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METI Established Five Principles for Board of Directors to Enhance "Growth Power" and Corporate Governance Guidance for Enhancement of “Growth Power”

METI Established Five Principles for Board of Directors to Enhance "Growth Power" and Corporate Governance Guidance for Enhancement of “Growth Power”

April 30, 2025

The Ministry of Economy, Trade and Industry established Five Principles for Board of Directors to Enhance "Growth Power" and Corporate Governance Guidance for Enhancement of “Growth Power” (hereinafter referred to as CG Guidance for “Growth Power”) based on the discussions conducted in a Study Group on Corporate Governance for Enhancement of Growth Power aimed at enhancing the "Growth Power" of Japan's listed companies. In particular, it is expected that the board of directors and the CEO along with the management team of TOPIX 500 companies, utilize these materials to further advance corporate governance initiatives aimed at enhancing "Growth Power" and to lead the efforts of other companies.

1. Background

In transitioning from a cost-cutting economy against the backdrop of prolonged deflation to a growth-oriented economy driven by wage increases and investment, the need for Japanese companies to enhance their "Growth Power" is becoming increasingly urgent. At the same time, it is further expected for the corporate management team to adopt a "growth-oriented management approach", in which they take risks and, execute business portfolio strategy and active investment for growth aimed at enhancing their "Growth Power."

Corporate governance serves as a foundation for companies to build and implement growth strategies based on a medium- to long-term perspective that builds on the company’s competitive advantages, in an increasingly complex business environment, and to engage in a "growth-oriented management approach" aimed at enhancing their "Growth Power." It has been ten years since corporate governance initiatives were positioned as part of the government's growth strategy, and companies have steadily progressed in their efforts, including an increase in the number of outside directors and the establishment of nomination and compensation committees.

On the other hand, there are concerns that many companies are only focusing on establishing a formal structure; the compliance with the Corporate Governance Code has become an end in itself, and corporate governance initiatives are being carried out solely as compliance activities. In light of this, there is an increasing demand for companies to deepen their efforts toward enhancing their "Growth Power," which is a key challenge for them.

2. The contents of the discussions in the study group

METI established a Study Group on Corporate Governance for Enhancement of Growth Power (Chair: Mr. Kanda Hideki, Emeritus Professor, the University of Tokyo) in September of last year and has been examining how to advance corporate governance initiatives.

During the discussions, a renewed perspective on corporate governance aimed at enhancing "Growth Power" was presented. From the viewpoint of sustainably and effectively building and implementing growth strategies based on a medium- to long-term perspective, it is important to thoroughly discuss the corporate governance systems for each company and consider the structures and systems under a consistent framework.

In light of these discussions, METI has published the Five Principles for Board of Directors to Enhance "Growth Power" to present the key considerations that the board of directors should take into account when pursuing the corporate management aimed at enhancing their “Growth Power”, contrasted with the actions that the management team should take.

METI also published CG Guidance for “Growth Power” to present foundational concepts and approaches for advancing initiatives, key discussion points, examples of approaches and initiatives of each company to support the discussions and initiatives of each company.

3. Outline of the published materials

The outline of the published materials is as follows.

4. The Way to Utilize CG Guidance for “Growth Power” (Including Five Principles for Board of Directors to Enhance "Growth Power")

The Guidance is supposed to be utilized:

I. as an opportunity for the CEO and outside directors to reconsider the corporate governance systems for their company,
and;

II. as a reference for corporate governance efforts aimed at enhancing "Growth Power" by the board of directors, the CEO
along with the management team, and the secretariat of the board, who play a central role in corporate governance
initiatives.

For specific examples of utilization, please refer to the diagram below. Please note that CG Guidance for “Growth Power” provides examples of corporate governance initiatives aimed at enhancing "Growth Power" for each company, and it does not require uniform implementation of the initiatives described.