Here is the short speech that I gave to the Fall 2016 Conference of the Council of Institutional Investors (CII), on September 30, 2016. On this video, my speech starts at the 36:00 minute point. Below, I have reproduced the CII’s summary of my comments, and further below, the full text of my speech.
” Nick Benes, representative director for the Board Director Training Institute of Japan, said a sea change is underway in Japan in terms of companies beginning to comply with the Corporate Governance code, but there is still room for improvement. He reported that almost 80 percent of Japanese companies now have two or more independent directors and 40 percent of large companies have their own corporate governance guidelines, but beyond that, the reforms that companies say they have in place are lacking in substance. He estimated that 90 percent of firms say they comply, but have little evidence this is the case and few have actually changed their practices. Despite these setbacks, Benes said he remains optimistic that Japanese companies will move in the right direction because there is now broad awareness that “governance is good”. Additionally, disclosure has vastly improved and the number of votes opposing the re-election of directors is climbing. A video of this session is available here.
Text of Speech (and Slides)
“In 2013, I was lucky enough to propose to key congressmen in Japan, that Japan should have a Corporate Governance Code. I then advised them, and then the Financial Services Agency, about the content of the Code.
So I am very pleased to have this opportunity to summarize the progress that Japanese companies have made so far in implementing the principles of the Code, based on my activities as consultant, independent director, “directorship” trainer, and policy advocate.
My main message to Committee members is this:
1) A sea change is underway in companies, the media, the government, and the public. Because Japan is a “shame-based” society, the vastly enhanced disclosure required by the Code has created a strong virtuous circle.
2) These changes represent a very big opportunity for foreign investors, but only IF they study the Code and the disclosures in detail, and then leverage the Code’s principles so as to make specific requests for better governance practices to Japanese companies they invest in, while also brandishing the possibility of consequences – such as not re-electing senior executives, – if progress is not made.
Here are some highlights “from the trenches” about what is occurring in Japan:
Following the release of the ”Commonsence Principles of Corporate Governance ” by a diverse, twelve-member coalition of executives of major corporations, asset managers and one shareholder activist in America in July 2016, the influential Business Roundtable (“BRT”) recently released a set of corporate governance principles which are to provide guidance on governance disclosure.
Whereas the Commonsence Principles of Corporate Governance are mainly 8 recommendations on roles and responsibilities of the board, companies and shareholders, the BRT Principles extensively cover the key governance issues such as board responsibilities, roles of key corporate actors, committee responsibilities and other, elemental, governance concerns historically addressed by the organization.
In his article,
Read full article here.
Source: Havard Law School Forum on Corporate Governance and Financial Regulation
”Foreword and Introduction
Business Roundtable has been recognized for decades as an authoritative voice on matters affecting American business corporations and meaningful and effective corporate governance practices. Since Business Roundtable last updated Principles of Corporate Governance in 2012, U.S. public companies have continued to adapt and refine their governance practices within the framework of evolving laws and stock exchange rules. Business Roundtable CEOs continue to believe that the United States has the best corporate governance, financial reporting and securities markets systems in the world. These systems work because they give public companies not only a framework of laws and regulations that establish minimum requirements but also the flexibility to implement customized practices that suit the companies’ needs and to modify those practices in light of changing conditions and standards.
Thanks to the leadership in the LDP, we wereso successful in suggesting a large number of new practices to the FSA that were in fact included in the Japan's Corporate Governance Code, that I got worried that more explanation is needed.
BDTI’s Representative Director Nicholas Benes is quoted in his article about Sharp in the Financial Times this morning. Excerpts:
Sharp, a century old stalwart of corporate Japan, has unveiled an annual loss of $1.9bn and warned of “material uncertainty” about its ability to stay in business, less than three years after facing a similar crisis of survival.
Even for a company with Wal-mart’s heft, $800 million is a sizable sum. That is what the giant retailer will have spent by the end of this fiscal year on its internal probe into alleged bribing of Mexican officials, into whether subsidiaries elsewhere may have been greasing palms and on related compliance improvements.
Matthews Asia is seeking to profit from profound change in Japan with the launch of a new fund.
The Matthews Japan fund, run by Kenichi Amaki, has the flexibility to invest across the whole market cap spectrum in Japan, particularly companies that can benefit from improvements in corporate governance and the domestic growth outlook.
The strategy will replicate that of the existing Matthews Japan fund, which has been available in the US since 1998.