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Asset managers pressure Japanese companies to include more outside directors

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Asset managers pressure Japanese companies to include more outside directors

A number of asset management companies in Japan are flexing their influence over the firms they invest in by calling for more outside board members, among other recommendations, The Nikkei reported June 14.

JPMorgan Asset Management plans to oppose the appointments of president and other representative directors if firms do not appoint outside members to make up at least one-third of the board. Domestic asset managers are also weighing in on the matter. Mitsubishi UFJ Trust & Banking Corp. plans to oppose the appointment of all board members if companies do not have at least two outside directors. Sumitomo Mitsui Trust Bank Ltd. will follow JPMorgan in opposing the appointments of board members at parent entities unless the board is made up of one-third outside directors.

Tokio Marine Asset Management Co. Ltd., meanwhile, is more concerned with corporate governance and is planning to oppose appointments of outside directors who have been in office for more than 10 years to prevent potential bias and conflicts of interest among board members.

The average percentage of independent outside board members at 100 major Japanese companies that make up the Tokyo Stock Price Index 100 is 33%, compared with 85% in the U.S. and 61% in the U.K.

Daiwa Asset Management Co. Ltd. said diversity in terms of gender, nationality and age is a major challenge for boards.

Nikko Asset Management Co. Ltd. is calling for the reduction of cross-held shares when its investee companies are delivering poor returns on equity. The revised governance code will require listed companies to cut their shares held in other companies.