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TOKYO (Jiji Press) — An increasing number of Japanese companies now allow shareholder voting rights to be exercised electronically in the run-up to shareholders’ meetings, to help facilitate efficient and effective communications.
According to ICJ Inc., a Tokyo Stock Exchange Inc. affiliate that operates a platform for the electronic execution of shareholder voting rights, 1,690 listed companies had participated in the ICJ platform by the end of March, marking a sharp increase of 469 from a year before and accounting for 44.9% of all companies listed on the TSE.
ICJ aims to attract more companies to the platform by highlighting its benefit of promoting dialogue with shareholders.
One institutional investor started using the ICJ platform several years ago, after about half of the 1,500 or so companies in which it owned equity stakes had participated in the platform.
Previously, the investor sent documents by mail to trust banks involved in the administration of shareholders’ meetings to show how it intended to vote on proposals by company management at the meetings. Mail-in shareholder votes need to arrive at trust banks by about a week before the meetings.
As the institutional investor exercises voting rights for more than 1,000 companies in just one month before a host of Japanese companies hold annual shareholders’ meetings in late June, the huge workload of reviewing management proposals and processing related paperwork weighed heavily.
With the electronic platform, the institutional investor has until immediately before the shareholders’ meetings to consider management proposals carefully and make informed decisions. An official welcomes the increase in the number of companies participating in the platform, saying, “We are now able to work more smoothly.”
In 2020, it came to light that Sumitomo Mitsui Trust Bank and Mizuho Trust Bank had erroneously excluded some mail-in shareholder votes from counting at annual meetings due to confusion stemming from special delivery arrangements with Japan Post Co. designed to streamline work during the hectic period when shareholders’ meetings are concentrated.
The merit of the electronic platform goes beyond the elimination of tasks to process mail-in votes. It also allows listed companies to learn the intentions of shareholders quickly and fine-tune their responses including by providing additional explanations on the purposes of management proposals. For their part, shareholders can gain opportunities to better understand management’s aims.
The rapid increase in the use of the electronic platform can be attributed to a revision of the corporate governance code. In the 2021 revision, the TSE urged companies listed on its Prime top-tier section to participate in ICJ’s electronic platform.
Overseas, electronic voting solutions have been adopted widely, according to Yutaka Suzuki, an analyst at Daiwa Institute of Research Ltd. who is familiar with corporate governance and shareholder behavior. “Japanese companies are catching up with the times,” Suzuki said.
Still, many smaller companies have not gone digital yet. Only 99 companies listed on the TSE’s Standard section for midsize companies have taken part in the ICJ platform and 24 companies on the Growth section for start-ups.
On the shareholder side, 47 Japanese institutional investors have started using the ICJ platform, with the number increasing steadily every year. But Daiwa’s Suzuki said, “Further promoting use by institutional investors is a major challenge.”
