The pressure on Japanese firms to appoint more outside directors is increasing.

Japan has long lagged much of the rest of the world in requiring outside directors on the boards of its listed companies. The United States was an early adopter of the practice with a majority of its directors being independent by the late 1980s. The issuance of the Cadbury Report in 19921 in the U.K. triggered a dramatic increase in the number of outside directors on the boards of U.K. firms, and a number of other countries followed suit by adopting similar requirements in the late 1990s. By comparison, less than half of Japanese firms listed on the first section of the Tokyo Stock Exchange as recently as 2010 had outside directors. However, the number of outside directors on Japanese boards has increased dramatically since 2010 — up to 62.2% in 2013 — and the trend is expected to continue.

Originally published in The Asian Lawyer on July 1, 2014.