Collaborative Engagement After Stewardship Code 3.0

TL;DR - The June 2024 AGM season set a then-record at 453 shareholder proposals at 109 companies. June 2025 set a new record on the company-count metric: 399 proposals at 114 companies — the fourth consecutive year of record activity. - Capital allocation (buybacks, dividend increases) drove ~50% of activist demands in 2025; operational and strategic demands rose to ~30%. ISS recommended ~80% support for compensation-related proposals and ~80% support for any activist proposal at sub-1× P/B issuers. - The 26 June 2025 revised Stewardship Code v3.0 explicitly elevates collaborative / collective engagement ("should be considered more proactively") and adds Guidance 4-2 on beneficial-ownership response policies. With the 2024 FIEA amendments clarifying "joint holders" and "acts of material proposal," the 5%-rule chilling effect on collaboration has materially narrowed.

Shareholder proposals as a regularised feature

A statistical table is the cleanest way to anchor the scale shift:

AGM season	Proposals	Companies	Top proposal categories	Notable feature
June 2018	~50	~30	Governance reform; cross-shareholdings	Murakami-fund-led era
June 2019	~60	~40	Governance; board independence	First wave of foreign activists (Elliott v Alps; ValueAct v Olympus)
June 2020	~80	~50	Capital allocation; ESG	Pandemic-era; Murakami affiliates active
June 2021	~120	~60	Capital allocation; ESG; board	Post-CGC-revision; first 100+ year
June 2022	~180	~80	Capital allocation; governance	Post-market-restructuring acceleration
June 2023	~270	~90	Capital allocation; ESG; spinoff	Post-TSE March 2023 PBR request
June 2024	453	109	Capital allocation; board; ESG	First 400+ year; record on proposals
June 2025	399	114	Capital allocation; operational; ESG	Record on companies; 14 proposals passed

The 2025 season's most operative number is the 14 shareholder proposals that passed at 7 companies — a small absolute number, but the highest in the post-1990 era. Roughly 30-50% of non-information-disclosure proposals achieved >20% support, the threshold at which sell-side analysts and engagement teams start treating a proposal as a near-future agenda item even if not passed.

Three shifts in the underlying campaign mix matter most.

Shift one — capital allocation is the dominant ask. Approximately 50% of 2025 activist demands concerned dividends, buybacks, debt structure or specific capital-allocation policies. This is the direct downstream of the TSE March 2023 cost-of-capital request: where a company trades at sub-1× P/B and the activist can credibly model a capital-return programme that lifts the equity-spread, the proposal writes itself. The 2025 ISS support rate of ~80% for compensation-related proposals at sub-1× P/B issuers tells the same story — proxy advisers have aligned with the diagnostic frame.

Shift two — operational/strategic demands are rising. Approximately 30% of 2025 demands concerned operational strategy — segment divestiture, CEO change, M&A response, joint-venture restructuring. Several high-profile 2024-25 campaigns produced CEO changes: Fuji Soft (Oasis); Seven & i (ValueAct / Couche-Tard interest); Recruit (engagement-led). The operational-demand category is where Japanese activism is now indistinguishable in style from US activist campaigns.

Shift three — ESG and governance proposals are mainstreaming. Proposals on climate-target disclosure, gender-pay-gap action plans, and board-independence numbers are increasingly tabled. They typically receive lower support rates than capital-allocation proposals, but they generate engagement that translates into Action-Programme priorities and CGC revisions in the next cycle.

The 2025 activist universe

The foreign activist universe operating in Japan in 2025 is now stable and recognisable. Six names appear in nearly every Japanese activism review:

Elliott Investment Management — Toyota Industries (the major 2025 intervention); Daiwa House; Sumitomo Corp; previously Toshiba, SoftBank. Style: position-disclosure-led; pricing-discipline focused; willing to litigate.
ValueAct Capital — JSR, Olympus, Seven & i. Style: long-engagement; board-seat seeking; constructive partner framing.
Oasis Management — Fuji Soft (the most successful 2024 campaign); Kanematsu; historic ToshibaPlant Systems case. Style: highly visible; specific-target campaigns; willing to use proxy fights.
Palliser Capital — Several Japanese mid-cap positions disclosed 2023-25. Style: long-term holder; quiet engagement first.
Silchester International Investors — Multi-decade UK-based holder of Japanese mid-cap equities. Style: low-key; standing engagement; rare public action.
Dalton Investments — Japan-focused with long history; specific cross-shareholding and listed-subsidiary campaigns.

The domestic engagement-fund universe is now arguably more institutionally significant than the foreign universe by AUM:

Murakami-affiliated funds (City Index Eleventh, Reno, Strategic Capital) — the longest-running domestic activist family, with eight separate campaigns in 2024 making the group the world's third-busiest activist by campaign count.
Strategic Capital — Tsuyoshi Maruki's vehicle; specialised in capital-return demands at mid-cap manufacturers.
Symphony Financial Partners — David Baran's vehicle; long-term engagement style.
Effissimo Capital Management — domestic-affiliated with a Singapore base; most famous for Toshiba pre-MBO interventions and historic Olympus and Toyota Industries positions.

The notable structural feature of 2025 is that foreign and domestic activists increasingly coordinate informally, even where formal joint-holder declarations have been historically chilled by the 5%-rule overhang. The 2024 FIEA amendments and the 2025 Stewardship Code v3.0 between them have narrowed the chilling effect substantially.

Stewardship Code v3.0 — what changed on 26 June 2025

The FSA's Council of Experts on the Stewardship Code published the third revision of the Code on 26 June 2025, after a draft released 21 March 2025 and a consultation period. The revisions, in operative terms, are five.

One — Collaborative engagement reframed. The 2020 Code (v2.0) said collaborative engagement "may be beneficial as necessary." The 2025 Code (v3.0) says collaborative engagement "should be considered more proactively." The word proactively is the operative change. Institutional investors are now expected to treat collective engagement not as a last-resort tactic but as a default option for material issues.

Two — Guidance 4-2 on beneficial ownership. A new Guidance 4-2 requires institutional investors to publish a policy on how they will respond to companies' requests for beneficial-ownership information. The mechanism is a response to the long-standing IR-team frustration that engagement letters come from layered nominee structures where the underlying decision-maker is opaque. The Guidance does not impose a mandatory disclosure; it imposes a published policy on how each investor will respond.

Three — ESG and sustainability mainstreamed. The 2025 Code expands references to sustainability and integrates the SSBJ disclosure framework into the engagement expectations. Institutional investors are expected to engage with companies on SSBJ-aligned topics with reference to the financial-materiality framework.

Four — Active-investor stewardship clarified. The 2025 Code clarifies the application to passive and index investors (who own large stakes but have less natural engagement bandwidth) and to active managers. The clarifications harden the expectation that passive ownership does not exempt the institution from stewardship duties.

Five — Transition / engagement on transition. The Code makes explicit reference to the role of stewardship in supporting credible transitions — corporate restructuring, generational succession, climate-related transitions. The language opens the institutional door to engagement on multi-year transition plans rather than only year-by-year issues.

The combined effect of the v3.0 revisions is a soft-law architecture that expects institutional investors to behave like engaged owners — without imposing mandatory action. The mechanism is a public-policy declaration; the enforcement is reputational and regulatory monitoring.

Sidebar: the 5%-rule and the collaborative-engagement chilling effect

For two decades, Japanese institutional investors avoided formal collaboration with peers on engagement campaigns because of a structural fear: the 5%-rule disclosure obligation under FIEA could be triggered by "joint holder" status, with the trigger threshold dropping from 5% per investor to 5% across the joint holder group. For a passive index investor holding ~3% of a Prime issuer, formal collaboration with another 3% holder would mechanically convert the position into a 6% disclosed group position — with all the disclosure timing, position-disclosure and trade-restriction obligations that follow.

The chilling effect was structural, not theoretical. Japanese institutional investors consistently declined to formally co-sign letters, file joint proposals or coordinate voting positions on engagement campaigns. ACGA, the ICGN and several other international stewardship bodies advocated for clarification.

The 2024 FIEA amendments clarified two definitions:

"Joint holders" (共同保有者) — narrowed to require a substantive coordination of investment or voting decisions, not merely shared engagement on a particular issue.

"Acts of material proposal" (重要提案行為) — clarified to exclude routine engagement activities and to focus on actions that would constitute a coordinated proposal to materially alter the issuer's business or capital structure.

The combination of the FIEA clarifications and the Stewardship Code v3.0 language collectively rewires the institutional infrastructure for engagement. A passive investor holding 3% can now sign a coordinated engagement letter with a peer 3% holder on a specific governance issue without automatically triggering joint-holder status, provided the coordination is limited to the specific engagement and does not extend to coordinated voting on routine matters or coordinated investment decisions.

The early evidence — visible in 2025 engagement-letter signature patterns and in the rise of multi-investor coordination through Japan Stewardship Initiative and ICGN-coordinated activities — is that the chilling effect has materially narrowed. Whether it has been fully removed depends on how the FSA enforces the clarified definitions in practice. The 2026 enforcement cycle will be the first practical test.

The IR-team perspective

For an IR team, the practical question is: how does the 2025 engagement environment differ from the 2020 environment? Three operative changes matter most.

Letters are more analytically grounded. A 2020 activist letter typically contained a short list of governance asks (board independence, gender diversity, dividend policy). A 2025 activist letter typically contains a detailed financial model justifying the proposed capital action, a peer benchmark, a multi-scenario valuation analysis, and a specific operational proposal. The analytical sophistication of the engagement community has risen substantially.

Letters arrive earlier and more frequently. Pre-2020, an activist letter often arrived 60-90 days before an AGM with a specific shareholder proposal. In 2025, engagement letters arrive throughout the year, with AGM-season proposals serving as one specific manifestation of an ongoing dialogue. IR teams that treat the AGM-season letter as the start of the conversation are now structurally behind.

Activists coordinate more openly. The post-FIEA-amendment environment makes informal coordination among engagement funds and institutional investors materially easier. An IR team that receives a letter from one activist should expect that the diagnostic frame in that letter has been shared with other institutional holders and that the company's response will be benchmarked across the engagement community.

What this means for IR

Treat engagement as a standing programme, not an AGM-season response. The 2025 environment requires year-round engagement infrastructure — not a 3-month spike around the AGM. Quarterly engagement calls with the top 20 shareholders by holding size, plus an open door to material engagement letters, is now the operative minimum.
Read every activist letter as a market-test document. Even if the letter is from a small holder, the diagnostic frame in the letter has likely been pre-shared. The company's response is being evaluated by the broader engagement community, not only by the letter's author.
Publish your stewardship-response policy. The Guidance 4-2 obligation flows in both directions: investors disclose how they will respond to your requests for beneficial-ownership information; you should publish how you will respond to engagement letters. A standing IR-policy disclosure on engagement response is now the operative norm.
Brief your board on activist diagnostics. The 2025 activist universe expects to engage with board chairs, lead independent directors, and nomination/compensation committee chairs — not only with the CEO and CFO. Board-level engagement preparation is now part of the IR function's standing remit.
Use cost-of-capital language even when not asked. Capital-allocation proposals will be benchmarked against your published cost of capital, your equity spread, and your peer comparisons. Pre-empt the activist diagnostic by publishing this framing in your own materials.

Sources & further reading

Sodali & Co., "2024 Japan AGM Review Focusing on Shareholder Proposals" (PDF): https://sodali.com/media/insights/3705/2024-japan-agm-review.pdf
White & Case, "Summary of June 2025 Annual General Shareholder Meeting Season Shareholder Proposals": https://www.whitecase.com/insight-alert/summary-june-2025-annual-general-shareholder-meeting-season-shareholder-proposals
EY Strategy, "Shareholder proposals: 2025 trends": https://www.ey.com/content/dam/ey-unified-site/ey-com/en-jp/services/strategy-transactions/documents/shareholder-proposals-2025-trends.pdf
FSA, "Draft revisions to Japan's Stewardship Code" (21 March 2025): https://www.fsa.go.jp/en/news/2025/20250321-2.html
FSA, "Revision of the Stewardship Code" (26 June 2025 PDF): https://www.fsa.go.jp/en/refer/councils/stewardship/20250626/03.pdf
Glass Lewis 2025 Japan Benchmark Policy Guidelines: https://resources.glasslewis.com/hubfs/2025%20Guidelines/2025%20Japan%20Benchmark%20Policy%20Guidelines.pdf
ISS Japan policy: https://www.issgovernance.com/policy-gateway/voting-policies/

Next in this theme: 5.8 The Working Groups That Are Writing Japan's Next Governance Rules