Japan Corporate Governance Principles for Listed Companies – An Overview and Summary of Requirements
Japan conceptualized and implemented this framework to motivate and monitor the management for disciplining corporate activities. It helps to provide an environment for enhancing the corporate value. Following are the five main principles of corporate governance for listed companies:
- Rights of shareholders
- All listed companies should respect the shareholders’ basic rights. This includes:
- Respect of voting rights
- Development and improvement of an environment in which shareholders exercise voting rights appropriately
- Development and improvement of an environment in which shareholders are inclined to participate in general meetings of shareholders;
- Mutual communication with shareholders at the general meetings of shareholders
- Return of profit to shareholders
- All listed companies should give due consideration to the infringement of rights of existing shareholders.
- Equal treatment of shareholders
All listed companies should ensure equal treatment of all shareholders, including minority and foreign shareholders. This includes:
- Development and improvement of a system to prohibit transactions against the primary interests of the company or shareholders through the abuse of concerned parties’ positions such as officers, employees, and controlling shareholders
- Enhanced disclosure of information to shareholders in cases where concerned parties conduct actions that are likely to damage the primary interests of the company or shareholders
- Prohibition of special benefits provided to specified shareholders.
- Relationship with stakeholders in corporate governance
All listed companiesshould help to create corporate value and jobs through the establishment of smooth relationships between the company and its stakeholders and encourage further sound management of the enterprise. This includes:
- Cultivation of a corporate culture that respects the positions of stakeholders and development of internal systems
- Timely and accurate disclosure to stakeholders of material information relating to stakeholders and development of internal systems
- Disclosure and transparency
All listed companies should ensure that timely and accurate disclosure is conducted on all material matters including the financial condition, performance results and ownership distribution. This includes:
- Enhanced disclosure of quantitative information on financial conditions and operating results and enhanced disclosure of qualitative information that deepens the understanding of the management conditions of companies by investors
- Securing opportunities for investors to access information equally and easily
- Development and improvement of internal systems to secure the accuracy and promptness of disclosure.
- Responsibilities of Board of Directors, Auditors, Board of Company Auditors, and other relevant group(s)
All listed companies should enhance the supervision of management by the Board of Directors, Auditors, Board of Company Auditors, and other relevant group(s) and ensure their accountability to shareholders. This includes:
- Monitoring of the management by the Board of Directors and Auditors or Board of Company Auditors and other relevant group(s)
- Motivation for the management to maximize corporate value through positive convergence of management and company interests by appropriate means.
- Development and improvement of a mutual monitoring system by directors under which fulfillment of duty and integrity as prudent managers should be secured and under which illegal activities and inappropriate activities from the perspective of generally accepted views are prevented
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