Discussion Forum

”Research Reveals “Human” Issues as Top Cyber Security and Business Risk”

”…Based upon the data collected from the first global survey to capture the voice of cyber security professionals on the state of their profession, this final report of the two-part series, titled “Through the Eyes of Cyber Security Professionals: Annual Research Report (Part II),” concludes:

  • The clear majority (92%) believe that an average organization is vulnerable to some type of cyber-attack or data breach.
  • People and organizational issues contribute to the onslaught of security incidents.
  • Most organizations are feeling the effect of the global cyber security skills shortage.
  • Cyber security professionals have several suggestions to help improve the current situation.
  • Sixty-two percent (62%) believe critical infrastructure is very vulnerable to cyber-attacks.
  • Sixty-six percent (66%) believe government cyber security strategy tends to be incoherent and incomplete.
  • Eighty-nine percent (89%) of cyber security professionals want more help from their governments

December 15th “Director Boot Camp” – Another Successful and Enjoyable Program! Next Course: February 17th

On December 15th, BDTI held its English Director Boot Camp , attended by a number of experienced participants. Participants from various companies heard lectures about corporate governance and related topics by Nicholas Benes, and exchanged experiences and opinions at a spacious, comfortable room kindly donated for our use by Cosmo Public Relations, a leading communications and PR firm in Tokyo.

We are planning to hold the next course on February 17th. Sign up early!

”Japan’s Coming Shareholder Revolution” (written in 2001!)

Here is an article I wrote in 2001, about the topic in the title. It makes interesting reading some 15 years later. While I may have made correct call… obviously I was a bit too early! It has taken a lot more work, by many persons, for Japan to move as far as it has come in the past years…and the job is not done yet.

“Last month, the Life Insurance Association of Japan published a survey of 561 public companies and 122 institutional investors, focusing on corporate governance and investor relations practices. The results exploded some myths regarding the supposed lack of support for modern corporate governance concepts among institutional shareholders in Japan. Japanese investors are in effect saying: “We want transparency and clear accountability, independent outside directors on boards, and independent board committees.”

The very fact that the survey addressed these topics is a breath of fresh air. Japan’s institutional investor community is weighing in on the emerging debate over corporate governance. It is none too late. Although they should be the most directly motivated constituency, institutional shareholders had been conspicuously quiet. Like most of Japan’s institutional investors, insurance companies have feared a backlash if they took a stance opposed by certain senior executives and politicians. They feared imperiling governmental assistance with industry cleanup, as well as losing insurance and pension business from companies in which they hold stock.

Logic and hard realities are finally coming to the fore. And the investor community will become more vocal as competition heats up in the fund management industry. Investment advisor companies, known as (toshi komon ), compete on the basis of investment returns and prudent decision-making, and do not have other businesses that might fear adverse repercussions.

Japan’s Productivity Gap – Employment System Re-examined

Japan’s GDP per hours worked only amounts to just above 60 percent of the level in the US. In a rapidly ageing society, such a situation is no longer tenable. When the employment to population ratio declines, productivity needs to increase in order to preserve the level of welfare.

Compared to other nations, Japan’s adult population is highly educated. Investment in research and development is also among the highest and corporations have access to an abundant amount of financial capital. The low level of productivity can therefore not be explained by lack of skills, technology or capital. Rather, the available resources are simply not employed in the best possible way.

The deficiencies are being acknowledged by the Japanese government, which is pushing for a “productivity revolution”. Besides the classic approach of promoting new technologies and the recent support for start-ups also undertaken in other countries, the emphasis is on corporate governance reform, more flexible labour markets and a change in working practices (hataraki-kata kaikaku, 働き方改革).

Glass Ceilings or Sticky Floors? An analysis of the gender wage gap across the wage distribution in Japan, by HARA Hiromi (Japan Women’s University)

Abstract

This study examines the gender wage gap across the wage distribution in Japan using large sample data for 1990, 2000, and 2014. The results of the Firpo-Fortin-Lemieux decomposition show that the part of the observed gender gap that is not explained by gender differences in human capital is larger at the top and at the bottom of the wage distribution, indicating that both a glass ceiling and a sticky floor exist for women in the Japanese labor market…….

Top Ten International Anti-Corruption Developments for September 2016

On November 22nd Morrison & Foerster LLP made public their latest legal update titled “Top Ten International Anti-Corruption Developments for September 2016”.

In this update they summarize “some of the most important international anti-corruption developments from the past month, with links to primary resources.” This month they ask: “What is a Department of Justice (DOJ) “declination with disgorgement”? How many FCPA resolutions was the Securities and Exchange Commission (SEC) able to bring in the last month of its fiscal year? How does one avoid running afoul of South Korea’s new anti-corruption laws?”

”Abenomics & Inclusive Growth” by Aoyagi Chie and Giovanni Ganelli

”In the last few years, policy makers in Japan have embarked on an ambitious effort to decisively get the economy out of deflation and revive growth. This policy approach, which has been dubbed “Abenomics” after Prime Minister Shinzo Abe, comprises three so-called “arrows”, namely monetary policy, fiscal policy, and growth enhancing structural reforms. In this article, we seek to evaluate the effects of Abenomics’ reforms in terms of inclusiveness. Inclusive growth is a multidimensional concept and the notion has varying definitions, interpretations and connotations. To study the degree of inclusiveness of the Japanese economy, we will first review trends in equity, and then refer to econometric studies attempting to assess how implementation of Abenomics is expected to affect inclusive growth…..”.

Read full article here.

ISS Proposes Policy Opposing the Creation of “Advisory” Posts (sodanyaku, komon)

ISS has proposed a policy for Japan essentially opposing the creation of “advisory” posts for retired directors or kansayaku, who can tend to over-influence the decisions of currently serving executives because the “advisors” were previously the “senpai” (seniors)  of executives, thus creating bottlenecks or “legacy” issues can make changing strategy difficult. This occurs notwithstanding the fact that “advisors” bear no fiduciary duties, cannot be sued by shareholders, and require no disclosure (not even regarding their compensation). At the same time, METI has announced that it will undertake a study about the impact of such positions.

Such advisory posts are a custom in Japanese corporate governance that I have publicly opposed for some time, even before I proposed the full disclosure of all compensation paid to “advisors” when proposing the contents of the Corporate Governance Code to the FSA in 2014. (Unfortunately, the FSA did not include that provision. )

While ISS’ proposed policy is the outcome of my recommendations in an indirect sense, in fact I have had no recent discussions whatever with anyone at ISS about this topic, and it is most accurate to say that concern about the practice simply “percolated” and came to be shared by many others over the past few years.  This is further evidence of a deepening dialogue and consideration of key issues related to corporate governance practice in Japan.

I would like to encourage those who have comments on the proposed policy to respond to the questions below by sending an email to:  jp-research@issgovernance.com

A Study of Cross-Shareholding

Cross share holding is still a big issue in Japan, as the cancellation of shares and return on shareholders equity remain slower to improve. This report shows this evidence clearly, using analysis of 500 companies of core research universe as of August 2016. Average ROE and CG scores for 50 largest cross share holdings/sales companies were lower than those for overall 500 companies. A half of 50 companies are banks and those holdings have not really decreased for a year. Due to accountability to shareholders, companies should disclose cost/benefit on the holdings that put downward pressure on ROE by earning only dividends. Detail is shown as link below.

http://www.titlisgroup.com/mwbhpwp/wp-content/uploads/Cross-share-holdings20160905.pdf

Companies Improved CG Scores 09/2015-09-2016

Titlis updated companies in Japan improved CG scores from 09/2015-09/2016, following the previous posting of Attribution of change in CG score. Of 455 companies 7 companies removed takeover defense and many companies moved to improve board of directors at slower but steady pace. This is not enough but we should positively appreciate further effort in near future. Meantime share holding and share cancelation that would put positive pressure on return on shareholders’ equity have shown little improvement.

http://www.titlisgroup.com/mwbhpwp/wp-content/uploads/CGscore-improvement20161007sample1-2.pdf