Japan weighs changes to shareholder proposal rules

For over 40 years, shareholders in Japanese companies have had a right to propose resolutions. That right, enshrined into law in 1981, was conditional on having continuously held at least 1% of voting rights or 300 voting rights for the preceding six months.

The two differ in how many shares need to be held. At a rate of 100 shares per individual voting right, the latter lowers the bar.

Now, the country’s lawmakers are considering scrapping the 300 voting rights threshold. Nippon Steel’s chief executive is among those in favour. The move could have implications for institutional stewardship of Japan’s industrial behemoths.

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Right to propose

When the right to propose was introduced, the 300 voting rights threshold – in addition to the 1% rule – was a deliberate choice. At the time, Japanese lawmakers viewed it as an international norm worthy of import. The UK and Germany for instance, had similar rules in place.

In practice 300 voting rights equate to 30,000 shares in Japan’s publicly listed companies. For reference Meiji Yasuda Life Insurance Company’s 1.3% stake in Nippon Steel equates to over 13m shares or 130,000 voting rights.

Changing the criteria would require reforms to Japan’s Companies Act. Last week, the legislative council of Japan’s Ministry of Justice met to discuss the options on the table.

Among them, is a proposal to limit shareholder proposal rights to those holding a minimum of 1% of voting rights – effectively removing the 300 voting right eligibility. Research and shareholder advocacy group ACCR has warned that this could constrain institutional investors’ ability to file resolutions.

Nippon Steel

The group has raised concerns with Nippon Steel chief executive Eiji Hashimoto’s support of the reform. At the Japan Growth Strategy Conference, convened at the Prime Minister’s residence on 10 March, Hashimoto called for abolishing the 300 voting right rule.

“Large institutional investors have a mandate to invest over the long term. It is counterproductive to restrict their rights to file proposals on issues that are highly relevant to shareholders”, says Martin Norman, ACCR’s global head of stewardship.

“Given ACCR’s recent history of engagement with Nippon Steel, we are concerned to see these comments from the company’s CEO, which create unnecessary friction between shareholders and Nippon Steel when investors in Japanese equities are seeking certainty during significant domestic and global upheaval”, he adds.

As the country’s largest steelmaker, Nippon Steel’s emissions disclosures and targets have received investor attention over the years. In 2024, for instance, Legal and General Investment Management co-filed a resolution asking for transparency in climate lobbying.

Two other resolutions linked to emissions reductions were co-filed by ACCR that same year. Amundi, Nordea Asset Management and Storebrand Asset Management supported all three.

Removing the 300 voting rights criteria could make such proposals less likely. Few investors, ACCR says, exceed the 1% threshold for shareholding in Nippon Steel. By some estimates, proposals from minority shareholders could decrease by 80%.

Those in favour of the reform have defended their position based on the lack of checks and balances on resolutions being filed. For resolutions that rarely pass, the argument goes, they demand management resources better used elsewhere.

ACCR’s Norman says this concern could be addressed without diluting shareholder rights in the process.

“Other jurisdictions have developed effective checks and balances to ensure that shareholder proposals are appropriate while protecting shareholders’ rights”, he notes.

The original 1981 rule was born out of international best practice, Norman points out. This time too, it offers useful precedent.

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