The Results of the 2025 Corporate Governance Survey Are Revealed

Introduction

HR Governance Leaders, led by CEO Shigeru Uchigazaki, has announced the results of the 2025 Corporate Governance Survey (CG Survey). This unique and comprehensive survey included around 360 companies, primarily large firms in the Prime Market, and was conducted under the guidance of esteemed professors such as Hideki Kanda from the University of Tokyo, Katsuhiro Kubo from Waseda University, and Tsuyoshi Mizuguchi from Takasaki University of Economics.

Key Findings

The CG Survey focuses on crucial aspects of corporate governance including board operations, human capital, nominations, compensation, and sustainability. One of the significant observations was that more than 90% of companies identify the board's primary roles as determining basic management policies and overseeing business execution. The survey highlights the increasing importance of corporate governance, especially since the Ministry of Economy, Trade and Industry released the Corporate Governance Guidance aimed at enhancing profitability.

Prof. Kanda emphasized that the evolution of corporate governance is moving from mere compliance to a phase where unique governance structures conceived by CEOs are taking shape. This transformation is essential for companies to assess their current governance status and discuss future governance goals within their boards.

Role of the Board

High participation was noted in identifying the main roles of the board, including the decision-making for business execution and overseeing management. With distinct insights revealed based on organizational design, companies with nomination committees are more inclined to delegate decision-making to management, while audit committee companies emphasize making decisions directly.

Expectations from Board Chairs

The expectations from the chairperson of the board have seen a rise, with 93.1% of surveyed companies highlighting facilitation as a key role of the chair. This indicates a shift towards more complex roles for board chairs, embodying various functions and strategic inputs.

Human Capital Management

In terms of human capital management, while engagement and flexible working conditions have been prioritized by HR departments, developing a dynamic talent portfolio remains a work in progress. Notably, a push for establishing cross-departmental governance structures and appointing Chief Human Resource Officers (CHRO) indicates the growing recognition of human capital's significance in governance.

Nominations and Compensation Committees

The report indicates that both nominations and compensation committees are witnessing an increase in session frequency. Discussions around succession planning have risen to 71.9%, reflecting a growing interest in establishing clear criteria for executive transitions. Compensation remains a critical topic, with significant growth in the proportion of performance-related rewards observed particularly in companies with a market capitalization exceeding 1 trillion yen.

Sustainability Considerations

Sustainability considerations in board oversight are advancing, particularly in reward design; however, their integration into director nominations and investment judgments is still limited. Although over 60% of companies integrate materiality into their management strategies, less than 20% have aligned this with their financial strategies.

Consultants' Commentary

Senior Consultant Yosuke Inoue noted the striking difference in companies with nomination committees regarding shareholder engagement, asserting the essentiality of communication between directors and shareholders as outlined in governance guidance documents. Meanwhile, Manager Akihito Oishi pointed out the steady progress in human capital measures, although room for improvement remains in integrating these efforts with corporate strategy.

Consultant Shingo Kanno emphasized the necessity for a well-structured reward system that aligns incentives with the company's value creation narratives. The increasing trend towards performance-related pay signifies a strategic direction aimed at enhancing accountability in executive remuneration.

Lastly, Consultant Moe Ishimaru remarked on the importance of linking sustainability with management strategy, yet pointed out that there are still challenges in achieving this integration at the board level. Consistent discussion of sustainability within the boardroom, alongside establishing financial metrics for monitoring, are critical for enhancing corporate value.

Conclusion

The 2025 Corporate Governance Survey provides comprehensive insights into how corporations are adapting to evolving governance landscapes in Japan. Moving forward, it is essential for firms to not only address basic governance frameworks but engage in deeper, strategic dialogues regarding their operational and ethical responsibilities.

For detailed findings, join HRGL's upcoming webinars on the CG Survey results. Further information can be found on their official website.

About HR Governance Leaders

Established in April 2020, the HR Governance Leaders is dedicated to sustainability governance consulting, board governance consulting, and other governance services. Their commitment to research and notion dissemination empowers organizations striving for excellence in governance structures.