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Listed Firms in Japan Urged to Improve Corporate Governance

Tokyo, Nov 4, 2008 (Jiji Press) - Listed companies in Japan are faced with growing pressure from both the government and overseas investors to improve corporate governance in the interest of their shareholders.

The Financial Services Agency and the Ministry of Economy, Trade and Industry are considering ways to make listed firms promote measures to bolster corporate governance as overseas institutional investors have expressed dissatisfaction with the current situations.

Those investors have noted that 60 pct of the companies listed on the Tokyo Stock Exchange have yet to take on outside directors and that many firms do not fully explain to investors the purpose of antitakeover measures and cross-shareholdings.

The FSA thus launched a study group in late October to discuss how best to persuade listed companies to meet their responsibilities, seeking to review relevant rules by next summer. METI plans to begin full-fledged talks on the issue by the end of the year.

In May, the California Public Employees' Retirement System, or CalPERS, the world's largest pension fund, British pension fund managing firm Hermes, and five other institutional investors called on listed Japanese companies to take on at least three directors from outside so the companies will pay more attention to shareholders.

The U.S. and European pension funds will regard the number of outside directors as one of the criteria for judging whether to approve a set of proposals to be made by listed companies at their annual shareholders' meetings.

Among Japanese institutional investors, the Pension Fund Association may support the plan. However, most Japanese companies oppose the forced introduction of outside directors because of what they see as a dearth of qualified individuals.

By Jiji Press, (c) Jiji Press

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