On October 26th, 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 Andrew Silberman of AMT, and exchanged experiences and opinions at a spacious, comfortable room kindly donated for our use by […]
CG Top 20 stocks raised its outperformance, hitting all-time high Top 20 CG Score Index continued outperformance for September 2017 in favor of stock market rally for September. CG top 20 stocks hit its all time high of June 2015 when Corporate Governance Code was launched. This would be due to a sign that an increasing number of long-term investors are coming […]
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This excellent working paper by Naoshi Ikeda, Kotaro Inoue and Sho Watanabe describes their research that leads to the conclusion (similar to BDTI’s own research) that cross-shareholdings in Japan negatively impact risk-taking, investment for growth, and the frequency of restructuring activities. Conversely, when managers are monitored more heavily by investors and independent directors, they are positively affected.
August CG Score inched up 0.7pt YoY
CG Rating Monthly Letter
1. CG Score attribution analysis (08/2016-08/2017)
CG score of core research universe of 489 companies for 1 year period from August 2016 to August 2017 rose 0.7 pt to 61.7 pt from 61.0 pt a year ago. Core universe increased 30 companies to 489 from 459 companies as JPX400 composites have been renewed in the month. The rise in average score keeps improving at modest rate, whereas the change in score from the previous month of 459 companies from July 2016 to July 2017 rose 0.8 pt.
We are reviewing CG enhancement in Japan before / after AGM in June 2017, but that shows modest improvement after AGM. The analysis will be released soon after review.
BDTI’s August 30th English Director Boot Camp was a great success, with active participation by a diverse group of Japanese, American、and European persons! Participants from various companies heard lectures about corporate governance and related topics 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.
Thank you all for coming!
The next course will be held on Thursday, October 26th. Sign up now to secure your spot!
We were amiss…in that we recently discovered this video interview of Nicholas Benes made some months ago, has been kindly made public by Econvue.com . (Econvue provides succinct, timely, evidence-based research and commentary on economic topics that matter, delivered to your inbox. ) In it, Mr. Benes explains how a number of major steps […]
Yes, it is true. Secom’s pension fund is the only one. Following the report of a government study group urging private pension funds to sign the Stewardship Code, it is an open secret that many firms in industrial Japan are now waiting for either Panasonic or Toyota to sign the Stewardship Code. If one of these iconic companies’ pension funds signs, it is said there will be an avalanche of other corporate funds that sign. Conversely, if neither of them signs, everyone can use that as an excuse for why they did not sign, e.g. “even mainstream companies like Toyota or Panasonic did not sign it yet.”.
Oddly, Japanese companies pride themselves on the strength of their covenant to employees, yet neglect employees’ pensions by failing to sign the stewardship code and report how they have handled those funds. Why is this? Quite simply, Japanese companies are afraid that if their pension funds become more proactive, those same governance and proxy voting practices might come back and hit them in the face at their own shareholders meeting. What is in the best interests of employees’ pensions may not be in the self-interest of corporate executives. This breaks the most important link in the investment chain – asset owner voice.
Here is an article from Bloomberg focusing on this increasingly interesting situation:
” “The only way you can explain this behavior pattern is to say that, let’s face it, senior executives don’t want active proxy voting and engagement in the market,” said Nicholas Benes, the Tokyo-based head of the Board Director Training Institute of Japan. He said they fear “blowback” at their own shareholder meetings. Judging by their actions, “they care more about that than they do about their employees’ funds,” he said.”
The GPIF should be highly commended for including reference to “the corporate governance codes of each country” to its recent statements regarding its stewardship policy and its proxy voting policy. This is a major step forward, considering the politics that it faces and the long-standing and unfounded claim by leaders in the industrial community who claim that if the GPIF had its own “principles and guidance for governance and proxy voting”, that would be “intervening in managerial decision making. Even though the reference in the recently-released principles bends over backwards to encourage “giving a full hearing to explanations of non-compliance”, if you know the full background, this is significant progress. (For the first time, the GPIF has uttered the words “corporate governance code” in writing!)
The FSA has finalized its revision of the Stewardship Code. Perhaps the biggest change is that it now encourages signatories to disclose their voting records “for each investee company on a per-agenda basis”, something I proposed to the FSA in 2010 but was ignored. However as you can see below, this is a “comply or explain rule”, thus weakening it to some extent:
“Institutional investors should disclose voting records for each investee company on an individual agenda item basis. (If there is a reason to believe it inappropriate to disclose such company-specific voting records on an individual agenda item basis due to the specific circumstances of an investor, the investor should proactively explain the reason. Institutional investors should at a minimum aggregate the voting records into each major kind of proposal, and publicly disclose them.)”