Reflections on Succession Planning Following the Revision of the Corporate Governance Code

Key Points of the Corporate Governance Code Revision

In July 2026, the Corporate Governance Code was revised for the first time in five years. The aim of this revision is to make the Code more "substantive." Previously, each revision added detailed rules that tended to accumulate, with companies often treating the Code as a mere checklist. This time, the fine details have been significantly reduced, narrowing the norms to be observed from 83 to 30, shifting toward a framework in which each company considers for itself the governance it needs. At the same time, the focus has shifted from "defensive" governance centered on preventing scandals toward "offensive" governance that supports growth—symbolized by a new requirement that boards themselves verify, disclose, and explain whether accumulated cash and other resources are being effectively deployed toward R&D and human capital.

The "CEO Succession Plan" That Cadira Is Watching Closely

One point Cadira is paying particular attention to in this revision is that the item on CEO succession has been upgraded from a "supplementary principle" to a full "principle," meaning companies are now held to a higher standard of response than before.

Who serves as top management, and the process by which a successor is selected, are important factors that influence a company's direction as well as employee motivation and ways of working. It is also considered desirable, for the sake of a smooth transition, to have a planned talent development program in place.

In relation to this, Cadira conducted a survey of listed companies regarding "succession planning." This survey was conducted following IR meetings held between April and June 2026, and while the sample is limited to 26 responding companies, it reflects responses from companies with which we have actually engaged in dialogue, offering a useful reference point for the actual state of governance among Japanese listed companies.

Survey Result ①: Board-Level Discussion Is Becoming Established

In response to the question "Over roughly the past year, has the board of directors, etc. discussed succession planning for the CEO and other key executives?", 73% answered "Yes," 15% answered "No," and the remaining 12% either did not disclose or withheld their response.

With over 70% treating succession planning as a board agenda item, we take this as an indication that formal establishment of the practice has progressed to a certain degree. Even among companies that answered "No," comments suggested this was due to company size or growth stage rather than a negative stance, indicating a "not yet, but on the way" phase rather than outright reluctance.

Notably, companies included in the TOPIX 100 accounted for 35% of respondents, and all of them answered "Yes." For reference, in a 2022 survey conducted by the Tokyo Stock Exchange of TOPIX 100 constituent companies (*1), 57% of companies cited "formulation and oversight of succession planning" as a role of their voluntary nomination and compensation committee. While the survey questions differ and a simple comparison is not possible, this suggests that the presence of succession planning in board discussions has grown over the past four years.

Survey Result ②: Discussion Concentrated on "Candidate Selection and Development," While "Disclosure" Lags Behind

Following the above question, when asked about the content of these discussions, 58% cited "listing and evaluating successor candidates" and 54% cited "confirming development policy," confirming that more than half of respondents are discussing these topics (multiple answers allowed).

On the other hand, only 23% cited "identifying an interim successor in the event of an emergency," and just 12% cited "considering a disclosure policy for succession planning," suggesting that only a minority of companies are engaging in more in-depth discussion.

While the internal process of "who to develop and how" appears to be underway at many companies, disclosure design—how to explain this to shareholders and the market—appears to remain a task for the future.

It should be noted that the "quality of disclosure" is not unrelated to shareholder value. An empirical study in the United States (*2) reported that companies making in-depth disclosures about succession planning saw a statistically significant positive stock price reaction around the time of disclosure. However, the effect was not uniform: the positive impact of disclosure was found to be larger for larger companies, those with more complex operations, and those with more stable management, suggesting that disclosure design should be tailored to a company's own characteristics.

Survey Result ③: Development Programs Centered on "In-House" Training, with Selection Mainly by "Executive Appointment"

On the question of the state of development programs for selecting next-generation top management, "has an in-house training program" was the most common response at 54%, followed by "top management provides direct guidance" at 38% and "participation in external programs" also at 38%, while 19% responded "has not established" such a program. A certain number of companies combine in-house development as a foundation with direct involvement from top management and the incorporation of outside expertise.

As for selection methods, "appointment by management" accounted for the majority at 58%, followed by "recommendation by someone other than management" at 31%, "selection based on pre-established criteria" at 27%, and "self-nomination" at 4% (multiple answers allowed). Conversely, this means that fewer than 30% of companies select successors based on objective, codified criteria. The transparency and systematization of the selection process appears to be an area still in development, alongside development itself.

Summary

Taken together, these results show that more than 70% of companies have moved past the first stage of putting succession planning on the board's agenda, confirming that, overall, there is an awareness of the importance of management continuity.

At the same time, around 30% of companies appear to still be at the stage of beginning to codify and systematize their approach. Establishing a succession plan is considered an important factor that can influence long-term management performance—not only by ensuring business continuity in the event of an emergency, but also because the criteria used for selection signal a company's direction and can affect the motivation of executive talent.

This point is also supported by academic empirical research. Studies show that companies that develop successor candidates in a planned manner and then promote them internally tend to have higher post-transition performance and long-term stock returns, along with lower volatility in both performance and stock price (*3). In addition, analysis shows that at companies with established and disclosed succession plans, negative market reactions are mitigated even when a CEO change is announced due to poor performance, with this effect being more pronounced at companies with stronger governance (*4). These findings suggest that the presence or absence of planned preparation can affect both resilience during a crisis and sustained growth during normal times.

Because this is an area where questions from investors can provide important insights, we intend to continue actively engaging in dialogue on these points going forward.

Sources:

*1 "Corporate Governance White Paper 2025"
https://www.jpx.co.jp/equities/listing/cg/tvdivq0000008jb0-att/um3qrc000001isbf.pdf

*2 McConnell, J. J. & Qi, Q. (2022) "Does CEO Succession Planning (Disclosure) Create Shareholder Value?" Journal of Financial and Quantitative Analysis.

*3 Tao, R. & Zhao, H. (2019) "'Passing the Baton': The Effects of CEO Succession Planning on Firm Performance and Volatility," Corporate Governance: An International Review.

*4 Bae, J., Joo, J. H. & Yu, J. (2023) "CEO Succession Planning and Market Reactions to CEO Turnover Announcements," Finance Research Letters.