Discussion Forum

Is Mr. Ghosn’s understatement of compensation ”material”?

Mr. Ghosn and Nissan are charged with misrepresentation of securities reports.  The Financial Instruments and Exchange Act provides for civil liability as well as criminal liability for acts of misrepresentation of securities.  Nissan will face a civil lawsuit seeking damages from investors in no distant future.  One of the issues that will be argued in civil lawsuits […]

Damages Estimation- How Much Will Nissan Have to Pay to Investors?

Mr. Ghosn’s criminal cases are ongoing. But the criminal cases alone will not put a close to this entire ordeal. It is a matter of time for Nissan to face civil cases filed by investors. Due to Mr. Ghosn’s understated compensation, it is anticipated that a considerable amount of assets will flow out of Nissan. The largest part of this outflow will be accounted for the damages claimed by and awarded to investors in civil lawsuits. What amount of assets will flow out of Nissan? This memo is an attempt to estimate the probable size of these damages.

01/29 (Tue) Seminar “Jamie Allen, Secretary General of ACGA: Next-Stage Governance Policies for Japan, and What Companies Need to Do”

In early December, the Asian Corporate Governance Association (ACGA) released the ninth edition of the highly anticipated CG Watch 2018 report, published in collaboration with CLSA. Titled “Hard Decisions: Asia faces tough choices in CG reform”, this biennial regional survey of corporate governance compares and ranks 12 markets in Asia Pacific. Unfortunately, Japan was downgraded from the third position to the seventh position in the report. In this seminar, Jamie Allen, ACGA’s Secretary General will explain the ranking process. He will also talk about how Japan’s fall in ranking in the survey does not mean Japan is “going backwards” on corporate governance. On the contrary, the report recognizes the progress that’s being made in many areas. However, Jamie will clarify how Japan’s regulatory reform needs to focus more on “hard law” (e.g., takeover rules, third-party allotments, collective engagement rules) and not just principles-based “soft law” (CG Code, Stewardship Code). Jamie will carve out a roadmap for the future to bring about cultural or behavioural change on the part of companies, investors and other stakeholders, and will focus on timely issues as the protection of minority shareholders.

5 Myths About Digitizing the Boardroom

Recent advances in technology have sparked a seismic shift in how companies operate and communicate. At the boardroom level, paper systems are drifting out and being replaced with upgraded tools and processes that streamline board activities.
You may be struggling to pinpoint the true benefits a board portal may bring to your organization, or you may have some assumptions about the technology that is inhibiting you from looking into a solution further.

This checklist spotlights some of the most common myths about digitizing the boardroom, and will illustrate the ways board portal technology can streamline information sharing and accelerate collaboration.

RIETI Paper: “Corporate Governance, Employment, and Financial Performance of Japanese firms: A cross-country analysis”

Abstract:  “This study examines whether the sustained lower profitability and market valuation of Japanese firms compared to global peer firms can be explained by the structure of insider dominate board of directors and the employment system which hinders flexible employment adjustments by using cross-country data. Firstly we show that level of outside director ratio and flexibility of employment adjustment both differ consistently across 27 countries in the analyzed period. We show that these two factors significantly explain observed variation of financial performance across countries significantly. In addition, we show that not only do these two factors have significant explanation power over the relatively poor performance of Japanese firms, but also over the better financial performance and growth rate of US firms. ”

Authors: ARIKAWA Yasuhiro (Waseda University) / INOUE Kotaro (Tokyo Institute of Technology) / SAITO Takuji (Keio University)

Download the paper:  “Corporate Governance, Employment, and Financial Performance of Japanese firms: A cross-country analysis” 

Related page on RIETI web site:  https://www.rieti.go.jp/en/publications/summary/18120006.html

 

Japanese Institutional Investors- Serious About ESG? Or Just a PR Line to Increase AUM?

Amid the hoopla about Nissan and other scandals, NOT ONE of the major Japanese asset managers on this list have supported non-profit BDTI in its mission to improve governance in Japan via training and analysis of governance practices, at any time over the past nine years. Some of the foreign asset managers have supported us (thanks!), but none of the domestics. ESG is the fad of the month here in Japan, but mainly as a PR line to use in gathering AUM, it seems to me.

Engagement in Japan: How to Discuss Director and Executive Education – the Most Necessary Thing!

Executive training is badly needed in order for independent directors to perform their expected role 

When I proposed to the LDP and the government in 2013 that Japan promulgate a corporate governance code, one of the most important principles that I advised should be included in it was a requirement for director and pre-director training.  To anyone who has ever sat on an average Japanese board, the need for this is obvious.  Without more training of both executives and external directors in Japan, it will continue to be very difficult for independent directors to perform the roles that are now expected of them. From personal experience, I know that it is simply not possible to convince engineers who do not understand finance that their company could very easily go bankrupt in two years.

ICGN Urges Japan to Focus More on Independent Committees and Director Training, Other Key Areas

We are pleased to note that against the backdrop of the recent events at Nissan, the Institutional Corporate Governance Network (ICGN)  has submitted a letter to Japan’s Council of Experts for the Follow-up of Japan’s Stewardship Code and Corporate Governance Code, stressing the importance of independent directors, independent board committees, director training, use of a “skills matrix”, capital allocation, disclosures, and a number of other issues that BDTI has been stressing for many years,  – ever since its establishment in 2009, in fact.   On the topic of director training, Kerrie Waring of the ICGN wrote:

” ICGN encourages the introduction of high quality training for independent directors in Japan to help build an understanding of what their role entails, particularly in relation to monitoring management and public disclosures. This would help ensure objective decision-making in response to business issues and in alignment with the company’s vision, mission and strategy. We also stress the importance of financial literacy to ensure that independent directors are able to challenge management on issues such as capital efficiency, the use of cross shareholdings and CEO remuneration.”  (emphasis added) 

November 22nd “Director Boot Camp” – Another Successful Program! Next Course: February 12th, 2019!

On November 22nd, BDTI held its English Director Boot Camp , attended by a number of highly experienced participants. Participants from various companies heard lectures about corporate governance by Nicholas Benes, 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.

Letter from a Person Who is Concerned about the Nissan Affair:  a View from the Inside of Another Company

As you might imagine I have been besieged by inquiries from the press when I have little knowledge of what is going on, or went on, a Nissan.  I also received this spontaneous email from a friend who is concerned about the Nissan-Ghosn affair.  Having “sanitized” it, with permission I am posting it.  This particular person worked in matters related to legal compliance for 10 years at a major Japanese company.

Dear Mr Benes:

I retired nine months ago ago and after a long vacation, recently I have finally got around to looking for an outside director or other similar position.

Anyway, I wanted to write because I was floored by the whole Ghosn spectacle.  I am not close to that company, but was astounded that they chose to turn over and have arrested two foreign senior staff (Chairman and his aide) for redirecting assets to his own account “over several years.”  I was floored because:

a) Neither of them is likely that spiffy at Japanese and would need other staff to prepare the transactions for them.  Indeed even had they been Japanese staff themselves this would have required a certain amount of nemawashi at least the way the companies I am familiar with are now run.  Gone are the days when 10,000 here and 100,000 there can be disbursed at some executive’s personal discretion…..