Toshiba needs ‘prompt, appropriate’ disclosure, TSE chief says

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TOKYO (Reuters) -The Tokyo Stock Exchange (TSE) wants Toshiba (OTC:TOSYY) Corp to make “prompt and appropriate” disclosure about its widening governance scandal, including who was responsible, the head of the bourse said, adding transparency remained a problem.

Hiromi Yamaji also told Reuters that activist investors – who have been in focus because of Toshiba – can be a force for better shareholder engagement at Japanese companies and help improve governance.

His comments reflect both a shift in attitude toward activist investors in Japan, and the extent the Toshiba scandal has raised concern within corporate Japan about governance, something shareholders have said is long overdue.

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

“We strongly request Toshiba make prompt and appropriate disclosures of its own inquiries such as who was responsible,” he said.

An independent probe revealed last month that Toshiba had colluded with the government to put pressure on foreign shareholders.

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

While some activists focus on short-term profits, Japan is seeing an increasing number of those with more constructive approaches, Yamaji said.

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

MARKET REVAMP

Yamaji said the bourse could further tighten the criteria for companies to stay on its main board after an initial revamp in April next year.

The change is aimed at improving companies’ profitability and governance, by raising the requirements to remain on the bourse’s first section, which will be renamed the “prime market”.

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

He declined to say how many companies would be downgraded. Analysts expect about 30% of the nearly 2,200 listed companies could be forced from the first section.

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

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

He also expects more Asian companies to list in Tokyo after the debut this year of Appier, an AI technology firm founded in Taiwan, and Omni Plus System, a Singapore plastics manufacturer.

Japan’s political stability, predictable regulatory environment and vast household savings make Tokyo an attractive place for fundraising for Asian firms, he said, adding the bourse was doing more marketing in places such as Hong Kong and Singapore.

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