Japan’s asset owners urged to adopt stewardship and monitor their managers

Revised version of three-year code released by expert panel

Asset owners should engage in stewardship “as much as possible” on behalf of the beneficiaries, according to the latest revision to Japan’s Stewardship Code.

The voluntary code – officially known as the Principles for Responsible Institutional Investors – was originally launched in 2014 and the Financial Services Agency has released the revised version of the code that has been formulated an expert panel called the Council of Experts on the Stewardship Code. The council is chaired by University of Tokyo Professor Hiroyuki Kansaku.

“When asset owners do not directly engage in stewardship activities, including the exercise of voting rights, they should instruct that their asset managers be engaged in effective stewardship activities on their behalf,” the updated text reads.

Another section refers to manager selection: “When selecting or issuing mandates to asset managers, asset owners should clearly specify issues and principles to be required in conducting stewardship activities, including the exercise of voting rights, in order to ensure effective stewardship activities.“In particular, large asset owners should proactively consider and clearly specify issues and principles to be required in conducting stewardship activities, including the exercise of voting rights, keeping in mind their positions and roles in the investment chain, instead of mechanically accepting asset managers’ policies without any verification.”

As for asset managers, they should set up governance structures, such as an independent board of directors or third party committees for decision-making or oversight of voting — in order to secure the interests of clients and beneficiaries and prevent conflicts of interest.

One element that will draw interest is the call in the code for investors to disclose detailed records of their voting at AGMs.
Currently, institutions such as asset management firms, pension funds, insurers and trust banks need only to “aggregate the voting records” when disclosing them publicly.
Now, the new text reads, they “should disclose voting records for each investee company on an individual agenda item basis.” Link