Newspaper article The Daily Yomiuri (Toyko, Japan)

EDITORIAL: Firms Must Listen to Stern Voices Calling for Reform of Corporate Governance

Newspaper article The Daily Yomiuri (Toyko, Japan)

EDITORIAL: Firms Must Listen to Stern Voices Calling for Reform of Corporate Governance

Article excerpt

At the annual general meetings of shareholders this year, there was significant growth in the number of companies who appointed outside directors.

Firms with two or more outside directors, who are believed to be more independent than other board members, now account for 46 percent of all companies listed on the First Section of the Tokyo Stock Exchange, more than double the figure a year before.

A major factor behind this is the introduction of the Corporate Governance Code, a set of guidelines for the conduct of listed companies that took effect this month. The code calls for strengthening corporate governance through such means as effectively utilizing outside directors.

Reviewing corporate management from an external perspective is expected to help prevent corporate irregularities from occurring and expedite a company's aggressive business operations. Outside directors are also expected to bring their judgment to bear on matters that in-house executives tend to shy away from, such as the advisability of abolishing nonperforming departments.

Needless to say, it is meaningless to bring in outside directors as attractive decorations from among a company's business partners and related quarters. Even more questionable is that many companies like to select outside directors from among celebrities, many of whom know nothing about running a business.

It is obviously one of the key obligations of company management to choose resourceful people who will make meaningful, constructive proposals as outside directors.

Also characteristic of this year's general shareholders meetings was the significant increase in once "silent shareholders," such as insurance firms, who objected to management-sponsored proposals. This is presumably due to the implementation in February last year of the Stewardship Code, which calls for institutional investors to exercise their voting rights aggressively.

Boosting firms' values

Effective from April this year, the Dai-ichi Life Insurance Co. decided not to reappoint outside directors if their attendance rates at board meetings were less than 50 percent. …

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