Current Efforts for Achieving the Process for Dialogue-based Shareholder Meetings (Compilation of follow-up results)

Transcription

1 Provisional translation Current Efforts for Achieving the Process for Dialogue-based Shareholder Meetings (Compilation of follow-up results) April 21, 2017 Study Group on Promoting Electronification of Processes for Shareholder Meetings 1. In April 2016, aiming to facilitate constructive dialogue between companies and shareholders/investors and accomplish sustainable growth of companies and mid-term improvement of corporate value, the Study Group on Promoting Electronification of Processes for Shareholder Meetings (chair: Mr. Yasuhiro Osaki, professor, Faculty of Law, Waseda University; hereinafter referred to as the study group ), established under METI (Ministry of Economy, Trade and Industry), summarized its discussions into a collection of proposals for measures that will enhance information disclosure and secure sufficient time for shareholders to deliberate on shareholder meeting agendas, as one of the efforts for establishing a world-class environment for dialogue between companies and shareholders/investors in Japan. 2. In light of the details of the above proposals, at its seventh and eighth meetings, the study group conducted follow-up sessions concerning the current state of efforts related to such dialogue. A summary of the meetings is as follows (for details, see the Appendix). Over this year, companies have dramatically advanced their efforts toward improving such dialogues, including early publication of shareholder meeting notices in Japanese via the internet prior to sending notices by postal mail, publication of notices in English and participation in electronic voting platforms. These company efforts have contributed to improving the timing at which domestic and overseas institutional investors are able to access information on shareholder meeting notices. In addition, an increasing number of companies are starting to participate in electronic voting platforms. This increase is resulting in improved voting environments (e.g., lengthening the period for shareholders to deliberate on shareholder meeting agendas) for institutional investors who exercise their voting rights online (in particular, those based overseas), and also increasing the potential for companies to monitor voting trends and hold dialogues with shareholders in a timely manner. Concerning schedule of shareholder meetings, holding shareholder meetings on the date beyond three months from the closing date of financial account is one of effective approaches to securing sufficient time for shareholders to deliberate on shareholder meeting agendas. To do that, companies need to prescribe a record date (affecting the right to exercise a vote) which 1

2 will be different from the closing date, and to hold shareholders meetings within three months from the record date. In order to promote such efforts depending on their situations, Zenkabukon published discussion results concerning administrative actions (including a description of the shareholder meeting agenda for revising the articles of incorporation) in October 2016 and revised a series of its Collection of Models Concerning the Articles of Incorporation in February Furthermore, under the FY2019 Tax Reform, Japan has revised due date for filing a final return form for corporate tax payment (enforced in April 2017). 3. As seen above, the study group confirmed steady advancement in efforts to create a process for dialogue-based shareholder meetings. However, approximately 30% of the companies that have conducted early online publication of shareholder meeting notices disclose information on their websites just one business day before the shareholder meeting notices are sent by postal mail, which reveals room for further advancement of these efforts. 4. To address this situation, the study group expects stakeholders, including companies, investors and dialogue-supporting industries, to continue to advance further efforts and discussions, while bearing in mind the proposals prepared by the study group ( Future Directions of the Efforts Expected ), so as to establish a world-class environment for company-investor dialogue in Japan. 5. Furthermore, in February 2017, the Minister of Justice consulted with the Legislative Council of the Ministry of Justice concerning the review of laws and regulations related to the Companies Act (those related to corporate governance, etc.). It will discuss a variety of related issues, mainly the challenges in the new establishment of a system for companies electronic provision of documents related to shareholder meetings (i.e., a system in which companies are able to provide documents concerning shareholder meetings via the internet to shareholders without individual shareholders prior consent). The study group expects stakeholders, including companies, investors and dialogue-supporting industries, to advance discussions to accomplish the following goals, considering legislation for electronic provision of shareholder meeting documents: Acceleration of discussions on administrative practices to respond to shareholder requests for hard copy documents (those necessary regardless whether or not a right to claim such documents is to be secured under the law); and, Establishment of highly user-friendly platforms for both companies and shareholders (e.g., an online system environment in which individual shareholders are easily able to receive shareholder meeting notices and other materials and exercise voting rights). End of document 2

3 Appendix Current Efforts for Achieving the Process for Dialogue-based Shareholder Meetings and Future Directions of the Efforts Expected Study group proposal 1: Promoting the electronic provision of shareholder meeting notices and other materials - Promoting efforts for early publication of shareholder meeting notices via internet prior to sending by postal mail, and for the publication in English - Increase the number of companies engaging in early online publication of documents concerning shareholder meetings Examine appropriate timing of such online publication (e.g., immediately after fixing a resolution of the board of directors or finishing proofreading of final documents before printing). Submit documents to TDnet (a company-announcements disclosure service system operated by the Tokyo Stock Exchange (TSE)) Promote early online publication of shareholder meeting notices in English, submit such documents to TDnet, etc. 1) Early online publication [Current state of companies efforts] Looking at the companies that held shareholder meetings in June 2016, 1,605 companies voluntarily made shareholder meeting notices and other documents public online prior to sending them by postal mail (early online publication), accounting for approximately 70% of the companies, showing a significant increase from the 769 companies in the previous year. 1 This fact reveals that approximately 60% of these companies disclosed online or sent information on shareholder meetings more than three weeks before the date of such meetings. (As many as 336 companies disclosed or sent information on shareholder meetings more than four weeks before the date of such meetings, up by 200 from the previous year.) 2 Meanwhile, approximately 70% of the companies that conducted early online publication of information on shareholder meetings disclosed such information after finishing printing notices for the meeting. 3 Approximately 30% (533 companies) disclosed such information online only one business day before sending out printed notices. 4 1 According to the aggregation results by KPMG AZSA LLC targeting TSE-listed companies, and calculated based on data on the ICJ Arrow Force (data on annual shareholder meetings of companies setting March 31 as a record date when the information was provided for public inspection at all stock exchanges across Japan) 2 The same method was adopted as that in Footnote 1 above. 3 Source: FY2016 Zenkabukon Survey Report, released by Zenkabukon in October The same method was adopted as that in Footnote 1 above. 3

4 [Evaluations by the study group members and stakeholders] It can be said that for shareholder meetings in June 2016, many companies provided environments in which shareholders and investors from both inside and outside Japan were able to access information on the shareholder meetings at an earlier timing than in previous years. Actually, the timing when overseas institutional investors are able to access information on shareholder meeting agendas in English became earlier. Institutional investors and dialogue supporting industries that assist investors in deliberating meeting agendas positively evaluate such companies efforts in terms of the expansion of the period for shareholders/investors to deliberate on shareholder meeting agendas and the reduction of their employee workloads. In addition, in response to the spread of early online publication, some investors plan to change existing systems so that they can start analyzing shareholder meeting agendas on the day following the date when the agendas are published online. This change allows institutional investors to engage in multilateral discussions, including internal discussions as well as to contact companies concerning the details of the released agendas, thereby contributing to improving the quality of voting rights exercised. At the same time, it is advantageous for companies because it leads to reduction of the number of against votes due to misunderstandings or insufficient information provided. Meanwhile, some institutional investors have been requesting that companies submit the following documents to TDnet in the same timing as the early online publication of information on shareholder meetings: [i] Independent Directors/Auditors Notification, a document that companies are required to submit to stock exchanges, and [ii] certain documents published on the internet which are legally deemed to have been sent to shareholders. 2) Publication of documents in English [Current state of companies efforts] Among the companies that held shareholder meetings in June 2016, 634 companies provided notices of such meetings in English, accounting for approximately 30% and showing a dramatic increase from 398 in the previous year. 5 Among companies that translated their shareholder meeting notices and other documents into English for the first time in 2016, many of them prioritized the translation of what they deemed to be the most critical notices and related references such as explanation for meeting agendas proposed. [Evaluations by the study group members and stakeholders] Some cases show that the online publication of shareholder meeting notices in English encouraged overseas institutional investors to exercise their voting rights. 5 The same method was adopted as that in Footnote 1 above. 4

5 It is desirable for companies to release an English version of shareholder meeting notices and other documents with the same timing as the Japanese version. However, some shareholders requested the publication of the Japanese version prior to the English one if the translation procedure causes a delay in the publication of the Japanese version (because some shareholders consider it possible to have necessary parts of the Japanese versions translated earlier than the publication of the official English version if they can access the Japanese version.) Future Directions of the Efforts Expected Bearing in mind the proposals prepared by the study group, companies are expected to continue to advance related efforts, e.g., a further increase in companies that engage in early online publication of shareholder meeting notices (prior to sending them by postal mail), and accelerated spread of companies involvement in online publication of the notices, at an earlier timing, e.g., immediately after fixing a resolution of the board of directors or proofreading of final documents before printing. Moreover, it is desirable that companies submit the following documents to TDnet at the same timing as that of early online publication of information on shareholder meetings: [i] Independent Directors/Auditors Notification, a document that companies are required to separately submit to stock exchanges, and [ii] certain documents published on the internet which are legally deemed to have been sent to shareholders. Study group proposal 2: Promoting the electronification of the voting processes Encourage listed companies and institutional investors to participate in and further use electronic voting platforms; resolve the two insufficient ways, online and offline, of voting instructions Harmonize systems between electronic voting platforms Hold discussions on providing user-friendly procedures for these platforms, targeting institutional investors located in Japan. [Current state of stakeholders efforts] A dramatic increase was seen in the number of listed companies that have participated in electronic voting platforms (ICJ platform), 6 showing an increase by over 200 companies in the last year, reaching 807 as of the end of March The companies operating the electronic voting platforms (i.e., ICJ, Inc.) have been developing campaigns as needed to attract the attention of companies, asset managers and asset owners, to 6 An electronic voting platform operated by ICJ, Inc. (a joint venture company funded by the TSE and Broadridge Financial Solutions, Inc.), one of the infrastructures on which institutional investors (mainly asset managers) are able to exercise voting rights; the only platform currently connected to systems of the transfer agents that ultimately aggregates voting results. 7 The number of participating companies is estimated to be as of the end of June

6 the effectiveness of using the platform. In addition, in January 2017, the TSE issued a document encouraging TSE-listed companies to participate in the platform. Stakeholders have started discussions on establishing a new system in which asset managers based in Japan are able to reduce the administrative burden associated with voting instructions (using a one-stop service). ICJ, Inc. and Institutional Shareholder Services (ISS) discussed system interconnection of electronic voting platforms. Master trust banks and ICJ, Inc. had previously outlined a series of procedures in which asset managers receive the consent of asset owners concerning the use of electronic voting platforms. In addition, it was confirmed that as a future direction, asset owners basically agree on the use of electronic voting platforms on the request of institutional investors. However, in the past year, only one asset manager based in Japan has newly started using an electronic voting platform. Furthermore, among institutional investors not currently using any electronic voting platforms, approximately 40% (about 30 companies) say they will use or consider the use of electronic voting platforms. 8 [Evaluations by the study group members and stakeholders] The increase in the number of companies participating in electronic voting platforms has been improving the environment in which institutional investors can exercise their voting rights (in particular, those based overseas) (e.g., expansion of the period for such investors to deliberate on shareholder meeting agendas by extending the closing date for votes, and providing user-friendly procedures for voting again). In addition, this trend has been creating potential for companies to smoothly ascertain the results of votes and to hold dialogues with shareholders based on the results. Providing additional information based on voting trends works effectively, as seen in a case where institutional investors shifted their votes for shareholder meeting agendas from against to for after accessing additional information provided by companies. (Company participation in electronic voting platforms may allow institutional investors to easily vote again before the date of general shareholder meetings. Many companies not participating in such platforms find it difficult to provide shareholders with opportunities to change their votes since such companies cannot provide additional information based on voting trends before the closing date for voting; and, even if they can, the procedures often become troublesome for institutional investors because of difficulty of voting again.) Moreover, the study group members expressed their wishes for electronic voting platforms as follows: More overseas institutional investors are requesting that they want to ascertain whether or not companies have appropriately received or accepted and aggregated their votes. To meeting these needs, more and more companies are expected to participate in electronic 8 Source: Third Questionnaire Survey for Responses to and Other Measures for the Japanese Stewardship Code, conducted by Japan Investment Advisers Association, Tokyo (JIAA) in December

7 voting platforms. A new service targeting companies participating in electronic voting platforms is under consideration. Separate from actions related to the regular flow of electronic voting, this service only discloses the results of votes cast by institutional investors at shareholder meetings to the respective companies to which the investors have voted. This effort is desirable from the viewpoint of promoting their dialogue and is also expected to work as an incentive encouraging companies to participate in electronic voting platforms. Meanwhile, some stakeholders point out that the current situation, where an insufficient number of companies utilize electronic voting platforms, may limit the effectiveness for asset managers based in Japan to use these platforms because of duplicated flows for the votes. Moreover, some asset managers say they feel uncomfortable requesting consent for the use of such platforms from asset owners that are their customers. In response, the study group members representing companies stated the following: Institutional investors located in Japan are recommended to engage in efforts for improving the quality of voting procedures through electronification of the voting process, under the Japan s Stewardship Code. Such platforms will aid institutional investors through early provision of information on shareholder meeting agenda items, expansion of the period for shareholders to deliberate on agenda items and providing shareholders with user-friendliness in casting and changing votes. Institutional investors located in Japan are also recommended to use such platforms to enhance the effectiveness of companies efforts such as early postal-mailing and early online publication of shareholder meeting notices, and company participation in electronic voting platforms. Concerning procedures for electronification of voting processes, the study group members also discussed a case overseas where custodians, not asset managers, receive consent of electronic voting from asset owners, and pointed out that this is an interesting case as a win-win approach to making administrative practices of custodians more efficient and reducing fees for asset owners, and they wondered whether Japan might be able to advance the use of such platforms through a similar approach. Some institutional investors consider they will make efforts to proceed the consent of asset owners for the use of electronic voting platforms to exercise those voting rights through such platforms if system interconnection among platform systems makes significant advances. The study group members also discussed whether or not Japan should immediately require issuing companies to participate in electronic voting platforms as a measure for advancing the electronification of voting. 9 9 Some of the study group members proposed that Japan should require issuing companies to participate in electronic voting platforms while providing a grace period thereof, based on the fact that all TSE-listed companies are target companies of institutional investors operating passive management strategies and on the network externality (a structure in which the effectiveness of company or investor participation relatively 7

8 Participants further discussed that, in any case, the great significance in the electronification of processes for exercising voting rights lies in its potential to enhance efficacy for institutional investors in exercising voting rights and to further improve dialogue between companies and shareholders/investors, including approaches to providing investors with environments in which they can effectively decide on substantial shareholder meeting agenda points and not merely on formalities. Following this, they expressed their expectations for the steady advancement of discussions and efforts for promoting electronification. They also proposed that, to this end, Japan should provide opportunities for a variety of stakeholders to frankly exchange views and deepen discussions to streamline advantages for all related parties, assess obstacles in advancing electronification of processes for exercising voting rights, and set methods of overcoming the obstacles. Future Directions of the Efforts Expected The great significance in the electronification of processes for exercising voting rights lies in its potential to enhance efficacy for institutional investors in exercising voting rights and to further improve dialogue between companies and shareholders/investors, including approaches to providing investors with environments in which they can effectively decide on substantial shareholder meeting agenda points. Bearing in mind the study group s proposals, companies, investors, dialogue-supporting industries and other stakeholders are expected to advance efforts for: encouraging listed companies and domestic institutional investors to participate in and use electronic voting platforms; interconnection of electronic voting platform systems; and, providing user-friendly procedures for using electronic voting platforms. The study group considers the approach of providing the variety of stakeholders related to exercising voting rights with opportunities to frankly exchange views so as to advance these efforts to be a valuable approach. decreases if another company decides to not participate in the platform). Meanwhile, participants also pointed out the fact that obligations under the listing regulations cannot be enforced on institutional investors (asset managers, etc.) in order to compel them to use the platform and that Japan should hold discussions on designing a system to control private entities that operate platforms and compel such investors to use the platform, while controlling commercial business in the private sector is not easy. 8

9 Study group proposal 3: Appropriate setting of record dates for shareholder meetings Discuss necessary measures for addressing situations where the record date for exercising voting rights is prescribed differently from the closing date of financial accounts Discuss sophisticated mechanisms for smoothly communicating changes in the record date to stakeholders, etc. [Current state of stakeholders efforts] In October 2016, Zenkabukon released a proposal report consisting of a compilation of discussion results concerning administrative measures taken by companies in the case where they prescribe a record date for exercising voting rights that was different from the closing date of financial accounts and hold shareholder meetings on a date within three months from the record date for exercising voting rights so they are able to secure a sufficient period for shareholders to deliberate on shareholder meeting agenda points between the closing date and the date of the shareholder meetings (Zenkabukon report titled Toward Constructive Dialogue between Companies and Investors: Efforts for Promoting Dialogue and Future Challenges Therein). The report includes key points that companies should note, e.g., specific examples of shareholder meeting agenda points for changing the articles of incorporation, examples of schedules involving the change of the existing record date, and notifications sent to related organizations. Moreover, in February 2017, Zenkabukon also decided and released changes for the series of the Collection of Models Concerning the Articles of Incorporation. FY2017 Tax Reform describes Japan s effort for the revision of the corporate and other tax declaration deadlines as one of the efforts to improve the environment for corporate governance reform and business restructuring. This revision will allow companies to extend the declaration deadline for corporate and other taxes if such companies, which set March 31 as the closing date of financial accounts, for example, decide to hold a shareholder meeting on a certain date in July which falls after the three-month mark from the closing date of financial accounts in March of the same year. 10 [Evaluations by the study group members and stakeholders] In addition to the efforts involving early online publication of shareholder meeting notices (prior to sending them by postal mail) and the encouragement of more companies to use electronic voting platforms, it is effective for companies to set a record date for exercising voting rights which is different from the closing date of financial accounts; and to hold such meetings within three months from the record date (that is, to hold such meeting at the date beyond three months 10 In April 2017, METI released key points to be noted in filing a request to employ the special provisions extending the declaration deadline of corporate and other taxes. ( 9

10 from the closing date of financial accounts) so as to secure a sufficient time period from the record date to the date of shareholder meetings, to allow shareholders to deliberate on shareholder meeting agenda points and ensuring the quality and quantity of information provided to shareholders before holding shareholder meetings. These efforts will enhance the quality of dialogue between companies and shareholders. As for these efforts, the concrete administrative measures of changing the record date of voting rights are revealed, and the government of Japan, has established the special provisions extending the corporate tax declaration deadline. These are expected to contribute to advancement in the development of an environment in which companies are able to smoothly change the record date of exercising voting rights and the date of shareholder meetings if they decide these actions are appropriate. Meanwhile, from the company perspective, while recognizing the challenges caused by an increasing number of shareholder meetings occurring in Japanese companies over a shorter time frame in a concentrated manner, respective companies have been engaging in a variety of year-round efforts to enhance the quality of dialogue with shareholders, e.g., activities involving investor relations (IR) and early online publication and early sending of shareholder meeting notices. They have also been making efforts to set respective schedules for the operation of shareholder meetings through consistent administrative advances. However, changing such schedules requires companies to make additional efforts, including announcing the changes to the majority of their shareholders. Participants pointed out that these may cause companies to consider it unnecessary, or decrease the priority of changing the record date for exercising voting rights, as seen in the results of the questionnaire survey. 11 In response, the study group members stated the following: The number of opportunities for investors to hold dialogues with companies has dramatically increased throughout the year. However, as long as many companies continue holding shareholder meetings in a shorter time frame and in a concentrated manner, the schedules of their dialogues are also concentrated throughout a year. This will make difficult to improve the quality of dialogue which should be held on a year-round basis. As seen in ACGA s written opinion, 12 some overseas institutional investors consider that in Japan, the time period from the record date to the date of shareholder meetings before exercising voting rights is relatively short compared to that in other countries, and they are concerned that this fact may have negative impacts on corporate governance of Japanese companies. As the quantity and complexity of auditing requirements increases, some of companies will encounter a limit to their ability to prepare highly-reliable information, due to limitations in 11 Source: Results of the Questionnaire Survey for Companies Concerning Appropriate Setting of a Record Date Related to Shareholder Meetings (Summary), prepared by METI and Kabukon Tokyo in February Source: Response from the Asian Corporate Governance Association (ACGA) to a committee studying the annual shareholder meetings of Japanese companies, METI (December 2014) 10

11 human resources. For these companies, it is important to have a sufficient period of time between the closing date of financial accounts and the shareholder meeting date. Under the Japan s Stewardship Code, scheduled to be revised soon, the institutional investors should, in principle, publicize the results of voting rights exercised by each company and each shareholder meeting agenda. Asset managers that comply with this provision are therefore more likely to accelerate voting procedures in an automated and formulated manner. From the viewpoint of addressing this concern, changing the record date is one of important options, as well as providing shareholder meeting notices at an earlier time, which will secure the sufficient time for shareholders to deliberate on the agendas and improve the situations which shareholders meetings are held in a highly concentrate manner in June. Increasing the time between shareholder meeting dates will also help individual shareholders with multiple stock brands will be able to easily adjust their schedules to attend multiple shareholder meetings, if the situations which shareholder meetings are held in a concentrate manner in June are improved through changing the record date of exercising voting rights. Future Directions for the Efforts Expected Companies efforts to set record dates of exercising voting rights at different times from the closing date of financial accounts in order to ensure adequate periods from closing dates of financial accounts to shareholder meeting dates will secure sufficient time for shareholders to deliberate on shareholder meeting agendas and secure a period for them to hold dialogue with companies. It will also encourage shareholders to exercise their voting rights based on more substantial information. These efforts are expected to contribute to enhancing the quality of year-round dialogues. Keeping in mind the study group proposals, it is expected to advance the development of environments in which companies making efforts to hold enhanced dialogues with shareholders/investors are able to appropriately set schedules for shareholder meetings to the best of their ability in line with their particular situations. 11

12 The Study Group on Promoting Electronification of Processes for Shareholder Meetings List of Members <Chairman> <Members> Yasuhiro Osaki Katsumi Ao Takashi Ameshima Takeyuki Ishida Ryoko Ueda Akitsugu Era Sadakazu Osaki Minoru Ogiso Yuji Kuramoto Mach 31th, 2017 (Without honorifics/ Japanese alphabetical order) Professor of Law,Faculty of Law, Waseda University Executive Officer, Listing Department, Tokyo Stock Exchange Vice President, Head of Investor Relations Nippon Telegraph and Telephone Corporation Executive Director, Institutional Shareholder Services Senior Research Fellow, Japan Investor Relations and Investor Support, Inc. Director, Head of Investment Stewardship, BlackRock Japan Co., Ltd. Head of Research at Nomura Research Institute s Center for Strategic Management and Innovation. Vice General Manager, Public Policy Office, Rakuten, Inc. Head of Stewardship Daiwa SB Investments Ltd. Minoru Sawaguchi Partner, Attorney at Law, Mori Hamada & Matsumoto Yoshiko Takayama Managing Director, J-Eurus IR Co.,Ltd. Kazuhiro Takei Wataru Tanaka Masataka Nagaike Junko Nakagawa Hiroko Nomura Chisa Hayakawa Shozo Furumoto Hisashi Hotta Partner, Attorney at Law, Nishimura & Asahi Professor of Commercial law, Institute of Social Science, The University of Tokyo The chairman of the Zenkabukon (Senior advisor, BANDAI NAMCO Holdings Inc.) Senior Managing Director, Nomura Holdings, Inc. Professor, Shukutoku University College of Humanities School of Expression Studies Executive Officer, IR and Strategic Planning Group Calbee, Inc. Executive Officer, Head of Legal Division Nippon Steel & Sumitomo Metal Corporation Senior Vice President, Head of Operations Team Ⅱ Custody & Proxy Office, Settlement & Clearing Services Department, Mizuho Bank, Ltd. 12

13 Hideyuki Matsui Masao Yanaga Haruhiko Yamada Takuya Wakiyama Professor, College of Law and Politics, Department of Law, Rikkyo University Professor of Law and Accounting Graduate School of Business Sciences University of Tsukuba Deputy President, The Japanese Insutitute of Certified Public Accountants Senior manager, Corporate Consulting Services Division, Mitsubishi UFJ Trust and Banking Corporation <Observers> Toshikazu Takebayashi Counsellor, Civil Affairs Bureau, Ministry of Justice Yasumasa Tahara Director, Corporate Accounting and Disclosure Division, Financial Services Agency (FSA) <Secretariat> Corporate Accounting Disclosure and CSR Policy Office, Economic and Industrial Policy Bureau, Ministry and Economy, Trade and Industry (METI) Junko Hioki Eri Tozawa Hiroki Sugino Daisuke Hanamura 13