(The original article in Japanese was posted on June 18, 2021)

According to Tokyo Stock Exchange, the date on which the largest number of companies that settle accounts for the fiscal year ended March hold shareholders’ meetings will be June 29. Having said that, the concentration rate this year is 26.9%, the lowest ever. It is exactly different now compared to the past when 90% of the companies held the meetings on the same specific day. The system of holding the meetings also has changed. Early announcement of convocation notices on the website and exercise of voting rights online have also become common. Moreover, triggered by the current COVID-19 pandemic, more and more companies have been shifting the style of shareholders’ meetings from the conventional physical meetings to real-time virtual (online) video meetings. The “Revised Industrial Competitiveness Enhancement Act,” allowing the holding of virtual (online)-only general meetings of shareholders, the “Revised Industrial Competitiveness Enhancement Act” that came into effect on June 17 will further accelerate this trend of changing the ways of carrying out the shareholders meetings.

Market reorganization of the Tokyo Stock Exchange is close at hand, and what has been changing toward the reorganization is not only the system of holding the meetings but also the standards for exercising voting rights of institutional investors, which have been becoming stricter. The examples of the new standards are as follows: “The ratio of independent outside directors on the board must be 1/3 or more,” “The term of office must be less than 12 years,” and “Cross-shareholdings must be less than 10% of net assets.” As well as antitakeover measures, countermeasures against climate change, and executive compensation as matters-of-course, online shareholders’ meetings are also something to which strict attention will have to be paid. As a matter of fact, some advisory companies have expressed opposition to companies that have proposed to amend the articles of incorporation to change to the virtual (online)-only meetings, saying that concerns about “loss of fair questioning opportunities” and “decrease of transparency in management of meetings” are inevitable.

While not a few struggles being accompanied with, listed companies and investors have been making efforts to improve governance, and build relationships of trust through dialogue. However, it was revealed that there was a shocking case serious enough to shake confidence in the capital market that is supposed to be highly fair and transparent. On June 10, Toshiba Corporation has disclosed an investigation report on the operation of general meetings of shareholders conducted by a lawyer elected by the shareholders, and the contents of the report were shocking as follows. Toshiba requested the Ministry of Economy, Trade and Industry (METI) to support in dealing with the overseas funds that were in conflict over matters of personnel proposal, and METI called for the withdrawal of shareholders’ proposals by suggesting the invocation of the Revised Foreign Exchange and Foreign Trade Act as well as it has urged another overseas investors to refrain from exercising voting rights.

While I am simply fed up with the series of actions of Toshiba and METI that disregard the basis of the joint-stock company system, there are also some other different opinions that “state intervention in business of the companies involved in defense and nuclear power is unavoidable.” However, in the first place, it was Toshiba who requested investment from overseas investors for the purpose of maintaining the status of “being listed,” and it would be fair to say that their act of trying to suppress the legitimate rights of shareholders by using the “power” is a betrayal to the capital market. Toshiba should realize that the loss of trust in the capital markets where the rule of law is premised also means a significant loss to the Japan’s national security.

Yoshihide Suga, whose name appears in the report as Chief Cabinet Secretary at the time, says “I don’t know anything about the matter at all.” The incumbent Minister of Economy, Trade and Industry also dismisses saying, “This matter is a problem of Toshiba’s governance.” However, this is not a domestic political issue, and therefore it should not be allowed to give careful consideration to the administration. It will be necessary for Toshiba and METI to promptly disclose the facts to the capital markets and urgently express their intention to restore the trust and announce concrete measures to do so.

This Week’s Focus, June 18, 2021

Takashi Mizukoshi, the President