What Shareholders in Japan Say About Director Pay : Does Article 361 of Japan's Companies Act Matter?

The comparatively modest and differently structured compensation that Japanese corporate executives receive has sparked recent interest in the determinants of executive pay in Japan. One factor that remains unexamined is the role played by Article 361 of the Companies Act which requires that director pay be set by the corporation's general shareholders meeting. To explore the question of whether this rule, by giving shareholders a veto over changes to compensation they disagree with, matters to pay in Japan this paper examines the results of the shareholders meetings of companies listed on the first section of the Tokyo Stock Exchange which voted on compensation resolutions in 2014. We find that, while all resolutions were approved, there was significant variation in both what pay directors asked for and how shareholders responded which was correlated with differences in each. The results are consistent with the view that the relevance of the rule varies depending on the context of the company. While at most companies shareholder voting on pay is relatively uncontroversial, the changing structure of ownership and governance at some provides an avenue through which the rule may now matter to pay