailored to try to encourage companies to engage with investors to a greater degree and respect minority shareholders’ rights. This year, Minerva Analytics has covered other countries such as Australia and Korea making changes to their corporate governance practices, while a Dutch politician put forward a motion to scrap the country’s corporate governance code.
The FSA’s action programme showcased future policy priorities to effectively implement corporate governance reform by encouraging companies and investors to improve dialogue and engagement. It also stressed that “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”. It added that 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”.
As well as improving engagement, the corporate governance code has also been credited with drawing billions of dollars into the Japanese market and enabling a boom in deal-making in the country since its 2015 introduction. However, with many of these investors coming from aboard, in the eyes of some companies have lessened their focus on domestic priorities, including worker wages. Last week, it was reported that Japan’s real wages fell for the ninth consecutive month in September as resurgent inflation outgrew nominal pay according to government data.
Takaichi said that she thought the ‘excessive hoarding’ of capital by firms was a major problem, adding that she wanted companies to effectively use this rise in profits to invest in people including through wage hikes. “I would like to see firms conduct business not just thinking about clients, but also considering their contribution to the broader society,” Takaichi reportedly said. According to Finance Ministry data, Japan’s corporate retained earnings totalled ¥630 trillion (U$4.1 trillion) in Q2, surpassing the earnings of the nominal economy for the year ending March 2025.
Improvements in Japan’s corporate governance has also seen an increase in the number of ESG- and sustainability focused investors. These investors purchased more than U$6.6 billion worth of Japanese stocks in 2024, while Japan saw the second-largest number of activist campaigns last year trailing only the US. This trend was showcased in 2023 by Japan’s three largest banks – Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group – face pressure from shareholder groups over climate change policies that the groups claimed “lack credibility” in the form of shareholder proposals at their AGMs, as reported by Minerva Analytics.
Japan’s 2025 AGM peak season saw 538 AGMs held by Japanese companies during the nine days between 17 and 27 June according to Minerva Analytics data. This year, shareholders at Japanese companies in the electric power sector were challenged on the risks and long-term viability of nuclear power, as reported by Minerva Analytics. Japanese investors also filed both governance and remuneration proposals which highlighted the evolution of Japan’s corporate governance amid complex social, environmental and economic pressures.
As well as Takaichi potentially being set to take action impacting shareholders, investors in Japanese companies also faces risks from the rise of virtual-only AGMs. In June, 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.
The number of companies holding virtual-only AGMs had almost tripled since the prior 2023 Corporate Governance White Paper was published, while adopting articles to allow online-only meetings has also notable risen.
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. While hybrid AGMs can enable the benefits offered by virtual participation – including reducing costs, improving efficiency and including a broader range of participants – solely virtual AGMs are seen by many as predominantly creating risks for shareholders.
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Last Updated: 14 November 2025