The owner of the Tokyo Stock Exchange Building faces a shareholder resolution from Hong Kong hedge fund LIM Advisors calling for an end to giving board seats to former executives at the TSE and its parent, a practice LIM says results in offering the bourse below-market rent.

Heiwa Real Estate has customarily appointed ex-officials of the TSE -- its biggest tenant, leasing the entire building -- to directorships. President Kiyoyuki Tsuchimoto is Heiwa's fourth consecutive chief to have started his career at the Tokyo bourse. Including Tsuchimoto, three of Heiwa's five inside directors are TSE alumni.

This could create a conflict of interest, LIM says.

The ties are likely to stir debate, given that TSE operator Japan Exchange Group (JPX) is essentially the standard-bearer for corporate governance reform at the nation's listed companies.

Formed in 1947 to manage stock exchange facilities across the country, Heiwa is known as the "landlord of Kabutocho" because it owns a large portfolio of properties in the area, considered the Wall Street of Japan.

LIM Advisors is apparently proposing three main changes at Heiwa: no board candidacies for anyone who has worked at JPX for five years or longer; filling at least two-thirds of the board with real estate professionals with 10 or more years of industry experience; and selling off roughly 3.2 million JPX shares held by Heiwa. The activist fund also points out that the TSE building's rent is a bargain compared with market rates. If the rent is low because former JPX executives are on the leadership team, this would constitute a material conflict of interest, the shareholder says.