日本取締役協会

Over the past decade, Japan's corporate governance reforms have moved from aspiration to visible market impact. Equity prices, international capital flows, and global rankings now reflect a governance ecosystem that is considerably stronger than in the early days of Abenomics. At the same time, investor expectations have risen in parallel. Directors now face a different question: not "Do we comply?" but "Are we using governance as a strategic lever for long-term value creation?"

Against this backdrop, the Asian Corporate Governance Association (ACGA) conducted a survey¹ of its Japan Working Group (JWG) institutional investor members following its annual Japan delegation in October 2025. The results highlight priorities that are particularly relevant to corporate directors: strengthening minority shareholder protection in takeover and buyout situations and enhancing board effectiveness and leadership. Both issues go to the heart of trust in the board as an effective steward of the company's future.

Figure 1: Results of ACGA JWG investor survey 2025

Source: ACGA Research

Boards to Strengthen Minority Investors' Rights

Current law and regulations² allow boards to remain neutral in the face of a tender offer bid (ToB). As the recent Toyota Industries case shows, special committees are not under a clear fiduciary duty to recommend for or against an offer, even when the interests of minority shareholders are at stake. In practice, this often leaves minority investors without a clear signal from the board about whether the proposed transaction is in their best interests. In many jurisdictions, boards are expected to provide a reasoned opinion on the fairness and strategic rationale of a bid. For Japanese boards, the practical implication is straightforward: special committees must be equipped and mandated to protect minority shareholders, not merely validate process.

Respondents to our survey emphasized that special committees should comprise members with strong financial literacy and experience in evaluating valuation methodologies, capital structure, and deal terms. This is not only about avoiding legal challenge; it is about demonstrating to all stakeholders that the board takes its stewardship role seriously. In short, minority protection in control transactions³ such as ToBs and conflicted acquisitions is not solely a question for policymakers. Boards can already adopt higher standards by:

• Mandating special committees to issue explicit recommendations on deal terms.
• Ensuring that committee members possess the financial expertise to scrutinize valuations and fairness opinions and not be overly reliant on management-selected advisors.
• Clearly disclose the process for evaluating offers, including any alternative options considered.

These practices would bring Japanese boards closer to global best practice and support the broader aim shared by JACD and ACGA of enhancing investor trust as a foundation for sustainable growth.

Board Effectiveness and Leadership: From Structure to Behavior

The second theme that emerges strongly from our investor survey is the need to deepen board effectiveness and independent oversight. Japan has made impressive progress on structural indicators: more than 90% of Tokyo Stock Exchange (TSE) Prime Market companies now have at least one-third independent directors, and over 85% have established nomination and compensation committees⁴. Yet structures alone do not guarantee effective oversight or high-quality decision-making.

One area of concern is board leadership. According to a TSE white paper published in 2025⁵, only 2.9% of companies currently have an outside director chairing the board. Many boards continue to be led by executive chairs or former CEOs who remain in senior advisory roles, blurring the line between oversight and execution. While such arrangements may feel comfortable within long-standing corporate cultures, investors increasingly view them as obstacles to robust challenge and independent judgment on the board.

Figure 2: Attributes of a Board chair from TSE White paper, 2025

Investors in our survey support a gradual transition toward independent chairs or, at a minimum, the appointment of a strong lead independent director with a clear mandate. This is consistent with JACD's longstanding emphasis on clarifying the oversight role of outside directors and building boards that can both support and challenge management in the interest of sustainable corporate value. An independent chair or lead independent director can:

• Set board agendas that prioritize strategic issues, risk, and capital allocation.
• Ensure that CEO and senior management evaluations are conducted objectively.
• Serve as a focal point for investor engagement, particularly in the absence of a fully independent chair.

Another pillar of effective boards is human capital development at the director and management levels. Our survey suggests strong investor backing for mandatory and iterative training programmes for directors covering emerging risks, technological change, sustainability issues, and capital market expectations. For Japanese boards, this aligns closely with JACD's educational mission and its commitment to improving the quality of directorship through seminars, publications, and policy work. Well-designed training is not a compliance exercise; it equips directors of diverse backgrounds with tools to navigate increasingly complex strategic issues which may impact company prospects.

Figure 3: Background of Outside Directors for Topix100 companies

Source: UBP Investments Bloomberg Data, December 2025, ACGA Research

Transparency around board performance is another area where Japanese practice lags regional peers. Many companies now conduct board evaluations, yet disclosures often remain high-level, with generic statements that the board is "effective" and limited information on findings or follow-up measures. Investors would like to see more meaningful narrative disclosure: what themes emerged from the evaluation, what specific improvements were identified, and how the board plans to address them over time.

Finally, investor access to independent non-executive directors (INEDs) is viewed as a practical lever to strengthen accountability. Facilitated dialogue with INEDs can give investors insight into how the board thinks about capital allocation, strategy, and succession, beyond what is visible in management presentations. Establishing regular opportunities for such interaction, within appropriate confidentiality boundaries, can reinforce the message that the board welcomes constructive challenges and values the perspectives of long-term shareholders.

Looking Ahead: Directors at the Centre of the Next Phase

Japan's governance reforms have reached a stage where the most important advances will come less from new rules and more from how boards interpret and apply them. The 2023 Action Program for Accelerating Corporate Governance Reform launched by the Financial Services Agency explicitly aims to move from "form to substance," focusing on value creation, capital efficiency, and investor trust. For directors, this is an invitation to go beyond minimum compliance and view governance as an integral part of corporate strategy.

Strengthening minority shareholder protection in control transactions and enhancing board effectiveness and leadership are two areas where boards can have immediate impact. Together, they reflect the ethos shared by JACD and ACGA: governance as an evolving practice that underpins sustainable, long-term growth for companies, markets, and the broader economy.

As Japan works toward revising its Corporate Governance Code and Companies Act this year, the choices made in boardrooms will be as important as those made at the regulatory level. Directors who embrace higher standards of fairness, transparency, and independent oversight will not only help close the gap between regulation and practice but will also position their companies as leaders in the next chapter of Japan's governance story.

Anuja Agarwal Anuja is Head of Research for Japan and India of the Asian Corporate Governance Association (ACGA). She has 20+ years of experience in financial markets and is passionate about integrating ESG strategies with fundamental views and has experience in PRI Disclosures, Stewardship and Proxy voting. She has been on the Board of Zubin Foundation, mentor for 100 women for Finance (100WF) and a Board advisor for a reusable cutlery company Recube.hk. She is a ESG CFA certificate holder and a Talent4Impact Fellow. She is a fitness freak and has completed Greenpower (50k), Moon trekker (42k), UNICEF (20k) races. Her work on financial literacy for kids has been featured on Forbes, SCMP, Radio HK.