VOLUME 1 ISSUE 7 | SEPTEMBER 2022

GET READY
The universal proxy card will lead tosubtle changes in the tenor of contests

THE ONCOMING STORMInvestors are placing an ESG lens on theirscrutiny of donations by public companies

GOVERNANCE
ENGAGEMENTSTEWARDSHIPGUEST ARTICLEADVANCING GENDER
DIVERSITY IN JAPANJAPANESE ISSUERS FACE MOUNTING DEMANDS BY SHAREHOLDERS TO STRENGTHEN BOARD
GENDER DIVERSITY, WRITES TRACY GOPAL, CEO AND FOUNDER, THIRD ARROW STRATEGIES.

Proxy advisors and foreign investors are no longer giving
Japanese boards a free pass for a lack of board diversity.
Year-on-year, more foreign investors are opting tovote against both chairs and CEOs at the annual meetingsof Japanese-listed companies, voicing concern about theprominence of all-male or male-dominated boards and pushingcompanies to take prompt action.
Dissenting votes should come as no surprise to boards, giventhat investors proactively revealed their stringent new board
diversity expectations at the start of the year in their updated
voting guidelines.
In 2022, both proxy advisers and a significant number offoreign investors updated or launched new minimum diversity
threshold policies for Japanese companies.
One notable example is proxy adviser Glass Lewis, which in
February expanded its recommendation that shareholders
vote against the chair or most senior person (the nominating
committee chair under a three-committee system) at listedcompanies on Japanese stock exchanges with fewer than
one gender-diverse director on the board. This year, UBS
also updated its policy to vote against directors at Japaneselisted companies with at least 10 board members or a market
capitalization of more than $10 billion with less than 30% femaleboard representation.

THE LEADERS AND THE LAGGARDS
Some companies are taking long-awaited action. During
the 2022 proxy season, several large “holdout” companies
appointed their first woman to the board, including Koito
Manufacturing, Stanley Electric, Ito En, and Capcom.
Currently, at least 12 Japanese companies feature four female
directors on the board, including Sony, Lixil, Sega Sammy,NIDEC, and Ajinomoto. Appointing four women to a board
in Japan sends a clear message to investors that the board islistening to global shareholders and focusing on diversity as akey part of its strategy. A handful of companies are also leadingwith the practice of appointing a female outside director aschair. Examples include Mitsui Financial Group (which recently
appointed Izumi Kobayashi), Lixil (Kimie Iwata), and NetOne
Systems (Maya Ito).

20

On the other end of the spectrum, larger companies stilllacking female board director representation post-proxy season
include Toray, Canon, Obic, Makita, and Hirose Electric. Amongthe companies that still lack female board representation,
more than 20 investors launched votes against managementproposals at shareholder meetings this season, specifically citing
concern regarding a lack of board diversity. Among this list ofdissenting investors includes AllianceBernstein, Amundi AssetManagement, Florida State Board of Administration, Invesco
Asset Management, Legal & General Investment Management,
Pensionskassernes Administration, Schroders, and T. RowePrice Associates.
Foreign investor pressure is still the driving source of change
in Japan. Governmental organizations and stock exchanges
are aware of global trends and taking action to address theseissues, but, despite this, regulations have yet to be establishedwhich mandate the appointment of at least one female director
per board. The Japanese Ministry for Economy, Trade, andIndustry’s (METI) July corporate governance guidelines went
beyond the Corporate Governance Code’s recommendation
to consider diversity, including gender and international
experience, and stated that companies that do not have a single
woman on their board should actively consider appointing
female directors.
Japanese boards must step up their efforts to fill thousandsof seats with female candidates, should they want to meetglobal investor expectations. Proper oversight of the director
nominations processes will become increasingly critical forcompetitive positioning.
Tracy Gopal is an impact entrepreneur focused on increasing thevalue of Japanese-listed companies through training Japan’scurrent and future female directors to be progressive voices ofmodern governance. She is the CEO and founder of Third Arrow
Strategies and the Japan Board Diversity Network (JBDN), a
global network of directors and senior leaders with a passion forenhancing corporate governance in Japan. She supports
Japanese companies and subsidiaries in identifying diverse
skills-based directors and works towards the alignment ofobjectives of shareholders and companies through promoting
effective engagement.