”Schroders is proud to be one of a very small group of UK companies with a corporate history stretching back more than 200 years. Astonishingly, Japan is home to as many as 3,146 companies which were founded more than 200 years ago; some of which can be traced back more than 1,000 years.
Of course most of these are small, family-run and operate in niche areas, such as hotels and restaurants. Nevertheless, we can consider whether this Japanese aptitude for corporate longevity can tell us anything about the sustainability of Japanese business models in the future, and their ability to reward shareholders over time.
Sustainability, in an investment sense, can have a variety of meanings but in recent years investors’ approach to sustainability has coalesced around the principle of Environmental, Social and Governance (ESG) factors. Companies’ attitudes to the stakeholders represented under these headings – employees, regulators, shareholders and the environment – are now broadly viewed as indicators of future sustainability.
Among these factors, Japanese companies typically have strong social characteristics as the principles of lifetime employment and community support have always been part of corporate ethos, long before anyone ever thought of attaching an ESG label.
Conversely, Japan is regarded as a significant laggard in governance issues compared to other developed markets globally. In recent years the specific examples of Olympus and Toshiba have suggested corporate cultures which wrongly targeted “survival at all costs”, leading management to fraudulently disguise loss-making activities in order to preserve the status quo. These individual instances highlight the need for better governance at the board level but this in itself will be insufficient without fundamental changes in behaviour, both within companies and towards outside shareholders……………”
Read full article here.
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.