The Tokyo Stock Exchange is asking companies that list on it to name independent directors and give others a bigger voice in corporate oversight, said Atsushi Saito, the chief executive officer of the bourse.
“Corporate governance is a key to a market-oriented economy,” Saito, the 70-year-old head of the Tokyo Stock Exchange Group Inc., said yesterday at the Federal Reserve Bank of San Francisco’s Asia Banking and Finance Conference. “This is a new style of corporate governance in Japan.”
Saito said the exchange is asking listed companies to invite an independent director to serve on the board, and give employees and bondholders, as well as other stakeholders, more influence in company affairs. Shareholders are not an effective watchdog because they are often happy as long as the stock price increases, he said.
“Stakeholders should make up a democratic structure,” Saito said. “They should watch the company.”
The TSE’s policy to urge companies to broaden their oversight base follows an upgrade to its trading platform. In January, the exchange introduced the Arrowhead system that slashes to five milliseconds the time needed to process orders, from two to three seconds previously.
In December 2009, the exchange was ordered to pay 10.7 billion yen ($116.6 million) in damages to Mizuho Securities Co. because the TSE’s system in December 2005 failed to promptly accept the brokerage’s cancellation of a faulty sell order.
Japan’s Nikkei 225 Stock Average has fallen 16 percent from this year’s peak on April 5 as credit-ratings downgrades of Greece, Portugal and Spain added to concern the European governments will struggle to fund budget deficits and derail the global economy.
In May, Saito said in a Bloomberg Television interview that plunging stock prices caused by Europe’s debt crisis will slash the number of new listings on the Tokyo bourse to about 50 this year, or half the number he projected in December. The exchange, still private, is considering an IPO of its own, which may come as soon as this year.