TOKYO : As many Japanese firms bow to pressure from shareholders and regulators to end the practice of listing subsidiaries - which critics say compromises corporate governance - one of the country's biggest retailers isn't buying it.

Aeon Co Ltd, whose 15 listed subsidiaries include supermarkets and drugstores, said so-called parent-child listings improve, rather than hinder, governance.

"It's the most cost-effective way to strengthen management of our subsidiaries," Executive Officer Tsukasa Ojima told Reuters in a recent interview.

Listed firms must have higher disclosure standards and management is always under shareholder scrutiny, resulting in better quality management, said Ojima, a former Nomura Securities banker who joined Aeon last year.

The comments set Aeon apart from many other firms at a time when the government and Tokyo Stock Exchange (TSE) discourage such listings and are setting stricter governance requirements.

Listing a subsidiary was once a popular way in Japan for a listed parent to raise funds and maintain influence. But governance experts have long branded the practice as fundamentally unfair to minority shareholders, whose interests are inevitably subordinated to those of the parent.

Some investors say the potential for conflicts of interest dulls listed subsidiaries' valuations, whereas others like hedge funds target such firms in anticipation of buyouts or sales.

With growing criticism, particularly from abroad where such listings are rare, authorities have gradually cracked down on the practice. The screws tightened in April when the TSE reorganised its markets into three new tiers and began requiring listed subsidiaries to secure higher board independence or set up an independent special committee to remain in the top tier.
Source: CNA