Japanese governance needs addressingJune 2008
The system of governance in most of Japan’s listed companies fails to meet shareholders’ needs, despite significant improvements in some businesses, says a report from the Asian Corporate Governance Association.
The document, being called a white paper, points out that the corporate governance model created during the rapid reconstruction and growth of the 1950s and 1960s needs to be updated. In the early post-war Japan companies did not have such a dominant position and investment capital was scarce.
The white paper found that today’s governance practices do not include adequate supervision of corporate strategy and they protect management from market disciplines so that corporate control is too weak. It also fails to provide the returns that are necessary to protect the pension system.
One recommendation is that shareholders should be recognized as owners of listed companies. Other recommendations are independent supervision of management and fairness and transparency in shareholder voting.
The white paper, Japan’s first collaborative project in the field, has been compiled with the support of a group of pension funds and asset managers, including F&C, with combined assets under management of $5trillion (£2.52tn).
Anna Krutikov, F&C’s associate director of governance and sustainable investment, said of the recommendations: ‘We believe these are the most pressing issues which relate to corporate governance in Japan today because they have an impact on the companies we invest in. It is still common for listed companies in Japan to be run as if management, and not shareholders, were the owners, and changes are needed. Using its influence as a leading shareholder, F&C has been encouraging more sustainable corporate behaviour among Japanese companies for years.’
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