Below are key takeaways from ISS’ recently released 2023 Proxy Season Review – Japan. The full report is available to institutional subscribers by logging into ProxyExchange 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.
- Board independence improves: Spurred in part by the April 2022 launch of the Tokyo Stock Exchange Prime Market, companies have increased their board independence. A minimum one-third independent board, based on the independence criteria set out by the exchange, is now required for companies listed on the TSE Prime. As of June 2023, 84.3 percent of Japanese boards are comprised of at least one-third outside directors.
- The number of female directors is increasing: 70.8 percent of Japanese boards now have at least one female director, as of June 2023, up from 62.6 percent in 2022. However, the increase is explained mostly by an increase in female outside directors.
- Shareholder proposals surge: The number of meetings where shareholder proposals were on the ballot was 104 through June 2023, which is a record high. These proposals have been submitted by activist shareholders, environmental NGOs, local governments, and individual shareholders.
- Tokyo Stock Exchange (TSE) questions low price to book ratios: The TSE has been shedding light on the low capital efficiency of Japanese companies, and urges companies to take measures to improve valuation if their price-to-book value ratio is below one. This development appears to have led to an increase in the number of shareholder proposals calling on companies to increase capital efficiency.
- Climate change proposals continue to be on ballot: As in recent years, climate proposals seeking better disclosure concerning the company’s environmental policy and business plans toward decarbonization were on ballot at nine companies.
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By: Japan Research Team