METRICAL: Does the Legal Structure of BoD Affect Japan’s Corporate Governance and Performance?

Public companies in Japan employ three types of legal governance structures for their boards. The three types of organizational structure are the Company with Corporate Auditors, the Company with an Audit Committee and the Company with Nomination Committee, etc. However, as shown in the pie chart below, very few companies use the Nomination Committee format. The number of companies shown below is based on Metrical’s research universe of 1,754 companies but the number of Companies with Nomination Committee, etc. would not be much different even if more smaller companies were included.

Governance Practices and Firm Performance in Japan – Preliminary Analysis of Causation

On December 11, 2019, Nicholas Benes gave a lecture on Corporate Governance Practices and Firm Performance in Japan at the Securities Analysts Association of Japan. It was generally well-received and covered the following topics:

  • An Introduction to BDTI
  • General Trends in Corporate Governance
  • Correlation Analysis on Relationships Between Corporate Governance and Firm Performance, and the Direction of Causation
  • Advice for Investors and Prospects for Future Research
  • Appendix: Preview of our internal corporate governance relational database

Of note were the three main themes that were discussed: (1) There are visible relationships between certain corporate governance practices and financial performance (2) the direction of causation is most important to confirm, and so far, BDTI’s analysis suggests that a number of specific governance practices actually do seem to “cause” improvement rather than simply serve as evidence that management wants to “look good”; and (3) this information is vitally useful for analysts and investors alike, in order to improve the effectiveness of investor engagement that enhances profitability, growth and stock performance in a win-win cycle.

Results of CFA Society Japan and CFA Institute survey regarding amendments to the Foreign Exchange and Foreign Trade Act

Almost 70% of respondents do not agree with the amendment and 86% showed their concern that the amendment might give a negative impact on the investment into the Japanese equity market.

Results of CFA Society Japan and CFA Institute survey regarding amendments to the Foreign Exchange and Foreign Trade Act

Glass Lewis:” Proxy Guidelines for 2020″

“….As announced in our policy guidelines last year, beginning in 2019, for companies listed on the first and second sections of the TSE, we will begin making recommendations against members of a board that does not have any incumbent or proposed female members. In such instances, we will generally recommend voting against the chair of the company (or the most senior executive in the absence of a company chair) under the two-tier board or one-tier with one committee structures, or against the nominating committee chair under a one-tier with three committees structure. In the case of a two-tier board structure, we will examine the board of directors and board of statutory auditors as a whole, and in the cases of one-tier with three- committee structures, we will consider whether the company has any female executive officers as well as female directors.

Investing.com:“Japan is the Place to Invest” By Cumberland Advisors

“ ….The OECD notes that, despite the current slowdown, the expansion of the Japanese economy that began in late 2012 is the longest in Japan’s postwar history and is projected to continue through 2020. The Bank of Japan’s forecast is similar, with a pick-up in growth expected in Japan’s fiscal year 2021. Continued supportive monetary policy with very low interest rates and large-scale government bond purchases, together with increased public investment and spending to offset the effects of the sales-tax increase, are expected to maintain the expansion. The new U.S.-Japan trade deal and the anticipated elimination of the threat of U.S. automobile tariffs are positive developments. If the current optimism about progress in trade talks between the U.S. and China proves to be justified, Japan’s economy would benefit significantly from the positive effects on the Asia region….“

November 13th “Director Boot Camp” – Another Successful Program! Next Course: February 19th, 2020!

On November 13th, BDTI held its English Director Boot Camp , attended by a number of highly experienced participants. Participants from various companies heard lectures about corporate governance by Nicholas Benes and Andrew Silberman of AMT, 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 Wednesday, February 19th,2020. Sign up early!