TOKYO, May 23 (Reuters) - A U.S. investor group has urged Japan’s government to require companies to appoint multiple independent directors, putting pressure on lawmakers to push ahead with corporate governance reforms that have met opposition from businesses.
In a letter addressed to Prime Minister Shinzo Abe, the Council of Institutional Investors (CII), whose members include state pension funds, endowments and others with combined assets of more than $3 trillion, applauded efforts to boost governance and called for more rigorous steps.
“CII encourages the Japanese government to further expand the independent director requirement in the future,” said the letter, signed by CII Executive Director Ann Yerger and sent to other senior lawmakers as well.
Japanese companies are currently not required to appoint independent directors, although a corporate law revision expected to be adopted in the current parliamentary session will encourage listed companies to hire at least one outside director.
Foreign investors have often blamed insiders’ domination of corporate boards for low shareholder returns and a lack of oversight.
The politically powerful Keidanren business lobby has opposed the proposed reforms, arguing that simply hiring outside directors who may not understand a company’s business would not necessarily be in investors’ interests. It is drawing up its own proposals in a bid to stave off pressure for change.
Abe, who has pledged to double the amount of foreign direct investment (FDI) into Japan by 2020 to help offset the impact of a shrinking population, is eager to promote reform. Japan’s inbound FDI is currently the lowest among OECD countries at around 3.5 percent relative to GDP.
Lawmakers are compiling a corporate governance code that would bring Japan in line with international standards. Masahiko Shibayama, a member of the ruling Liberal Democratic Party who is leading those efforts, has said all companies should be required to hire multiple independent board members. (Reporting by Ritsuko Ando; Editing by Edmund Klamann)