{"id":2412,"date":"2026-05-15T20:00:00","date_gmt":"2026-05-15T11:00:00","guid":{"rendered":"https:\/\/corporateactionjapan.org\/?post_type=news&#038;p=2412"},"modified":"2026-05-25T15:40:25","modified_gmt":"2026-05-25T06:40:25","slug":"public-comments-cg-code","status":"publish","type":"news","link":"https:\/\/corporateactionjapan.org\/en\/news\/announcement\/public-comments-cg-code\/","title":{"rendered":"Public Comments Submitted Regarding the Revision of the Corporate Governance Code"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Corporate Action Japan (CAJ) has submitted its public comments to the Financial Services Agency (FSA) and Tokyo Stock Exchange, Inc. (TSE) regarding the upcoming revisions to the Corporate Governance Code (hereinafter, the &#8220;CG Code&#8221;).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While we support the strategic shift toward a more &#8220;principles-based&#8221; approach in this revision, we believe its ultimate success depends on whether boards of directors can autonomously fulfill their oversight responsibilities regarding the &#8220;soundness of business judgments.&#8221; To ensure this effectiveness, our public comments propose that the following<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">three points be explicitly stated within the principles:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Clarifying the Roles of Independent Directors<\/li>\n\n\n\n<li>Disclosing the Selection Process for Independent Directors<\/li>\n\n\n\n<li>Disclosing the Performance and Activity Records of the respective Director<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">We firmly believe that codifying these specific measures within the revised CG Code will pave the way for authentic, effective corporate governance. Furthermore, this will ultimately contribute to advancing a sustainable, decarbonized society.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Those who wish to inquire about this matter are kindly requested to contact us <a href=\"https:\/\/corporateactionjapan.org\/en\/contact-investor\/\">here<\/a>.\u00a0<em>The full text of the submitted public comments is provided below for your reference.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Proportional Recommendations for the Proposed Revisions to the Corporate Governance Code<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">1. Core Objective of the Recommendations<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The strategic shift toward a &#8220;principles-based&#8221; approach in the proposed revisions\u2014achieved by reorganizing the Supplementary Principles and transferring specific provisions to the &#8220;Interpretation Guidelines&#8221;\u2014is commendable, as it returns to the original intent of the Corporate Governance Code (the &#8220;CG Code&#8221;). However, removing detailed practical provisions from the scope of the &#8220;Comply or Explain&#8221; (C&amp;E) framework carries an inherent risk: it may inadvertently cause a regression in corporate disclosure and delay the realization of substantive corporate governance (CG) from the perspective of stakeholders.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To mitigate this risk, it is vital to reaffirm that the essence of corporate governance lies in establishing a rigorous oversight (and auditing) function by the Board of Directors over the &#8220;soundness of business judgments.&#8221; Now that the CG Code is being streamlined, boards must autonomously oversee whether three core elements\u2014Talent, Strategy, and Risk (TSR)\u2014are functioning in an integrated manner, and they must bear the responsibility of communicating the reality of this oversight to shareholders in their own words (McNabb et al., 2021).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">2. Specific Opinions and Recommendations<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">(1) Support for the Proposed Revision to Principle 4. 8 Roles and Responsibilities of Independent Directors<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Historically, the CG Code has never limited the role of Independent Directors solely to providing &#8220;advice.&#8221; In practice, however, their involvement has undeniably leaned heavily toward advising management. An overemphasis on &#8220;advice&#8221; often results in fragmented and limited engagement, making it difficult for directors to exercise the discipline necessary to counteract managerial inaction\u2014which is the very essence of governance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the proposed revision to Principle 4-8, elevating the clause &#8220;exercising management oversight through the appointment and dismissal of senior management and other important decision-making by the Board&#8221; to Paragraph 1 is a highly welcome change. This amendment corrects prevailing practical misunderstandings and more clearly defines their true role as &#8220;Strategic Overseers&#8221; who rigorously discipline management from an objective standpoint.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>(2) Recommended Amendment to Principle 4.3 Roles and Responsibilities of the Board III: Effective Oversight of the Management and Directors (i)<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Recommendation:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While recognizing that the entire Board of Directors bears a fiduciary duty regarding the appointment and dismissal of the CEO, the main text of the Principle should explicitly state that in times of crisis\u2014where medium- to long-term corporate value is deemed to be deteriorating\u2014Independent Outside Directors, from their objective standpoint to protect shareholder interests, must assume the &#8220;role of proactively initiating discussions regarding the dismissal of the CEO.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Rationale:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To ensure that objective oversight functions free from internal organizational dynamics, having an independent party initiate the discussion is the key to practical effectiveness. As the Japan Association of Corporate Directors (2026) designates the decision to replace the CEO and other top executives as the &#8220;ultimate mission&#8221; of Independent Directors, the role of initiating these discussions without fear or favor during a crisis should be redefined as an explicit responsibility of outside directors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>(3) Recommended Amendment to Principle 3.1 Full Disclosure, Principle 4.9 Ensuring the Expertise of Independent Directors , and 4.11 Ensuring Independence of Independent Directors<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Recommendation:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the selection of candidates for Independent Directors, companies should be required to disclose their specific nomination processes, thereby enabling investors to substantively verify the candidates&#8217; independence.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Rationale:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As noted by Nakanishi (2024), when candidates are selected through introductions by the very top management they are meant to oversee, it risks turning oversight into a mere formality and serves as a structural cause for excessive deference (\u201csontaku\u201d). To overcome this challenge, it is essential not only to eliminate personal relationships but also to make the selection process thoroughly transparent, thereby creating a mechanism that allows investors to verify the objective distance (psychological independence) between the directors and management.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>(4) Recommended Amendment to Principle 4.13 Preconditions for Board and <em>Kansayaku<\/em> Board Effectiveness<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Recommendation:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Companies should be required to individually disclose the &#8220;quality of activity records,&#8221; specifically showing what concrete contributions (such as raising issues or recommending corrective actions) each director made regarding critical matters like strategy and risk.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Rationale:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The primary oversight function required of a board is the substantive monitoring of the &#8220;soundness of business judgments.&#8221; Currently, however, companies tend to focus entirely on superficial compliance, such as meeting board composition quotas, which leaves the &#8220;quality&#8221; of oversight opaque. Breaking away from this formalism and enabling shareholders to verify the quality of oversight based on individual contributions is indispensable to making governance substantive.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">3. Conclusion<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The key to successfully &#8220;streamlining&#8221; the CG Code through this revision depends entirely on whether boards of directors can autonomously fulfill their oversight responsibilities regarding the &#8220;soundness of business judgments.&#8221; To guarantee this effectiveness, the revised CG Code should explicitly incorporate the following three points into its principles:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Responsibility: &nbsp;The explicit duty of Independent Directors to initiate discussions on CEO dismissal during crises.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Mechanism: &nbsp;A framework where companies disclose the selection process of Independent Directors, allowing investors to verify their substantive independence.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The System: &nbsp;A structure where companies disclose the specific contributions of individual directors, enabling shareholders to evaluate the quality of oversight.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Codifying these specific measures within the revised CG Code will eliminate mere box-checking formalism and foster true corporate governance. We strongly advocate for this transition toward effective and authentic corporate governance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u3010References\u3011&nbsp;&nbsp;&nbsp;&nbsp;<br>Ippan Shadan Hojin Japan Association of Corporate Directors. (2026). &nbsp;Recommendations for the Revision of the Corporate Governance Code.\uff08\uff0a\uff09&nbsp;<br>Kazuyuki Nakanishi. (2024). Governance and Audit Officers in Contemporary Director Nominations: Key Aspects of Succession Planning and Considerations for Auditors*. Journal for audit &amp; supervisory board members. (767), 4\u201314.\u3000\uff08\uff0a\uff09<br>McNabb, B., Charan, R., &amp; Carey, D. (2021). Talent, strategy, risk: How investors and boards are redefining TSR. Harvard Business Review Press.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">*available only in Japanese<strong><\/strong><\/p>\n","protected":false},"featured_media":2416,"template":"","news_cat":[16],"class_list":["post-2412","news","type-news","status-publish","has-post-thumbnail","hentry","news_cat-announcement"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Public Comments Submitted Regarding the Revision of the Corporate Governance Code | Corporate Action Japan<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/corporateactionjapan.org\/en\/news\/announcement\/public-comments-cg-code\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Public Comments Submitted Regarding the Revision of the Corporate Governance Code | Corporate Action Japan\" \/>\n<meta property=\"og:description\" content=\"Corporate Action Japan (CAJ) has submitted its public comments to the Financial Services Agency (FSA) and Tokyo Stock Exchange, Inc. 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