Expert Panel OKs Draft Revision of Corporate Governance Code

Tokyo, April 3 (Jiji Press)–An expert panel on Friday broadly approved a draft revision of Japan’s corporate governance code presented by the Financial Services Agency and the Tokyo Stock Exchange. The draft urges listed companies to examine whether they are effectively using management resources such as cash and deposits for growth investment and to submit a governance report under the new code by July 2027. The new code will be designed to discourage short-term shareholder returns, such as dividends, and encourage companies to allocate management resources to research and development, as well as human capital investment. It will be the first revision of the governance code since 2021. The new code will be officially adopted by this summer. The draft states that boards of directors should constantly examine whether corporate management resources are allocated appropriately. Management resources include real estate and other assets, in addition to cash and deposits as stated in an earlier draft. The latest draft calls for securities reports containing financial information and other data to be disclosed before shareholders’ meetings. To reduce administrative burdens on companies, it includes a plan to promote work to integrate securities and business reports. The draft also seeks to enhance the effectiveness of outside directors by strengthening the functions of secretariats for boards of directors. Additionally, the draft reflects efforts to streamline the code by deleting parts that overlap with laws and regulations. END [Copyright The Jiji Press, Ltd.]