I've spent the last two weeks in Japan learning about their corporate governance reforms. One initiative stands out. In March 2023, the Tokyo Stock Exchange (TSE) asked every Prime and Standard Market company to explain whether it was earning its cost of capital, and to publish a plan to fix things if it wasn't. Then it started publishing, every month, a list of who had responded and who hadn't.
Three years later, the results are hard to ignore. And it raises an obvious question: why hasn't any U.S. exchange tried this?
The diagnosis was straightforward. Around half of Prime Market companies traded below book value, and a lot of them — Toyota, Mitsubishi, Honda — were earning returns on equity below their cost of equity. A price-to-book ratio under 1x isn't automatically a governance failure; it can reflect real business problems, not just neglect. TSE's actual ask was narrower than people give it credit for: explain your valuation, and show you've thought about it.
The response was fast. By February 2024, 59% of Prime companies had disclosed a plan or said they were working on one. By the end of that year, it was 90%. TSE says the disclosure rate has stayed above 90% since March 2025. Investors reportedly reverse-engineered the published list to figure out who hadn't responded, which only added to the pressure. None of this is legally required. There's no fine for skipping it. It works on reputation alone.
Two things often get credited to this campaign that predate it. Japan's cross-shareholding unwind — companies parking capital in each other's stock instead of using it — was already underway before 2023. So was foreign activist interest in Japan. The 2023 request accelerated both but didn't start either. Separately, TSE has also gotten tougher on delisting weak companies since its 2022 market restructuring, with well over 100 firms under formal supervision as of late 2025. That's a different policy, but it points the same way: TSE doesn't treat every existing listing as sacred.
This isn't altruism. JPX, TSE's parent, makes its money from trading and clearing activity — about ¥64.5 billion in trading revenue in the year ended March 2025, versus ¥17.3 billion from listings. A market full of higher-quality, more investable companies trades more. JPX has a real financial reason to want that outcome, on top of whatever governance philosophy is driving the initiative.
I laid out five major markets side by side to see what each treats as its job. This isn't a scorecard — every exchange has made a defensible choice given its own mandate and ownership structure. But the differences are real.
NYSE: Makes money on listing fees and, increasingly, data and clearing revenue through parent ICE. Its job is issuer eligibility and market quality at the point of listing, not ongoing scrutiny of capital allocation
Nasdaq: Similar story, plus a genuinely large financial-technology business. Good businesses, but none of it amounts to a TSE-style ongoing campaign
Texas Stock Exchange: Betting on tougher entry standards and a lighter touch afterward — the opposite instinct from TSE. Too new to judge
Europe (LSE, Euronext, Deutsche Börse): LSE has become mostly a data and index business. The others focus on trading and post-trade infrastructure. None runs anything like TSE's campaign
India (NSE, BSE): This is the most interesting comparison. Indian exchanges earn revenue almost exactly the way JPX does — overwhelmingly from trading and derivatives. If revenue model alone explained TSE's behavior, India should be doing something similar. It isn't. India has spent recent years expanding access — fast SME listing growth — while the regulator, SEBI, handles quality problems after the fact. Same economics, different institutional choices.
The U.S. number is worth stating precisely. I ran this screen myself for a Forbes column last summer and reran it recently: as of August 8, 2026, 1,164 of the 6,662 companies listed on NYSE and Nasdaq — about 18% — trade below book value, split 417 on NYSE and 747 on Nasdaq. The same screen on TSE-listed companies gives you 1,417 of 4,313, or 33%. Japan's problem is bigger in relative terms. But 18%, sitting inside U.S. indexes near record highs, is not a rounding error.
TSE's approach has an American precedent, and it's worth being honest about how that one turned out. In 1978, NYSE became the first U.S. exchange to require every listed company to have an audit committee of independent directors, decades ahead of Sarbanes-Oxley making it federal law in 2002.
But the follow-through was weak. Enron's audit committee still missed the fraud. WorldCom's committee didn't catch the inflated capital spending until it was enormous. NYSE had the rule on the books for almost 25 years and it didn't stop either scandal, because the exchange treated it as a box to check at listing, not something to monitor over time.
Have NYSE or Nasdaq added a genuinely self-initiated governance rule since 1978 — something they did on their own, not at Congress's direction? Not really. The 2003 independent-board rules came out of NYSE's own governance committee, but that committee was formed in mid-2002, right after Enron and WorldCom, while Sarbanes-Oxley was being written. The later claw back and compensation-committee rules were Dodd-Frank mandates, adopted as recently as 2023. The pattern since 1978 is regulators or scandals driving the exchanges, not the other way around. TSE's 2023 campaign is closer to an unprompted exchange initiative than anything NYSE or Nasdaq has produced in almost 50 years.
The likely explanation is structural. NYSE and Nasdaq's parent, the NASD, were member-owned, not-for-profit organizations for most of the twentieth century. Both converted to shareholder-owned, for-profit companies in the early 2000s. Research on exchange demutualization finds that monitoring of listed companies tends to decline afterward — a for-profit exchange must weigh the cost of vigorous oversight against shareholder returns in a way a mutual organization never did. Much of the disciplinary function also moved to FINRA in 2007, separating who runs the exchange from who polices listed companies. None of this was a scandal. It was a rational business evolution. But it also means a for-profit exchange has less appetite for an open-ended reputational campaign like TSE's than a mission-driven exchange once had — or than JPX, which still carries a public mandate around Japan's competitiveness, has today.
Japanese shareholders who clear modest ownership thresholds can submit a binding proposal, including one to appoint or remove a specific director. American shareholders submit proposals under SEC Rule 14a-8, which are non-binding even when they pass, and can be excluded if they touch "ordinary business operations." Activist pressure in Japan has a more direct formal channel into changing how a company is run than it does here, where investors instead rely on expensive tools — proxy contests, negotiated settlements, litigation. That's a plausible reason Japan's exchange felt compelled to build an institutional substitute for shareholder power its own investors couldn't always exercise. It deserves its own piece rather than a paragraph here.
Probably not soon, and not in this form. Both incumbents have moved in a narrower direction: Nasdaq proposed a $5 million continued-listing threshold in January 2026 aimed at removing thinly capitalized issuers, and NYSE American proposed similar tightening. That's pruning the weakest tail through a hard cap floor and delisting — not TSE's approach of engaging with companies that are underperforming but still very viable.
I used to think U.S. shareholder activism was a mature enough substitute that exchanges didn't need to bother. That needs a caveat. Overall activist campaign activity was actually up slightly in the first half of 2026. But the sharpest tool — the actual proxy contest — is declining fast: just 12 U.S. contests in the first half of 2026, a third fewer than a year earlier and two-thirds fewer than 2024. Activists are winning board seats through slower negotiated settlements instead. If that trend holds, the traditional check on undervalued American companies is getting more expensive to use, which is an argument for a lower-cost complement along TSE's lines, not against one.
TXSE has staked its whole pitch on the opposite instinct — fewer procedural mandates, not more — so it's the least likely of the three to try anything like this, even as its tougher entry standards address a related problem from a different angle.
I don't think NYSE, Nasdaq, TXSE, or the exchanges in Europe and India are falling short. Each has made a reasonable choice given its mandate, ownership structure, and the maturity of its market. But TSE has treated capital inefficiency among its own listed companies as a problem the exchange itself should help fix, using disclosure and reputation as its tools. That's unusual. It appears to be working. It deserves closer study by exchanges built around very different mandates — including ours.
This article was originally published on Forbes.com