Below are key takeaways from ISS’ recently released 2020 Japan Proxy Season Review. The full report is available to institutional subscribers by logging into ISS Link then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.
- COVID-19 causes audit delays and changes in the evaluation of director election proposals: The pandemic triggered delays in the audit process. Companies which were unable to complete the audit in time chose either to postpone or adjourn their annual meetings. While there were no particular developments in agenda items due to the pandemic, some shareholders suspended the use of financial metrics, such as return-on-equity (ROE), as part of the evaluation of director elections proposals, given the significant impact of the pandemic on corporate performance.
- Board independence improves: Only a few years ago, all-insider boards were the norm in Japan, but in 2020, 99 percent of Japanese boards have at least one outside director, 90 percent of boards have at least two outsiders, and 62 percent of boards have at least one-third of board members as outsiders.
- The number of female board directors is increasing, although from a low base: A total of 44 percent of Japanese boards now have at least one female director, up from 37 percent in 2019, and 26 percent in 2016.
- Shareholder proposals increase: In recent years, there has been an increasing number of shareholder proposals, and the number of meetings where shareholder proposals were voted on increased from 60 meetings in 2019 to 62 meetings this year (through the end of June).
- First climate change proposal on ballot: Mizuho Financial Group received the first climate-related shareholder resolution voted on at a Japanese company. Although the proposal was not approved, it received support of 35 percent of votes cast.