Council of Experts Concerning the Follow-up of Japan’s Stewardship Code
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| Council of Experts Concerning the Follow-up of Japan’s Stewardship Code | |
|---|---|
| Name | Council of Experts Concerning the Follow-up of Japan’s Stewardship Code |
| Formed | 2014 |
| Jurisdiction | Japan |
| Parent | Financial Services Agency |
Council of Experts Concerning the Follow-up of Japan’s Stewardship Code
The Council of Experts Concerning the Follow-up of Japan’s Stewardship Code is an advisory body formed to evaluate implementation of the Japan Stewardship Code and to propose revisions influencing Tokyo Stock Exchange practices, Financial Services Agency (Japan), and institutional investor conduct; it operates amid dialogues involving Prime Minister of Japan, Ministry of Finance (Japan), and leading asset managers such as Government Pension Investment Fund (Japan) and BlackRock. The Council’s work intersects with reforms initiated under Abenomics, draws on comparative frameworks from UK Stewardship Code, Principles for Responsible Investment, and informs stewardship discourse among nomura holdings, Mitsubishi UFJ Financial Group, and global custodians like State Street Corporation and BNP Paribas.
Background and Establishment
The Council was convened after the 2014 issuance of the Japan Stewardship Code by the Financial Services Agency (Japan), responding to critiques from stakeholders including Tokyo Stock Exchange, Investor Relations groups, Japan Exchange Group, and the Ministry of Economy, Trade and Industry; its formation paralleled initiatives under Shinzo Abe and the economic strategies labeled Abenomics and Corporate Governance Code (Japan). Early meetings referenced practices at UK Financial Reporting Council, cited reports from Organisation for Economic Co-operation and Development, and sought alignment with norms promoted by International Corporate Governance Network and International Organization of Securities Commissions.
Mandate and Objectives
The Council’s mandate includes reviewing adherence to the Japan Stewardship Code by institutional investors, recommending amendments to enhance stewardship by entities such as Government Pension Investment Fund (Japan), improving engagement between asset managers like Nomura Asset Management and corporations listed on the Tokyo Stock Exchange, and coordinating with regulators including Financial Services Agency (Japan) and Ministry of Finance (Japan). Objectives emphasize promoting shareholder engagement as envisaged by Corporate Governance Code (Japan), facilitating proxy voting reforms influenced by experiences at Australian Securities Exchange, and encouraging disclosure standards in line with Task Force on Climate-related Financial Disclosures and Principles for Responsible Investment.
Composition and Membership
Membership has included academics from institutions such as University of Tokyo, Hitotsubashi University, and Keio University, industry figures from Mitsubishi UFJ Financial Group, Nomura Holdings, and Dai-ichi Life Insurance Company, plus civil society and investor representatives from Japan Center for Economic Research and Japan Trustee Services Bank. Chairs and members have sometimes been drawn from former officials of Financial Services Agency (Japan), executives linked to Tokyo Stock Exchange and Japan Exchange Group, and international advisors familiar with UK Financial Reporting Council and International Corporate Governance Network practices.
Key Reports and Recommendations
The Council issued reports recommending clearer expectations for stewardship statements by asset managers such as BlackRock and State Street Corporation, enhanced disclosure of proxy voting linked to Tokyo Stock Exchange listed companies, and adoption of stewardship practices compatible with Principles for Responsible Investment and Task Force on Climate-related Financial Disclosures recommendations. Notable proposals urged revisions to the wording of the Japan Stewardship Code, promoted engagement procedures exemplified by UK Stewardship Code, and suggested monitoring mechanisms coordinated with Financial Services Agency (Japan) and reporting aligned with frameworks from Organisation for Economic Co-operation and Development and International Organization of Securities Commissions.
Impact on Corporate Governance and Asset Management
Council outputs influenced stewardship reporting by major institutional investors such as Government Pension Investment Fund (Japan), asset managers like Nomura Asset Management, and custodians including MUFG Bank and Sumitomo Mitsui Banking Corporation; adoption trends were visible on the Tokyo Stock Exchange and among firms listed by Japan Exchange Group. Its recommendations reinforced links between the Corporate Governance Code (Japan) and investor engagement, encouraged uptake of ESG frameworks promoted by Principles for Responsible Investment and Task Force on Climate-related Financial Disclosures, and catalyzed dialogue with global firms including BlackRock, Vanguard Group, and State Street Corporation on proxy voting, stewardship reporting, and board effectiveness.
Criticisms and Controversies
Critics cited limited enforcement authority relative to the Financial Services Agency (Japan) and questioned whether Council recommendations adequately constrained practices of large asset owners like Government Pension Investment Fund (Japan) or foreign managers such as BlackRock and Vanguard Group. Debates involved tensions between stewardship expectations and corporate practices at conglomerates like Mitsubishi Corporation and Hitachi, disputes over proxy advisor influence exemplified by conflicts akin to issues faced by ISS (company), and scrutiny from researchers at University of Tokyo and think tanks including Japan Center for Economic Research regarding measurement of outcomes and potential regulatory capture.