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Toshiba needs ‘quick and proper’ disclosure, says TSE chief

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TOKYO – The Tokyo Stock Exchange (TSE) wants Toshiba Corp to make a “quick and appropriate” disclosure on its growing governance scandal, including who was responsible, the course director said, adding that transparency remains an issue. .

Hiromi Yamaji also told Reuters that activist investors, who have been in the spotlight because of Toshiba, can be a force for better shareholder participation in Japanese companies and help improve governance.

His comments reflect both a change in attitude toward activist investors in Japan, and the extent to which the Toshiba scandal has raised concerns within Japanese companies about governance, something shareholders have said a long time ago.

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“Lack of transparency is the biggest problem at Toshiba,” Yamaji said in an interview late Friday, adding that investors are eager to know if shareholders have been treated unfairly.

“We strongly request Toshiba to promptly and adequately disclose its own inquiries, such as who was responsible,” he said.

An independent investigation revealed last month that Toshiba had teamed up with the government to pressure foreign shareholders.

Foreign investors represent 65% of the trading volume on the TSE, owned by Japan Exchange Group Inc (JPX).

While some activists are focusing on short-term gains, Japan is seeing increasing numbers of people with more constructive approaches, Yamaji said.

“The presence of such activists could be positive in the sense that they can foster dialogue between shareholders and companies, as encouraged by Japan’s corporate governance code,” said the former Nomura Holdings banker.

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MARKET REHABILITATION

Yamaji said the course could further toughen the criteria for companies to remain on its main board after an initial renewal in April next year.

The change aims to improve the profitability and governance of companies, raising the requirements to stay in the first section of the course, which will be renamed the “core market”.

Companies will be required to have a free-floating market capitalization of more than 10 billion yen ($ 90 million), and at least 35% of their total shares are free-floating. They will also need to adopt a stricter governance code in areas such as outreach and board diversity.

He declined to say how many companies would be downgraded. Analysts expect that around 30% of the nearly 2,200 publicly traded companies could be forced out of the first section.

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Many investors think the exchange could set higher standards, a point Yamaji acknowledges.

“We don’t think (the current criteria) is our ultimate goal,” he said. “The corporate governance code will be reviewed every three years. So that could also be a good time to re-evaluate our criteria. “

He also expects more Asian companies to be listed in Tokyo after the debut this year of Appier, an artificial intelligence technology company founded in Taiwan, and Omni Plus System, a Singapore-based plastics manufacturer.

Japan’s political stability, predictable regulatory environment, and large household savings make Tokyo an attractive fundraising location for Asian businesses, he said, adding that the course was doing more marketing in places like Hong Kong and Singapore.

“More Asian companies are starting to think of the Japanese markets as an option for the IPO,” he said.

(Reporting by Makiko Yamazaki, Hideyuki Sano, and Noriyuki Hirata; Edited by David Dolan and Jacqueline Wong)

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In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.

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