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NGO Rainforest Action Network (RAN) claims that many Japanese companies are either “systematically misreporting compliance” under Japan’s Corporate Governance Code, or have a “fundamental lack of understanding as to what constitutes meaningful sustainability reporting and stakeholder engagement.”
‘‘Abstract: The aim of our research is to investigate whether good governance is associated with higher credit rating in Japanese firms. Mainly, this research seeks to examine the effect of governance attributes namely those related to the board and ownership structure besides quality of information on credit ratings. Empirical analyses are conducted from a sample of 75 Japanese firms listed on Topix 100, over the period 2006- 2013 using Ordered Probit regression. The study shows that good governance is associated with higher credit rating and suggests that active monitoring by independent directors and better disclosure mitigate agency conflicts and protect the interests of debtholders……”
“The Study Group on Investment for Sustainable Value Creation established by Japan’s Ministry of Economy, Trade and Industry (METI), disclosed its minutes in April after three meetings in February and March. The objective of the Group is to find some common foundations for action by companies and investors on two main issues:
1) Measures to effectively utilize various kinds of capital and make decisions on investment for sustainable value creation.
2) Evaluation of information that investors use and proposed improvements for this and better corporate/investor dialogue. (…)
https://www.jri.co.jp/MediaLibrary/file/english/periodical/CSRTrendReport_201606.pdf
The FT comments on what seems to be a string of scandals in Japan. It is our opinion that such governance or compliance issues are not necessarily more frequent than in other developed nations – it is difficult to compare – , but (1) they arise from different gaps in governance and management structures; and (2) whistle-blowing is becoming more frequent in Japan.
”From carmakers and electronics groups to housebuilders and the constructors of the nation’s roads and runways, a government-led transparency drive has accelerated a record surge of accounting and data fraud scandals across corporate Japan.
On June 1 2016, the Asian Corporate Governance Association (ACGA) Chairman, Douglas Henck and Secretary General, Jamie Allen gave a speech at the Financial Services Agency (FSA) in Tokyo, Japan.
The presentation talked about how to foster constructive engagement between companies and investors.
”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.
”In today’s business environment, companies face numerous challenges that can impact success—from emerging technologies to changing regulatory requirements and cybersecurity concerns. As a result, the expertise, experience, and diversity of perspective in the boardroom play a more critical role than ever in ensuring effective oversight. At the same time, many investors and other stakeholders are seeking influence on board composition. They want more information about a company’s director nominees. They also want to know that boards and their nominating and governance committees are appropriately considering director tenure, board diversity and the results of board self-evaluations when making director nominations. All of this is occurring within an environment of aggressive shareholder activism, in which board composition often becomes a central focus………”
”Summary: What is the link between disruption and gender diversity? Innovation. In our experience, the way to spark innovation is to harness the power of different ideas from diverse groups of people who are supported by an inclusive culture. Part of this equation is gender diversity.
Companies that want to survive these challenging times will need to tap into a range of opinions, ideas and experiences. Successful leaders must anticipate and address the sweeping changes in global demographics and advances in technology to create an environment where people and ideas flourish. And improving gender diversity, not only in senior leadership but also across the talent pipeline, can help…. ”
Seth Fischer, chief investment officer and portfolio manager at Oasis Management, discusses Japan’s corporate governance, the effectiveness of Abenomics and where he sees opportunities. He speaks to Bloomberg’s Rishaad Salamat on “Trending Business.” (Source: Bloomberg)
”Historically, shareholder activism has rarely been successful at Japanese companies. However, as Japan moves closer to a Western model of corporate governance, shareholders may be playing a larger role in the strategy and leadership of some Japanese companies. This has recently been exemplified by the apparent influence of Daniel Loeb, from the hedge fund Third Point, on the leadership of Seven & i Holdings (“the Company”), which holds its annual general meeting on Thursday, May 26.