Japan stewardship code

Japan has revised its Stewardship Code after acknowledging that investors could benefit from a broader set of corporate governance guidelines.

Throughout 2019, a council of experts reviewed the code, before publishing a revised draft for review at the end of December. Since then, the expert panel revised the code in light of submissions received during this consultation period.

Existing signatories of the code will now be expected to update disclosure items, based on the revised principles, by September 2020.

The code, drawn up by the Tokyo Stock Exchange and Japan’s Financial Services Agency, was originally launched in 2014. However, it has been updated to increase engagement and promote sustainable growth in investee companies.

The revised principles encourage proxy advisors and pension fund consultants to provide support and advice in enhancing the functions of the entire investment chain.

“While progress has been made in corporate governance reform to a certain extent under these codes, it has also been pointed out that their effectiveness should be further enhanced,” Japan’s FSA noted in a statement.

The code, which adopts a principles-based method using the ‘comply or explain’ approach, comprises eight key principles.

These include encouraging institutional investors to have a specific policy on how they fulfil their stewardship responsibilities. It also expects that they publicly disclose these policies.

Investors are expected to have a policy managing conflicts of interest in fulfilling their stewardship responsibilities and should monitor investee companies through a sustainable growth lens, the FSA said.

Since the code was established, more than 280 institutional investors have signed up.

Investors that are prepared to sign up to the revised code are asked to confirm this to the FSA directly, by emailing jstewardship@fsa.go.jp.

Full details of the conclusions and changes to the code, following the public consultation, are now available in to read here, in English.

Last Updated: 1 April 2020
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