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Global Compliance Japan Makes Slow, Substantive Governance Moves By Yuriko Nagano reaucrats. to improve corporate governance at its Bureaucrats elsewhere in Japanese listed firms. Chief among them will be a T he people of Japan placed themselves under new national governance last August with the historic election of the business circles, however, still have some momentum. Atsushi Saito, president of the Tokyo Stock Exchange, says the TSE requirement that Japanese public compa- nies have outside officers on their boards. It will be implemented as a “soft rule,” Democratic Party of Japan. Now the DPJ will “promptly” carry out several changes meaning the rule firmly encourages com- and Japanese regulators seem likely to move forward with changes to corporate governance as well. STRUCTURAL ASPECTS Exactly what the DPJ might propose remains unclear. At the moment, the par- Below is an excerpt from the Financial System Council Study Group report on the internationalization ty is devoting much of its energy to larger of Japanese capital markets. priorities, such as overhauling the coun- try’s postal system and improving Japan’s 1. The structure of board of directors. sagging birth rate. Shizuka Kamei, the new chief of Japan’s Financial Services Adopting the “Company With Committees” system. At present, very few companies have ad- Agency, said recently that corporate gov- opted the Company with Committees system (2.3% of Tokyo Stock Exchange listed companies). For ernance measures agreed on during the the majority of listed companies, adopting this system looks unrealistic in the near future. Liberal Democratic Party’s rule were yet to be discussed. But the country’s stock Board of directors comprised mainly of independent outside directors. For example, at least exchanges have a raft of reforms they one-third or half of the company’s board of directors is to be comprised of independent outside direc- can push through themselves, and the tors. This requirement may overlap with that of the board of statutory auditors, where, by law the FSA seems likely to carry out regulatory majority must be outside auditors. changes proposed during the previous ad- ministration’s tenure. Joint monitoring by independent outside directors, the board of statutory auditors and “I haven’t heard anything about [cor- the ofﬁcers in charge of internal audit and internal control. Elect one or more highly indepen- porate governance] policies” specifically, dent outside directors. Coordinate with the board of statutory auditors, ofﬁcers in charge of internal since he is new to his post, Kamei said at a audit and internal control to strengthen the supervision of management. To gain and maintain the press conference in October. But, he add- conﬁdence of shareholders and investors, present this as a preferred model for the majority of listed ed, “I plan to make a clean break” from companies. Based on this, listed companies are to disclose the details of their governance structure previous policies, “which were based on and the reasons for adopting that structure in relation to the preferred model. radical free market principle and capital- ism.” 2. Other reforms. Kenji Tamura, the FSA’s parliamentary secretary, chimed in. “We may decide to Strengthening the function of statutory auditors. Identify the following as desirable attributes change the government’s policy [on cor- for listed companies, and listed companies to disclose their current status: (1) to maintain adequate porate governance],” he said. “This ap- human resources and infrastructure to support the audit by statutory auditors, (2) to appoint highly plies to everything that was determined independent outside auditors, and (3) to appoint auditors with an in-depth knowledge of ﬁnance/ by the previous admi
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