Tokyo Stock Exchange CEO says dialogue between companies and investors is the core of governance By Reuters
By Anton Bridge
TOKYO (Reuters) – The Tokyo Stock Exchange’s role going forward will be to promote constructive dialogue between companies and investors rather than dictate how companies should be run, it said on Thursday.
“The real power to bring about change lies with investors and shareholders,” Hiromi Yamaji, CEO of Japan Exchange Group, which operates the Tokyo Stock Exchange, said at a press briefing in Tokyo.
The exchange’s efforts to encourage companies to improve governance practices and corporate values lifted domestic stocks. The average stock price in February of this year exceeded a 34-year high.
But Yamaji said forcing companies to change their management practices could be counterproductive because it could spark a backlash.
“Reforms are not sustainable unless companies take voluntary action,” Yamaji said.
Since January of this year, the exchange began to disclose a list of companies that have disclosed their capital allocation and corporate value improvement plans, which is interpreted as a move to exile and shame companies that have not disclosed them.
As of the end of September, 80% of companies listed on the Tokyo Stock Exchange’s main market had submitted such plans.
Starting next year, the exchange plans to improve the list by highlighting companies that want to engage in active dialogue with investors while providing good and bad examples of shareholder engagement in companies, Yamaji said.
Investors also have a responsibility to take a long-term perspective and work with companies rather than seeking short-term profits, Yamaji said.
“Our goal is to encourage sustainable growth and foster medium- to long-term improvement in enterprise value,” he said.
Yamaji also said he hoped Japanese Prime Minister Shigeru Ishiba would push for policies to promote private sector growth and continue his predecessor Fumio Kishida’s efforts to encourage a shift from savings to investments.
