25 Jun 2020 4 min read

Japan’s AGM season: A year like no other

By Aina Fukuda

COVID-19 has only amplified the importance of issues related to ESG and resilience, so we will remain committed to our stewardship policies in Japan.



The Japanese government’s emergency declaration[1] on the COVID-19 pandemic was made precisely one week after 31 March, the year end for two-thirds of listed Japanese companies.

Given the impact of these emergency measures on reporting and audits, companies that are unable to report audited financial statements by their annual general meeting (AGM) have been given the option of either postponing or adjourning their meeting.[2]

Some investors have also made changes to their voting policies in light of the pandemic’s impact on businesses. We will explain below what we have suggested to companies and why the crisis hasn’t led us to make any changes to our voting policies.

Postpone or adjourn: What have we suggested that companies do?

By 11 May, 539 companies had announced delays to their preliminary earnings reports, which are typically released in mid-May. However, at the time of writing, only 60 companies have officially announced they will postpone their AGMs – 70-80% of which are normally held in late June – to July, August, or September.

Another 30 or so are considering the adjournment option, whereby there will be a meeting in June before any audited financial statements are available.[3] Under this arrangement, investors will need to cast their votes in the first meeting on the usual range of resolutions related to directors, dividends and other issues. The meeting will be reconvened later in the year as a formality to confirm the audited financial statements, but there will be no voting.

For companies experiencing pandemic-imposed audit challenges, our suggestion has been to postpone their AGM and hold one meeting later in the year.

Put simply, we don’t think AGMs can take place until audited financial statements and all other documentation are provided to investors. It is important to note that preliminary earning results are not technically subject to an auditor’s opinion and therefore do not suffice as an alternative to the audited financial statements.

Does this mean we want auditors to rush their work regardless of the extraordinary circumstances? Quite the opposite. Pressures on audit firms in the form of tight deadlines threaten audit quality, and we can’t take that risk. Understandably, this year’s audits[4] – particularly for companies with large overseas operations – have been impacted by travel restrictions and lockdown orders around the globe. We have called on companies to cooperate to allow auditors to carry out their duties without compromising their quality. In our view, a postponed AGM where investors have access to the audited accounts is a much better option than running the risk of relying on a potentially flawed audit.[5]

To all companies, particularly those that feel compelled to hold their AGMs as planned, we highlight our policy: ‘High-quality audits are valued by investors and should be considered an asset rather than a cost to the business.’

Will COVID-19 impact the way we vote this year?

The pandemic has not resulted in any changes to our voting policies. This is because our stewardship activities have always been designed with a long-term lens. We will not be lenient in applying any of our existing voting policies because the crisis has only amplified the importance of issues related to environmental, social, and governance (ESG) considerations and resilience.

For over a decade, we have been a strong advocate for good corporate governance in Japan and globally. Board independence and diversity are examples of matters that are more relevant than ever as boards strive to navigate these uncertain times and emerge more innovative and resilient than before.

We will, for example, vote against the most senior member of the board or the nomination committee chair of Japanese companies when:

  • There are no women on the board[6]
  • Less than one-third of the board is independent

While some investors have relaxed their return on equity (ROE) expectations this year, LGIM has neither historically nor currently applied a voting policy on ROE. As long-term investors, we believe this metric does not fundamentally address the issues for Japanese boards and their ability to be successful for the long term in this globally challenging environment.

We will continue to vote on issues that we believe are important in the long term, but in order to make informed voting decisions we need to be able to consult the audited financial statements and business reports. When this is not the case, we will vote against management due to a lack of disclosure in accordance with our standard voting policy. This may include voting against dividends, director and statutory auditor elections, and pay.

In our next blog on Japan’s AGM season, we will look ahead to next year and beyond.



[1] The state of emergency was initially declared for seven prefectures including Tokyo and Osaka and then expanded nationwide nine days later. The emergency declaration has since been lifted.

[2] Deadlines for the preliminary earnings results as well as for the Annual Securities Reports (“Yuho”), quarterly and other reports have been extended.

[3] We will discuss the issue of the “first” and “second” audits in a subsequent blog.

[4] Additionally, the Japanese government at one point requested cutting commuting by 70%. Such restrictions have shed light on the problem of traditional audit procedures, which have included onsite inspections (“jissa”), physical inventory observations (“tachiai”), and other paper-based confirmations (“kakunin”).

[5] This is why we welcomed the statements by the chair of the Japan Institute of Certified Public Accountants (JICPA), which encouraged companies and audit firms to take a flexible approach in performing and scheduling audits and AGMs this year.

[6] In 2020 this is applicable to the TOPIX 100 but the scope will be expanded over time.

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