TOKYO -- Companies in Japan will be encouraged to set voluntary targets for female and foreign managers and provide information on their progress under a revised corporate governance code due out in the spring of 2021.
The change was included in a draft of the new code released Tuesday by a panel commissioned by the Financial Services Agency and the Tokyo Stock Exchange.
With the coronavirus crisis clouding the outlook for business, the goal is to push companies to consider a diverse range of viewpoints to help make speedy decisions.
While the code is not legally binding, businesses that fail to follow it are required to provide an explanation, which in effect puts some force behind it. Released in 2015, it is considered a landmark change for a corporate governance in a country that critics long said neglected shareholder interests in favor of entrenched managers.
After further discussion early next year, the TSE aims to revise the guidelines in March and begin applying them to publicly listed companies in June.
The push for greater management diversity is in keeping with Prime Minister Yoshihide Suga's call for corporate reform in an October policy speech. "To spur further growth, we will promote appointments of women, non-Japanese, and midcareer professionals and advance reforms with a view to realizing diverse workplaces and unfettered management," he said.
The higher expectations for Tokyo-listed companies will align with a reorganization of the exchange into three sections in April 2022. The first of these new sections, tentatively named the "Prime Market," will carry over some of the current big board, which critics say is too bloated.
Companies on the new first section will need to have independent outside directors make up at least a third of their boards, up from the current recommendation of at least two members.