Introduction
As an investor or a company manager, have you ever felt that it's difficult to grasp the true shareholder information?
In Japan,Financial institutions hold shares anonymously as custodians.As a result, it remains unclear who is actually exercising their voting rights.
In this article,"Transparency in effective shareholders"This article provides a clear explanation of the social movement, its background, and its impact on companies and investors. It rewrites the content for easy reading, offering a multifaceted perspective that includes specific proposed amendments, comparative data with Europe and the US, and concerns about overseas investors. The article concludes with a summary of business lessons, so please read to the end.
In Japan, "custodians" are anonymous shareholders, and effective information disclosure is lagging behind.
One of the major challenges in shareholder meetings and investor relations for Japanese companies is the "non-disclosure of beneficial shareholder information."Financial Institutions (Custodians)Because a third party manages the shares on behalf of the company, the company remains unaware of "who actually holds the voting rights."
The reason this situation persists is the legal possibility of anonymous ownership. Compared to Europe and the United States, Japan has a weaker obligation to identify beneficial shareholders when exercising voting rights, and management by custodians is used to reduce costs. However, this is a disadvantage for companies.
This can lead to delays in acquisitions and dealing with activist investors.
For example, when an acquisition by an external party occurs, measures such as providing technology licenses may be required. However, if the beneficial shareholders cannot be identified, there is a risk that the response to the stock acquisition will be delayed.Shibaura Electronics Co., Ltd.It has been pointed out that this acquisition case is just the tip of the iceberg, and that many similar cases exist beneath the surface.
The burden on companies will also increase.
While transparency offers advantages in dialogue with investors, it also places a heavy burden on companies if it is not maintained. Many companies spend millions of yen on trust banks and consulting firms to conduct shareholder identification investigations. This situation is criticized as an "unfair playing field" compared to systems in Europe and the United States.
Comparison with Europe and the US, proposed amendments, and revisions to the Financial Services Agency's guidelines.
In Western countries, the disclosure of beneficial shareholder information is institutionalized. This article will summarize the differences between the proposed amendments currently being discussed in Japan and the existing systems in place.
United States: Transparency through SEC reporting obligations
Institutional investors managing a certain amount of capital are required to report the number of shares they hold to the SEC.
Because voting patterns are easily disclosed, it's easier to understand who is involved in management.
UK: Introduction of obligation to identify beneficial shareholders
Those who have a vested interest in voting shares are obligated to respond when asked by a company.
Those with such reasonable grounds will also need to be dealt with accordingly.
European Union (EU): Obligation to guarantee specific rights
The 2017 Second Shareholder Rights Directive stipulated that member states must guarantee a company's right to identify its shareholders.
Japan does not yet have a disclosure system of this level.
Revision of the Financial Services Agency's Guidelines for Institutional Investors (June 2025)
A clause has been added stating that custodians should disclose their holdings at the request of the investee companies. Previously, custodians could conceal their holdings without consequence, but now their disclosure obligations have been strengthened.
The Legislative Council's proposed amendments to the Companies Act
There are proposals to amend the Companies Act to impose penalties such as fines and suspension of voting rights on institutional investors who refuse to disclose information.
The government is discussing ways to increase transparency regarding effective shareholders.
These institutional changes may make it easier to identify a company's beneficial shareholders. However, the impact of these reforms on investors must also be considered.
Concerns of foreign investors and the need to improve corporate governance
While promoting "transparency" has its advantages, it also has its drawbacks. In particular, for foreign investors, a decrease in anonymity could be a reason to withdraw from Japanese stocks.
The reason money flows to Switzerland and Singapore is because of their high level of anonymity.
Yuichiro Kitamura, president of IR Japan, points out that "money flows into Switzerland and Singapore because of their high degree of anonymity." There are concerns that increasing transparency too much could put downward pressure on stock prices.
Risks of moving away from Japanese stocks
Compared to Europe and the United States, Japan's systems are not well-developed, which places a burden on companies. However, while this offers advantages in dialogue with investors, there are concerns that increased transparency may cause foreign investors to move away from Japanese stocks. This is a crucial issue that should be described as a "double-edged sword."
Balancing this with improving corporate governance
If beneficial shareholders demand transparency, then management must respond with transparency as well. It is also important to consider whether each company can meet shareholders' expectations through improvements in corporate governance.
On this point, lawyer Otatsu of Nishimura & Asahi Law Offices points out that "while the Financial Services Agency is promoting constructive dialogue with investors, in Japan companies have to bear the cost of identifying their own shareholders." He states that "it is not a fair, double-yield (competitive environment)" and emphasizes the need for institutional reform.
Summary
In this era where disclosure of information about beneficial shareholders is being institutionalized, both companies and investors need to embrace the trend towards "transparency." The introduction of stringent disclosure requirements, similar to those in Europe and the United States, in Japan will allow for a more accurate understanding of stock ownership. This is not merely a matter of cost reduction, but a crucial element of corporate management strategy and risk management.
A key lesson in the workplace is the principle that "sharing information creates a competitive advantage." Even in fields where secrecy was once considered the key to protection, open information exchange is now recognized as the most valuable tool. By building mutual trust between shareholders and companies, and by increasing transparency, dialogue with investors deepens, leading to increased corporate value.
However, reform requires balance. A gradual transition is necessary, taking into account the concerns of foreign investors and the disadvantages such as increased costs. Promoting transparency while simultaneously improving corporate governance is the path to sustainable growth.
Thus, increasing transparency regarding effective shareholders has become an important social issue in corporate management strategies. Let's continue to pay attention to this in the future.
