Kazuhiko Toyama, Chairman
Japan Association of Corporate Directors
Looking back on my fourth year as Chairman of the Japan Association of Corporate Directors (JACD), I am pleased to report that the Association has continued to grow steadily in membership, with an increasing number of committee meetings and seminars, enabling us to expand our activities with even greater momentum.
We had identified three key priority areas for the year.
First, regarding the enhancement of director training programs, we continued to roll out our extensively updated curriculum. The program received high satisfaction ratings and positive feedback from a growing and increasingly experienced participant base, and we also observed a strong response to the on-demand format.
Second, we took a proactive role in reforming the governance structure of Companies with Nomination Committee, etc. In January 2025, JACD compiled and submitted a formal proposal to the Ministry of Justice. Deliberations began in April at the Legislative Council's Subcommittee on Companies Act. At the ninth session held in December, the Chair and Vice Chair of JACD's Corporate Governance Committee participated as expert witnesses, carefully explaining the realities of corporate management and the potential risks and concerns involved. Their presentation earned the support of committee members, including legal scholars. With this milestone successfully cleared, the prospect of a future revision to the Companies Act is now coming into view.
Third, as a result of our dedicated membership recruitment committee's practical outreach efforts, we achieved particularly notable results in growing our corporate membership. By the end of FY2025, total membership had grown to 546.
In addition, we held three open seminars accessible to the general public and published two statements and proposals related to corporate governance. Our proposal on the governance of unlisted companies generated significant interest across a broad range of audiences. We also participated for the first time in the Financial Services Agency's expert panel on revisions to the Corporate Governance Code, successfully incorporating JACD's views into the draft revision.
Through these activities, I believe JACD was able to communicate its positions and perspectives broadly to society and stimulate meaningful interest in governance throughout FY2025.
As of 2026, corporate governance has become a well-established concept in public discourse. While debates continue over how best to implement it in substantive terms, arguments questioning the need for stronger governance are now seldom heard. The ongoing efforts of individual companies to improve their governance have enhanced trust in and valuation of the Japanese market as a whole, attracting capital inflows from overseas institutional investors and contributing to a sustained rise in stock prices. I recognize that a genuinely healthy, positive cycle is now taking shape.
In this environment, JACD will conduct its medium-term activities based on the following overarching policy:
" JACD will work toward a future in which monitoring boards--where independent directors constitute the majority--become the prevailing standard across corporate Japan. We aim to improve management performance and strengthen corporate earning power. By achieving these goals, we will foster an environment in which investors, both domestic and international, can more actively support Japanese companies, driving further growth of the Japanese economy."
In addition to continuing our committee activities, seminars, and other programs, we will place particular emphasis on three priority themes in FY2026 to give concrete form to this overarching policy.
JACD believes that the key to substantive corporate governance lies above all in its people--those who bear responsibility for corporate leadership. Enhancing the effectiveness of boards of directors requires the dual foundation of strong "Execution" to create corporate value and robust "Supervision" to prevent value destruction.
In the near future, We anticipate that the majority of Japanese companies will be organizations in which independent directors form the majority of the board--directors who confidently represent the interests of all shareholders, including minority shareholders, and who are prepared to make decisive decisions such as appointing or removing the CEO when circumstances require. To support this vision, we will continue to clarify the roles that independent directors are expected to fulfill, and through our director training programs, raise the overall competence of all directors--in other words, help build the foundation for high-quality governance. We will also develop a new training program specifically designed for board secretariats.
We will pursue proactive engagement and communication on governance matters. Governance is often perceived as a defensive discipline, but JACD will continue to send a positive message: that governance is a source of value creation and growth. In particular, this fiscal year we will advance our activities under the theme of "Supervision that strengthens Execution," actively raising awareness among Executives of the enduring importance of governance improvement.
Regarding corporate governance structures, we will promote the monitoring board model, in which supervision and execution are clearly separated. Of the three governance structures recognized under Japanese Companies Act, JACD identifies the Company with an Audit and Supervisory Committee and the Company with Nomination Committee, etc. as consistent with the monitoring model. We particularly advocate for the Company with Nomination Committee, etc. which features three legally mandated committees and enables the most effective supervise of management through control over executive appointments--a structure that is also most readily understood by international institutional investors. Looking ahead to a potential revision of the Companies Act regarding this structure, we will work in coordination with relevant government ministries and the Tokyo Stock Exchange to promote improvements through soft law mechanisms on a medium-term basis.
Given the maturing market for independent director candidates and the growing demand for governance that strengthens earning power, We believe that requiring companies listed on the Prime Market of the Tokyo Stock Exchange to adopt the Company with Nomination Committee, etc. structure is now a realistic and timely policy direction--a reflection of how far governance at Japanese companies has advanced.
In conjunction with the planned revision of the Corporate Governance Code in June 2026, we will also encourage companies to proactively design and articulate the governance approach best suited to their own circumstances. JACD will lead the charge in helping companies move away from excessive shareholder returns through dividends and share buybacks, toward active investment in the future and the revitalization of Japan's economy as a whole.
To build a stronger movement in society, we will encourage high-quality, influential companies that share our mission to join the Association. Our next milestone is to reach 1,000 members. To achieve this, we will supplement our membership introductions through personal networks with more direct outreach to companies that demonstrate a strong interest in governance. We will also encourage institutional investors--who play a central role in corporate engagement--to join JACD, so that we can work together to explore the future direction of governance from multiple perspectives.
We will hold three open seminars per year to provide opportunities for prospective members to experience the Association's activities firsthand.
We will continue our governance awards program, adding live-streamed ceremonies to our public relations and advertising efforts, to showcase exemplary companies and their governance practices to the broader business and investment community.
We will also build a new members-only section of our website to improve convenience and accessibility for members. At the same time, we will call on internal executives who tend to be consumed by day-to-day operations to engage more actively with the Association.
Through these initiatives, we aim to compound and elevate the tangible value that comes with JACD membership.
This year as well, through active discussions and exchanges with our members--each of whom plays a vital role in governance from their own unique standpoint--we aim to invigorate the Association's activities further. We will continue doing our part to contribute to advancing governance in Japanese companies and in society as a whole.