Fund managers investing in Japan should do more to hold companies to account, according to Baillie Gifford's Sarah Whitley.
Ms Whitley, who runs the £600m Baillie Gifford Japan trust, said fund managers and domestic shareholders need to vote more and be clear with companies about why they are not supporting action they think is wrong.
Speaking at a roundtable event in Edinburgh, she said: "We spend quite a lot of time engaging with companies, asking for more dividends, and explaining why we think some of their stock option plans are incorrectly formulated."
Japan is currently undertaking a process of radical reforms to try to revive its deflationary economy.
Ms Whitley said it was an interesting time as various changes sweep across the country, including the increased focus on corporate governance.
She said there was a greater push towards visibility, with talks to reveal how fund managers vote on measures that companies plan to undertake.
Figures from the Edinburgh-headquartered fund group showed that back in July nearly half of the Nikkei 500 firms were compliant with all principles of Japan's corporate governance code.
Ms Whitley also pointed to figures which showed the number of independent directors has been increasing, with the vast majority of listed firms now having at least one independent director on their board.
The trust manager suggested some independent directors in Japan are underpaid, adding: "If you are trying to get them to change the way companies work then they need to be paid more."
But she said the changes were all part of an evolving process that would take four to five years to take effect.
However, figures indicate a dramatic shift in the way companies work, with distributions to shareholders rising strongly.
"Japanese companies are cashed up to their eyeballs, and they could all increase their dividends significantly and disperse that cash to shareholders," she said.
"More focus on shareholders is something that we hope will emerge as the boards develop."
She also said Japan was not going to grow particularly fast, adding: "People often say that nothing is happening, but their timescale can be very short, and with any major change it takes a while to roll out."
katherine.denham@ft.com
