On June 1, 2018, the Tokyo Stock Exchange ("TSE")
announced revisions ("Revisions") to the Corporate
Governance Code ("CG Code"). The CG Code provides
principles of corporate governance for companies listed on the TSE
and came into force in June 2015 (for details of the original CG
Code, please see Jones Day Commentary, "
Japanese Corporate Governance Is Changing with the Adoption of a
New Code in 2015"). The Revisions, which are based on
proposals made by a council of experts for which the Financial
Services Agency of Japan ("FSA") and the TSE acted as
joint secretariats, were intended to deepen and make more
substantive Japanese corporate governance reform through engagement
between investors and companies.
Under the revised CG Code, a listed company is required, among
other things: (i) to disclose, if the listed company holds shares
of other listed companies for reasons other than pure investment
purposes, its policies regarding the reduction of such
cross-shareholdings; and (ii) to appoint or dismiss its CEO using
objective, timely, and transparent procedures. Listed companies
need to update their corporate governance reports in accordance
with the Revisions and file the reports immediately after their
preparation, but no later than December 31, 2018.
The Revisions will inevitably affect corporate governance of listed
companies and will, therefore, impact not only listed companies but
also their investors.
In addition, on June 1, 2018, the FSA published "Guidelines
for Investor and Company Engagement" ("Guidelines")
providing agenda items for engagement on which institutional
investors and companies are expected to focus. The Guidelines are
intended to supplement the CG Code and the Stewardship Code and to
encourage the effective implementation of both.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
