Japan ministry to urge firms to consider candidates for president with outside experience

The Yomiuri Shimbun

December 5, 2021

The Economy, Trade and Industry Ministry plans to draw up guidelines to strengthen corporate management and human resource strategies, encouraging companies to consider candidates for the post of president who have management experience outside the firm, The Yomiuri Shimbun has learned.

The ministry will also consider urging companies to openly advertise for key positions within the company.

It hopes to raise the competitiveness of Japanese companies by forcing them to drastically review their personnel systems, which often rely too heavily on seniority, according to sources.

The ministry, which plans to announce the guidelines around next spring, will set up an expert panel, the “future human resources council,” early this month to discuss the issue. It intends to help reform corporate management systems by providing nonbinding guidelines, sources said.

To train successors to management, the ministry will consider urging companies to select young people to be involved in management affairs, and to require prospective executives to gain managerial experience at other companies.

In addition to calling for the assignment of a chief personnel officer responsible for strategic human resource management, the ministry will also encourage companies to appoint an outside director as the chairperson of the nominating committee that decides on candidates for the board of directors.

According to consulting firm Strategy&, only 18% of newly appointed chief executive officers of Japanese companies have spent part of their careers at other companies.

In contrast, 94% of U.S. and Canadian companies have CEOs with experience working for other companies, as do 86% of European companies. Many firms in those countries make such experience a requirement for top jobs.

Given the need to respond to rapidly changing business environments amid trends such as digitization and decarbonization, the ministry is looking to increase the number of executives in Japan who have a gained a broad perspective through experience at other companies.

The ministry will also ask companies to provide employees with more opportunities to improve their knowledge in a bid to keep up with changes in society and technology — such as by allowing employees to take a sabbatical, which is a popular practice in North America and Europe, according to the sources.

With the working-age population poised for rapid decline, the ministry will press companies to actively invest in human resource development in order to improve employees’ skills and promote flexible work styles.