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The head of the Tokyo Stock Exchange has defended the Japanese government’s progress in corporate governance following a high-profile scandal at Toshiba, dismissing allegations that it had greatly diluted the market review that will take place. next year.
Hiromi Yamaji, who was appointed CEO of TSE in April, told the Financial Times that investors should not judge Japan by the boardroom talk at Toshiba, saying the situation was a “special case.”
His comments came as the TSE prepares for one reorganization which will streamline the “first” and “second” section of the main stock market, along with the Jasdaq and Mothers markets for smaller businesses and start-ups.
“We were proposing a reform that would be good for everyone involved in the markets,” Yamaji said. “We don’t do this for foreign investors, but we wanted to improve the convenience of the Topix index as an investment metric and reorganize market segments based on more precise concepts.”
The new market segments are titled “Prime”, “Standard” and “Growth”.
Yamaji’s comments coincide with an apparent move by corporate Japan to reassert itself against reform and as foreign investors have become increasingly skeptical of the country’s commitment to improving governance since Yoshihide Suga became prime minister in September. .
In a speech in June at the American Chamber of Commerce of Japan, Satoshi Ikeda, director of sustainable finance at the Financial Services Agency, described this governance reform as “really hated by corporate executives.”
One of the main focuses of investors ’doubts has been what was supposed to be a global reorganization of the way listed shares are classified in Tokyo. Earlier versions of the plan suggested incentive incentives for companies to abandon cross-shareholdings and strengthen the board’s independence to qualify for top-level status, meaning they are considered to have governance standards and growth potential. higher. Membership would depend on floating market capitalization, excluding cross-shareholding.
The reality, according to analysts, is that the reforms have been so watered down that they will force very few changes in the behavior of companies.
Masatoshi Kikuchi, chief stock strategist at Mizuho, said that while some companies could try to meet Prime market inclusion criteria, the general impression was that the rejection of ESE would not encourage widespread reform of the market. governance that many investors believe is necessary.
“Prime market criteria have been reduced from initial plans due to opposition from small or regional companies,” Kikuchi said.
Yamaji defended the reforms, saying the revision should be considered along with the country’s recent revision. corporate governance code. “Certainly, Japanese corporate governance is making progress, but obviously it’s still not perfect,” he said. “More and more companies are ready for dialogue with investors.”
However, analysts have warned that progress in governance over the past six years could be severely undermined after an independent investigation found that Toshiba had partnered with the Japanese government to suppress activist investors ahead of the annual meeting. shareholders of last year.
“I think Toshiba’s case is special,” Yamaji said. “I think it’s really inaccurate to say that this is evidence of the lack of progress in Japan’s corporate governance.”
Yamaji said corporate scandals like Wirecard occur worldwide, but stressed that the situation surrounding Toshiba was particularly unusual for the frequency of its government lapses.
The problems of the industrial conglomerate began in 2015 with the discovery of an accounting fraud and Toshiba came to collapse two years later with the failure of its US nuclear business. An emergency issue of $ 5.4 billion in equity in 2017 filled the shareholder register of foreign activists, sparking clashes with investors that have led to the recent removal of his presidency.
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