Japan’s new government eyes change in boardroom: lawmaker
TOKYO (Reuters) – Japan’s new government plans to introduce a law requiring public companies to have one-third of their board made up of independent directors and for employees to be represented on audit boards, a said a lawmaker on Wednesday.
Voters swept the Democratic Party of Japan to a historic victory in Sunday’s lower house elections, ousting the long-ruling Liberal Democratic Party.
Tsutomu Okubo, one of the party’s top politicians on financial issues, also told Reuters in an interview that the party wants to ban a majority-owned subsidiary and its parent company from listing on the stock exchange at the same time.
Japan ranks near the bottom of corporate governance polls, reflecting the relatively low number of independent directors traditionally tasked with overseeing executives and ensuring they work in the best interests of shareholders.
The changes would be part of a new law for public companies aimed at strengthening corporate governance and protecting employees and other stakeholders, Okubo said, adding that a bill would likely be introduced in three to four years.
It could take another year to enact the law, he added.
Japan’s Ministry of Commerce and financial regulators have also pushed for more independent directors to improve corporate governance.
A panel chaired by Japan’s Commerce Ministry and made up of investors, academics and business executives recommended in June that Japan require listed companies to have an independent director or independent auditor on their board. .
A senior Commerce Ministry official said the panel expected the Tokyo Stock Exchange to change its listing rules at the time.
Okubo said his party would work with the TSE on changing its registration rules, but still wanted a new law as well.
Most Japanese companies have a two-tier board structure consisting of a board of directors, which makes decisions on corporate strategy, and an audit board, which oversees the directors .
A push for employee representation on the audit board could prove controversial and spark opposition from business leaders who fear the new structure will hamper decision-making.
“We came to this fundamental question of knowing who are the stakeholders of a company. Stakeholders do not only mean shareholders, but also employees and customers,” Okubo said.
“There are a lot of parties involved, and we want to strike a balance between them.”
Another problem often criticized by governance advocates is the large number – around 400 – of listed companies majority-owned by a single shareholder, known in Japanese as the “oyako jojo” or parent-subsidiary listing problem that allows parent companies to have great influence to the detriment of minority shareholders.
Okubo said his party would seek to ban the practice.
Additional reporting by Taro Fuse and Kei Okamura; Editing by Hugh Lawson and David Cowell