‘Moonlighting’ directors a problem for company boards in Japan

Japanese companies with directors that sit on multiple boards are facing the equity market's displeasure as the Tokyo Stock Exchange steps up pressure to improve corporate governance.

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The bourse tightened listing guidelines in 2022, demanding that firms in its blue-chip Prime section get at least a third of their board members externally. While most companies have tried to meet this request, they are speeding up the process by taking on members already serving on other boards.

That has led some companies to hire directors who were too overstretched to focus on maximizing shareholder value. Since April 2019, these firms have underperformed the broader stock market by 8.6 percent, while the rest beat it by 3.5 percent, said Ms. Akemi Hatano, the chief quants strategist at SBI Securities.