The Justice Ministry’s Legislative Council plans to abandon a proposal that every publicly traded company in Japan must have at least one outside director, ministry officials said Wednesday.
Dropping the idea appears to be a concession to the business sector, which has been strongly opposed to the requirement.
The proposal was made in December to improve corporate governance amid a series of scandals, including the investment loss coverup at Olympus Corp.
The panel is expected to submit a final proposal next month before a bill to improve corporate governance is submitted to the Diet this fall.
It still plans to propose the introduction of a derivative action system that would allow a shareholder in a company to file a claim against a board member at a subsidiary, the officials said.
But shareholders eligible for such actions would be limited to those having a stake of 1 percent or more in the parent company. Subsidiaries would be limited to those owning at least 20 percent of parent assets, the officials said.