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Practical Guidelines for Corporate Governance Systems (CGS Guidelines) Formulated

Since 2016, the Ministry of Economy, Trade and Industry (METI) has been advancing discussions on Japanese companies’ specific actions for the improvement of corporate value. METI hereby announces that it has formulated the Practical Guidelines for Corporate Governance System (CGS Guidelines), in light of the “CGS Study Group Report -Guidebook for the Establishment and Operation of Effective Governance Systems-” (CGS Report) released by the CGS (Corporate Governance System) Study Group (chair: Mr. Hideki Kanda, professor, Gakushuin University Law School) on March 10, 2017. In addition, METI also formulated two appendices to the guidelines titled “Guidelines for Strategic Human Resource Development of Future Top Management” and “Diversity 2.0 Action Guidelines.”

1. Background to the formulation of the CGS Guidelines

Japan needs to overcome the current situation where Japanese companies have been suffering the downturn of corporate value for the past 20 years: it needs to improve corporate value from a mid- to long-term perspective and enhance the earning power of Japanese companies. To achieve these goals, it is essential for Japan to overcome challenges in corporate governance issues.

Japan conducted a variety of measures for corporate governance reform, including the formulation of the Corporate Governance Code. To enhance this reform from formality-based efforts to substance-based ones, Japanese companies are required to change their traditional management systems so as to enable decisive decision-making that changes the current situation without postponing the challenges involved.

Moreover, Japanese companies are now facing pressing challenges in regards to improving productivity through work style reform and utilizing innovation to change their management systems. To this end, companies should place the development and utilization of human resources at the core of their efforts. In particular, efforts for the strategic fostering of managerial human resources who exert leadership and the implementation of diversity management are indispensable for companies to enhance their management ability and overcome company-wide challenges in corporate governance reform.

Recognizing these challenges, METI has been advancing discussions on specific actions to improve corporate value since 2016. Based on the discussion results, METI formulated the CGS Guidelines detailing practical approaches to corporate governance systems. In addition, METI also formulated two appendices to the guidelines titled “Guidelines for Development of Managerial Human Resources” and “Diversity 2.0 Action Guidelines.”

2. Outline of the CGS Guidelines

Since July 2016, the CGS Study Group has been holding discussions, bringing together participants from the Ministry of Justice and the Financial Services Agency, and finally compiled the discussion results into the CGS Report released on March 10, 2017. In response, METI formulated the CGS Guidelines covering key points considered effective for companies to discuss, including the discussion results of the CGS Study Group and the details of the “Guidelines for Development of Managerial Human Resources” and “Diversity 2.0 Action Guidelines,” both of which pertain to METI’s discussion results concerning the improvement of corporate value.

Maintaining coherency with and working as a supplementary document to the Corporate Governance Code, formulated in 2015, the CGS Guidelines detail the significant points that companies should consider in implementing major principles that contribute to effective corporate governance stipulated in the Corporate Governance Code, and also compiled specific, productive actions that companies should take to fortify their earning power. METI expects companies to consider the key points to be discussed as shown in the CGS Guidelines when they proactively discuss ideal approaches to determining their appropriate corporate governance systems.

3. Outline of the Guidelines for Human Resource Development of Future Top Management

Since October 2016, the Study Group for Human Resource Development of Future Top Management (chair: Mr. Motohiro Morishima, professor, Graduate School of Commerce and Management, Hitotsubashi University) has been holding discussions, the outcome of which, along with results of a status survey on companies’ efforts for developing managerial human resources, was compiled into a report. Based on these results, METI has formulated the Guidelines for Human Resource Development of Future Top Management.

4. Outline of the Diversity 2.0 Action Guidelines

Moreover, since August 2016, the Study Group for Ideal Approaches to Diversity Management (Diversity 2.0) as a Competitive Strategy (chair: Mr. Tetsuo Kitagawa, Professor of Finance and Corporate Governance Graduate School of International Management,, Aoyama Business School, Aoyama Gakuin University) has been holding discussions, and on March 23, 2017, released Diversity 2.0 Action Guidelines explaining approaches that companies should take to overcome challenges they are facing in management and bottlenecks in implementing diversity management efforts.

The Diversity 2.0 Action Guidelines place companies’ efforts for continuing to create corporate value from mid- to long-term perspectives as Diversity 2.0, expecting companies to refer to the actions and the case examples of specific efforts that they should take and follow the Guidelines in implementing diversity management along with their own management strategies. For details of the background, challenges and other key points of the Diversity 2.0 Action Guidelines, see the text of the Report on Discussion Results Concerning Diversity 2.0  Aiming to implement diversity management as a competitive strategy  released on March 23, 2017.

5. Future actions

The CGS Guidelines are practical guidelines showing actions that companies should specifically discuss and take to improve their corporate value.

METI will continue to strive to disseminate the CGS Guidelines to improve the earning power of Japanese companies and also to make follow-up efforts for supporting these companies’ current actions in line with the CGS Guidelines. Moreover, it will also revise the CGS Guidelines if necessary.

Appendices:

References:

Related information

Release date

March 31, 2017

Divisions in Charge

Information on the CGS Guidelines
Corporate System Division, Economic and Industrial Policy Bureau
Information on the Guidelines for Development of Managerial Human Resources
Office for Human Resources Policy, Economic and Industrial Policy Bureau
Information on the Diversity 2.0 Action Guidelines Economic and Social Policy Office, Economic and Industrial Policy Bureau

Related Information

Ministry of Economy, Trade and Industry1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan Tel: +81-(0)3-3501-1511
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