13 Nov 2023 3 min read

Highlights from Japan’s AGM season

By Aina Fukuda

We saw improvements in board independence and diversity, more investors holding directors accountable, and another record year of shareholder activism. Here’s how we’re voting to push for progress on key governance and environmental topics.


Board independence and diversity

The independence and diversity of Japanese boards is improving, but companies in the country continue to lag behind developed market peers on these metrics. We’ve had voting policies in place on Japanese board independence since 2010 and diversity since 2020; both topics remain priorities for us.

In addition to voting against certain director candidates on independence grounds, we vote against the re-appointment of the most senior member of the board or the nomination committee chair unless: 

  • The board includes at least one-third independent outside directors. For listed subsidiaries with a controlling parent company, an ‘against’ vote will be applied unless the majority of the board are independent outsiders
  • For TOPIX 100 companies, at least 15% of the board are women. For companies listed on the Prime Market and not included in the TOPIX 100, an ‘against’ vote will be applied unless the board includes at least one female director

Between April and June of 2023, we voted against more than 700 directors in Japan on board independence grounds and 83 due to board diversity concerns.

We will continue to tighten our policies on board independence and diversity, paying attention to features specific to the market, in order to ensure a company’s nomination and selection process is well thought out.

Our engagements with Japanese companies and other stakeholders will also aim to agree on a tightened definition of independent directors (we often don’t agree with a company’s definition of independence) and to push for more independent directors to chair the board and committees.

Diversity and inclusion across every level of the organisation – not just at board level – also remains a priority. In future, we hope to see more women with senior management experience appointed to the board through promotions from within the company.

Director accountability

An increasing number of investors, both domestic and foreign, are using their votes against management to signal disapproval over issues such as board effectiveness and capital management.

In the TOPIX 500, the number of top management (president or chairman) with a rate of support below 80% has increased almost fivefold in the past decade.

One particular chairman received a level of support of just 50.6%, marking a significant decline in support over the past two years (he received 75.3% support in 2022 and 89.8% in 2021).1 LGIM has been voting against the re-appointment of this individual due to board independence concerns for over 12 years and additionally due to a lack of board diversity since 2020, the year we introduced a board diversity voting policy in Japan. With this company subsequently announcing a female director candidate to be formally appointed at the 2024 AGM, there will be no more all-male boards in the TOPIX 100.

Another record number of shareholder proposals

In 2023, more than 300 shareholder proposals were filed in Japan, tripling in number over the past decade. Proposals were primarily related to director appointments, shareholder returns, and other governance issues such as board independence and remuneration disclosures.

Shareholder resolutions also saw an upward trend of votes against management. This quarter, an average 16% of votes supported shareholder resolutions against management recommendations, compared with 11% in the same quarter in 2022 and 10% in 2021.2

Among the largest 500 companies, we also counted 21 climate-related shareholder proposals, a growing feature at AGMs.

As in the past, none of them passed. But they should nonetheless be attracting management attention, with two-thirds receiving more than 10% support, including four with over 20% support. LGIM supported many of these proposals, including all 11  that called for enhanced disclosures around fossil fuel and other climate-related issues.

The focus of climate-related proposals in previous years in Japan has typically been on coal exposure of the utilities, energy and financial sectors. This year, however, we also saw a shareholder proposal filed at an auto company regarding climate lobbying disclosure, which LGIM supported and pre-declared in line with our published stance.  

We are committed to using our influence positively and advocate for ambitious climate policy and responsible corporate climate lobbying, which we believe are essential to keeping hope of a 1.5⁰C world alive.

We will be publishing additional blogs on Japan to explore some of the topics discussed above in more detail.


1. Source: ISS TOPIX 500 data as at October 2023.

2. Source: Ibid.

Aina Fukuda

Head of Japan Investment Stewardship

Based in Tokyo, Aina leads LGIM's stewardship efforts in Japan. Working with colleagues in London and Chicago, she engages directly with companies, regulators and other investors on a range of issues, including climate change, biodiversity, board governance, and diversity. Prior to joining LGIM in 2019, she was a sustainability consultant at PwC Japan where she helped build the firm’s corporate sustainability advisory practice. Aina serves as the Deputy Chair of the Asian Corporate Governance Association (ACGA) Japan Working Group, which comprises 29 members with a combined global AUM of more than US$20 trillion. She also sits on the SASB Standards Advisory Group and represents LGIM at a number of organisations, such as the 30% Club Japan Investor Group and Japan Climate Leaders’ Partnership (JCLP). She is a licensed Certified Public Accountant (CPA) in the USA. Outside work, she enjoys spending time in nature and at the Aikido dojo.

Aina Fukuda