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There is an excellent article in Rudlin Consulting’s newsletter about Nidec’s “work – style” reforms, that will probably “hit the spot” for many in Japan. A juicy excerpt: “One area Nidec tackled was unnecessary meetings. In just 4 months at one of their subsidiaries, Tosok, the number of types of meetings was reduced from 156 […]
BDTI’s April 10th English Director Boot Camp was a great success, with active participation by a diverse group of Japanese 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 Tuesday, May 22nd. Sign up now to secure your spot!
The Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code (Chairman: Kazuhito Ikeo, Professor of Economics and Finance, Keio University) has published its proposals for “Revision of the Corporate Governance Code” and “Guidelines for Investor and Company Engagement”. Both are being put out for public comment until April 29, 2018. Full information from the FSA is available here. The documents themselves are available the links below.
（Appendix1）Japan’s Corporate Governance Code (Draft Revision)
（Appendix2）Guidelines for Investor and Company Engagement (Draft)
Recently, many major Japanese companies have been bringing non-Japanese executives to Japan to fill key roles in their global operations. Diversifying the ranks of senior executives is an important step forward for Japanese firms. But it also represents a significant change in terms of how communication and decision-making works at the highest levels of the organization.
Non-Japanese executives working in Japan have few chances to meet their peers at other Japanese firms. There are also few chances to have in-depth and meaningful conversations about the unique issues faced by Japanese companies in the process of becoming truly global entities.
Based on its long experience organizing forums for Japanese executives, the well-regarded Business Research Institute is establishing a new forum designed for non-Japanese executives in Japan and their Japanese counterparts to participate in together. This new forum will provide an important opportunity for networking and discussion. It will be held entirely in English, and will provide the opportunity for frank and in-depth exchange of opinions in a confidential setting.
As of February 2018, METRICAL now covers more than 1,800 companies, having increased its scope from 500 companies. Our research now covers all TSE 1st section companies that have a market capitalization greater than Yen 10 Billion, which is to say almost all TSE1 companies. METRICAL has analyzed the corporate governance of Japanese companies for three years, using 10 criteria and more than 20 sub-criteria. The analysis focuses on both board practices as well as the corporate actions that should be closely affected by CG practice and should ultimately improve financial performance of companies.
This link to our report on our research results shows the interesting (changing) landscape for CG in Japan.
http://www.metrical.co.jp/mwbhpwp/wp-content/uploads/CG_Score_Distribution_201802.pdf
A while back I spent some time writing an engagement letter (in both English and Japanese) that I myself would use if I was the head of governance and proxy voting at an investing institution that held positions in more than a handful of Japanese companies, and did not have enough time to meet with all of them, say, six or more times a year so as to do detailed “engagement” mainly via face-to-face meetings. This actually includes most institutional investors, when you think about it. I thought it might be helpful for friends of mine.
It has always seemed to me that in order for engagement to be efficient, you need to write down in detail your suggestions for companies, and send it out to them as early as you can – giving them a year or more of lead time to put new practices in place, if that is what one hopes. Otherwise, in Japan very much gets “lost in translation”, and even less will reach the board. Many governance practices are new in Japan, and just referring to them verbally will usually not be sufficient to fully communicate. (As the person who proposed Japan’s corporate governance code in order for effective “stewardship” to occur, and having sat on a number of boards, I have done a lot of thinking about this topic.)
To me, therefore, “efficient engagement” means that: a) you will send a letter or letters to the company’s board, one that will be largely or wholly standardized; but b) you may meet, or may never meet with the company, as you choose. You do not have to have multiple meetings with multiple companies, which for most investing institutions would be a very inefficient way to “engage”, particularly if little is put in writing.
What do sophisticated investors expect of directors when it comes to financial analysis of their own companies? In this seminar, an experienced equity portfolio manager and CIO will cover the basics of “accounting for value” and financial analysis that all directors in Japan should know, including:
• Challenges faced using the accounting information produced by listed Japanese companies
• Cash Flow vs Accrual Accounting and how each relates to performance and valuation
• The limitations of traditional measures of performance, value and returns such as sales growth, operating margins, PER, PBR, ROE, etc.
• Key financial metrics that investors and independent directors should use to evaluate business performance
• How to reformulate your company’s financial statements for purposes of investment and valuation
• How to use analysis to drive and support decision-making
There will be simple case studies, and time allotted to Q&A. For maximum benefit, participants may wish to read “Accounting for Value” by Stephen Penman, either before or after the course. Our speaker will be Campbell Gunn, the former country head of T. Rowe Price in Japan. Mr. Gunn is a fund manager with 30 years of broad experience in Japan equity portfolio management, during which time his teams generated returns that were consistently superior to market indices. Currently he advises PacificData, a leading provider of analytical systems and integrated financial information on Japanese companies.
Please sign up early, as we expect this to be a well-attended event. (Use the link below.)
BDTI’s January 25th English Director Boot Camp was a great success, with active participation by a diverse group of Japanese 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 […]
In 2016, Europacifica Consulting delivered the case study, Financial Services Sector Reform in Japan, for inclusion in the APEC Economic Policy Report, published in November 2016.
In the case study, we argued that corporate governance was a vital area of potential structural reform in PM Abe’s economic agenda, which at the time had yet to show clear results. Since then, there have been clear signals of improvement in corporate Japan’s balance sheets and governance practices, as well as a rise in Return on Equity among many of Japan’s largest companies.
Signals of bona fide structural reform are comforting, but we underscore the importance of another of the report’s key arguments; that Koizumi-era reforms in the financial sector did not go far enough in engendering self-sustaining financial market reforms. Both financial reform and investor education may go further to promote households’ move “from savings to investment”, in other words, a move toward greater household participation in financial markets.
The case study may be found in Annex A of the report. The case study was also prepublished by Columbia University’s APEC Studies Center as well (link to report).
” With the recent developments in ESG (Environment, Social and Governance) in our country, the Ministry of the Environment established a “Working Group on Incorporating Issues Regarding Sustainability into Investment” (ESG Working Group) in October 2015. Following discussion and debate over two fiscal years, the Ministry is pleased to announce that it has produced the […]