The Tokyo Stock Exchange has adopted a corporate governance code for listed companies that focuses on enhanced disclosure and assuring the quality and independence of outside auditors. Under the code, listed companies must conduct timely and accurate disclosure regarding corporate activities. In the view of the TSE, such disclosure is indispensable for appropriate investor evaluation of enterprises in the market, and concurrently for the appropriate exercising of voting rights by shareholders.
For this purpose, shareholders require periodic, reliable and comparable information sufficient to evaluate the operational conditions of businesses by the management, and further timely disclosure regarding material events taking place during the intervals between periodic disclosures. Such disclosure shall be conducted simultaneously to ensure equal treatment of shareholders. Fair disclosure helps to secure the confidence of investors in the market, reasoned the exchange, and is an important means to prevent the abuse of insider information.
The corporate governance standards call for the enhanced disclosure of quantitative information on financial conditions and operating results and enhanced disclosure of qualitative information that deepens the understanding of the management conditions of companies by investors. Companies should ensure that investors have access to information equally and easily. Companies should also develop internal systems to secure the accuracy and promptness of disclosure.
The principles of corporate governance also call for the appointment of highly independent outside auditors with an in-depth knowledge of finance and accounting. Also, management and the dequivalent of the board audit committee must work together to strengthen the functions of auditors and maintain adequate resources and infrastructure to support audits carried out by the auditors.