Discussion Paper by Hideaki Miyajima et al : ”Does Ownership Really Matter?: The Role of Foreign Investors in Corporate Governance in Japan”

”Abstract. After the banking crisis of 1997, corporate ownership in Japan shifted from an insider-dominated to an outsider-dominated structure. This paper analyzes the impact of dramatic changes in the ownership structure on corporate governance and firm value, focusing on the role of foreign institutional investors. There are two competing views on the role of increased foreign ownership. The positive view is that foreign investors have had high monitoring capability, and encourage improvements in the governance arrangement of firms, resulting in higher performance.

Forbes: U.S. Companies Joining FTSE4Good Index, Banks and Japanese Companies Exiting

“Green” indices are rising in popularity as investors increasingly seek to put business in context of its surroundings, and its wider impact. FTSE4Good, the global index provided by  FTSE Russell, measures how a company operates in terms of environmental, social and governance (ESG) factors rather than what it makes — and ESG risk is everywhere, quite apart from “climate risk,” now at the forefront of attention.

Tougher inclusion criteria has just resulted in the removal of 43 companies from the index, with a startling number from Japan, where the picture of the extent of corporate governance reforms remains unclear. Its latest review sees 77 new additions to the FTSE4Good Global Index, of which 26 companies are from the United States, making it the largest contributor………..”

“What They Do With Your Money: How the Financial System Fails Us and How to Fix It”

Based on the theory that responsible behavior by institutional investors hinges in turn on stimulating a population of active citizen investors, I am attaching two of my recent articles drawn from the new book “What They Do With Your Money: How the Financial System Fails Us and How to Fix It”, by Jon Lukomnik, David Pitt-Watson and me (Yale University Press, just out). The official book launch took place on June 7.

The first article, published on the Harvard Law CG blog, sets out the costs to society and individuals when citizen investors are missing in action, and offers several proposed fixes:

HBS Professors: American Managers Seek to Avoid Legitimate Shareholder Proposals

In this paper, HBS Professors Suraj, Srinivasan, and Vijayaraghavan analyze the period 2003-2013 and conclude that US managers often seek to avoid listing legitimate shareholder proposals in the proxy materials.  This is a stark contrast to the situation here in Japan, where executives must include virtually any shareholder proposal in the proxy, even if strange or rude.

Research by Ahmed Zemzem: ”Japan’s Corporate Governance Structures and Credit Rating”

‘Abstract: The aim of our research is to investigate whether good governance is associated with higher credit rating in Japanese firms. Mainly, this research seeks to examine the effect of governance attributes namely those related to the board and ownership structure besides quality of information on credit ratings. Empirical analyses are conducted from a sample of 75 Japanese firms listed on Topix 100, over the period 2006- 2013 using Ordered Probit regression. The study shows that good governance is associated with higher credit rating and suggests that active monitoring by independent directors and better disclosure mitigate agency conflicts and protect the interests of debtholders……”

Japan’s METI-led “Sustainable Value Creation” Investment Push

“The Study Group on Investment for Sustainable Value Creation established by Japan’s Ministry of Economy, Trade and Industry (METI), disclosed its minutes in April after three meetings in February and March. The objective of the Group is to find some common foundations for action by companies and investors on two main issues:

1) Measures to effectively utilize various kinds of capital and make decisions on investment for sustainable value creation.
2) Evaluation of information that investors use and proposed improvements for this and better corporate/investor dialogue. (…)


Financial Times: ”String of scandals puts Japanese investors on edge”

The FT comments on what seems to be a string of scandals in Japan.  It is our opinion that such governance or compliance issues are not necessarily more frequent than in other developed nations – it is difficult to compare – , but (1) they arise from different gaps in governance and management structures; and (2) whistle-blowing is becoming more frequent in Japan.

”From carmakers and electronics groups to housebuilders and the constructors of the nation’s roads and runways, a government-led transparency drive has accelerated a record surge of accounting and data fraud scandals across corporate Japan.