The Japanese FSA has revised the Ordinance on Disclosure of Corporate Affairs. Amendments include information disclosure on the structure of corporate governance, remuneration of directors and statutory auditors, and cross-shareholding.
Outline of Disclosure Items concerning Corporate Governance
The Financial Services Agency made amendments to Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc. in order to require listed companies to disclose the following information concerning corporate governance. This takes into consideration public comments on the proposal released on February 12 2010.
I. Structure of Corporate Governance
From this perspective, listed companies will be required to disclose the following items in securities reports:
(i) Outline of the governance system of the company and the detailed reason for selecting such particular system;
(ii) If a statutory auditor with an expert knowledge of finance and accounting is appointed, and the description of the relevant knowledge of the appointee;
(Note) A statutory auditor under the Japanese Company Law has a function of supervising management of board members (i.e., directors).
(iii) State of coordination between (a) outside directors/outside statutory auditors and (b) departments in charge of internal control and internal auditing of the company, as well as description of the functions and roles of the outside directors/outside statutory auditors in the governance of the company; and
(iv) If an outside director or an outside statutory auditor is appointed, and if not, the reason for not appointing one.
II. Remuneration of Directors and Statutory Auditors
It is considered that the information concerning the remuneration for directors and statutory auditors is important for shareholders and investors as it would allow them to examine whether incentive structures for the management of the company are formed appropriately, remuneration amounts are appropriate in terms of performance, and governance situations are proper and well-balanced. From this viewpoint, we will require listed companies to disclose detailed information regarding the remuneration for directors and statutory auditors in securities reports as follows:
III. Cross-shareholding
There has been a tradition of reciprocal and multilateral cross-shareholding among listed companies in Japan. Some investors take the negative view that such cross-holding by companies is not an efficient investment, while others make the point that the cross-shareholding has positive aspects, such as allowing companies to maintain and explore good business relationships, and further contributing to their profitability, which are not necessarily reflected in financial statements.
© FSA Japan
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