There has been a lot of talk about stewardship in Japan over the past year. And there have been fine statements and announcements made about stewardship commitments by many institutions. This is all good, even if it is not clear how all this will play out.
But actions speak much louder than words, – so we at BDTI think it fitting to point out that the following institutions have supported The Board Director Training Institute of Japan (BDTI) by making significant donations, in many cases more than once:
BDTI’s “Sustaining Donors”
Aberdeen Investment Management K. K.
Baillie Gifford & Co
La Caisse de dépôt et placement du Québec (CDPQ)
Cosmo Public relations
Dalton Advisory KK
Fidelity Worldwide Investment
Ichigo Asset Management
Indus Capital Partners, LLC
Prudential Holdings of Japan, Inc
Russell Investments, Japan
Shearman & Sterling LLP
State Street Trust and Banking Co., Ltd.
Symphony Financial Partners
TANABE & PARTNERS
Third Point, LLC
Regional Fund Manager (US$25 Bln AUM)
Institutional Investor (US$3 Bln AUM)
Nicholas E. Benes
These institutions walk the talk. They believe that dollar-for dollar,the most efficient way an investing institution can be a better steward in Japan, is by supporting BDTI, which is the only government-certified, non-profit public-interest organization dedicated to offering director training and other governance-related programs at low cost in the nation.
There’s a good reason for this. Almost all directors in Japan are internally promoted, which necessarily means almost none of them have any experience whatever(a) sitting on a board; or (b)working at a different company. Because these executives dominate the boards of Japanese companies, raising their understanding and knowledge aboutcorporate governance, best practices, finance, corporate and securities laws,M&A and other key directorship skill sets is essential to improving corporate governance in Japan. (If you are interested, please read our memo on this topic, Why Training is the Key to Reforming Corporate Governance in Japan,which can be downloaded here.)
Here is BDTI’s Progress Report for FY 2015. This was made possible by our donors, who deserve all the thanks we can give them.
If you are a beneficiary of an asset owner or fund manager that invests in Japan, please urge them to take the stewardship actions that are obvious, simple, low-cost, and senda very clear but nonthreatening message to the entire market as well as their portfolio companies: (a) donate to BDTI, and (b) simply ask every Japanese company they meet, what is your corporate policy about director training?….that is, about skill development and training for individuals before you ask us to elect those nominees to the board? Do you have a policy?
After all, the whole principle and purpose of corporate governance is that it is vastly more efficient, and likely to maximize both returns and social responsibility, if companies are self-governing with respect to most matters, and therefore do not require much time-consuming engagement, escalation and badgering by their shareholders. The more each and every company requires frequent engagement,the more returns will be eaten up by transaction costs. Likewise, if proxy-voting is only backwards-looking –e.g., voting against directors after several years of bad performance or a scandal — it will be an inefficient process, since large damage will already have been done.* Therefore, good stewardship begins with ensuring that the most suitable, dedicated, and qualified persons are elected to the board of directors in the first place. Those who do not recognize this, are missing the forest for the trees, and may pay the price in terms of higher costs and less efficient investment.
*The analogy is often made to driving a car by looking in the rear-view mirror.
Anyone can make a donation by following the instructions on this page. (Bank remittance preferred if possible.)
P.S. – For whatever reason, over the past four years not a single Japanese institutional investor or financial institution has donated to BDTI. What with all those committed new stewards out there, we are hoping to change this soon!
BDTI is a “public interest” nonprofit in Japan dedicated to training about directorship and corporate governance. It is certified by the Japanese government to conduct these activities.