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Corporate Governance Articles in the Newsletter of the Institute of Social Research, University of Tokyo, March 2016

2016-05-07 posted by

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.

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Association of Chartered Certified Accountants: ”Asia’s Corporate Governance Journey Gathers Momentum”

2016-05-06 posted by

Asia in general has seen significant improvement in corporate governance practices and standards over the past 10 years, even if there is much room for further improvement, as is described in this insightful article by the Association of Chartered Certified Accountants (ACCA) referred to below.  The very fact that there is much more to analyze (than before) when anyone tries to “rank” governance practices in various countries, is indicative of this.  In particular, I find it especially interesting that the self-interest of certain family dynasties has caused them to have strong interest in better corporate governance because “because there is a corollary for him between good governance and the long-term future of his corporation. ” See below.

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”CalSTRS, GPIF coming together to tackle corporate governance issues”

2016-05-06 posted by

This informal coalition that seems to be coming into being between the GPIF, CalSTRS, and CalPERS would be a big step ahead in terms of discussions to increase the effectiveness of engagement by not only these organizations, but also their fund managers and other market players.  Kudos to all three institutions, and also Mr. Mizuno, for moving in this direction.

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Papers by Professor Toru Yoshikawa: the Importance of Trust, and “Convergence”

2016-05-04 posted by

directorship director training

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

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Comment on Reuters Article: ”Secrecy, hierarchy haunt Japan corporate culture despite Abe’s reforms”

2016-05-03 posted by

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.

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Ferillo & Veltsos: ”Grading Global Boards of Directors on Cybersecurity”

2016-05-02 posted by

On April 1, 2016 NASDAQ, along with Tanium (a leading-edge cybersecurity consultant), released a detailed survey of non executive (independent) directors and C-suite executives in multiple countries (e.g., the US, UK, Japan, Germany, Denmark, and the Nordic countries) concerning cybersecurity accountability. [1] NASDAQ and Tanium wished to obtain answers to three basic questions: (1) how these executives assessed their company’s vulnerabilities to cybersecurity threat vectors; (2) how they evaluated their company’s readiness to address these vulnerabilities; and (3) who within the company was held “accountable” for addressing these cybersecurity vulnerabilities.

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CII’s ”Investor Guide to Engagement on Cyber Risk”

2016-04-30 posted by

Foreword:

As the frequency and severity of cyber attacks against global businesses continue to escalate, both companies and their investors are coming to terms with a grim reality: Data breaches, or cyber incidents, are no longer a matter of if but when. Having put to rest rose-colored notions of eliminating this threat, investors are looking to boards for leadership in addressing the risks and mitigating the damage associated with cyber incidents.

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Business Financial Post ”Japan discovers ‘good’ governance, U.S. style”

2016-04-28 posted by

”Not so long ago, back when they were eating the lunch of American corporations, Japan’s Toyotas, Hitachis, Sonys, Canons and Hondas were governed in the worst possible way — at least according to the canons of American governance. Their boards were made up almost exclusively of corporate insiders, with no independent directors and no diversity. […]

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Bloomberg: ”The Tokyo Whale Is Quietly Buying Up Huge Stakes in Japan Inc.”

2016-04-27 posted by

“…. Still, the longer the BOJ’s buying persists, the bigger the risk that market prices will detach from fundamentals. Assuming Goldman Sachs’s prediction for more stimulus proves correct, the central bank could end up owning a quarter of Mitsumi Electric Co., a supplier to Apple Inc., and 21 percent of Fast Retailing by the end of 2017, estimates compiled by Bloomberg show.

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