WSJ: Japan Puts Off Overhaul of $1.1 Trillion Public Pension Fund -Move Signals Prime Minister in No Hurry to Change Governance at GPIF
http://www.wsj.com/articles/japan-puts-off-public-pension-fund-overhaul-1424756051
BDTI's Representative Director Nicholas Benes was quoted in the article as follows:
“The government has been going in a good direction by setting forth policies for stewardship and corporate governance ‘best practices,’ ” said Nicholas Benes, head of the Board Director Training Institute of Japan. “For the GPIF itself to not be setting an example at the high end of those practices is a big opportunity loss that threatens the credibility of Abenomics itself.”…..
Article excerpt:
TOKYO—Japan’s cabinet on Tuesday put off a large-scale governance overhaul of the nation’s $1.1 trillion public pension reserve fund that was advocated by the welfare minister, approving smaller legislation instead.
The decision signaled that Prime Minister Shinzo Abe was in no hurry to change oversight at the Government Pension Investment Fund after a big shift to its investment strategy last year. The fund has decided to put more money in stocks, helping drive the Nikkei Stock Average to a 15-year high.
Minister of health, labor and welfare Yasuhisa Shiozaki, whose ministry has purview over the fund, has advocated installing a governing board that would oversee GPIF’s investments and ensure independence from political interference. But his idea was at odds with the overhaul process envisioned by others in the Abe administration. They believed a Shiozaki-style plan would be difficult to push through parliament in its current session, which ends in June, and they wanted to pursue as many changes as possible without a major new law.
Chilly relations between Mr. Shiozaki and the GPIF’s new chief investment officer, Hiromichi Mizuno, have also hindered the Abe government’s ability to build consensus.
On Tuesday, Mr. Abe’s cabinet effectively settled the dispute for now by approving a more modest bill without the Shiozaki proposals. The bill allows the fund to keep its headquarters in Tokyo, overturning a previous measure requiring a move, and gives legal imprimatur to the position of chief investment officer. Mr. Mizuno, a former private-equity executive in London, took the post in January. The smaller bill now goes to parliament for final passage.
Making the GPIF a more aggressive and better-run investor has become one symbol of Mr. Abe’s commitment to changing Japan and attracted the attention of global investors. The GPIF, the largest fund of its kind in the world, manages retirement funds for private-sector employees and for the country’s universal basic pension.
Proponents of a governance overhaul at the GPIF say a delay could put pensioners’ money at risk by leaving the fund with little oversight. They also say it will be harder to paint the GPIF as a role model for Japan.
The GPIF last year signed Japan’s Stewardship Code, a set of guidelines aimed at improving returns through more active engagement between investors and companies. Similarly, the Financial Services Agency and the Tokyo Stock Exchange are developing a corporate governance code to promote good practices at listed companies.
“The government has been going in a good direction by setting forth policies for stewardship and corporate governance ‘best practices,’ ” said Nicholas Benes, head of the Board Director Training Institute of Japan. “For the GPIF itself to not be setting an example at the high end of those practices is a big opportunity loss that threatens the credibility of Abenomics itself.”…..
The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.