Near-term fallout from Murakami's arrest will likely include tougher shareholder disclosure requirements, The Wall Street Journal reported. Japan's Diet is expected to pass a bill later this month requiring professional investors, brokerage houses, and banks to report to authorities within two weeks of the date at which their holdings exceed 5 percent of a company's outstanding equity. Currently, those types of investors have three months to file such disclosures, the newspaper reported, thus leaving many corporate share registers exposed.

Meanwhile, shareholders likely will focus on Japanese companies adopting "poison pill" takeover defenses without shareholder approval, as well as investor efforts to improve pay disclosure.

Domestic and foreign funds have increased their pressure on corporate boards that adopt poison pills with shareholder consent. As reported in the April 21, 2006, issue of Governance Weekly, Japan's influential Pension Fund Association (PFA) will vote against incumbent directors at companies that adopt pills without seeking shareholder approval of such provisions. The PFA manages 12 trillion yen ($104 billion) in assets, 4 trillion yen of which are invested in major domestic, exchange-listed corporations. While the association's investments represent only a small fraction of Japanese corporate pensions, it acts as a manager of last resort for insolvent funds.

The PFA is calling on companies to provide a full description of their plans and to put them to a shareholder vote. The association has set four conditions for supporting any poison pill, but those standards still leave the PFA with significant discretion that may invite corporate lobbying:

Management must provide "adequate explanation" of how the defense would be "useful" in boosting long-term shareholder value.

The firm must seek advance shareholder approval of the pill plan's details.

The pill plan must clearly spell out what would actually trigger the action to dilute a raider's position, as well as conditions that would preclude such action, "such as oversight by a committee of non-executive directors."

Any plan must have a two- to three-year sunset provision.

Similarly, Japan's Pension Fund Association for Local Government Officials (PAL) is opposing "poison pill" defenses adopted without a shareholder vote.

Without targeting specific companies, PAL is publicly urging its external equity managers to vote against the election of directors at firms where boards have formally adopted poison pill defenses.

Some foreign fund managers also have voiced concerns over board-adopted pills and may vote against directors at companies where shareholders are not given a vote.

"Hermes will on an individual basis deal with companies that have adopted a pill without shareholder approval," Makoto Seta, Asia-Pacific associate director of corporate governance at Hermes Pension Management, told Governance Weekly. A Hermes affiliate is a part owner of ISS.

Seta cautioned that votes against directors would be a last option, and that decisions to do so would be based on: what type of pill was adopted (with "dead-hand" features, for example); whether a threat of acquisition was real or perceived; and the fund's past dealings with a company. Hermes is looking at roughly 50 companies in its portfolio that have adopted pills without shareholder consent, though not all would be engaged, Seta said.

Enhanced pay disclosure also will be a focus of shareholders this proxy season. In a move similar to its proposals to Sony in the past four years, the Kabunushi Ombudsman (or "Shareholder Ombudsman") coalition proposes to amend the articles of association to require disclosure of the individual compensation of each of the five highest paid members of Sony's board of directors. The proposed bylaw would require the firm to include these details in the financial report that accompanies the annual meeting notice sent to shareholders (or to their local custodians in Japan, in the case of foreign shareholders) each year. Sony has long been seen as a governance trailblazer in the Japanese market.

The coalition's earlier proposals fell short of the 67 percent required for passage, but they did receive 31.2 percent of votes cast in 2004, and 38.8 percent support in 2005. While Sony has never agreed to amend its articles, the firm has voluntarily provided more compensation details in its proxy circular than the legal minimum, unlike the vast majority of companies in Japan.