Japan’s Corporate Governance Conundrum, and How Investors Can Solve it

Out of more than 700 defined-benefit corporate pension plans in Japan, only five non-financial corporate pension plans have signed the SC. Second, a major portion of Japan’s asset owners are the companies themselves, in the form of direct “policy holdings” of the shares issued by other companies. Japan’s dual walls of “conflicted pension governance” and “allegiant shareholders” need to be torn down. Here is how it can be done.

April 18th “Director Boot Camp” – Another Successful Program! Next Course: June 14th, 2019!

On April 18th, 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.

February 12th “Director Boot Camp” – Lots of Great Discussion! Next Course: April 18th, 2019!

On February 12th, 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.

The Story Behind Japan’s Corporate Governance Reforms

Frequent visitors to our blog are likely aware of Japan’s major corporate governance reforms, but not everyone is familiar with the story behind how these reforms were crafted. The eminent Steven K. Vogel (Professor of Political Science at the University of California, Berkeley), recently wrote a concise and easy-to-follow history of the major reforms to Japanese corporate governance practices since the 1990s, describing how and why they came to pass.

Public Comment to the METI Fair M&A Study Group (by Nicholas Benes)

As the person who initially proposed the Corporate Governance Code to the LDP in 2013 and 2014, I am well aware of its limitations in various areas. For this reason, I am very pleased that Fair M&A Study Group have decided that its discussions should cover not only MBOs, but also ”cases which are likewise significantly affected by the issues of conflict of interest and information asymmetry”[1], including “cases of acquisition of a controlled company by its controlling shareholder.”[2]

This indeed an important mission, because these topics include virtually all types of M&A transactions and the public statements of executives and boards with regard to them. For many years in the post-war era, the failure of the government and the JPX/TSE to set forth clear bright-line rules that facilitate a fair, robust M&A market in Japan has stunted productivity, dynamism and growth in the Japanese economy.

“Linkage Between Corporate Governance and Value Creation” (METRICAL/BDTI) – Update as of January, 2019

Our joint research – “Linkage Between Corporate Governance and Value Creation” – between BDTI and METRICAL has been updated as of January 31. The most important inferences are summarized below.

(1) Correlations: Board Practices
and Performance

Significant correlation between board practices and performance continues.

(a) ROE: Nominations Committee existence, the number of female directors and percentage of INEDs show a significant positive correlation.

(b) Tobins Q: Nominations Committee, retired top management “advisors” (ex-CEO “advisors”), and percentage of INEDs show significant positive correlation.

(c) ROA (actual): Compensation Committee existence (negative correlation), Incentive Compensation Plan disclosure, and retired top management (ex-CEO) serving as advisors show significant correlation.

松下幸之助の言葉

今から40年前、50年前に松下幸之助が語ったコーポレートガバナンスとスチュワードシップの考えが、今注目されています。昨年月刊誌『Voice』で松下幸之助の「株式の大衆化で新たな繁栄を」と題する文章が紹介されました。 同氏の『実践経営哲学』からの引用と併せて紹介します。

曰く、株式会社は、社長や重役のものではなく、 株主のものであると同時に、社会の「公器」でもある。 決算期ごとに株主総会で業績を報告し、業績が良いモノは 株主から称賛とねぎらいの言葉を頂戴する。 充分な成果が上がらなかった時には、 謹んでお叱りを被る。これが、本来の姿であり、 株主は経営者の御主人である事を決して忘れてはならない。 株主は短期的な売買姿勢をとらず、むしろ「主人公」として毅然とした態度を保つ事が大事である。 単に株式を保有して配当を受け取るだけでなく、株主としての権威、見識をもって 経営者を叱咤激励する事も望ましい。(BDTIによる要約。以下は各出典本文から引用。)

01/29 (Tue) Seminar “Jamie Allen, Secretary General of ACGA: Next-Stage Governance Policies for Japan, and What Companies Need to Do”

In early December, the Asian Corporate Governance Association (ACGA) released the ninth edition of the highly anticipated CG Watch 2018 report, published in collaboration with CLSA. Titled “Hard Decisions: Asia faces tough choices in CG reform”, this biennial regional survey of corporate governance compares and ranks 12 markets in Asia Pacific. Unfortunately, Japan was downgraded from the third position to the seventh position in the report. In this seminar, Jamie Allen, ACGA’s Secretary General will explain the ranking process. He will also talk about how Japan’s fall in ranking in the survey does not mean Japan is “going backwards” on corporate governance. On the contrary, the report recognizes the progress that’s being made in many areas. However, Jamie will clarify how Japan’s regulatory reform needs to focus more on “hard law” (e.g., takeover rules, third-party allotments, collective engagement rules) and not just principles-based “soft law” (CG Code, Stewardship Code). Jamie will carve out a roadmap for the future to bring about cultural or behavioural change on the part of companies, investors and other stakeholders, and will focus on timely issues as the protection of minority shareholders.