Japan’s corporate boards are coming under increasing pressure from shareholders to be more transparent regarding the salaries and roles of former executives.
For more than 20 years, boards in Japan have allowed former board directors to stay with a company as “advisers”, and without disclosing their exact role to the board or investors.
Many former executives have previously stayed with companies, getting paid high salaries with the same perks they had when they were working on the board or in the C-suite.
But after much criticism, the winds are now changing, with investors of companies in Japan insisting that this type of corporate governance is unfair, and that former executives’ titles and pay should be disclosed to the public.
Japan’s largest drugmaker, Takeda Pharmaceutical, recently sent a letter to shareholders stating that its retired chairman will stay on as an adviser, but will only earn 12% of his current compensation without a bonus, corporate secretary or a car. The company also made it clear, in a public statement, that the former chairman will only play a “limited role”.
Although Takeda is one of the first firms to take action against former executives sticking around with high salaries, other companies in Japan are beginning to follow suit, such as Sony Corp and Tokyo Electric Power Company.
Firms listed on Tokyo’s Nikkei 225 index have the lowest median proportion of independent directors (25%) and female directors (0%), and the oldest average age (63.1 years) among developed-market peers, according to an estimate by Bloomberg Intelligence.