06 Mar 2020 3 min read

Japan cannot be an island on board diversity

By Aina Fukuda

We have extended our voting policy on female representation on boards to Japan, as we expect companies in all regions to make progress on this strategic business issue.

Mount Fuji Japan

There aren’t any in the S&P 500. There is one in the FTSE 350. But there are 164 in the TOPIX 500.

These numbers refer to the companies in each index with all-male boards[1], marking Japan as an obvious outlier in this regard. We plan to use our voting rights as a major shareholder to change this regrettable situation, while continuing to press companies in other regions to do more on this issue too.

We announced last month that we would be escalating our voting policies in Japan by moving to vote against all companies in the large-cap TOPIX 100 index – where we have the greatest voting weight – that do not have at least one woman on their board.[2] At present, this will affect 22 companies in that index.

We believe that enhancing female representation in this way will encourage both board diversity and director independence, which we have long argued brings a host of benefits to companies and their investors.

A company’s success or failure is largely determined by the quality of its leaders’ decision-making, and we believe that for companies to make the best decisions a diverse range of viewpoints is needed. Increasing the diversity of leadership teams leads to greater innovation, lower risk profiles, and in turn better financial performance.

At LGIM, we first implemented a voting policy on board diversity in the UK in 2015 by voting against the largest 100 UK companies with all-male boards. Today, we also vote against FTSE 350 constituents if their boards are less than a quarter female as well as the largest 100 companies in the S&P 500 and S&P TSX indices if female representation on their boards is below 25%. With the latest update to our policy in Japan, we will now be voting against all-male boards globally.


Overall, the percentage of female board members in the FTSE 350 and S&P 500 is 30% and 27% respectively. For the TOPIX 100, although it climbed into double digits for the first time in 2019, it is just 10.1%.

We understand that change takes time but, while we are seeing positive steps in Japan, more needs to be done – just as it still does in the UK and US, where we are continuing to vote for greater board diversity. In Japan, we are applying this change of voting policy to the TOPIX 100 initially, but we will consider expanding its scope to a greater number of Japanese companies to further push the diversity agenda going forward.

This will build on the success we have already achieved through engagement in Japan. In 2019, we focused on improving gender diversity at board, executive and management levels in 19 large Japanese companies. We pushed these businesses to appoint at least one woman to their board and implement a policy outlining how they would increase female representation at all levels of seniority through clear aspirational targets. Following this engagement, 12 of these firms had improved their gender diversity score by September 2019 compared with 2018.[3]

Well functioning, independent boards are key to long-term investment performance. As stewards of our clients’ capital, we want to ensure we are holding companies to high standards, and that we speak with one voice in encouraging markets to align with global best practices.


[1] Interestingly, the last company with an all-male board in the FTSE 350 – Daejan Holdings – is expected to be taken private.

[2] This only includes board of directors, not kansayaku (or statutory auditors).

[3] The gender diversity score, which is a subset of the LGIM ESG score, is measured by the ratio of women board members, women executives, women managers and women employees.

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