Following is the 2nd half of our interview with Hiroaki Yamada of FSA on the Second Revision of the Stewardship Code. Part 2 describeexamines the Code’s expectations of corporate pensions.
The interview appeared in AL-IN vol. 56, July 2020, a magazine for Japanese institutional investors.



What has been revised in the guidance for asset owners, such as corporate pensions?
Yamada: As shown in CHART 3, thirty-five corporate pensions have signed onto the Code as of March 13, 2020.  Still, the number of corporate pension signatories remains limited in comparison to the total number of corporate pensions.  This is due to the doubts that corporate pensions had about the significance and effectiveness of their stewardship activities.



We believe, however, that encouraging asset owners to engage with asset managers and promote effective stewardship activities will enhance medium- to long-term corporate value and sustainable growth among investee companies and produce medium- to long-term investment returns to clients and beneficiaries.  Accordingly, we made two major revisions in the Revised Code to encourage asset owners like corporate pensions to accept the Code: 1) clarification of the role of corporate pensions, and 2) redefining “asset owners” under the Code to include contract-type defined benefit corporate pensions.

Clarification of roles expected of corporate pensions

In the Council and elsewhere, it was pointed out that many corporate pensions who have not yet signed onto the Code do not have a clear understanding of what it requires of them.  We revised Guidance 1-3 to state that asset owners are expected to “encourage asset managers to engage in effective stewardship activities”.⁵  We further stated as a codicil to Footnote 11 what actions corporate pensions are expected to take when they don’t directly manage funds with the exercise of voting rights, which is, in fact, most corporate pensions. 

In Guidance 1-4 and 1-5, we added the phrase “in line with their size and capabilities, etc.” in response to concerns among asset owners about increased operational burden under the Code.  These revisions make clear that corporate pensions are expected under the Code to monitor their asset managers as appropriate to their particular size and capabilities.

As is now clearly stated in Guidance 1-5, “asset owners should put emphasis on the ‘quality’ of stewardship activities.”  At the same time, we added in Footnote 12 that “asset owners are not necessarily expected to make individual and specific instructions to asset managers”.  The revisions are made based on the suggestion that asset owners should consider leaving discretion to asset managers that proactively engage in constructive dialogues.

Contract-type DB pension funds and the Code

During our deliberations, the Council heard from many defined benefit pension funds who claimed “We did not understand that the Code applied to us” or that “it was unclear whether corporate pensions, their sponsor companies, or both should be signatories to the Code”, and so on.

We therefore revised Footnote 9 to clarify that contract-type defined benefit (DB) corporate pensions fall under the Code, and that contract-type corporate pensions are expected to accept the Code as “a corporate pension” and not as “a sponsor company”.  We hope these revisions will encourage more contract-type DB corporate pensions to accept the Code.


Lastly, what would you like corporate pensions to understand about the Code?


In order to make the Code effective and make its aims achievable, it is very important for asset owners, who are situated closest to the final beneficiaries, to start monitoring asset managers as provided under the Code in line with their size and capability, etc.  We expect corporate pensions to evaluate the policies and stewardship activities reported by their asset managers, which will improve the quality of stewardship and help institutionalize these good practices.

At the same time, we expect corporate pensions, who manage their funds with limited resources, to further develop operational measures and practices which lead to effective and efficient monitoring and evaluation of stewardship activities by asset managers.⁶  It is our hope the Revised Code will push corporate pensions to help drive these improvements.

IJ: Thank you very much.


When asset owners directly manage funds and exercise their voting rights, they are required to engage in stewardship activities, such as conducting dialogue with investee companies. (Guidance 1-3)

The Foreword to the Revised Code reports “[o]ne Council member also commented on a measure put in place by a private organization to use a common format for asset owners to receive reports from asset managers on the status of their stewardship activities. It is expected that further development of this initiative will support asset owners in carrying out effective stewardship activities.”


Hiroaki Yamada

Deputy Director
Corporate Accounting and Disclosure Division, Policy and Markets Bureau, Financial Services Agency

January 2014  Become an Assistant judge, Tokyo District Court

April 2019      Seconded to Financial Services Agency (FSA)
                       Deputy Director, Corporate Accounting and Disclosure Division, Policy and                                   Markets Bureau, FSA