TOKYO -- A growing number of Japanese companies are eliminating counselor and adviser positions, typically given to retired executives, as shareholders led by overseas institutional investors call for greater transparency in Japan's corporate governance.
Earlier this month, Japan Tobacco and food processor Kagome announced plans to abolish advisory posts, saying shareholders were unconvinced they were needed. The decisions will take effect with shareholder approval following the companies' annual shareholders meetings in March.
In January, trading house Itochu said it will eliminate its adviser positions.
Japanese companies often appoint former presidents or chief executives as counselors and advisers after they retire. The positions are, in effect, a way to keep paying corporate leaders after retirement, partly because Japanese executives are not paid as highly as their U.S. or European counterparts.
These positions are not defined under Japanese corporate law, and the roles, responsibilities and remuneration are often opaque. Abolishing these positions could lead to higher salaries for senior executives while they are in office.
After an accounting fraud was uncovered at industrial conglomerate Toshiba in 2015, concerns grew among shareholders over the possible involvement of advisers in corporate wrongdoing.
Last year, a number of companies faced shareholder resolutions demanding that advisory posts be scrapped. Shiseido, a cosmetics company, J. Front Retailing, which operates Daimaru and Matsuzakaya department stores, and electronics and chemical maker Nisshinbo Holdings all moved to abolish such posts.
The positions of counselor and adviser are also useful ways for new CEOs to ease their predecessors onto the sidelines. One company CEO said he asked his predecessor not to move up to chairman, but to become a non-executive adviser instead. As part of the deal, the predecessor would be paid a salary equivalent to that of chairman.
Since January, listed companies have been asked to provide the Tokyo Stock Exchange with information on the duties and compensation of their advisers.
Atsushi Osanai, professor at Waseda University Business School, questions whether such moves are a good idea.
"Unlike Western companies, Japanese companies have retirement ages. The counselor and adviser positions were a way to retain talented executives -- often with a wide, deep network of contacts -- in the company," he said.
Osanai notes that it is common for employees to spend their entire careers at one company, and very rare for a CEO to be scouted to another company in a similar top position.
"Without a fluid market for senior talent, abolishing the counselor and adviser positions could hurt rather than help companies," he said.
Nikkei Asian Review Chief Desk Editor Ken Moriyasu contributed to this report.