In this second interview about corporate governance reform in Japan, IJ spoke with George Iguchi, Chief Corporate Governance Officer at Nissay Asset Management Corporation and a prominent specialist on shareholder rights and responsibilities.
Iguchi sees very positive movements in governance reform among big companies on the Tokyo Stock Exchange since the introduction of the Stewardship and Corporate Governance codes in 2014 and 2015.

Japan (IJ):

We have seen many corporate governance reforms in Japan over the last four to five years. The Financial Services Agency (FSA), with TSE, introduced codes regulating institutional investors and big businesses aimed at improving profitability of domestic businesses and achieving sustainable growth in Japan's economy. The majority of asset managers and listed companies have taken steps to bring their practice in line with the codes.

What is your evaluation about the progress of governance reform so far?


My evaluation of the progress of governance reform is very positive. I can say the quality of corporate governance in Japanese companies has improved significantly.

Looking back on Japanese businesses before 2015, the majority of management was not clearly aware of the importance of their 'governance.' It was not until Japan's corporate governance code was imposed that management executives realized the roles and responsibilities of the board of directors, including the function of monitoring executives and the importance of independent outside directors.

Since then, the number of listed companies that have appointed multiple independent directors has risen, as Mr. Inoue of FSA mentioned in your article (dated of Feb. 21). More importantly, some companies have set up nominating and compensation committees, some of which are led by independent directors.

The next big challenge business leaders ought to tackle, I think, is making corporate governance more substantial; management needs to harmonize business principles with those stated in the governance code.

Disclosures about independent directors need to be more detailed. For instance, what skills is a director expected to contribute and to which part of the management system? On top of that, training for independent directors should be a key concern for both government and the private sector. Before newly appointed directors are allowed to start managing a company's affairs, it is vital that they have already acquired at least the basic skills required of a competent board member.


How about progress on the investor side? The stewardship code requires institutional investors, including asset management companies, to improve some actions so as to meet their stewardship responsibilities.


On the investor side, we can see a lot of improvements in areas such as voting disclosures and conflict of interest management.

I think we asset managers should disclose as much as possible about our activities since we request the same from listed companies. NAM has just released (in late February) new voting standards on its official website. We sent e-mails regarding general shareholder meetings in May-June of some 400 companies.


One of the newest things in the codes, at least for Japanese business culture, is the recommendation of dialogues between investors and companies. What is your take on this request?


I see more and more businesses coming around to the idea of engaging in dialogue with investors. Japanese big business has made great strides since four or five years ago, when the idea of a notice of an annual general shareholder meeting was first floated. Now NAM engages in one-on-one meetings with investee companies about 800 times per year.

On the investor side, we have found it easier to have constructive dialogues with companies, thanks to the Guidelines for Investor and Company Engagement, which FSA provided last year. The guidelines included agenda items such as 'management compensation and 'CEO appointment/dismissal,' which otherwise we would have been hard to discuss.


What items of governance reform will be major challenges for listed companies and institutional investors in Japan from now on?


I hope companies will continue to move toward greater disclosure. For instance, publishing the board meeting agenda is very useful for helping investors understand a company's governance more deeply.

I think investors, including NAM, need to disclose their stewardship activities more and investors will be able to refine their activities by learning from each other.

Both sides of Japanese business can expect to deal with new matters of ESG and climate change in the near future, due to the many rules and regulations, both compulsory and voluntary, that have been promulgated in global society.

About Nissay Asset Management:

George Iguchi

George Iguchi is Chief Corporate Governance Officer and Senior General Manager of the Equity Investment Department at Nissay Asset Management, responsible for stewardship activities and equity research.

He is Board Governor of International Corporate Governance Network (ICGN) from 2015, and also a member of IFRS advisory council from 2019.  He is a member of Disclosure Working Group and Audit Committee of Business Accounting Council at Financial Services Agency (FSA), Technical Committee at Accounting Standards Board of Japan (ASBJ), the Forum for Integrated Corporate Disclosure and ESG Dialogue Forum at Ministry of Economy, Trade and Industry (METI), etc.

His published reports and books include: “Effective Disclosure of Financial and Non-financial Information for ESG Investments ”, Shoji-homu(2018), co-author of “Corporate Governance and Sustainable Growth of Corporates”, Shoji-homu(2018), co-author of “Practical Introduction to Corporate Governance Code”, Nikkei BP(2018), “The Materiality of ESG Factors on Corporate Value”, Securities Analysts Journal 51 (2013), “Corporate Governance with a Narrative Story”, Shoji-homu (2014), etc.