Aberdeen, a consistent supporter of BDTI, has produced this short note (see link below for full memo) succinctly summarizing the recent progress in Japan on corporate governance. ”One year after Japan introduced a voluntary Corporate Governance code, there are signs of progress.
Tag: Corporate Governance Code
Forbes： U.S. Companies Joining FTSE4Good Index, Banks and Japanese Companies Exiting
“Green” indices are rising in popularity as investors increasingly seek to put business in context of its surroundings, and its wider impact. FTSE4Good, the global index provided by FTSE Russell, measures how a company operates in terms of environmental, social and governance (ESG) factors rather than what it makes — and ESG risk is everywhere, quite apart from “climate risk,” now at the forefront of attention.
Tougher inclusion criteria has just resulted in the removal of 43 companies from the index, with a startling number from Japan, where the picture of the extent of corporate governance reforms remains unclear. Its latest review sees 77 new additions to the FTSE4Good Global Index, of which 26 companies are from the United States, making it the largest contributor………..”
The Canadian Business Journal: “Japanese Corporate Governance Codes in Global Investors Spotlight”
”NEW YORK, NY–(Marketwired – May 31, 2016) – Institutional Investor, a world leading financial information company founded in 1967, is pleased to announce the results of the 2016 rankings of Japan’s top CEOs, CFOs, Investor Relations Officers and Investor Relations Departments. Institutional Investor’s CEO, David Antin, is the founder of the Executive Team rankings, which are supported by deep data and have become a key benchmark globally. This year, 443 Japanese companies received nominations across 25 business sectors. Corporate governance proved a key factor in determining the winners.
Citywire: ”Japanese value is not dependent on a weak yen”
”The Japanese equity market has been under pressure recently from a strengthening currency, a weakening global economy and the uncertainty caused by the Bank of Japan’s introduction in late January of a negative interest rate policy. We recognise these concerns, but think that the fears of many market participants are overdone.
As value investors we still see Japan as a fertile hunting ground.
A far greater percentage of listed companies have net cash on their balance sheets in Japan than in any other major market and net cash represents a greater percentage of market capitalisation, as shown below. Furthermore, many of those companies have significant unrealised gains on real estate holdings; and many have large holdings of listed equities, some for strategic business purposes, but some for no reason other than historic relationships.
The question that has occupied the minds of value investors like us has been how that value can be unlocked, used more efficiently and returned to investors when not needed for operational purposes. In that regard, we think that 2015 was a pivotal year for listed Japanese companies.
Prof. Osugi: ”Corporate Governance – No Longer Somebody Else’s Problem”
An article by BDTI’s Representative Director Professor Kenichi Osugi:
”1. Introduction
Up until very recently, discussion of corporate governance was only relevant to certain academics and the IR representatives of listed companies. However, since the Japanese government cited improvements to corporate governance as being a part of its “Abenomics” policy, corporate governance has become a broad-reaching topic that cannot be ignored by listed companies and their executives. Specifically, organizations such as the Financial Services Agency and Tokyo Stock Exchange have formulated the ”Stewardship Code” (February 2014) and the ”Corporate Governance Code” (June 2015), and listed companies and institutional investors were forced to respond to these codes of conduct………”
Corporate Governance Articles in the Newsletter of the Institute of Social Research, University of Tokyo, March 2016
Corporate Governance
”Social Science Japan newsletter 54 takes up where it left off last issue and continues to explore the theme of governance. This time, the focus is on corporate governance. Six ISS scholars discuss the topic from various angles.
Tanaka Wataru summarizes the ISS research project and the book that inspired this issue’s featured theme. He explains what corporate governance entails and the history of its transformation in Japan. Cato Susumu analyses the dynamics of the wage structure in firms and shows how firm-specific human capital affects wages under a seniority system. Focusing on middle managers as actors in corporate governance, Owan Hideo looks at how they affect firm productivity and what measure can be used to evaluate their performance. Sasaki Dan highlights the concurrent passage, in 2014, of amendments to corporate and school educational law and argues that the reforms have reduced autonomy and increased externally-imposed or topdown control. He raises concerns about the consequences of mandating the inclusion of “neutral,” external members to the executive boards of large corporations. Nakamura Naofumi and Nakabayashi Masaki explore corporate governance in its historical context.
Papers by Professor Toru Yoshikawa: the Importance of Trust, and “Convergence”
A recent article put out by the SMU Office of Research, quoted second below, describes the work of Professor Yoshikawa of the Singapore Management University related to concepts of convergence in corporate governance as related to Asia and Japan. I personally think that the more recent 2013 paper that Professor Yoshikawa contributed to is equally, if not more, on point. In my own experience effective collaboration between management and outside directors can only occur if the latter’s perception of the CEO values and integrity, including his/her committment to governance, are high. This is true in any country, but it is even more true in Japan because the number of outside directors is small. (Comment by Nicholas Benes of BDTI)
1) Paper: “The Effects of CEO Trustworthiness on Directors’ Monitoring and Resource Provision2
Comment on Reuters Article: ”Secrecy, hierarchy haunt Japan corporate culture despite Abe’s reforms”
Comment by Nicholas Benes at BDTI: The foreign press often tends to focus on each of these scandals as if they expose significant flaws in a recently installed set of governance “best practices” that in fact, is just now gathering momentum and evolving in Japan. However, the foreign press rarely specifies exactly what additional changes are needed, which is not easy to do. What the recent scandals most directly reveal, is flaws in the corporate culture of particular firms. It is my own view that the combination of: (a) the content of the new practices (and upcoming reforms) (b) the degree to which they are sincerely deployed; and (c) the extent to which companies use external training to spread essential knowledge and awareness in the ranks, all affect the extent to which boards can effectively focus on “managing” and improving their own corporate culture.
”TOKYO, May 3 (Reuters) – A spate of high-profile scandals at leading Japanese companies show reforms and rhetoric aimed at improving the country’s corporate governance do not go far enough to unwind the culture of secrecy and hierarchy that plagues Japan Inc.
Sonoko Noda and Nobuhiro Sato: ”Japan’s rate of independent directors is one of world’s lowest”
Background:
Last year, Japan introduced codes designed to work together to increase corporate value and investor return in Japanese companies. The Corporate Governance Code and the Stewardship Code are supposed to work hand-in-hand to promote transparency and sustainable growth. Part of the Corporate Governance Code calls for companies to have at least two independent directors. Having outsiders on board, it was hoped would bring discipline as companies reach for higher profits.
KKR & Co. LP: ”Strengthened Corporate Governance Will Help Drive Japan’s Economy”
”Japan, the question of value creation has become increasingly important as corporate governance evolves and Japanese industry restructures in the era of Abenomics, Prime Minister Shinzo Abe’s plan to jolt the world’s third-largest economy.